-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Nt78pCXnbxruwVcVKWHQEfj0BLVXpvxSHYlpj0gEoZZ7qsPfLYUAWm9U4fp7yy7S CQNZGENxQHVeYjvEMmOI6g== 0000950172-99-000342.txt : 19990402 0000950172-99-000342.hdr.sgml : 19990402 ACCESSION NUMBER: 0000950172-99-000342 CONFORMED SUBMISSION TYPE: N-14/A PUBLIC DOCUMENT COUNT: 16 FILED AS OF DATE: 19990331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GABELLI UTILITY FUND CENTRAL INDEX KEY: 0001080720 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: N-14/A SEC ACT: SEC FILE NUMBER: 333-72983 FILM NUMBER: 99580097 BUSINESS ADDRESS: STREET 1: 1 CORPORATE CENTER CITY: RYE STATE: NY ZIP: 10580 BUSINESS PHONE: 9149215083 MAIL ADDRESS: STREET 1: 1 CORPORATE CENTER CITY: RYE STATE: NY ZIP: 10580 N-14/A 1 As filed with the Securities and Exchange Commission on March 30, 1999 - ---------------------------------------------------------------------------- Registration No. 33-72983 - ---------------------------------------------------------------------------- U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-14 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] Pre-Effective Amendment No. 1 [ ] Post-Effective Amendment No. __ The Gabelli Utility Fund (Exact Name of Registrant as Specified in Charter) Area Code and Telephone Number: (914) 921-5070 One Corporate Center, Rye, New York 10580 (Address of Principal Executive Offices) (Zip code) Bruce N. Alpert The Gabelli Utility Fund One Corporate Center Rye, New York 10580 (Name and Address of Agent for Service) ------------- Copies to: James E. McKee, Esq. Richard T. Prins, Esq. The Gabelli Utility Fund Skadden, Arps, Slate, Meager & Flom LLP One Corporate Center 919 Third Avenue Rye, New York 10580 New York, New York 10022 -------------
Calculation of Registration Fee under the Securities Act of 1933: Proposed Maximum Proposed Maximum Title of Securities Amount Being Offering Price per Aggregate Offering Amount of Being Registered Registered Unit Price Registration Fee Common Stock, 8,000,000* $10** $80,000,000** $22,240**+ $.001 par value - -----------------------------------------------------------------------------------------------------------------
* The amount being registered assumes a dividend of one share of Registrant's Common Stock for every fourteen shares held of Common Stock of The Gabelli Equity Trust Inc. If this ratio changes, the number of shares to be issued will be adjusted accordingly, but the proposed maximum aggregate offering price will remain unchanged. ** No separate consideration will be received for shares of Common Stock to be distributed to the shareholders of The Gabelli Equity Trust Inc. + $20,850 previously paid. Approximate date of proposed public offering: As soon as possible after the effective date of this Registration Statement. Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. THE GABELLI UTILITY FUND FORM N-14 CROSS REFERENCE SHEET Pursuant to Rule 481(a) Under the Securities Act of 1933
Prospectus/Proxy Part A Item No. and Caption Statement Caption - --------------------------- ------------------ Item 1. Beginning of Registration Cover Page; Cross Reference Sheet Statement and Outside Front Cover Page of Prospectus Item 2. Beginning and Outside Back Cover Table of Contents Page of Prospectus Item 3. Fee Table, Synopsis Information Proxy Statement/Prospectus Summary; Table of Fees and Risk Factors and Expenses Item 4. Information About the Transaction Proxy Statement/Prospectus Summary; The Transaction; Pro Forma Statement of Assets and Liabilities Item 5. Information About the Registrant Cover Page; Proxy Statement/Prospectus Summary; Investment Objectives and Policies of the Utility Fund and the Equity Trust; Further Information; Description of Common Stock of the Utility Fund and the Equity Trust Item 6. Information About the Company Proxy Statement/Prospectus Summary; Investment Being Acquired Objectives and Policies of the Utility Fund and the Equity Trust; Further Information; Description of the Common Stock of the Utility Fund and the Equity Trust Item 7. Voting Information General Voting Information; Principal Shareholders; Additional Information -- Broker Non-Votes and Abstentions; Required Vote for the Transaction Item 8. Interest of Certain Persons and Experts Experts Item 9. Additional Information required Not Applicable for Reoffering By Persons Deemed to be Underwriters Proxy Statement/ Part B Item No. and Caption* Prospectus Caption - ---------------------------- ------------------- Item 10. Cover Page Not Applicable Item 11. Table of Contents Not Applicable Item 12. Additional Information About the Investment Objectives and Policies of the Utility Registrant Fund and the Equity Trust; Description of Common Stock of the Utility Fund and the Equity Trust; Management of the Utility Fund and the Equity Trust; Principal Shareholders; Taxation Item 13. Additional Information About the Not Applicable Company Being Acquired Item 14. Financial Statements The Gabelli Utility Fund Statement of Assets and Liabilities; Annual Report of The Gabelli Equity Trust Inc. and Semi-Annual Report of The Gabelli Equity Trust Inc. incorporated by reference; Pro Forma Statement of Assets and Liabilities Part C Item No. and Caption Other Information Caption - --------------------------- ------------------------- Item 15. Indemnification Incorporated by reference to Part A caption "Description of Common Stock of the Utility Fund and the Equity Trust -- Limitation of Officers' and Directors' Liability" Item 16. Exhibits Exhibits Item 17. Undertakings Undertakings - ------------------ * All information required to be set forth in Part B: Statement of Additional Information has been included in Part A: The Proxy Statement/Prospectus. THE GABELLI EQUITY TRUST INC. One Corporate Center Rye, New York 10580-1434 April __, 1999 Dear Fellow Shareholder: I would like to invite you to the Annual Meeting of Shareholders of The Gabelli Equity Trust Inc. (the "Equity Trust") to be held on May 17, 1999 to consider a proposal to distribute to shareholders, in the form of a dividend, shares in a newly-organized non-diversified closed-end investment company, The Gabelli Utility Fund (the "Utility Fund"). The enclosed Proxy Statement/Prospectus describes the proposal in detail. Through our ongoing communications with our shareholders we have learned a great deal about them. We have found that, in general, our shareholders are conservative, dividend sensitive investors who like current income. They overwhelmingly favor the Equity Trust's 10% distribution policy. Knowing this, your Board of Directors believes that the Equity Trust shareholders want an investment vehicle that provides monthly dividends. At the same time, we continue to be attracted to the opportunities for long-term capital growth and income presented in the utility industry. Consolidation and deregulation in the utility sector are presenting good values and sound investment opportunities. To enable the Equity Trust's shareholders to participate more directly in these opportunities, we are proposing to contribute approximately $75 million of the Equity Trust's net assets to the Utility Fund, which would follow a policy of concentration in utility related businesses. If approved, each Equity Trust shareholder would receive one share of the Utility Fund for each fourteen shares of the Equity Trust owned on the dividend record date. No commission or other sales charge would be imposed. The Utility Fund expects to pay dividends monthly. In addition, the broker-dealer affiliate of the Equity Trust's investment adviser intends to allow shareholders of the Equity Trust to purchase up to 500 additional shares of the Utility Fund (acquired through open market purchases at market prices) without a commission in order to round up their positions to even round lots. Please note that the proposed transaction will not affect the Equity Trust's 10% distribution policy. The Equity Trust will continue to distribute $0.27 per share in each of the first three quarters of the year with an adjusting distribution in the fourth quarter of a sufficient amount to pay 10% of the average net asset value. We believe this proposal represents an attractive opportunity for shareholders, and we urge you to give it your careful consideration. Very truly yours, MARIO J. GABELLI Chairman of the Board and President Whether or not you plan to attend the Annual Meeting of Shareholders, please complete, sign and date the enclosed proxy card and return the same as soon as possible in the enclosed postpaid envelope. The Gabelli Equity Trust Inc. One Corporate Center Rye, New York 10580-1434 (914) 921-5000 ------------------- NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To Be Held on May 17, 1999 ------------------- To the Shareholders of THE GABELLI EQUITY TRUST INC. Notice is hereby given that the Annual Meeting of Shareholders of The Gabelli Equity Trust Inc. (the "Equity Trust") will be held at the Greenwich Hyatt Regency, 1800 East Putnam Avenue, Greenwich, Connecticut 06870, on Monday, May 17, 1999, at 9:00 a.m. to consider the following purposes: 1. To consider and vote upon a proposal to distribute to Equity Trust shareholders approximately $75 million of the Equity Trust's net assets in the form of shares of The Gabelli Utility Fund, a newly-organized closed-end, registered investment company (Proposal 1) 2. To elect three (3) Directors of the Equity Trust (Proposal 2) 3. To ratify the selection of PricewaterhouseCoopers LLP as independent accountants of the Equity Trust for the year ending December 31, 1999 (Proposal 3) 4. To consider and vote upon such other matters as may come before said meeting or any adjournment thereof. These items are discussed in greater detail in the attached Proxy Statement/Prospectus. The close of business on March 17, 1999, has been fixed as the record date for the determination of shareholders entitled to notice of and to vote at the meeting and any adjournments thereof. Your vote is important regardless of the size of your holdings in the Equity Trust. Whether or not you plan to attend the meeting, we ask that you please complete and sign the enclosed proxy card and return it promptly in the enclosed envelope which needs no postage if mailed in the continental United States. Instructions for the proper execution of proxies are set forth on the inside cover. By Order of the Directors JAMES E. MCKEE Secretary April , 1999 This Statement is printed on recycled paper. INSTRUCTIONS FOR SIGNING PROXY CARDS The following general rules for signing proxy cards may be of assistance to you and avoid the time and expense to the Equity Trust involved in validating your vote if you fail to sign your proxy card properly. 1. Individual Accounts: Sign your name exactly as it appears in the registration on the proxy card. 2. Joint Accounts: Either party may sign, but the name of the party signing should conform exactly to a name shown in the registration. 3. All Other Accounts: The capacity of the individuals signing the proxy card should be indicated unless it is reflected in the form of registration. For example: Registration Valid Signature Corporate Accounts (1) ABC Corp. .................................... ABC Corp. (2) ABC Corp. .................................... John Doe, Treasurer (3) ABC Corp. c/o John Doe, Treasurer ....................... John Doe (4) ABC Corp., Profit Sharing Plan .................. John Doe, Trustee Trust Accounts (1) ABC Trust .................................... Jane B. Doe, Trustee (2) Jane B. Doe, Trustee u/t/d 12/28/78 ................................ Jane Doe Custodial or Estate Accounts (1) John B. Smith, Cust John B. Smith. f/b/o John B. Smith, Jr. UGMA (2) John B. Smith John B. Smith, Jr., Executor THE GABELLI EQUITY TRUST INC. --------------- ANNUAL MEETING OF SHAREHOLDERS May 17, 1999 --------------- PROXY STATEMENT/PROSPECTUS This Proxy Statement/Prospectus is furnished in connection with the solicitation of proxies by the Board of Directors of The Gabelli Equity Trust Inc. (the "Equity Trust") for use at the Annual Meeting of Shareholders of the Equity Trust to be held on May 17, 1999, and at any adjournments thereof (the "Meeting"). A Notice of Meeting of Shareholders and a proxy card accompany this Proxy Statement/Prospectus. Among the proposals to be considered at the Meeting is a proposal (Proposal 1) to distribute to Equity Trust shareholders common shares of beneficial interest of The Gabelli Utility Fund, a newly-organized closed-end, registered investment company (the "Utility Fund"). Under this proposal, the Equity Trust will contribute a segment of its assets (which is anticipated to consist largely or exclusively of cash and short-term fixed income instruments) having a value of approximately $75 million to the Utility Fund, an investment company organized and wholly-owned by the Equity Trust. All of the common shares of beneficial interest of the Utility Fund (the "Utility Fund Common Stock") will then be distributed by the Equity Trust as a dividend to the Equity Trust's shareholders at a rate of one share of Utility Fund Common Stock for every fourteen shares held of the Equity Trust. See "The Transaction." Like the Equity Trust, the Utility Fund is a closed-end non-diversified management investment company. The primary investment objective of the Utility Fund is long-term growth of capital and income. The primary investment objective of the Equity Trust is long-term capital appreciation, with income as a secondary objective. Unlike the Equity Trust, which attempts to achieve its objective by investing primarily in a portfolio of equity securities of companies involved in a wide variety of industries, the Utility Fund will invest primarily in common stock and other securities of foreign and domestic companies involved to a substantial extent in providing products, services or equipment for the generation or distribution of electricity, gas and water and the provision of telecommunications services or infrastructure operations, such as airports, toll roads and municipal services. No assurances can be given that the Utility Fund's objectives will be achieved. Application will be made to list the Utility Fund's shares on the New York Stock Exchange. Although there is no current trading market for shares of Utility Fund Common Stock, it is expected that "when issued" trading of such shares will commence on the New York Stock Exchange four business days prior to the record date set by the Board of Directors of the Equity Trust for the distribution of the shares of the Utility Fund. If an Equity Trust shareholder sells the shares in the Utility Fund that it receives through the dividend, the shareholder may incur brokerage commissions and the sale may constitute a taxable event for the shareholder. Shares of closed-end investment companies frequently trade at a discount to net asset value. The Equity Trust cannot predict whether the Utility Fund Common Stock will trade at, below or above net asset value. Shareholders must bear the risk of loss created by the possibility that its shares may trade at a discount to net asset value. The Equity Trust's Common Stock trades on the New York Stock Exchange under the symbol "GAB." The Equity Trust will furnish, without charge, a copy of its Annual Report upon request in writing or by telephone. The address of both the Equity Trust and the Utility Fund is One Corporate Center, Rye, New York 10580 and the telephone number of both is (914) 921-5070. These securities have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission nor has the Securities and Exchange Commission or any state securities commission passed upon the accuracy or adequacy of this Proxy Statement/Prospectus. Any representation to the contrary is a criminal offense. This Proxy Statement/Prospectus sets forth concisely certain information about the Utility Fund and the Equity Trust that shareholders should know before giving a proxy and it should be read and retained for future reference. April __, 1999 TABLE OF CONTENTS Page GENERAL VOTING INFORMATION................................................. PROXY STATEMENT/PROSPECTUS SUMMARY......................................... TABLE OF FEES AND EXPENSES................................................. PRO FORMA STATEMENT OF ASSETS AND LIABILITIES.............................. The Transaction............................................................ Background........................................................ Description of the Transaction.................................... Federal Income Tax Consequences of the Transaction................ Listing ......................................................... Transaction Expenses.............................................. Manner of Effecting the Distribution.............................. Costs Associated with Sales of Utility Fund Common Stock.......... Allocation of Investment Opportunities............................ Investment Objectives and Policies of the Utility Fund and the Equity Trust............................. Risk Factors............................................................... Investment Restrictions.................................................... Management of Utility Fund and the Equity Trust.............................................. Investment Advisory and Other Services..................................... Portfolio Transactions and Brokerage....................................... Determination of Net Asset Value........................................... Distributions; Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan................................................ Taxation .................................................................. Principal Shareholders..................................................... Custodian, Transfer Agent, Dividend Disbursing Agent and Registrar.................................... Description of Common Stock of the Utility Fund and the Equity Trust................................. Reports to Shareholders.................................................... Experts .................................................................. Further Information........................................................ Financial Statements....................................................... Required Vote for the Transaction.......................................... PROPOSAL 2................................................................. PROPOSAL 3................................................................. ADDITIONAL INFORMATION..................................................... SHAREHOLDER PROPOSALS...................................................... OTHER MATTERS TO COME BEFORE THE MEETING................................... APPENDIX A................................................................A-1 APPENDIX B................................................................B-1 APPENDIX C................................................................C-1 APPENDIX D................................................................D-1 GENERAL VOTING INFORMATION In addition to the solicitation of Proxies by mail, officers of the Equity Trust, affiliates of the Equity Trust or other representatives of the Equity Trust may also solicit proxies by telephone, telegraph or in person. In addition, the Equity Trust has retained Georgeson and Company Inc. to assist in the solicitation of Proxies for a fee estimated at $6,000 plus reimbursement of expenses. The costs of solicitation and the expenses incurred in connection with preparing the Proxy Statement/Prospectus and its enclosures will be paid by the Equity Trust. The Equity Trust will reimburse brokerage firms and others for their expenses in forwarding solicitation materials to the beneficial owners of shares. The Annual Report of the Equity Trust, including audited financial statements for the fiscal year ended December 31, 1998, was previously mailed to all shareholders of the Equity Trust. If the enclosed Proxy is properly executed and returned in time to be voted at the Meeting, the shares represented thereby will be voted in accordance with the instructions marked thereon. Unless instructions to the contrary are marked thereon, the Proxy will be voted FOR Proposals 1, 2 and 3 and FOR any other matters deemed appropriate. Any shareholder who has given a Proxy has the right to revoke it at any time prior to its exercise either by attending the Meeting and voting his or her shares in person or by submitting a letter of revocation or a later-dated Proxy to the Equity Trust at the above address prior to the date of the Meeting. In the event a quorum is present at the Meeting but sufficient votes to approve any of the proposed items are not received, the persons named as proxies may propose one or more adjournments of such Meeting to permit further solicitation of proxies. Any such adjournment will require the affirmative vote of a majority of those shares present at the Meeting in person or by proxy. If a quorum is present, the persons named as proxies will vote those proxies which they are entitled to vote FOR such proposal in favor of such an adjournment and will vote those proxies required to be voted for rejection of such proposal against any such adjournment. The close of business on March 17, 1999 has been fixed as the record date for the determination of shareholders entitled to notice of and to vote at the Meeting and all adjournments thereof. Each shareholder is entitled to one vote for each full share and an appropriate fraction of a vote for each fractional share held. On the record date there were 106,116,347 shares of Common Stock and 5,400,000 shares of Cumulative Preferred Stock of the Equity Trust outstanding. To the knowledge of the management of the Equity Trust, no person owns of record or beneficially 5% or more of the shares of the Common Stock or the Cumulative Preferred Stock of the Equity Trust, except that as of March 17, 1999, 88,725,776 shares of Common Stock and 5,334,450 shares of Cumulative Preferred Stock were held of record by Cede & Co., a nominee partnership of The Depository Trust Company. The following table shows the shares held by The Depository Trust Company as nominee for each 5% record or beneficial holder:
Name and Address of Amount of Shares Percent Beneficial/Record Owner Title of Class and Nature of Ownership of Class - -------------------------------------------------------------------------------------------------------------------- Cede & Co., as nominee for Common Stock 88,725,776 83.6% The Depository Trust Company P.O. Box 20 Cumulative 5,334,450 98.8% Bowling Green Station Preferred Stock New York, NY 10004 Salomon Smith Barney Inc. Common Stock 19,278,763 18.2% 333 W 34th Street New York, NY 10001 Cumulative 1,784,960 33.1% Preferred Stock A. G. Edwards & Sons, Inc. Common Stock 10,739,322 10.1% 1 North Jefferson St. Louis, MO 63103 Prudential Securities Inc. Common Stock 5,923,713 5.6% c/o ADP Proxy Services 51 Mercedes Way Cumulative 555,872 10.3% Edgewood, NY 11717 Preferred Stock Paine Webber Inc. Cumulative 982,580 18.2% 1000 Harbor Blvd Preferred Stock Weehawken, NJ 07087 National Financial Cumulative 614,692 11.4% Services Corp. Preferred Stock 200 Liberty Street New York, NY 10281
As of March 17, 1999, the officers and directors of the Equity Trust, as a group, owned 1,302,548 shares of Common Stock and 5,000 shares of Cumulative Preferred Stock of the Equity Trust, representing 1.23% of the shares of Common Stock and 0.09% of the shares of Cumulative Preferred Stock. This Proxy Statement/Prospectus is first being mailed to shareholders on or about April __, 1999. PROXY STATEMENT/PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information included elsewhere in this Proxy Statement/Prospectus. The Transaction ..... The Board of Directors of the Equity Trust has approved, subject to shareholder approval, the contribution of a segment of the Equity Trust's assets (which is anticipated to consist largely or exclusively of cash and short-term fixed income instruments) having a value of approximately $75 million to the Utility Fund, a newly formed investment company organized and wholly-owned by the Equity Trust. All of the Utility Fund Common Stock (as hereinafter defined) will then be distributed by the Equity Trust as a dividend to its shareholders at a rate of one share of the Utility Fund for every fourteen shares held of the Equity Trust. The contribution of such Equity Trust assets to the Utility Fund and the subsequent distribution of the Utility Fund's shares to Equity Trust shareholders is referred to herein as the "Transaction." See "The Transaction." The Gabelli Utility Fund ......... A newly formed investment company organized by the Equity Trust and registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as a non-diversified closed-end investment company. Comparison of Investment Objectives and Policies of the Equity Trust and the Utility Fund .... The primary investment objective of the Utility Fund is long-term growth of capital and income. Unlike the Equity Trust, which attempts to achieve its objective by investing primarily in a portfolio of equity securities of companies in a wide variety of industries, the Utility Fund will concentrate its investments in common stock and other securities of foreign and domestic companies involved to a substantial extent in providing products, services or equipment for the generation or the distribution of electricity, gas and water and the provision of telecommunications services or infrastructure operations, such as airports, toll roads and municipal services. As a result of investing in these businesses, the Utility Fund over time may be expected to experience different investment results than the Equity Trust. The Equity Trust's secondary investment objective is income. See "Investment Objectives and Policies of the Utility Fund and the Equity Trust." The investment practices and restrictions of each of the Utility Fund and the Equity Trust are substantially similar except that, generally, (i) the Utility Fund has no fundamental policy with respect to purchasing securities of other investment companies, (ii) the Utility Fund may borrow money to the extent permitted by applicable law whereas the Equity Trust is limited to borrowings not exceeding 10% of its total assets to finance repurchases of its shares and 5% for extraordinary or emergency purposes, (iii) there is no limitation on the amount of foreign securities in which the Utility Fund may invest whereas the Equity Trust is limited to investing up to 35% of its total assets in foreign securities, (iv) the Utility Fund may invest without limit in illiquid securities whereas the Equity Trust may not invest more than 10% of its total assets in illiquid securities and (v) the Utility Fund may make short sales of securities. For a more detailed description of the differences between the investment practices and restrictions of the Utility Fund and the Equity Trust, see "Appendix A - Investment Practices" and "Appendix B - Investment Restrictions." Investment Adviser to the Utility Fund; Advisory Fees ............. Gabelli Funds, LLC (the "Investment Adviser"), the investment adviser for the Equity Trust, will also serve as investment adviser to the Utility Fund. The advisory fee structure for the Utility Fund will be the same as that of the Equity Trust. The investment advisory agreement between the Utility Fund and the Investment Adviser combines investment advisory and administrative responsibilities in one agreement. The Utility Fund will pay the Investment Adviser a fee computed daily and paid monthly at an annual rate of 1.00% of the average weekly net assets of the Utility Fund. See "Investment Advisory and Other Services." Listing ........... Application will be made to list the Utility Fund's shares on the New York Stock Exchange upon notice of issuance of such shares. Although there is no current trading market for shares of Utility Fund Common Stock, it is expected that "when issued" trading of such shares will commence on the New York Stock Exchange four business days prior to the record date set by the Board of Directors of the Equity Trust for the distribution of the shares of the Utility Fund. Federal Income Tax Consequences of the Transaction....... The Transaction is not expected to increase significantly the total amount of taxable distributions received by the Equity Trust shareholders for this year and is not expected to result in the recognition of significant taxable gain by the Equity Trust. The distribution of Utility Fund shares and cash in lieu of fractional shares to holders of Equity Trust Common Stock will constitute a dividend to each such shareholder up to its portion of the Equity Trust's current or accumulated earnings and profits (but not in excess of the fair market value of Utility Fund shares and cash received by such shareholder) and generally will be taxable to such shareholder as a distribution of ordinary income and/or long-term capital gains. To the extent that the fair market value of the distributed Utility Fund shares and cash exceeds the allocated current earnings and profits and any accumulated earnings and profits from prior years, the excess will first be treated as a non-taxable return of capital, reducing the Equity Trust Common Stock holder's tax basis in its Equity Trust shares; thereafter, distributions in excess of the Equity Trust Common Stock holder's basis will be taxable as gain realized from a deemed sale of its Equity Trust shares. Each Equity Trust Common Stock holder will take a fair market value tax basis in the Utility Fund shares received and will have a new holding period beginning on the date following the date of the distribution. In addition to the other information necessary to file tax returns, the Equity Trust will provide shareholders with information as to the amount of the distribution to be treated as a dividend. The Utility Fund has received an opinion of counsel to the effect that the foregoing discussion accurately summarizes the material federal income tax consequences of the Transaction. The foregoing summary is subject to and qualified in its entirety by the discussion in "The Transaction-Federal Income Tax Consequences of the Transaction" and "Taxation" below. Comparison of Distribution Policies of the Utility Fund and the Equity Trust The Utility Fund intends to file an exemptive application with the Securities and Exchange Commission requesting an order of exemption from Section 19(b) of the 1940 Act (the "Section 19(b) Exemptive Order") enabling it to distribute to shareholders substantially all of its annual net investment income monthly and capital gains quarterly or more frequently. The Equity Trust will continue to make quarterly dividend payments pursuant to its 10% distribution policy. See "Distributions; Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan." Manner of Effecting the Distribution The Equity Trust's Board of Directors is expected to declare a distribution (the "Distribution") of all the outstanding common shares of beneficial interest, par value $.001 per share, of the Utility Fund ("Utility Fund Common Stock"), payable to the holders of record of the Equity Trust's Common Stock, par value $.001 per share ("Equity Trust Common Stock"), as of the close of business on a date (the "Distribution Record Date") to be determined, together with the payable date for the Distribution (the "Distribution Date"), by the Equity Trust's Board of Directors promptly following shareholder approval of the Transaction and receipt of an exemptive order from the Securities and Exchange Commission. On or about the Distribution Date, the Equity Trust will contribute a segment of its assets (which is anticipated to consist largely or exclusively of cash and short-term fixed income instruments) having a value of approximately $75 million to the Utility Fund. The Equity Trust will effect the Distribution on the Distribution Date by providing for the delivery of the shares of Utility Fund Common Stock to State Street Bank and Trust Company (the "Distribution Agent") for distribution to holders of record of Equity Trust Common Stock as of the close of business on the Distribution Record Date. The Distribution will be made on the basis of one share of Utility Fund Common Stock for every fourteen shares of Equity Trust Common Stock outstanding on the Distribution Record Date. All such shares of Utility Fund Common Stock will be fully paid and non-assessable. Commencing on or about the Distribution Date, certificates representing shares of Utility Fund Common Stock will be mailed to persons holding Equity Trust Common Stock on the Distribution Record Date. Shareholders who have their Equity Trust shares registered with the transfer agent in book-entry form in their names, will receive shares of the Utility Fund in book-entry form. Fractional shares of Utility Fund Common Stock will only be issued as part of the Distribution to holders of Equity Trust Common Stock who are participants in the Equity Trust's Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan (the "Equity Trust Plan"). The Distribution Agent will aggregate the fractional shares to which holders who are not participants in the Equity Trust Plan would otherwise be entitled and attempt to sell them in the open market at the then prevailing prices on behalf of such holders, and such holders will receive instead a cash payment in the amount of their pro rata share of the total sales proceeds. In addition, holders of Equity Trust Common Stock may purchase up to 500 additional shares of the Utility Fund (acquired through open market purchases at market prices) from Gabelli & Company, Inc., the broker-dealer affiliate of the Investment Adviser, without a commission in order to round up their positions to even round lots. No holder of Equity Trust Common Stock will be required to pay any cash or other consideration for the shares of Utility Fund Common Stock received in the Distribution or to surrender or exchange shares of Equity Trust Common Stock in order to receive shares of Utility Fund Common Stock. The Distribution will not affect the number of, or the rights attaching to, outstanding shares of Equity Trust Common Stock. See "The Transaction - Manner of Effecting the Distribution." Shares of Utility Fund Common Stock distributed in connection with the Distribution will be freely transferable except for shares received by persons who may be deemed to be "affiliates" of the Utility Fund under the Securities Act of 1933, as amended (the "1933 Act"). See "The Transaction - Manner of Effecting the Distribution." Risk Factors and Special Considerations Repurchase and Charter Provisions. As shareholders of a closed-end fund, the Utility Fund shareholders do not have the right to redeem their shares. However, the shares are freely transferable, except for shares received by persons who may be deemed to be "affiliates" of the Utility Fund under the 1933 Act, and shareholders desiring liquidity may, subject to applicable securities laws, trade their shares in the Utility Fund on the New York Stock Exchange or other markets on which the shares may trade at the then current market value. Like the Equity Trust, the Utility Fund is authorized to repurchase its shares on the open market when the shares are trading at a discount of 10% or more (or such other percentage as its Board of Directors (which term includes a Board of Trustees) may determine from time to time) from the net asset value. In addition, certain provisions of the Utility Fund's Declaration of Trust may be regarded as "anti-takeover" provisions. Pursuant to these provisions only one of the three classes of directors (which term includes trustees) is elected each year, and the affirmative vote of the holders of 75% of the outstanding voting shares of the Utility Fund is necessary to authorize amendments to the Utility Fund's Declaration of Trust that would be necessary to convert the Utility Fund from a closed-end to an open-end investment company. In addition, the affirmative vote of the holders of 80% of the outstanding voting shares of each class of the Utility Fund, voting as a class, is generally required to authorize certain business transactions with the beneficial owner of more than 5% of the outstanding shares of the Utility Fund. In addition, if the Utility Fund issues preferred stock, the holders of the preferred shares would have the authority to elect two directors at all times and would have separate class voting rights on specified matters including conversion of the Utility Fund to open-end status and certain reorganizations of the Utility Fund. The overall effect of these provisions is to render more difficult the accomplishment of a merger with, or the assumption of control by, a principal shareholder, or the conversion of the Utility Fund to open-end status. These provisions may have the effect of depriving Utility Fund shareholders of an opportunity to sell their shares at a premium above the prevailing market price. See "Description of Common Stock of the Utility Fund and the Equity Trust - Certain Provisions of the Governing Documents of the Utility Fund and the Equity Trust." Non-Diversified Status. As a non-diversified investment company under the 1940 Act, the Utility Fund, like the Equity Trust, is not limited in the proportion of its assets that may be invested in securities of a single issuer, and accordingly, an investment in the Utility Fund may, under certain circumstances, present greater risk to an investor than an investment in a diversified company. See "Investment Objectives and Policies of the Utility Fund and the Equity Trust," "Risk Factors" and "Taxation." Discount to Net Asset Value. Shares of closed-end investment companies frequently trade at a discount from net asset value. This characteristic of shares of a closed-end investment company is a risk separate and distinct from the risk that the Utility Fund's net asset value may decrease. The Equity Trust cannot predict whether the Utility Fund's shares will trade at, below or above net asset value. The risk of holding shares of closed-end investment companies that might trade at a discount to net asset value is more pronounced for shareholders who wish to sell their shares in a relatively short period of time after completion of the Distribution. For those shareholders, realization of a gain or loss on their investment is likely to be more dependent upon the existence of a premium or discount than upon portfolio performance. See "Investment and Objectives of the Utility Fund and the Equity Trust" and "Risk Factors." Taxable Distribution. Each holder of Equity Trust Common Stock will recognize taxable income as a result of the distribution of the Utility Fund shares and cash in lieu of fractional shares. The Transaction is not expected to increase significantly the total amount of taxable distributions received by the Equity Trust shareholders for this year, provided that the Equity Trust, as it expects, does not contribute securities with significant net unrealized appreciation to the Utility Fund in exchange for Utility Fund shares. In the event that the Equity Trust does contribute securities with significant net unrealized appreciation, the Transaction could result in the recognition of significant taxable gain by the Equity Trust and could increase the total amount of taxable distributions received by the Equity Trust shareholders for this year. See "Proxy Statement/Prospectus Summary - Federal Income Tax Consequences of the Transaction" and "The Transaction - Federal Income Tax Consequences of the Transaction." Costs Associated with Sales of Utility Fund Common Stock. If an Equity Trust shareholder sells the shares in the Utility Fund that he receives, the shareholder may incur brokerage commissions and the sale may constitute a taxable event for the shareholder. Industry Risks. The Utility Fund will invest a significant portion of its assets in companies in the utility industry and, as a result, the value of the Utility Fund's shares will be more susceptible to factors affecting those particular types of companies, including governmental regulation, deregulation, inflationary and other cost increases in fuel and other operating expenses and high interest costs or borrowings needed for capital construction programs, including compliance with environmental regulations. As a consequence of its concentration policy, the Utility Fund's investments may be subject to greater risk and market fluctuation than a fund that has securities representing a broader range of alternatives. See "Investment Objectives and Polices of the Utility Fund and the Equity Trust" and "Risk Factors." Foreign Securities. There is no limitation on the amount of foreign securities in which the Utility Fund may invest. The Equity Trust, in contrast, may invest up to 35% of its total assets in foreign securities. Investing in securities of foreign companies and foreign governments, which generally are denominated in foreign currencies, may involve certain risk and opportunity considerations not typically associated with investing in domestic companies and could cause the Utility Fund to be affected favorably or unfavorably by changes in currency exchange rates and revaluations of currencies. See "Investment Objectives and Policies of the Utility Fund and the Equity Trust" and "Risk Factors." Leveraging. As provided in the 1940 Act and subject to certain exceptions, the Utility Fund may issue debt or preferred stock so long as the Utility Fund's total assets, less certain ordinary course liabilities, exceed 300% of the amount of the debt outstanding and exceed 200% of the sum of the amount of preferred stock and debt outstanding and the Equity Trust may issue debt for certain restricted purposes up to 10% of its total assets and preferred stock up to the 200% asset coverage limitation. Such debt or preferred stock may be convertible in accordance with SEC staff guidelines which may permit each fund to obtain leverage at attractive rates. Use of leverage may magnify the impact on the holders of common stock of changes in net asset value and the cost of leverage may exceed the return on the securities acquired with the proceeds of leverage, thereby diminishing rather than enhancing the return to such shareholders and generally making the fund's total return to such shareholders more volatile. In addition, the fund may be required to sell investments in order to meet dividend or interest payments on the debt or preferred stock when it may be disadvantageous to do so. See "Risk Factors" and "Appendix A - Investment Practices." TABLE OF FEES AND EXPENSES
Equity Utility Trust Fund ------ ------- Shareholder Transaction Expenses Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan Fees.......................................... (1) (1) Annual Operating Expenses (as a percentage of net assets attributable to common shares) Management Fees.................................................. 1.00% 1.00% Other Expenses (2)............................................... 0.15% 0.75% ----- ----- Total Annual Operating Expenses............................ 1.15% 1.75% ----- -----
Example The following examples illustrate the projected dollar amount of cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in each of the Equity Trust and the Utility Fund. These amounts are based upon payment by each of the Equity Trust and the Utility Fund of expenses at levels set forth in the above table. You would pay the following expenses on a $1,000 investment, assuming a 5% annual return:
1 year 3 years 5 years 10 years ------ ------- ------- -------- Equity Trust (3)........................... $12 $37 $63 $140 Utility Fund (3)........................... $18 $55 $95 $206
The foregoing table is to assist you in understanding the various costs and expenses that an investor in each of the Equity Trust and the Utility Fund will bear directly or indirectly. The assumed 5% annual return is not a prediction of, and does not represent, the projected or actual performance of the Equity Trust Common Stock or the Utility Fund Common Stock. Actual expenses and annual rates of return may be more or less than those assumed for purposes of the Example. The Utility Fund is a newly-formed entity with no operating history. As such, expenses are estimated based on the anticipated size of the Utility Fund as of the date of this Proxy Statement/Prospectus. - ---------------------- (1) Shareholders participating in the Equity Trust's or the Utility Fund's Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan would pay $0.75 per transaction to purchase shares and $2.50 per transaction to sell shares. See "Distributions; Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan." (2) "Other expenses" are based on estimated amounts for the first full fiscal year for the Utility Fund and actual expenses for the year ended December 31, 1998 for the Equity Trust. (3) Amounts are exclusive of fees discussed in Note (1) above. PRO FORMA STATEMENT OF ASSETS AND LIABILITIES The following unaudited pro forma statement of assets and liabilities of the Equity Trust and the Utility Fund assumes that the Distribution occurred as of December 31, 1998, that the spin-off was at a rate of one share of the Utility Fund for every fourteen Equity Trust shares resulting in 7,579,739 shares of the Utility Fund outstanding and that the assets contributed to the Utility Fund were valued at cost.
December 31, 1998 Pro Forma Equity Trust Assets Equity Trust Utility Fund - ------------------------ ------------------- ------------------ $1,341,215,869 Investments, at value (1) $1,265,418,478 $75,797,391 41,454,278 Cash and other assets 41,454,278 - - ------------------------ ------------------- ------------------ $1,382,670,147 Total Assets $1,306,872,756 $75,797,391 - ------------------------ ------------------- ------------------ Liabilities 30,480,425 30,810,425 - - ------------------------ ------------------- ------------------ $1,352,189,722 Net Assets $1,276,062,331 $75,797,391 ======================== =================== ================== Net Assets consist of: Cumulative Preferred Stock (7.25%, $25 liquidation value, $0.001 par value, 8,000,000 shares authorized with 5,400,000 shares issued and $135,000,000 outstanding) $135,000,000 - 106,116 Common Stock at par value 106,116 $7,580 720,262,347 Additional paid-in capital 720,262,347 $75,789,811 55,868 Accumulated net investment income - - Distributions in excess of net investment income (76,071,523) - Accumulated net realized gain on investments, futures contracts and 6,820,887 foreign currency transactions 6,820,887 - Net unrealized appreciation on investments, futures contracts and 489,944,504 foreign currency transactions 489,944,504 - ======================== =================== ================== $1,352,189,722 Total Net Assets $1,276,062,331 $75,797,391 ======================== =================== ================== $11.47 Net Asset Value per common share $10.75 $10.00 ======================== =================== ================== (1) $844,193,648 Cost of investments $768,396,257 $75,797,391 Set forth below is information with respect to the Utility Fund Common Stock and the Equity Trust Common Stock following the Distribution. The following table assumes that the Distribution will be based on the 106,116,347 shares of Equity Trust Common Stock outstanding as of December 31, 1998. Amount Held by Company Amount Amount Authorized or for Its Own Account Outstanding Utility Fund Common Stock........... unlimited 0 shares 7,579,739 shares Equity Trust Common Stock........... 200,000,000 shares 0 shares 106,116,347 shares
PROPOSAL 1: TO APPROVE THE DISTRIBUTION TO EQUITY TRUST SHAREHOLDERS OF APPROXIMATELY $75 MILLION OF THE EQUITY TRUST'S NET ASSETS IN THE FORM OF SHARES OF THE GABELLI UTILITY FUND, A NEWLY-ORGANIZED CLOSED-END, REGISTERED INVESTMENT COMPANY. At the Meeting, a proposal will be presented to approve or disapprove a distribution to Equity Trust shareholders of approximately $75 million of the Equity Trust's net assets in the form of shares of the Utility Fund. The Transaction Background The Equity Trust commenced operations in August 1986 as a non-diversified, closed-end management investment company seeking long-term growth of capital primarily through investment in a portfolio of equity securities selected by the Investment Adviser. Income is a secondary objective of the Equity Trust. At December 31, 1998, the Equity Trust's net assets approximated $1.35 billion. The Equity Trust stated in its prospectus that, as a "non-diversified" investment company, the Equity Trust could concentrate investments in individual issues to a greater degree than a diversified investment company. The Board of Directors of the Equity Trust has taken several steps in order to seek to reduce any discount between the trading price of the Equity Trust's shares and the Equity Trust's net asset value. The Board of Directors has authorized the purchase of Equity Trust shares in the open market whenever a discount of 10% or more exists. Additionally, the Board has adopted a "10% distribution" policy.(1) While the Board of Directors of the Equity Trust believes that the adoption of this policy has ameliorated the discount at which the Equity Trust's shares trade, the Investment Adviser, in managing the Equity Trust's assets with a view to assuring that the Equity Trust has sufficient cash and liquidity available to be able on a consistent basis to meet its 10% distribution policy, has diversified the Equity Trust's investments to a greater extent than required under the 1940 Act and the Internal Revenue Code of 1986 (the "Code"). Additionally, the Investment Adviser has found that, in general, the Equity Trust's shareholders are conservative, dividend sensitive investors who like current income. They overwhelmingly favor the Equity Trust's 10% distribution policy. - ------------- 1 Pursuant to this policy, the Equity Trust makes quarterly distributions of $0.27 per share following the first three calendar quarters of each year and an adjusting distribution in December equal to the sum of 2.5% of the net asset value of the Equity Trust as of the last day of each of the four preceding calendar quarters less the aggregate distribution of $0.81 per share for the most recent three calendar quarters. Description of the Transaction The Board of Directors of the Equity Trust has approved, subject to shareholder approval, the contribution of a segment of the Equity Trust's net assets having a value of approximately $75 million to the Utility Fund, a newly-formed investment company organized and wholly owned by the Equity Trust. It is anticipated that the contributed assets will consist largely or exclusively of cash and short-term fixed income instruments. All the shares of Utility Fund Common Stock will then be distributed by the Equity Trust as a dividend to its shareholders at a rate of one share of Utility Fund Common Stock for every fourteen shares held of Equity Trust Common Stock. The primary investment objective of the Utility Fund is long-term growth of capital and income. Unlike the Equity Trust, which attempts to achieve its objective by investing primarily in a portfolio of equity securities of companies involved in a wide variety of industries, the Utility Fund will invest primarily in common stock and other securities of foreign and domestic companies involved to a substantial extent in providing products, services or equipment for the generation or distribution of electricity, gas, and water and the provision of telecommunications services or infrastructure operations, such as airports, toll roads and municipal services. As a result, the Utility Fund over time may be expected to experience different investment results than the Equity Trust. The Utility Fund will register under the 1940 Act as a non-diversified, closed-end investment company, and the Investment Adviser will serve as investment adviser to the Utility Fund. The advisory fee structure for the Utility Fund will be the same as that of the Equity Trust (see "Investment Advisory and Other Services"), and the Utility Fund's shares will be listed for trading on the New York Stock Exchange. The Distribution Record Date and the Distribution Date will be determined by the Board of Directors of the Equity Trust following shareholder approval of the Transaction. The investment restrictions, policy of concentration in utility businesses and other matters relating to the Utility Fund's structure are described below. See "Investment Objectives and Policies of the Utility Fund and the Equity Trust." The Board of Directors believes that the Transaction will result in the following benefits to Equity Trust shareholders: 1. The shareholders will receive shares of an investment company with a different risk-return profile than the Equity Trust, thereby providing shareholders with the following alternatives: (a) retaining their shares in both the Equity Trust and the Utility Fund; (b) selling their shares in the Utility Fund and retaining the Equity Trust shares; or (c) selling the Equity Trust's shares and retaining their shares in the Utility Fund. As a consequence, the Equity Trust's shareholders may more closely align their investment portfolio with their desired exposure to different segments of the market. Of course, if a shareholder sells his shares in either the Utility Fund or the Equity Trust, the shareholder may incur brokerage commissions and such sale may constitute a taxable event for the shareholder. 2. Shares of the Utility Fund will be issued at a much lower transaction cost to investors than is typically the case for a newly organized closed-end equity fund since there will be no underwriting discounts or commissions. Of course, the Transaction will not result in an increase in the aggregate net assets of the Equity Trust and the Utility Fund. 3. As a concentrated fund, the Utility Fund will afford shareholders the opportunity to seek the capital appreciation opportunities presented by a particular market segment. The Utility Fund's policy of concentrating in the utility industry is a fundamental policy that can be changed only with approval of the holders of a majority of the Utility Fund's outstanding voting securities. Of course, as a consequence of its concentration policy, the Utility Fund's investments may be subject to greater risk and market fluctuation than a fund that has securities representing a broader range of alternatives. 4. The Utility Fund will distribute to shareholders substantially all of its net income monthly and capital gains quarterly or more frequently pursuant to the Section 19(b) Exemptive Order. The Utility Fund intends to adopt a fixed dividend policy, at a rate to be determined, that is similar to the Equity Trust's 10% distribution policy. The dividend policy of the Utility Fund may be modified from time to time by the Utility Fund's Board of Directors (which term includes a Board of Trustees). As a regulated investment company under the Code, the Utility Fund will not be subject to U.S. federal income tax on its investment company taxable income that it distributes to shareholders, provided that at least 90% of its investment company taxable income for that taxable year is distributed to its shareholders. See "Taxation." The Board of Directors believes that the benefits of the Transaction outlined above outweigh the costs of the Transaction. For a description of the costs and expenses relating to the Transaction, see "Transaction Expenses" below. Federal Income Tax Consequences of the Transaction The Equity Trust will contribute cash and securities to the Utility Fund in exchange for shares of the Utility Fund. Such contribution should not be a taxable event to either the Equity Trust or the Utility Fund, but the subsequent distribution of Utility Fund shares to holders of Equity Trust Common Stock may be a taxable event to the Equity Trust and its shareholders as noted below. The Equity Trust does not expect that any significant amount of net unrealized appreciation will exist in the securities transferred to the Utility Fund. Accordingly, the Transaction is not expected to result in the recognition of significant taxable gain by the Equity Trust and, except as noted below, is not expected to increase significantly the total amount of taxable distributions received by Equity Trust shareholders for this year. In addition, the Board of Directors of the Equity Trust has considered the tax consequences of the Transaction to its shareholders and has determined that the benefits of the Transaction outweigh any adverse tax consequences. The distribution of Utility Fund shares and cash in lieu of fractional shares to holders of Equity Trust Common Stock will constitute a dividend to each such shareholder up to its portion of the Equity Trust's current or accumulated earnings and profits (but not in excess of the fair market value of Utility Fund shares and cash received by such shareholder) and generally will be taxable to such shareholder as a distribution of ordinary income and/or long-term capital gains. The Equity Trust's current earnings and profits for 1999 (including earnings and profits, if any, from the Transaction) will be allocated pro rata among all the Equity Trust's distributions during this year. The Equity Trust intends to contribute to the Utility Fund assets that do not reflect in the aggregate net unrealized appreciation so as to minimize any increase in the Equity Trust's earnings and profits as a result of the Transaction. To the extent that the fair market value of the distributed Utility Fund shares and cash exceeds the allocated current earnings and profits and any accumulated earnings and profits from prior years, the excess will first be treated as a non-taxable return of capital, reducing the Equity Trust Common Stock holder's tax basis in its Equity Trust shares; thereafter, any distributions in excess of the Equity Trust Common Stock holder's tax basis will be taxable as gain realized from a deemed sale of its Equity Trust shares. Each shareholder will take a fair market value tax basis in the Utility Fund shares received and will have a new holding period beginning on the date following the date of the distribution. In addition to the other information necessary to file tax returns, the Equity Trust will provide shareholders with information as to the amount of the distribution to be treated as a dividend. The Utility Fund has received an opinion of counsel to the effect that the foregoing discussion accurately summarizes the material federal income tax consequences of the Transaction. The foregoing discussion is subject to and qualified in its entirety by the discussion in "Taxation" below. Listing Application will be made to list the Utility Fund's shares on the New York Stock Exchange upon notice of issuance thereof. Although there is no current trading market for shares of Utility Fund Common Stock, it is expected that "when issued" trading of such shares will commence on the New York Stock Exchange four business days prior to the Distribution Record Date. Transaction Expenses The costs of organizing the Utility Fund and effecting the distribution of the Utility Fund's shares to the Equity Trust's shareholders, including the fees and expenses of counsel and accountants and printing, listing and registration fees, are estimated to be approximately $330,000 and will be borne by the Equity Trust. In addition, the Utility Fund will incur operating expenses on an ongoing basis, including legal, auditing, transfer agency and custodian expenses that, when aggregated with the fees payable by the Equity Trust for similar services after the distribution, will likely exceed the fees currently payable by the Equity Trust for those services. It is not expected that the Distribution will have a significant effect on the annual expenses of the Equity Trust percentage of its net assets. Manner of Effecting the Distribution If the Transaction is approved by shareholders of the Equity Trust and all other conditions thereto are satisfied, the Equity Trust's Board of Directors is expected to declare the Distribution of all the outstanding shares of Utility Fund Common Stock, payable on the Distribution Date to the holders of record of the Equity Trust Common Stock as of the close of business on the Distribution Record Date. The Distribution Record Date and the Distribution Date will be determined by the Board of Directors of the Equity Trust promptly following shareholder approval of the Transaction. The Equity Trust will effect the Distribution on the Distribution Date by providing for the delivery of shares of Utility Fund Common Stock to the Distribution Agent for distribution to holders of record of Equity Trust Common Stock as of the close of business on the Distribution Record Date. The Distribution will be made on the basis of one share of Utility Fund Common Stock for every fourteen shares of Equity Trust Common Stock outstanding on the Distribution Record Date. All such shares of Utility Fund Common Stock will be fully paid and nonassessable. The holders of Utility Fund Common Stock will have no preemptive rights to subscribe for additional shares of Utility Fund Common Stock or other securities of the Utility Fund. See "Description of Common Stock of the Utility Fund and the Equity Trust - Utility Fund Common Stock." Commencing on or about the Distribution Date, certificates representing shares of Utility Fund Common Stock will be mailed to persons holding Utility Fund Common Stock on the Distribution Record Date or credited in book-entry form to accounts registered directly with the transfer agent, with a confirmation statement mailed to shareholders. Fractional shares of Utility Fund Common Stock will only be issued as part of the Distribution to holders of Equity Trust Common Stock who are participants in the Equity Trust Plan. The Distribution Agent will aggregate the fractional shares to which holders who are not participants in the Equity Trust Plan would otherwise be entitled and attempt to sell them in the open market at then prevailing prices on behalf of such holders, and such holders will receive instead a cash payment in the amount of their pro rata share of the total sales proceeds. Thus, a person who holds a number of shares of Equity Trust Common Stock that is not an even multiple of fourteen and who is not a participant in the Equity Trust Plan will receive the appropriate number of shares of and a check for his or her pro rata share of the proceeds from sales of fractional share interests. A holder of fewer than fourteen shares of Equity Trust Common Stock who is not a participant in the Equity Trust Plan will receive no shares of Utility Fund Common Stock in the Distribution but will be entitled only to his or her pro rata share of the proceeds from sales of fractional share interests. Sales of fractional shares of Utility Fund Common Stock are expected to be made as soon as practicable after the Distribution Date and checks representing proceeds of fractional share sales of Utility Fund Common Stock will be mailed shortly thereafter. The Utility Fund will bear the cost of commissions incurred in connection with such sales. In addition, holders of Equity Trust Common Stock may purchase up to 500 additional shares of the Utility Fund (acquired through open market purchases at market prices) from Gabelli & Company, Inc., the broker-dealer affiliate of the Investment Adviser, without a commission in order to round up their positions to even round lots. No holder of Equity Trust Common Stock will be required to pay to the Equity Trust any cash or other consideration for the shares of Common Stock received in the Distribution or to surrender or exchange shares of Equity Trust Common Stock in order to receive shares of Utility Fund Common Stock. The Distribution will not affect the number of, nor the rights attaching to, outstanding shares of Equity Trust Common Stock. Shares of Utility Fund Common Stock distributed in connection with the Distribution will be freely transferable, except for shares received by persons who may be deemed to be "affiliates" of the Utility Fund under the 1933 Act. Persons who may be deemed to be "affiliates" of the Utility Fund after the Distribution generally include individuals or entities that control, are controlled by or are under common control with the Utility Fund, and may include certain officers and directors (which term includes trustees) of the Utility Fund as well as principal shareholders of the Utility Fund. Persons who are affiliates of the Utility Fund will be permitted to sell their shares of the Utility Fund Common Stock only pursuant to an effective registration statement under the 1933 Act or an exemption from the registration requirements of the 1933 Act, such as the exemptions afforded by Section 4(2) of the 1933 Act and Rule 144 thereunder. Costs Associated with Sales of Utility Fund Common Stock If an Equity Trust shareholder sells the shares of Utility Fund Common Stock that he receives in the Distribution, the shareholder may incur brokerage commissions and the sale may constitute a taxable event for the shareholder. Allocation of Investment Opportunities After the distribution of shares in the Utility Fund, the Equity Trust and the Utility Fund and other clients of the Investment Adviser or its affiliates may purchase or sell the same securities. The Investment Adviser follows a policy of allocating purchases and sales of the same security among the Equity Trust and other managed accounts in a manner deemed fair and equitable to all accounts. See "Portfolio Transactions and Brokerage." Investment Objectives and Policies of the Utility Fund and the Equity Trust The primary investment objective of the Utility Fund is long-term growth of capital and income. The primary investment objective of the Equity Trust is long-term capital appreciation, with income as a secondary objective. Unlike the Equity Trust, which attempts to achieve its objective by investing primarily in a portfolio of equity securities of companies in a wide variety of industries, the Utility Fund will invest primarily in common stock and other securities of foreign and domestic utility companies involved to a substantial extent in providing products, services or equipment for the generation or the distribution of electricity, gas, and water, the provision of telecommunications services or infrastructure operations, such as airports, toll roads and municipal services. The Utility Fund's investment objectives are "fundamental" and therefore may not be changed without the approval of the holders of a majority of the Utility Fund's outstanding voting securities, as defined in the 1940 Act. Except as expressly stated herein, none of the Utility Fund's policies are fundamental and may be modified by the Board of Directors without shareholder approval. The Utility Fund The Utility Fund will attempt to achieve its objectives by investing, under normal market conditions, at least 65% of its total assets in common stock and other securities of foreign and domestic companies in the utility industry. Such industry is generally associated with electric, gas, gas pipeline, telephone, telecommunications, water, cable, airport, seaport, toll road, water disposal and other municipal services companies. It is anticipated that the Utility Fund will invest primarily in equity securities of companies in the utility industry. However, the Utility Fund may also invest in preferred stocks and debt securities of any quality and any maturity of such companies when it appears that the Utility Fund will be better able to achieve its investment objective through investments in such securities or when the Utility Fund is temporarily in a defensive position. The remaining 35% of its assets may be invested in other securities, including stocks, debt obligations and money market instruments, as well as certain derivative instruments in the utility industry or other industries. Moreover, should extraordinary conditions affecting such sectors or securities markets as a whole warrant, the Utility Fund may temporarily be primarily invested in money market instruments. The companies in which the Utility Fund may invest are those that are engaged to a substantial extent in providing products, services or equipment anywhere in the world relating to the generation or distribution of electricity, gas, water and the provision of telecommunications services or infrastructure operations, such as airports, toll roads and municipal services. Although many of these companies traditionally pay above average dividends, the Utility Fund intends to focus on those companies whose securities have the potential to increase in value. The Utility Fund's performance is expected to reflect conditions affecting public utility industries. These industries are sensitive to factors such as interest rates, local and national government regulations, the price and availability of fuel, environmental protection or energy conservation regulations, the level of demand for services, and the risks associated with constructing and operating nuclear power facilities. These factors may change rapidly. The Utility Fund emphasizes quality in selecting utility investments, and looks for companies that have proven dividend records and sound financial structures. Believing that the industry is under consolidation due to changes in regulation, the Utility Fund intends to position itself to take advantage of trends in consolidation. Under normal circumstances the Utility Fund may invest in securities of issuers located in countries other than the United States. Investing in securities of foreign issuers, which generally are denominated in foreign currencies, may involve certain risk and opportunity considerations not typically associated with investing in domestic companies and could cause the Utility Fund to be affected favorably or unfavorably by changes in currency exchange rates and revaluations of currencies. For a further discussion of the risks associated with investing in foreign securities and a description of other risks inherent in the Utility Fund's investment objectives and policies, see "Investment Objectives and Policies of the Utility Fund and the Equity Trust" and "Risk Factors." The Equity Trust The Equity Trust attempts to achieve its objectives by investing primarily in a portfolio of equity securities consisting of common stock, preferred stock, convertible or exchangeable securities and warrants and rights to purchase such securities, selected by the Investment Adviser. Investment Methodology of the Equity Trust and the Utility Fund In selecting securities for the Equity Trust or the Utility Fund, the Investment Adviser normally will consider the following factors, among others: (1) the Investment Adviser's own evaluations of the private market value, cash flow, earnings per share and other fundamental aspects of the underlying assets and business of the company; (2) the potential for capital appreciation of the securities; (3) the interest or dividend income generated by the securities; (4) the prices of the securities relative to other comparable securities; (5) whether the securities are entitled to the benefits of call protection or other protective covenants; (6) the existence of any anti-dilution protections or guarantees of the security; and (7) the diversification of the portfolio of the Equity Trust or the Utility Fund as to issuers. The Investment Adviser's investment philosophy with respect to debt and equity securities seeks to identify assets that are selling in the public market at a discount to their private market value, which the Investment Adviser defines as the value informed purchasers are willing to pay to acquire assets with similar characteristics. The Investment Adviser also normally evaluates the issuers' free cash flow and long-term earnings trends. Finally, the Investment Adviser looks for a catalyst -- something in the company's industry or indigenous to the company or country itself that will surface additional value. The investment objectives of long-term growth of capital and income are fundamental policies of both the Equity Trust and the Utility Fund. The Utility Fund's policy of concentration in companies in the utility industry is also a fundamental policy of the Utility Fund. Fundamental policies may not be changed without the authorization of a Majority Vote (as hereinafter defined) of the fund's shareholders. Risk Factors Industry Risks. The Utility Fund will invest a significant portion of its assets in particular types of companies, and, as a result, the value of the Utility Fund's shares will be more susceptible to factors affecting those particular types of companies, including governmental regulation, inflation, cost increases in fuel and other operating expenses and high interest costs such as borrowings needed for capital construction programs, including compliance with environmental regulations. The Equity Trust, on the other hand, has historically been broadly diversified across industry groups. Various regulatory regimes impose limitations on the percentage of the shares of a public utility held by an investment for its clients. These limitations may unfavorably restrict the ability of the Utility Fund to make certain investments. In addition, deregulation of the utility industry could have a positive or negative impact on the Utility Fund's shares. The Investment Adviser believes that certain utility companies' fundamentals should continue to improve as the industry undergoes deregulation. Companies may seek to strengthen their competitive positions through mergers and takeovers. The loosening of the regulation governing utilities should encourage convergence within the industry Improving earnings prospects, strong cash flows, share repurchases and takeovers from industry consolidation may tend to boost share prices. However, certain companies may be less able to meet the challenge of deregulation as competition increases and investments in these companies would not be likely to perform well. Long-Term Objective. Each of the Equity Trust and the Utility Fund is intended for investors seeking long-term capital growth and income. Neither the Equity Trust nor the Utility Fund is meant to provide a vehicle for those who wish to play short-term swings in the stock market. An investment in shares of the Equity Trust and/or shares of the Utility Fund should not be considered a complete investment program. Each shareholder should take into account the shareholder's investment objectives as well as the shareholder's other investments when considering the Transaction. Non-Diversified Status. The Equity Trust and the Utility Fund each is classified as a "non-diversified" investment company under the 1940 Act, which means neither the Equity Trust nor the Utility Fund is limited by the 1940 Act in the proportion of its assets that may be invested in the securities of a single issuer. However, the Equity Trust has in the past conducted and the Equity Trust and the Utility Fund each intends to conduct its operations so as to qualify as a "regulated investment company" for purposes of the Code, which will relieve it of any liability for federal income tax to the extent its earnings are distributed to shareholders. See "Taxation." To so qualify, among other requirements, the Equity Trust and the Utility Fund each will limit its investments so that, at the close of each quarter of the taxable year, (i) not more than 25% of the market value of its total assets will be invested in the securities of a single issuer, and (ii) at least 50% of the market value of its assets is represented by cash, securities of other regulated investment companies, U.S. government securities and other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of its assets and not greater than 10% of the outstanding voting securities of such issuer. The investments of the Equity Trust and the Utility Fund in U.S. Government Securities are not subject to these limitations. Because the Equity Trust and the Utility Fund, as non-diversified investment companies, may invest in the securities of individual issuers to a greater degree than a diversified investment company, an investment in the Equity Trust or the Utility Fund may, under certain circumstances, present greater risk to an investor than an investment in a diversified company. Market Value and Net Asset Value. The Utility Fund is a newly organized, non-diversified, closed-end management investment company with no previous operating history. Shares of closed-end investment companies frequently trade at a discount from net asset value. The characteristic of shares of a closed-end fund is a risk separate and distinct from the risk that the Utility Fund's net asset value will decrease. The Equity Trust cannot predict whether the Utility Fund's shares will trade at, below or above net asset value. The risk of holding shares of a closed-end fund that might trade at a discount is more pronounced for shareholders who wish to sell their shares in a relatively short period of time after the Distribution because, for those investors, realization of a gain or loss on their investments is likely to be more dependent upon the existence of a premium or discount than upon portfolio performance. The Utility Fund's shares are not subject to redemption. Shareholders desiring liquidity may, subject to applicable securities laws, trade their shares in the Utility Fund on the New York Stock Exchange or other markets on which such shares may trade at the then current market value, which may differ from the then current net asset value. For information concerning the trading history of the Equity Trust's shares, see "Description of Common Stock of the Utility Fund and the Equity Trust - Equity Trust Common Stock." Lower Rated Securities. The Equity Trust and the Utility Fund each may invest up to 10% of its total assets in fixed-income securities rated in the lower rating categories of recognized statistical rating agencies, such as securities rated "CCC" or lower by S&P or "Caa" or lower by Moody's, Inc., or non-rated securities of comparable quality. These debt securities are predominantly speculative and involve major risk exposure to adverse conditions and are often referred to in the financial press as "junk bonds." Foreign Securities. The Equity Trust may invest up to 35% of its total assets in foreign securities. There is no limitation on the amount of foreign securities in which the Utility Fund may invest. Investing in securities of foreign companies and foreign governments, which generally are denominated in foreign currencies, may involve certain risk and opportunity considerations not typically associated with investing in domestic companies and could cause the Equity Trust or the Utility Fund to be affected favorably or unfavorably by changes in currency exchange rates and revaluations of currencies. In addition, less information may be available about foreign companies and foreign governments than about domestic companies and foreign companies and foreign governments generally are not subject to uniform accounting, auditing and financial reporting standards or to other regulatory practices and requirements comparable to those applicable to domestic companies. Foreign securities and their markets may not be as liquid as U.S. securities and their markets. Securities of some foreign companies may involve greater market risk than securities of U.S. companies. Investment in foreign securities may result in higher expenses than investing in domestic securities because of the payment of fixed brokerage commissions on foreign exchanges, which generally are higher than commissions on U.S. exchanges, and the imposition of transfer taxes or transaction charges associated with foreign exchanges. Investment in foreign securities also may be subject to local economic or political risks, including instability of some foreign governments, the possibility of currency blockage or the imposition of withholding taxes on dividend or interest payments, and the potential for expropriation, nationalization or confiscatory taxation and limitations on the use or removal of funds or other assets. Among the foreign securities in which the Equity Trust and the Utility Fund may invest are those issued by companies located in developing countries, which are countries in the initial stages of their industrialization cycles. Investing in the equity and debt markets of developing countries involves exposure to economic structures that are generally less diverse and less mature, and to political systems that can be expected to have less stability, than those of developed countries. The markets of developing countries historically have been more volatile than the markets of the more mature economies of developed countries, but often have provided higher rates of return to investors. The Equity Trust and the Utility Fund each may also invest in debt securities of foreign governments. For a further description of lower rated securities and the risks associated therewith, see Appendix A. For a description of the ratings categories of certain recognized statistical ratings agencies, see Appendix D. Risks to Holders of Common Stock of Issuance of Senior Securities. A leveraged capital structure creates certain special risks and potential benefits not associated with unleveraged funds having similar investment objectives and policies. Any investment income or gains from the capital represented by preferred shares or debt which is in excess of the dividends payable thereon will cause the total return of the common shares to be higher than would otherwise be the case. Conversely, if the investment performance of the capital represented by preferred shares or debt fails to cover the dividends payable thereon, the total return of the common shares would be less or, in the case of negative returns, would result in higher negative returns to a greater extent than would otherwise be the case. The requirement to pay dividends on preferred shares or debt in full before any dividends may be paid on the common shares means that dividends on the common shares from earnings may be reduced or eliminated. The mandatory requirements of the 1940 Act could also pose certain risks for the holders of Common Stock in the same circumstances. If the asset coverage for any preferred shares or debt securities falls below the requirements of the 1940 Act, a fund would be unable to pay dividends on its common shares. Although an inability to pay dividends on the common shares could conceivably cause a fund to lose its special federal income tax status, which would be materially adverse to the holders of the common shares, such inability can be avoided through the use of mandatory redemption requirements designed to ensure that the fund maintains the necessary asset coverage. The class voting rights of preferred shares could make it more difficult for a fund to take certain actions that may, in the future, be proposed by the Board and/or the holders of Common Stock, such as a merger, exchange of securities, liquidation or alteration of the rights of a class of the Utility Fund's securities if such actions would be adverse to the preferred shares, or such as changing to an open-end investment company or acting inconsistently with its fundamental investment restrictions or other fundamental policies or seeking to operate other than as an investment company. The Equity Trust currently has preferred shares outstanding. Preferred shares (additional preferred shares in the case of the Equity Trust) will be issued only if the Board of the Utility Fund or the Equity Trust, as the case may be, determines in light of all relevant circumstances known to the Board that to do so would be in the best interests of the fund and its shareholders. The circumstances that the Board will consider before issuing preferred shares, include not only the dividend rate on the preferred shares in comparison of the historical performance of the fund but also such matters as the terms on which the fund can call the preferred shares, the circumstances in which the Investment Adviser will earn additional investment advisory fees on the net assets attributable to the preferred shares and the ability of the fund to meet the asset coverage tests and other requirements imposed by the rating agencies for such preferred shares. The issuance of preferred shares convertible into shares of common stock might also reduce net income per share of such shares and net asset value per share of such shares if these securities are converted into common stock. Such income dilution would occur if the fund could, from the investments made with the proceeds of the preferred shares, earn an amount per common share issuable upon conversion greater than the dividend required to be paid on the amount of preferred stock convertible into one share of common stock. Such net asset value dilution would occur if preferred shares were converted at a time when the net asset value per common share was greater than the conversion price. Temporary Investments. During temporary defensive periods and during inopportune periods to be fully invested the Equity Trust and the Utility Fund each may invest in U.S. Government Securities and in money market mutual funds not affiliated with the Investment Adviser that invest in those securities. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association, are supported by the "full faith and credit" of the U.S. Government; others, such as those of the Export-Import Bank of the U.S., are supported by the right of the issuer to borrow from the U.S. Treasury; others, such as those of the Federal National Mortgage Association, are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; and still others, such as those of the Student Loan Marketing Association, are supported only by the credit of the instrumentality. No assurance can be given that the U.S. Government would provide financial support to U.S. Government-sponsored instrumentalities if it is not obligated to do so by law. Other Investments. The Equity Trust and the Utility Fund each is permitted to invest in securities subject to reorganization, repurchase agreements, options and futures contracts, engage in forward currency transactions and enter into forward commitments for the purchase or sale of securities, including on a "when issued" or "delayed delivery" basis and the Utility Fund may make short sales of securities. See Appendix A for a discussion of these investments and techniques and the risks associated with them. Investment Restrictions The Equity Trust and the Utility Fund operate under the investment restrictions described in Appendix B. The same investment restrictions apply to both the Equity Trust and the Utility Fund except as described in Appendix B. Management of Utility Fund and the Equity Trust Directors and Officers Overall responsibility for management and supervision of each of the Equity Trust and the Utility Fund rests with its Board of Directors. The Board of each fund approves all significant agreements between the fund and the companies that furnish the fund with services, including agreements with the Investment Adviser, the fund's custodian and the fund's transfer agent. The day-to-day operations of each of the Equity Trust and the Utility Fund are delegated to the Investment Adviser. With the exception of Anthony J. Colavita, Vincent D. Enright and John D. Gabelli, who will serve as directors of the Utility Fund, the same persons who currently serve as directors of the Equity Trust are also directors of the Utility Fund, and the principal officers of the Equity Trust hold the same or similar offices with the Utility Fund. The names and business addresses of the directors and principal officers of the Equity Trust and of the Utility Fund are set forth in the following table, together with their positions and their principal occupations during the past five years and, in the case of the directors, their positions with certain other organizations and companies. Directors who are "interested persons" of the Equity Trust and the Utility Fund, as defined by the 1940 Act, are indicated by an asterisk. Directors who are solely elected by the holders of the Equity Trust's Cumulative Preferred Stock are indicated by a "+".
Position with the Equity Trust Number and Percentage of and the Utility Fund and Equity Trust Shares Beneficially Principal Occupation Owned** Directly or Name and Business Address (Age) During Past Five Years Indirectly on March 17, 1999 ------------------------- ---------------------- ---------------------------- Common Preferred Dr. Thomas E. Bratter (60) Director of the Equity Trust and the 10,802*** 0 One Corporate Center Utility Fund. Director, President and Rye, NY 10580-1434 Founder, The John Dewey Academy (residential college preparatory therapeutic high school). (10) Bill Callaghan (54) Director of the Equity Trust and the 959*** 0 One Corporate Center Utility Fund. President of Bill Rye, NY 10580-1434 Callaghan Associates Ltd., an executive search company. (3)(10) +Felix J. Christiana (73) Director of the Equity Trust and the 36,415*** 1000*** Anthony J. Colavita Utility Fund. Retired; formerly One Corporate Center Senior Vice President of Dollar Dry Rye, NY 10580-1434 Dock Savings Bank. (1)(2)(3)(4)(5)(8)(10)(13) Anthony J. Colavita (62 ) President and Attorney at law in the One Corporate Center law firm of Anthony J. Colavita, P.C. 0 0 Rye, NY 10580-1434 since 1961. (1)(2)(3)(4)(6)(7)(8) (9)(11)(12)(13)(14) + James P. Conn (61) Director of the Equity Trust and the 23,251*** 4000*** One Corporate Center Utility Fund. Former Managing Rye, New York 10580-1434 Director and Chief Investment Officer of Financial Security Assurance Holdings Ltd., 1992- 1998; Director of Meditrust Corporation (real estate investment trust); Director of First Republic Bank. (1)(2)(10)(14) Vincent D. Enright (55) Director of the Utility Fund. 0 0 One Corporate Center Former Senior Vice President and Rye, NY 10580-1434 Chief Financial Officer of KeySpan Energy Corporation through 1998. Frank J. Fahrenkopf, Jr. (59) Director of the Equity Trust and the 0 0 One Corporate Center Utility Fund. President and CEO of Rye, New York 10508-1434 the American Gaming Association since June 1995; Partner of Hogan & Hartson; Chairman of International Trade Practice Group. Co-Chairman of the Commission on Presidential Debates; former Chairman of the Republican National Committee. * Mario J. Gabelli (56) Chairman of the Board, President 1,188,018 (1.12%) 0 One Corporate Center and Chief Investment Officer of the Rye, New York 10580-1434 Equity Trust and the Utility Fund. Chairman of the Board, Chief Executive Officer of Gabelli Asset Management Inc. and Chief Investment Officer of the Investment Adviser and GAMCO Investors, Inc; Chairman of the Board and Chief Executive Officer of Lynch corporation (diversified manufacturing and communications services company); Director of East/West Communications Inc. (1)(2)(3)(4)(5) (6)(7)(8)(9)(10)(11)(12) * John D. Gabelli (53) Senor Vice President of Gabelli & 0 0 One Corporate Center Company, Inc. and Director of Rye, New York 10580-1434 Gabelli Advisers, Inc. (1)(2)(5)(8) * Karl Otto Pohl (69) Director of the Equity Trust and the 0 0 One Corporate Center Utility Fund. Member of the Rye, New York 10580-1434 Shareholder Committee of Sal. Oppenheim Jr. & Cie (private investment bank); Board Member of TrizecHahn Corporation (real estate company) and Zurich Versicherungs- Gesellschaft (Insurance company); Director of Gabelli Asset Management Inc. Former President of the Deutsche Bundesbank and Chairman of its Central Bank Council from 1980 through 1991. (1)(2)(3)(4)(5)(6)(7)(8) (9)(10)(11)(12)(13)(14) Anthony R. Pustorino (73) Director of the Equity Trust and the 9,617*** 0 One Corporate Center Utility Fund. Certified Public Rye, New York 10580-1434 Accountant, Professor of Accounting, Pace University, since 1965. (1)(2)(3) (4)(5)(10)(11)(13) * Salvatore J. Zizza (53) Director of the Equity Trust and the 31,102*** 0 One Corporate Center Utility Fund; Adviser to The Gabelli Rye, New York 10580-1434 Growth Fund; Chairman of The Bethlehem Corp.; Board Member of Hollis Eden Pharmaceuticals; Former Executive Vice President of FMG Group (a healthcare provider); Former President and Chief Executive Officer of the Lehigh Group Inc. (an electrical supply wholesaler); Former Chairman of the Executive Committee and Director of Binnings Building Products, Inc.; (1)(4)(10) Directors and Officers as a Group 1,302,548 5,000*** (1.23%) Bruce N. Alpert (47) Vice President and Treasurer of the One Corporate Center Equity Trust and the Utility Fund. Rye, New York 10580-1434 Executive Vice President and Chief Operating Officer of the Investment Adviser since June 1988; Director and President of Gabelli Advisers, Inc.; Officer of all other registered investment companies advised by the Investment Adviser; Vice President of The Treasurer's Fund Inc.; Vice President of Gabelli Westwood Funds. James E. McKee (36) Secretary of the Equity Trust and the One Corporate Center Utility Fund. Vice President, Rye, New York 10580-1434 General Counsel and Secretary of the Investment Adviser (since 1995) and Vice President and General Counsel of GAMCO Investors, Inc. (since 1993); Secretary of the registered investment companies advised by the Investment Adviser and its affiliates; Branch Chief of the Securities and Exchange Commission -- Northeast Regional Office, 1992-1993. Marc S. Diagonale (32) Vice President of the Equity Trust. One Corporate Center Client services representative of Rye, New York 10580-1434 Gabelli & Company, Inc. since March 1993. - ---------------- * "Interested person" of the Equity Trust and the Utility Fund, as defined in the 1940 Act. Mr. Mario Gabelli is an "interested person" of each fund as a result of his employment as an officer of the fund and the Investment Adviser. Messrs. John and Mario Gabelli are registered representatives of an affiliated broker-dealer. Mr. Pohl is a director of the parent company of the Investment Adviser. Mr. Zizza may be an "interested person" as a result of his previous association within the last three years with Binnings Building Products, Inc., an entity which was controlled by GLI, Inc., an affiliate of the Investment Adviser. ** For this purpose "beneficial ownership" is defined under Section 13(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act"). The information as to beneficial ownership is based upon information furnished to the Equity Trust by the Directors. *** Less than 1%.
(1) Director of The Gabelli Asset Fund. (8) Director of Gabelli Global Series Funds, Inc. (2) Director of The Gabelli Growth Fund. (9) Director of Gabelli Gold Fund, Inc. (3) Director of The Gabelli Value Fund Inc. (10) Director of The Gabelli Global Multimedia Trust (4) Director of The Gabelli Convertible Securities Inc. Fund, Inc. (11) Director of Gabelli Capital Series Funds (5) Director of Gabelli Equity Series Funds, Inc. (12) Director of Gabelli International Growth Fund, (6) Director of The Gabelli Money Market Funds Inc. (7) Director of Gabelli Investor Funds, Inc. (13) Director of the Treasurer's Fund, Inc. (14) Director of the Gabelli Westwood Funds
The Board of Directors of the Equity Trust and the Utility Fund are each divided into three classes, with a class having a term of three years except as described below. Each year the term of office of one class of directors of the Equity Trust and one class of directors of the Utility Fund will expire. However, to ensure that the term of a class of the Utility Fund's directors expires each year, one class of the Utility Fund's directors will serve an initial one-year term and three-year terms thereafter and another class of its directors will serve an initial two-year term and three-year terms thereafter. The terms of Messrs. Callaghan, Fahrenkopf and Zizza as directors of the Equity Trust expire in 1999 (See Proposal 2) and as directors of the Utility Fund in 2002; the terms of Messrs. Conn, Pohl and Pustorino as directors of the Equity Trust and of the Utility Fund expire in 2000; the terms of Messrs. Bratter, Christiana and Mario Gabelli as directors of the Equity Trust and the Utility Fund expire in 2001. The terms of Messrs. John Gabelli, Enright and Colavita as directors of the Utility Fund expire in 2000, 2001 and 2002, respectively. See "Description of Common Stock of the Utility Fund and the Equity Trust--Certain Provisions of the Governing Documents of the Equity Trust and the Utility Fund." Non-Resident Directors Karl Otto Pohl, a director of the Equity Trust and of the Utility Fund, resides outside the United States and substantially all of his assets are located outside the United States. Mr. Pohl has not authorized an agent in the United States to receive notice of service of process. Consequently, it may be difficult for shareholders to effect service of process upon him within the United States or to realize against him upon judgments of courts in the United States predicated upon civil liability under the United States federal securities laws. In addition, it is not certain that civil liabilities predicated upon the U.S. federal securities laws on which a valid judgment of a court in the United States is obtained would be enforceable in German courts. Remuneration of Directors and Officers The Equity Trust pays each director not affiliated with the Investment Adviser or its affiliates, a fee of $12,000 per year plus $1,500 per meeting attended, together with the director's actual out-of-pocket expenses relating to attendance at meetings. The aggregate remuneration paid by the Equity Trust to such directors during the fiscal year ended December 31, 1998, amounted to $156,500. For a description of the remuneration received by each director of the Equity Trust individually and the total remuneration received by each such director from funds in the Gabelli complex for the fiscal year ended December 31, 1998, see "Proposal 2 - Compensation Table." The Utility Fund will pay each director who is not affiliated with the Investment Adviser or its affiliates a fee of $3,000 per year plus $500 per meeting attended, together with each director's actual out-of-pocket expenses relating to attendance at such meetings. Since July 15, 1994, Marc S. Diagonale, Vice President of the Equity Trust, has performed shareholder services on behalf of the Equity Trust. Mr. Diagonale will perform similar services on behalf of the Utility Fund. He currently receives a salary from the Equity Trust at the annual rate of $115,000. Investment Advisory and Other Services Investment Adviser The Investment Adviser, together with other affiliated investment advisers, has assets under management totaling $16.2 billion. Gabelli Funds, LLC, a New York limited liability company, with offices at One Corporate Center, Rye, New York 10580-1434, is investment adviser (the "Investment Adviser") to the Equity Trust and to the Utility Fund. The Investment Adviser was organized in 1999 and is the successor to Gabelli Funds, Inc. which was organized in 1980. As of December 31, 1998, the Investment Adviser and its affiliates act as registered investment advisers to 13 management investment companies with aggregate net assets of $7.2 billion. GAMCO Investors, Inc., an affiliate of the Investment Adviser, acts as investment adviser for individuals, pension trusts, profit sharing trusts and endowments, having aggregate assets of $8.0 billion under management as of December 31, 1998. Gabelli Fixed Income LLC, an affiliate of the Investment Adviser, acts as investment adviser for the Treasurer's Funds and separate accounts having aggregate assets under management of $1.5 billion. The Investment Adviser is a wholly-owned subsidiary of Gabelli Asset Management Inc., a New York corporation, whose Class A Common Stock is traded on the New York Stock Exchange under the symbol "GBL ." Mr. Mario J. Gabelli may be deemed a "controlling person" of the Investment Adviser on the basis of his ownership of a majority of the stock of the Gabelli Group Capital Partners, Inc., which owns 80% of the capital stock of Gabelli Asset Management Inc. There is no contract of employment between the Investment Adviser and Mr. Gabelli, although, Mr. Gabelli has entered into a three year employment agreement with Gabelli Asset Management Inc., the parent company of the Investment Adviser. There can be no assurance that a suitable replacement could be found for Mr. Gabelli in the event of his death, resignation, retirement or inability to act on behalf of the Investment Adviser. Investment Advisory Agreements The terms of Investment Advisory Agreement between the Utility Fund and the Investment Adviser, which becomes effective on the consummation of the Transaction, are identical to those of the Investment Advisory Agreement between the Equity Trust and the Investment Adviser (each such agreement, an "Advisory Agreement"). Under the terms of each Advisory Agreement, the Investment Adviser manages the portfolio of the fund in accordance with its stated investment objective and policies, makes investment decisions for the fund, places orders to purchase and sell securities on behalf of the fund and manages its other business and affairs, all subject to the supervision and direction of the fund's Board of Directors. In addition, under each Advisory Agreement, the Investment Adviser oversees the administration of all aspects of the fund's business and affairs and provides, or arranges for others to provide, at the Investment Adviser's expense, certain enumerated services, including maintaining the fund's books and records, preparing reports to the fund's shareholders and supervising the calculation of the net asset value of its shares. All expenses of computing the net asset value of the Utility Fund or the Equity Trust, including any equipment or services obtained solely for the purpose of pricing shares or valuing its investment portfolio, will be an expense of the fund under its respective Advisory Agreement unless the Adviser voluntarily assumes responsibility for such expense. Each Advisory Agreement combines investment advisory and administrative responsibilities in one agreement. For services rendered by the Investment Adviser on behalf of each fund under the fund's Advisory Agreement, the fund pays the Investment Adviser a fee computed daily and paid monthly at the annual rate of 1.00% of the average weekly net assets of the fund. The Advisory Agreements provide that in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard for its obligations and duties thereunder, the Investment Adviser is not liable for any error or judgment or mistake of law or for any loss suffered by the Equity Trust or the Utility Fund. As part of the Advisory Agreements, the Equity Trust and the Utility Fund each has agreed that the name "Gabelli" is the Investment Adviser's property, and that in the event the Investment Adviser ceases to act as an investment adviser to the fund, the fund will change its name to one not including "Gabelli." Pursuant to its terms, each Advisory Agreement will remain in effect with respect to the Equity Trust or the Utility Fund, as the case may be, until the second anniversary of shareholder approval of such Agreement, and from year to year thereafter if approved annually (i) by the fund's Board of Directors or by the holders of a majority of its outstanding voting securities and (ii) by a majority of the Directors who are not "interested persons" (as defined in the 1940 Act) of any party to the Advisory Agreement, by vote cast in person at a meeting called for the purpose of voting on such approval. Each Advisory Agreement terminates automatically on its assignment and may be terminated without penalty on 60 days' written notice at the option of either party thereto or by a Majority Vote. Portfolio Management Mario J. Gabelli, Chief Investment Officer of the Equity Trust, has managed the Equity Trust's assets since its inception and, as Chief Investment Officer of the Utility Fund, will be the leader of a team which will manage the Utility Fund's assets. For a list of Mr. Gabelli's other affiliations, see "Management of the Utility Fund and the Equity Trust--Directors and Officers." Administrator The Investment Adviser has entered into an Administration Contract with First Data Investor Services Group Inc. (the "Administrator") pursuant to which the Administrator provides certain administrative services necessary for the Equity Trust's operations which do not include the investment advisory and portfolio management services provided by the Investment Adviser. For these services and the related expenses borne by the Administrator, the Investment Adviser pays a prorated monthly fee at the annual rate of .10% of the first $1.0 billion of the aggregate average net assets of the Equity Trust and all other funds advised by the Investment Adviser and administered by the Administrator, .08% of the aggregate average net assets exceeding $1.0 billion, .03% of the aggregate average net assets in excess of $1.5 billion and .02% of the aggregate net assets in excess of $3.0 billion (with a minium annual fee of $30,000 per portfolio), which, together with the services to be rendered, is subject to negotiation between the parties. The Administrator has its principal office at 101 Federal Street, Boston MA 02110. The Investment Adviser will enter into an Administration Agreement with the Administrator pursuant to which the Administrator will provide certain administrative services necessary for the Utility Fund's operations but which do not concern the investment advisory and portfolio management services provided by the Investment Adviser. These services include the preparation and distribution of materials for meetings of the Utility Fund's Board of Directors, compliance testing of the Utility Fund's activities and assistance in the preparation of proxy statements, reports to shareholders and other documentation. For such services and the related expenses borne by the Administrator, the Investment Adviser will pay the Administrator a monthly fee at the annual rate of .10% of the average daily net assets of the Utility Fund (with a minimum annual fee of $30,000 and subject to reduction to (i) .08% of the aggregate assets exceeding $1 billion, (ii) .03% of the aggregate assets managed by the Investment Adviser and administered by the Administrator in excess of $1.5 billion and (iii) .02% of such assets in excess of $3.0 billion) which, together with the services to be rendered, is subject to negotiation between the parties and both parties retain the right unilaterally to terminate the arrangement on 60 days' written notice. Payment of Expenses For purposes of the calculation of the fees payable to the Investment Adviser by the Equity Trust and the Utility Fund, respectively, average weekly net assets of each of the Equity Trust and the Utility Fund are determined at the end of each month on the basis of its average net assets for each week during the month. The assets for each weekly period are determined by averaging the net assets at the end of a week with the net assets at the end of the prior week. The Investment Adviser will be obligated to pay expenses associated with providing the services contemplated by the respective Advisory Agreements including compensation of and office space for its officers and employees connected with investment and economic research, trading and investment management and administration of the Equity Trust and the Utility Fund, as well as the fees of all directors of the Equity Trust and of the Utility Fund who are affiliated with the Investment Adviser or any of its affiliates. The Equity Trust and the Utility Fund each pays all other expenses incurred in its operation including, among other things, expenses for legal and independent accountants' services, costs of printing proxies, stock certificates and shareholder reports, charges of the custodian, any subcustodian and transfer and dividend paying agent, expenses in connection with its respective Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan, Securities and Exchange Commission ("SEC") fees, fees and expenses of unaffiliated directors, accounting and pricing costs, membership fees in trade associations, fidelity bond coverage for its officers and employees, directors' and officers' errors and omission insurance coverage, interest, brokerage costs, taxes, stock exchange listing fees and expenses, expenses of qualifying its shares for sale in various states, litigation and other extraordinary or non-recurring expenses, and other expenses properly payable by the Equity Trust or the Utility Fund, as the case may be. Portfolio Transactions and Brokerage The Equity Trust's practices and policies with respect to portfolio transactions and brokerage are described under "Additional Information--Portfolio Transactions and Brokerage." The Utility Fund will follow those same practices and policies in its operations. Portfolio Turnover The Equity Trust's portfolio turnover rates for the fiscal years ended December 31, 1998 and December 31, 1997 were 39.8% and 39.2%, respectively. It is not expected that the annual portfolio turnover rate for the Utility Fund will exceed 100%. Portfolio turnover rate is calculated by dividing the lesser of an investment company's annual sales or purchases of portfolio securities by the monthly average value of securities in its portfolio during the year, excluding portfolio securities the maturities of which at the time of acquisition were one year or less. A high rate of portfolio turnover involves correspondingly greater brokerage commission expense than a lower rate, which expense must be borne by the Equity Trust and its shareholders or by the Utility Fund and its shareholders, as applicable. Determination of Net Asset Value The net asset value of the Equity Trust's shares is computed, and that of the Utility Fund's shares will be computed, based on the market value of the securities it holds and determined daily as of the close of regular trading on the New York Stock Exchange and reported in financial newspapers of general circulation as of the last day of each week. Portfolio securities which are traded on a nationally recognized stock exchange or Nasdaq National Market System are valued at the last sale price as of the close of regular trading on the day the securities are being valued, or lacking any sales, at the mean between closing bid and asked prices. If no asked prices are quoted on such day, then the security is valued at the closing bid price on such day. Other over-the-counter securities are valued at the mean of the current bid and asked prices as reported by Nasdaq, or in the case of securities not quoted by Nasdaq, the National Quotation Bureau or other comparable source as the Board of Directors deems appropriate to reflect their fair value. If no asked prices are quoted on that day, then the security is valued at the closing bid price on such day. If no bid or asked prices are quoted on that day, then the security is valued by such method as the Board of Directors shall determine in good faith to reflect its fair market value. Portfolio securities traded on more than one national securities exchange or market are valued according to the broadest and most representative market, as determined by the Investment Adviser. Securities traded primarily on foreign exchanges are valued at the closing price on such exchanges immediately prior to the close of the New York Stock Exchange. Securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of the Board of Directors. Short-term investments that mature in more than 60 days are valued at the highest bid price obtained from a dealer maintaining an active market in that security or on the basis of prices obtained from a pricing service approved as reliable by the Board of Directors. Short-term investments that mature in 60 days or fewer are valued at amortized cost, unless the Board of Directors determines that such valuation does not constitute fair value. Options are valued at the last sale price as of the close of regular trading, or lacking any sales, at the mean between the last bid and asked prices. Net asset value per share is calculated by dividing the value of the securities held plus any cash or other assets minus all liabilities, including accrued expenses, by the total number of shares outstanding at such time. Distributions; Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan The Equity Trust's 10% Distribution Policy The Equity Trust's policy is to make quarterly distributions of $0.27 per share at the end of each of the first three calendar quarters of each year. The Equity Trust's distribution in December for each calendar year is an adjusting distribution (equal to the sum of 2.5% of the net asset value of the Equity Trust as of the last day of the four preceding calendar quarters less the aggregate distributions of $0.81 per share made for the most recent three calendar quarters) in order to meet the Equity Trust's 10% distribution policy as well as the Code's distribution requirements. Prior to May 13, 1998, the quarterly distribution in each of the first three quarters of each year was $0.25 per share. The Equity Trust reserves the right, but does not currently intend, to retain for reinvestment and pay federal income taxes on its net capital gain, if any. If, for any calendar year, the total distributions exceed net investment income and net realized capital gains, the excess will generally be treated as a tax-free return of capital (up to the amount of the shareholder's tax basis in his shares). The amount treated as a tax-free return of capital will reduce a shareholder's adjusted basis in his shares, thereby increasing his potential gain or reducing his potential loss on the sale of his shares. Such excess, however, will be treated as ordinary dividend income up to the amount of the Equity Trust's current and accumulated earnings and profits. The distribution to shareholders of Utility Trust shares will not affect the Equity Trust's 10% Distribution Policy. In the event the Equity Trust distributes amounts in excess of its net investment income and net realized capital gains, such distributions will decrease the Equity Trust's total assets and, therefore, have the likely effect of increasing the Equity Trust's expense ratio. In addition, in order to make such distributions, the Equity Trust may have to sell a portion of its investment portfolio at a time when independent investment judgment might not dictate such action. The Utility Fund's Distribution Policy While the Equity Trust distributes dividends quarterly under its 10% distribution policy, the Utility Fund will distribute to shareholders substantially all of its net investment income monthly and capital gains quarterly or more frequently pursuant to the Section 19(b) Exemptive Order and any amendments thereto. The Utility Fund intends to adopt a fixed dividend policy, at a rate to be determined, that is similar to the Equity Trust's 10% distribution policy. The dividend policy of the Utility Fund may be modified from time to time by the Utility Fund's Board of Directors. As a regulated investment company under the Code, the Utility Fund will not be subjected to U.S. federal income tax on its investment company taxable income that it distributes to shareholders, provided that at least 90% of its investment company taxable income for that taxable year is distributed to its shareholders. Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan Under the Equity Trust Plan and the substantially similar Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan adopted by the Utility Fund (each, the "Plan"), a shareholder whose Common Stock is registered in his own name will have all distributions reinvested automatically by State Street Bank and Trust Company ("State Street"), which is agent under the Plan, unless the shareholder elects to receive cash. Distributions with respect to shares registered in the name of a broker-dealer or other nominee (that is, in "street name") will be reinvested by the broker or nominee in additional shares under the Plan, unless the service is not provided by the broker or nominee or the shareholder elects to receive distributions in cash. For a further description of the Plan, see Appendix C. Taxation Regulated Investment Company Tax Status The Equity Trust has elected and qualified to be treated as a regulated investment company under the Code, and the Utility Fund intends to elect and qualify to be treated as a regulated investment company under the Code. Accordingly, if each of the Equity Trust and the Utility Fund continues to qualify and distributes each year, in a timely manner, at least 90% of its "investment company taxable income" as defined in the Code (in general, taxable income excluding long-term capital gains), each such entity will not be subject to federal income tax on the portion of the taxable income and gain it distributes to its shareholders. The Equity Trust and the Utility Fund, however, each will be subject to tax at regular corporate rates on any undistributed ordinary income or net capital gain. In addition, if the Equity Trust and the Utility Fund each distributes, in a timely manner, (or treats as "deemed distributed" as described below) 98% of its net capital gain income for each one year period ending on October 31 (or December 31, if so elected by the Equity Trust or the Utility Fund), and distributes 98% of its investment company taxable income for each calendar year (as well as any income not distributed in prior years), it will not be subject to the 4% nondeductible federal excise tax on certain undistributed income. The Equity Trust and the Utility Fund each intends to make such distributions as are necessary to avoid the application of this excise tax. In order to continue to qualify as a regulated investment company for federal income tax purposes each of the Equity Trust and the Utility Fund, among other requirements, must (a) derive at least 90% of its gross income from interest, dividends, payments with respect to securities loans, and gains from the sale or other disposition of stock or securities or foreign currencies or other income (including, but not limited to, gain from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities or currencies; (b) diversify its holdings so that at the end of each quarter of its taxable year (i) at least 50% of the market value of its assets is represented by cash, securities of other regulated investment companies, U.S. government securities and other securities provided that such other securities do not represent more than 5% of its total assets and 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its assets is invested in securities (other than U.S. government securities or securities of other regulated investment companies ) of any one issuer or of any two or more issuers that it controls and that are determined to be engaged in the same or similar trades or businesses or related trades or businesses. Dividend and Capital Gain Distributions For any period in which the Equity Trust or the Utility Fund qualifies as a regulated investment company, distributions to shareholders of ordinary income and any distributions of net short-term capital gains generally will be taxable to shareholders as ordinary income (and not as short-term capital gains) to the extent such distribution is out of Equity Trust's or Utility Fund's current and accumulated earning and profits (as the case may be), whether paid in cash or reinvested in the Equity Trust shares or the Utility Fund shares. Distributions by either the Equity Trust or the Utility Fund of net long-term capital gains (designated by the Equity Trust or the Utility Fund as capital gain dividends) will be taxable to shareholders as long-term capital gains regardless of the shareholder's holding period in its shares. Dividends received by a corporate shareholder from the Equity Trust or the Utility Fund will generally qualify for the federal dividends-received deduction for domestic corporate shareholders to the extent the dividends do not exceed such shareholder's pro rata portion of the aggregate amount of dividends received by the Equity Trust or the Utility Fund, as the case may be, from qualified domestic corporations for the taxable year. Capital gain dividends will not qualify for a dividend-received deduction. Furthermore, if securities are held by the Equity Trust or the Utility Fund (i) for less than 46 days (90 days in the case of certain preferred stock), (ii) are "debt-financed" (generally, acquired with borrowed funds), or (iii) are subject to certain forms of hedges, the portion of the dividends, paid by the Equity Trust or the Utility Fund to their respective shareholders, that corresponds to the dividends paid with respect to such securities will not be eligible for the corporate dividends-received deduction. To the extent that the Equity Trust or the Utility Fund retains any net long-term capital gains, the Equity Trust or the Utility Fund may designate such gains as "deemed distributions" and pay a tax thereon for the benefit of their respective shareholders. In that event, the shareholders report their share of Equity Trust's or Utility Fund's (as the case may be) retained realized capital gains on their individual tax returns as if it had been received, and report a credit for the tax paid thereon by Equity Trust or Utility Fund. The amount of the deemed distribution net of such tax is then added to the shareholder's cost basis for his shares. Qualified pension and profit sharing funds, certain trusts and other organizations or persons not subject to federal income tax on capital gains and certain non-resident alien individuals and foreign corporations would be entitled to a refund of their pro rata share of such taxes paid by the Equity Trust or by the Utility Fund upon filing appropriate returns or claims for refund with the proper tax authorities. Disposition of Shares As a general rule, selling shareholders will recognize gain or loss on a sale of Equity Trust shares or Utility Fund shares in an amount equal to the difference between their adjusted tax basis in the shares and the amount received. If the shares are held as a capital asset, the gain or loss will be capital gain or loss. Gain or loss on a sale of Equity Trust shares or Utility Fund shares held for more than one year will be a long-term capital gain or loss, and gain or loss on a sale of Equity Trust shares or Utility Fund shares held for one year or less will be a short-term capital gain or loss. If, however, a shareholder receives a distribution taxable as long-term capital gain with respect to shares of the Equity Trust or shares of the Utility Fund and such shares are sold within 6 months of their acquisition, any loss on the sale will be treated as a long-term capital loss to the extent of such prior capital gain distributions with respect to such shares. Backup Withholding If a shareholder fails to furnish a correct taxpayer identification number, fails to report fully dividend or interest income, or fails to certify that it has provided a correct taxpayer identification number and is not subject to backup withholding, then the shareholder may be subject to a 31% backup withholding tax with respect to all taxable dividends and distributions. An individual's taxpayer identification number is his social security number. The 31% backup withholding tax is not an additional tax and may be credited against a taxpayer's regular federal income tax liability. General The Equity Trust and the Utility Fund will mail to each of their respective shareholders, as promptly as possible after the end of each taxable year, a notice detailing, on a per share and per distribution basis, the amounts includible in such shareholder's taxable income for such year as net investment income, as net realized capital gains (if applicable), as a dividend eligible for the corporate dividend received deduction (if applicable), as "deemed" distributions of capital gains and as taxes paid by the Equity Trust and the Utility Fund with respect to such distribution. Other Tax Consequences See "The Transaction - Federal Income Tax Consequences of the Transaction" for a discussion of certain federal income tax consequences of the Transaction. The federal income tax discussion set forth above concerning the federal income tax consequences of an investment in the Equity Trust or the Utility Fund and the Transaction is for general information only. The foregoing discussion is based upon the Code, judicial decisions and administrative regulations, rulings and practices, all of which are subject to change and which, if changed, may be applied retroactively to the Equity Trust, the Utility Fund, their respective shareholders and/or their respective assets. No rulings have been sought from the Internal Revenue Service with respect to any of the tax matters discussed above. Furthermore, shareholders should be aware that any tax opinions rendered to the Equity Trust or the Utility Fund in connection with the Transaction are not binding on the Internal Revenue Service or any court, are based on certain assumptions and representations as to relevant factual matters and are subject to qualifications customary in opinions of similar import. Dividend and capital gain distributions may be subject to additional state, local and foreign taxes depending on each shareholder's particular situation. Shareholders are urged to consult their own tax advisors regarding the particular tax consequences to them of an investment in the Equity Trust or the Utility Fund. Non-U.S. shareholders are urged to consult their own tax advisors concerning the applicability of United States withholding tax. Principal Shareholders The Equity Trust As of March 17, 1999, the current Directors and officers of the Equity Trust, as a group, beneficially owned 1,302,548 shares of the Equity Trust, representing 1.23% of the Equity Trust's outstanding shares, including 667,828 shares owned individually by Mario J. Gabelli and 520,190 shares owned by the Investment Adviser and its affiliates. For other information concerning the ownership of the Equity Trust's shares, see "General Voting Information." The Utility Fund As of the date of this Proxy Statement/Prospectus, 10,000 shares of Utility Fund Common Stock are outstanding, all of which are owned beneficially and of record by the Equity Trust. These shares were issued in respect of the Equity Trust's contribution of $100,000 of initial capital to the Utility Fund. The Equity Trust has represented that these shares were purchased for investment purposes only and that they will be sold only pursuant to a registration statement under the 1933 Act or an applicable exemption therefrom. Custodian, Transfer Agent, Dividend Disbursing Agent and Registrar Boston Safe Deposit and Trust Company ("Boston Safe") located at One Boston Place, Boston, Massachusetts 02108, serves as the custodian of the Equity Trust's assets pursuant to a custody agreement. Boston Safe is a wholly owned subsidiary of The Boston Company, Inc., which in turn is an indirect wholly owned subsidiary of Mellon Bank Corporation. Under the custody agreement, Boston Safe holds the Equity Trust's assets in compliance with the 1940 Act. For its custody services, Boston Safe receives a monthly fee based upon the average weekly value of the total assets of the Equity Trust, plus certain charges for securities transactions. Boston Safe will serve as the custodian of the Utility Fund's assets pursuant to a custody agreement. Under the custody agreement, Boston Safe will hold the Utility Fund's assets in compliance with the 1940 Act. For its custody services, Boston Safe will receive a monthly fee based upon the average value of the total assets of the Utility Fund, plus certain charges for securities transactions. Rules adopted under the 1940 Act permit the Equity Trust and the Utility Fund each to maintain its foreign securities in the custody of certain eligible foreign banks and securities depositories. Pursuant to those rules, any foreign securities in the portfolio of the Equity Trust or the Utility Fund may be held by subcustodians approved by the directors of the Equity Trust or of the Utility Fund, as the case may be, in accordance with the regulations of the SEC. Selection of any such subcustodians will be made by the directors of the Equity Trust or of the Utility Fund, as the case may be, following a consideration of a number of factors, including but not limited to the reliability and financial stability of the institution, the ability of the institution to perform capably custodial services for the Equity Trust or the Utility Fund, as applicable, the reputation of the institution in its national market, the political and economic stability of the country or countries in which the subcustodians are located, and risks of potential nationalization or expropriation of assets of the Equity Trust or the Utility Fund, as applicable. State Street serves as the Equity Trust's dividend disbursing agent, as agent under the Equity Trust Plan and as transfer agent and registrar for shares of the Equity Trust Common Stock. State Street also will serve as the Utility Fund's dividend disbursing agent, as agent of the Utility Fund Plan and as transfer agent and registrar for shares of Utility Fund Common Stock. Description of Common Stock of the Utility Fund and the Equity Trust Utility Fund Common Stock The Utility Fund was formed as a business trust under the laws of the State of Delaware on February 25, 1999 and is authorized to issue an unlimited number of shares of beneficial interest, par value $.001 per share, in multiple classes and series thereof as determined from time to time by the Board of Directors. The Board of Directors of the Utility Fund has authorized issuance of an unlimited number of shares of two classes, common stock and preferred stock. Each share within a particular class or series thereof has equal voting, dividend, distribution and liquidation rights. When issued, the shares of Utility Fund Common Stock distributed in the Transaction will be fully paid and non-assessable. Shares of the Utility Fund Common Stock are not redeemable and have no preemptive, conversion or cumulative voting rights. See "Pro Forma Statement of Assets and Liabilities" for certain information with respect to the Utility Fund Common Stock following the Distribution. Equity Trust Common Stock The Equity Trust, which was incorporated under the laws of the State of Maryland on May 20, 1986, is authorized to issue 200,000,000 shares of Common Stock, par value $.001 per share and 8,000,000 shares of Cumulative Preferred Stock, par value $0.001. Each share has equal voting, dividend, distribution and liquidation rights. The shares outstanding are fully paid and non-assessable. Shares of Equity Trust Common Stock are not redeemable and have no preemptive, conversion or cumulative voting rights. Set forth below is information with respect to the Common Stock and Cumulative Preferred Stock as of December 31, 1998.
Amount Held by Equity Trust Amount Amount Authorized or for Its Own Account Outstanding - ------------------------------ ------------------------------ ------------------------ 200,000,000 common shares 0 shares 106,116,347 8,000,000 preferred shares 0 shares 5,400,000
The Equity Trust Common Stock and the Cumulative Preferred Stock are listed and traded on the New York Stock Exchange under the symbols "GAB" and "GABPr", respectively. The net asset value per share of a share of Equity Trust Common Stock at the close of business on March 29, 1999 was $11.74 and the last reported sales price of a share of Equity Trust Common Stock on the New York Stock Exchange on such date was $11.875. Repurchase of Shares The Equity Trust and the Utility Fund are closed-end, management investment companies and as such their respective shareholders do not, and will not, have the right to redeem their shares. The Equity Trust and the Utility Fund each, however, may repurchase its shares from time to time as and when it deems such a repurchase advisable. Such repurchases will be made when the Equity Trust's shares or the Utility Fund's shares, as the case may be, are trading at a discount of 10% or more (or such other percentage as the Board of Directors of the Equity Trust or the Utility Fund may determine from time to time) from the net asset value of the shares. Pursuant to the 1940 Act, the Equity Trust and the Utility Fund each may repurchase its shares on a securities exchange (provided that the Equity Trust or the Utility Fund, as the case may be, has informed its shareholders within the preceding six months of its intention to repurchase such shares) or as otherwise permitted in accordance with Rule 23c-1 under the 1940 Act. Under that Rule, certain conditions must be met regarding, among other things, distribution of net income for the preceding fiscal year, identity of the seller, price paid, brokerage commissions, prior notice to shareholders of an intention to purchase shares and purchasing in a manner and on a basis which does not discriminate unfairly against the other shareholders through their interest in the Equity Trust or the Utility Fund, as the case may be. Shares repurchased by the Equity Trust will constitute authorized and unissued shares of the Equity Trust available for reissuance. The Equity Trust and the Utility Fund each may incur debt, in an amount not exceeding 10% of its total assets, to finance share repurchase transactions. See "Investment Restrictions." Any gain in the value of the investments of the Equity Trust or the Utility Fund, as the case may be, during the term of the borrowing that exceeds the interest paid on the amount borrowed would cause the net asset value of its shares to increase more rapidly than in the absence of borrowing. Conversely, any decline in the value of the investments of the Equity Trust or the Utility Fund, as the case may be, would cause the net asset value of its shares to decrease more rapidly than in the absence of borrowing. Borrowing money thus creates an opportunity for greater capital gain but at the same time increases exposure to capital risk. When the Equity Trust or the Utility Fund repurchases its shares for a price below their net asset value, the net asset value of those shares that remain outstanding will be enhanced, but this does not necessarily mean that the market price of those outstanding shares will be affected, either positively or negatively. Further, interest on borrowings to finance share repurchase transactions will reduce the net income of the Equity Trust or the Utility Fund, as applicable. Neither the Equity Trust nor the Utility Fund currently has an established tender offer program or established schedule for considering tender offers. No assurance can be given that the Board of Directors of either the Equity Trust or the Utility Fund will decide to undertake any such tender offers in the future, or, if undertaken, that they will reduce any market discount. Rights Offerings of the Equity Trust In October 1991, September 1992, July 1993 and October 1995, the Equity Trust issued transferable rights to shareholders entitling the holders thereof to subscribe for an aggregate of 7,882,562 shares, 9,563,615 shares, 11,654,962 shares and 14,931,381 shares respectively, of the Equity Trust Common Stock at the rate of one share of common stock for each six rights held and entitling shareholders to subscribe for any shares not acquired by exercise of primary subscription rights. The subscription price in each of the offerings was $8.00 per share, representing a discount to the prevailing net asset value of the Equity Trust Common Stock at the time of the offer of approximately 27.5% in the 1991 offering, 22.5% in the 1992 offering, 29.9% in the 1993 offering and 24.4% in the 1995 offering and a discount from market value of approximately 22.9% on average for each offering. Each of the rights offerings was substantially oversubscribed, resulting in the issuance of the maximum number of shares being offered. The Equity Trust raised $63,060,496 in the 1991 offering, $76,508,920 in the 1992 offering, $93,239,696 in the 1993 offering and $119,451,048 in the 1995 offering while subscriptions remitted to the Equity Trust totaled more than $136,000,000, $164,000,000, $176,000,000 and $199,000,000 respectively. As a percentage of the shares outstanding on the record dates for the offering, holders of more than 91% of the outstanding shares participated in the 1991 offering, more than 92% participated in the 1992 offering, more than 93% participated in the 1993 offering and more than 88% participated in the 1995 offering. The Equity Trust and the Utility Fund each may, in the future and at its discretion, choose to make rights offerings from time to time for a number of shares and on terms which may or may not be similar to any of the Equity Trust's previous offers. Any such future rights offering will be made in accordance with the 1940 Act. Under the laws of Maryland, the state in which the Equity Trust was incorporated, and Delaware, the state in which the Utility Fund was organized, respectively, the Board of Directors of each fund is authorized to approve rights offerings without obtaining shareholder approval. The staff of the SEC has interpreted the 1940 Act as not requiring shareholder approval of a transferable rights offering at a price below the then current net asset value so long as certain conditions are met, including (i) a good faith determination by a fund's Board of Directors that such offering would result in a net benefit to existing shareholders; (ii) the offering fully protects shareholders' preemptive rights and does not discriminate among shareholders (except for the possible effect of not offering fractional rights); (iii) management uses its best efforts to ensure an adequate trading market in the rights for use by shareholders who do not exercise such rights; and (iv) the ratio of a transferable rights offering does not exceed one new share for each three rights held. The Equity Trust's shareholders approved rights offerings generally at the 1993 Annual Meeting of Shareholders. The Multimedia Trust On November 15, 1994, the Equity Trust effected a transaction substantially similar to the Transaction by contributing $64,382,764 of its assets in exchange for 8,587,702 shares of The Gabelli Global Multimedia Trust Inc. (the "Multimedia Trust"), a newly formed non-diversified closed-end registered investment company (the "Prior Transaction"). The Multimedia Trust's investment objective is long-term growth of capital and, under normal market conditions, the Multimedia Trust seeks to achieve its investment objective by investing at least 65% of its total assets in common stock and other securities of foreign and domestic companies in the telecommunications, media, publishing and entertainment industries. The Prior Transaction has proven successful. From its inception on November 15, 1994 through December 31, 1998, the Multimedia Trust has had an annualized rate of return of 21.6% and an average annualized expense ratio of 1.89% based on total assets. Certain Provisions of the Governing Documents of the Equity Trust and the Utility Fund The Equity Trust and the Utility Fund each presently has provisions in its Articles of Incorporation or Declaration of Trust, respectively, and By-Laws (together, in each case, its "Governing Documents") which could have the effect of limiting, in each case, (i) the ability of other entities or persons to acquire control of the fund, (ii) the fund's freedom to engage in certain transactions, or (iii) the ability of the fund's directors or shareholders to amend the Governing Documents or effectuate changes in the fund's management. These provisions of the Governing Documents of the Equity Trust and the Utility Fund may be regarded as "anti-takeover" provisions. The Board of Directors of the Equity Trust and the Utility Fund are each divided into three classes, each having a term of no more than three years (except, to ensure that the term of a class of the Utility Fund's directors expires each year, one class of the Utility Fund's directors will serve an initial one-year term and three-year terms thereafter and another class of its directors will serve an initial two-year term and three-year terms thereafter). Each year the term of one class of directors will expire. Accordingly, only those directors in one class may be changed in any one year, and it would require a minimum of two years to change a majority of the Board of Directors. Further, one director in each of two of the classes of the Equity Trust is elected solely by the holders of preferred stock issued by the Equity Trust and cannot be removed or replaced by the holders of the Common Stock. The same feature will apply to the Utility Fund if it issues preferred stock. Such system of electing directors may have the effect of maintaining the continuity of management and, thus, make it more difficult for the shareholders of that fund to change the majority of directors. See "Management of the Equity Trust and the Utility Fund -- Directors and Officers." A director of either the Equity Trust or the Utility Fund may be removed with or without cause by a vote of, in the case of the Equity Trust, a majority, and, in the case of the Utility Fund, 662/3% of the votes entitled to be cast for the election of directors of such fund. In addition, the affirmative vote of the holders of 662/3% of the outstanding voting shares of the Equity Trust and the separate vote of a majority (as used in the 1940 Act) of its outstanding preferred stock are required to authorize its conversion from a closed-end to an open-end investment company. With respect to the Utility Fund, this voting requirement also applies to mergers into or a sale of all or substantially all of its assets to an open-end fund (or other closed-end fund that does not have minority shareholder protections against conversion to open-end status) and is 75% of its outstanding voting shares and, if the Utility Fund issues preferred stock, the same separate class vote of the preferred stock. In addition, the 662/3% vote (80% in the case of the Utility Fund) of the holders of the outstanding voting securities of each class of the fund, voting as a class is generally required in order to authorize any of the following transactions: (i) merger or consolidation of the fund with or into any other corporation; (ii) issuance of any securities of the fund to any person or entity for cash; (iii) sale, lease or exchange of all or any substantial part of the assets of the fund to any entity or person (except assets having an aggregate fair market value of less than $1,000,000); or (iv) sale, lease or exchange to the fund, in exchange for securities of the fund, of any assets of any entity or person (except assets having an aggregate fair market value of less than $1,000,000); (v) in the case of the Utility Fund, the purchase of the fund's Common Stock by the fund from any other person or entity; if such corporation, person or entity is directly, or indirectly through affiliates, the beneficial owner of more than 5% of the outstanding shares of the Equity Trust or the Utility Fund, as the case may be. However, such vote would not be required when, under certain conditions, the Board of Directors approves the transaction. Reference is made to the Governing Documents of the Equity Trust and the Utility Fund, on file with the SEC, for the full text of these provisions. See "Further Information." The provisions of the Governing Documents described above could have the effect of depriving the owners of shares in either fund of opportunities to sell their shares at a premium over prevailing market prices, by discouraging a third party from seeking to obtain control of either the Equity Trust or the Utility Fund in a tender offer or similar transaction. The overall effect of these provisions is to render more difficult the accomplishment of a merger or the assumption of control by a principal shareholder. Limitation of Officers' and Directors' Liability The Governing Documents of each of the Equity Trust and the Utility Fund provide that the fund will indemnify its directors and officers and may indemnify its employees or agents against liabilities and expenses incurred in connection with litigation in which they may be involved because of their positions with the fund, to the fullest extent permitted by law. However, nothing in the Governing Documents of either the Equity Trust or the Utility Fund protects or indemnifies a director, officer, employee or agent of such fund against any liability to which such person would otherwise be subject in the event of such person's willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her position. Restrictions on Issuance of Senior Securities Overview The 1940 Act permits registered closed-end investment companies such as the Equity Trust and the Utility Fund to issue senior securities under certain circumstances as summarized below. In the first instance, such issuance must be consistent with the fundamental investment restrictions and any other fundamental restrictions of the investment company. Moreover, if such class of senior securities represents an indebtedness ("debt securities"), then the following requirements must be met: a. such debt securities must have an asset coverage (meaning the ratio which the value of the total assets of the investment company, less all liabilities and indebtedness not represented by senior securities, bears to the aggregate amount of debt securities) of at least 300% immediately after issuance or sale of such debt securities: b. provision must be made to prohibit the declaration of any dividend (other than a stock dividend) or the declaration of any other distribution upon any class of the capital stock of the investment company, or the purchase of any such capital stock by the company, unless, after giving effect to such action, such debt securities have an asset coverage of at least 300% (200% in the case of dividends on any preferred stock); and c. provision must be made either that: i. if on the last business day of each of twelve consecutive calendar months such debt securities have an asset coverage of less than 100%, the holders of such securities voting as a class will be entitled to elect at least a majority of the members of the board of directors of the investment company, until such debt securities have an asset coverage of at least 100% on the last business day of three consecutive calendar months, or ii. if on the last business day of each of twenty-four consecutive calendar months such debt securities have an asset coverage of less than 100%, an event of default shall be deemed to have occurred. If the senior securities are preferred stock ("preferred shares"), then the following requirements must be met: (a) such shares must have an asset coverage (meaning the ratio which the value of the total assets of the investment company, less all liabilities and indebtedness not represented by senior securities, bears to the aggregate amount of debt securities of such company plus the involuntary liquidation preference of the preferred shares of such company) of at least 200% immediately after such issuance or sale; (b) provision must be made to prohibit the declaration of any dividend (other than a dividend payable in common shares) or the declaration of any other distribution upon the common shares of the company, or the purchase of any such common shares, unless, after giving effect to such action, such preferred shares has an asset coverage of at least 200%; (c) provision must be made to entitle the holders of such preferred shares, voting as a class, to elect at least two directors at all times, and, subject to the prior rights, if any, of the holders of any debt securities outstanding, to elect a majority of the directors if at any time dividends on such preferred shares are unpaid in an amount equal to two full years' dividends on such securities, and to continue to be so represented until all dividends in arrears are paid or otherwise provided for; (d) provision must be made requiring approval by the vote of a majority (i.e., the lesser of a majority of the outstanding shares or two-thirds of a quorum of such shares) of such preferred shares, voting as a class, of any plan of reorganization adversely affecting such preferred shares; of any action to change the classification of the investment company from a non-diversified to a diversified company; or of any action to change its classification from a closed-end investment company to an open-end investment company; of any action to borrow money, issue senior securities, underwrite securities of other persons, purchase or sell real estate or commodities or make loans to other persons that is not authorized in such company's registration statement under the 1940 Act, of any deviation from fundamental investment restrictions or other fundamental policies of such company or of any change in the nature of the business of such company so as to cease to be an investment company; and (e) such class of shares must have complete priority over any other class as to distribution of assets and payment of dividends, which dividends must be cumulative. The 1940 Act limits a registered closed-end investment companies such as the Equity Trust and the Utility Fund to one class of debt securities and to one class of preferred shares, except that (i) any such class may be issued in one or more series so long as no such series has a preference or priority over any other series upon the distribution of the assets of such company or in respect of the payment of interest or dividends and (ii) promissory notes or other evidences of indebtedness issued in consideration of any loan, extension, or renewal thereof, made by a bank or other person and privately arranged, and not intended to be publicly distributed, are not deemed to be a separate class of debt securities. In addition, debt securities do not include any promissory note or other evidence of indebtedness of temporary purposed only and in an amount not exceeding 5% of the value of the total assets of the investment company at the time. Reports to Shareholders The Equity Trust sends, and the Utility Fund will send, unaudited semi-annual and audited annual reports to their respective shareholders, including a list of investments held. Experts PricewaterhouseCoopers LLP, independent accountants, 1177 Avenue of the Americas, New York, New York 10036, serve as auditors of the Equity Trust and the Utility Fund and annually renders an opinion on the financial statements of each fund. The statement of assets and liabilities of the Utility Fund, as of March 29, 1999, contained in this Proxy Statement/Prospectus has been included herein in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, and upon the authority of such firm as experts in auditing and accounting. The statement of assets and liabilities of the Equity Trust, as of December 31, 1998, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the selected per share date and ratios for each of the five years in the period then ended included in the Annual Report have been audited by PricewaterhouseCoopers LLP, independent accountants, as indicated in their report with respect thereto, and are incorporated by reference in reliance upon such report and upon the authority of such firm as experts in accounting and auditing. Further Information The disclosure concerning the Transaction in this Proxy Statement/Prospectus does not contain all of the information included in the Registration Statement filed with the SEC under the 1933 Act, with respect to the shares of Utility Fund Common Stock to be distributed in the Transaction, certain portions of which have been omitted pursuant to the rules and regulations of the SEC. The Registration Statement, including exhibits filed therewith, may be examined at the office of the SEC in Washington, D.C. Statements contained in this Proxy Statement/Prospectus as to the contents of any contract or other document referred to are not necessarily complete, and, in each instance, reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, of which this Proxy Statement/Prospectus forms a part, each such statement being qualified in all respects by such reference. Financial Statements The Annual Report of the Equity Trust either accompanies this Proxy Statement/Prospectus or was previously sent to the person to whom this Proxy Statement/Prospectus is being sent, is incorporated herein by reference with respect to all information other than the information set forth in the respective Letters to Shareholders included therein. The Equity Trust will furnish, without charge, a copy of the Annual Report, upon request to the Equity Trust at One Corporate Center, Rye, New York 10580-1434, telephone (914) 921-5070. Required Vote for the Transaction Approval of the Transaction by the shareholders is to be determined by the vote of a majority of the outstanding shares of the Equity Trust (holders of Common Stock and holders of Cumulative Preferred Stock voting together as a single class). Under the 1940 Act, this means that to be approved, the Transaction must receive the affirmative vote of the lesser of (1) a majority of the outstanding shares of the Equity Trust, or (2) 662/3% or more of the shares of the Equity Trust represented at the Meeting if more than 50% of the outstanding shares of the Equity Trust are present or represented by proxy at the Meeting ("Majority Vote"). While the Equity Trust has no present intention of making any additional distributions in the form of registered investment companies other than the distribution of the Utility Fund as described above, the Board of Directors of the Equity Trust in the future could authorize such additional distributions. The Board of Directors of the Equity Trust may elect to delay or not to proceed with the Transaction notwithstanding its approval by shareholders if for any reason the Board of Directors determines that such action would be in the best interests of shareholders. The Board of Directors, including the "non-interested" directors, recommends that the shareholders vote "for" approval of the Transaction. PROPOSAL 2: TO ELECT THREE DIRECTORS OF THE TRUST At the meeting, three of the nine directors of the Equity Trust are to be elected to hold office for a period of three years and until their successors are elected and qualified (Messrs. Callaghan, Fahrenkopf and Zizza). The Board of Directors is divided into three classes. Each year the term of office of one class will expire. Unless authority is withheld, it is the intention of the persons named in the proxy to vote the proxy FOR the election of the nominees named below. Each nominee has indicated that he will serve if elected, but if any nominee should be unable to serve, the proxy will be voted for any other person determined by the persons named in the proxy in accordance with their judgment. Each of the directors of the Equity Trust has served in that capacity since the July 14, 1986 organizational meeting of the Trust with the exception of (i) Mr. Conn who became a director of the Equity Trust on May 15, 1989, (ii) Mr. Pohl, who became a director of the Equity Trust on February 19, 1992 and (iii) Mr. Fahrenkopf, who became a director of the Equity Trust on May 11, 1998. Under the Equity Trust's Articles of Incorporation and the 1940 Act, holders of the Equity Trust's Cumulative Preferred Stock, voting as a separate class, are entitled to elect two directors, and holders of the Equity Trust's Common Stock and Cumulative Preferred Stock, voting as a single class, are entitled to elect the remaining directors, subject to the provisions of the 1940 Act and the Equity Trust's Articles of Incorporation and By-Laws. The holders of the Equity Trust's Cumulative Preferred Stock would elect the minimum number of additional directors that would represent a majority of the directors in the event that dividends on the Equity Trust's Cumulative Preferred Stock are in arrears for two full years. Felix J. Christiana and James P. Conn represent the holders of the Equity Trust's Cumulative Preferred Stock. The Equity Trust pays each director not affiliated with the Investment Adviser or its affiliates, a fee of $12,000 per year plus $1,500 per meeting attended in person and by telephone, together with the director's actual out-of-pocket expenses relating to attendance at meetings. The aggregate remuneration paid by the Equity Trust to such directors during the fiscal year ended December 31, 1998, amounted to $156,500. During the year ended December 31, 1998, the directors of the Equity Trust met six times, two of which were special meetings of directors. Each director then serving in such capacity, except Messrs. Fahrenkopf and Pohl, attended at least 75% of the meetings of directors and of any Committee of which he is a member. Mr. Fahrenkopf attended 80% of the meetings during the period from May 11, 1998 (when he became a director) through December 31, 1998. Messrs. Christiana and Pustorino, who are not "interested persons" of the Equity Trust as defined in the 1940 Act, serve on the Equity Trust's Audit Committee. The Audit Committee is responsible for recommending the selection of the Equity Trust's independent accountants and reviewing all audit as well as non-audit services performed for the Equity Trust. During the fiscal year ended December 31, 1998, the Audit Committee met twice. The directors serving on the Equity Trust's Nominating Committee are Messrs. Christiana (Chairman) and Zizza. The Nominating Committee is responsible for recommending qualified candidates to the Board in the event that a position is vacated or created. The Nominating Committee will consider recommendations by shareholders if a vacancy were to exist. Such recommendations should be forwarded to the Secretary of the Equity Trust. The Nominating Committee did not meet during the fiscal year ended December 31, 1998. The Equity Trust does not have a standing compensation committee. The following table sets forth certain information regarding the compensation of the Equity Trust's directors and officers. Mr. Diagonale is employed by the Equity Trust and is not employed by the Investment Adviser. Officers of the Equity Trust who are employed by the Investment Adviser receive no compensation or expense reimbursement from the Equity Trust. Compensation Table for the Fiscal Year Ended December 31, 1998
Aggregate Total Compensation from Compensation the Equity Trust and from the Equity Fund Complex Name of Person and Position Trust Paid to Directors* -------------------- ---------------------------- Mario J. Gabelli $ 0 $ 0 Chairman of the Board Dr. Thomas E. Bratter $ 22,000 $ 27,500(2) Director Bill Callaghan $ 22,000 $ 41,500(3) Director Felix J. Christiana $ 21,500 $ 88,500(9) Director James P. Conn $ 20,500 $ 46,000(5) Director Frank J. Fahrenkopf, Jr. $ 8,000 $ 8,000(1) Director Karl Otto Pohl $ 19,000 $ 102,466(15) Director Anthony R. Pustorino $ 22,000 $ 100,500(9) Director Salvatore J. Zizza $ 21,500 $ 51,000(4) Director Marc S. Diagonale $ 115,000 $ 115,000(1) Vice President
* Represents the total compensation paid to such persons during the calendar year ended December 31, 1998 by investment companies (including the Equity Trust) or portfolios thereof from which such person receives compensation that are considered part of the same fund complex as the Equity Trust because they have common or affiliated investment advisers. The number in parenthesis represents the number of such investment companies and portfolios. For additional information regarding the nominees for election to the Board of Directors of the Equity Trust, directors whose terms of office continue beyond the 1999 Annual Meeting and the officers and directors of the Equity Trust as a group, see "Management of the Utility Fund and the Equity Trust." Required Vote Election of each director of the Equity Trust requires the affirmative vote of the holders of a plurality of the applicable classes of shares of the Equity Trust represented at the Meeting if a quorum is present (holders of Common Stock and holders of Cumulative Preferred Stock voting together as a single class for each of the three directors). The Board of Directors, including the "non-interested" directors, recommends that the shareholders vote "For" the proposal to elect the respective directors of the Equity Trust. PROPOSAL 3: TO RATIFY THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT ACCOUNTANTS OF THE EQUITY TRUST FOR THE YEAR ENDING DECEMBER 31, 1999 Upon recommendation by the Audit Committee, PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York 10036, has been selected by the vote of a majority of those directors who are not "interested persons" of the Equity Trust to serve as independent accountants for the Equity Trust's fiscal year ending December 31, 1999. PricewaterhouseCoopers LLP has advised the Equity Trust that it is independent with respect to the Equity Trust in accordance with the applicable requirements of the American Institute of Certified Public Accountants and the SEC. Representatives of PricewaterhouseCoopers LLP are expected to be present at the Meeting to answer appropriate questions and will be given the opportunity to make a statement if they so desire. Required Vote Ratification of the selection of PricewaterhouseCoopers LLP as independent accountants requires the affirmative vote of a majority of the votes cast by holders of shares of the Equity Trust (holders of Common Stock and holders of Cumulative Preferred Stock voting together as a single class) represented at the Meeting if a quorum is present. The Board of Directors, including the "non-interested" directors, recommends that the shareholders vote "for" the proposal to ratify the selection of PricewaterhouseCoopers LLP as the independent accountants of the equity trust for the year ending December 31, 1999. ADDITIONAL INFORMATION Portfolio Transactions and Brokerage Subject to policies established by the Board of Directors of the Equity Trust, the Investment Adviser is responsible for placing purchase and sales orders and the allocation of brokerage on behalf of the Equity Trust. Transactions in equity securities are in most cases effected on U.S. stock exchanges and involve the payment of negotiated brokerage commissions. In general, there may be no stated commission in the case of securities traded in over-the-counter markets, but the prices of those securities may include undisclosed commissions or mark-ups. Principal transactions are not entered into with affiliates of the Equity Trust. However, Gabelli & Company, Inc. ("Gabelli & Company") may execute transactions in the over-the-counter markets on an agency basis and receive a stated commission therefrom. To the extent consistent with applicable provisions of the 1940 Act and the rules and exemptions adopted by the SEC thereunder, as well as other regulatory requirements, the Equity Trust's Board of Directors have determined that portfolio transactions may be executed through Gabelli & Company and its broker-dealer affiliates if, in the judgment of the Investment Adviser, the use of those broker-dealers is likely to result in price and execution at least as favorable as those of other qualified broker-dealers, and if, in particular transactions, those broker-dealers charge the Equity Trust a rate consistent with that charged to comparable unaffiliated customers in similar transactions. The Equity Trust has no obligations to deal with any broker or group of brokers in executing transactions in portfolio securities. In executing transactions, the Investment Adviser seeks to obtain the best price and execution for the Equity Trust, taking into account such factors as price, size of order, difficulty of execution and operational facilities of the firm involved and the firm's risk in positioning a block of securities. While the Investment Adviser generally seeks reasonably competitive commission rates, the Equity Trust does not necessarily pay the lowest commission available. For the fiscal years ended December 31, 1996, December 31, 1997 and December 31, 1998, the Equity Trust paid a total of $439,741, $846,195 and $829,777, respectively, in brokerage commissions of which Gabelli & Company received $119,897, $170,831 and $362,787, respectively, and of which Keeley Investment Corp. received $2,100, $8,005 and $2,215, respectively. The amount received by Gabelli & Company, Inc. and Keeley Investment Corp. from the Equity Trust in respect of brokerage commissions for the fiscal year ended December 31, 1998 represented 43.7% and 0.3%, respectively, of the total of all brokerage commissions paid during such fiscal year. Such commissions were paid with respect to 48.4% and 0.3%, respectively, of the total dollar value of all transactions involving the payment of brokerage commissions effected during the fiscal year. Subject to obtaining the best price and execution, brokers who provided supplemental research, market and statistical information to the Investment Adviser or its affiliates may receive orders for transactions by the Equity Trust. The term "research, market and statistical information" includes advice as to the value of securities, and advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities, and furnishing analyses and reports concerning issues, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts. Information so received will be in addition to and not in lieu of the services required to be performed by the Investment Adviser under its Advisory Agreement and the expenses of the Investment Adviser will not necessarily be reduced as a result of the receipt of such supplemental information. Such information may be useful to the Investment Adviser and its affiliates in providing services to clients other than the Equity Trust, and not all such information is used by the Investment Adviser in connection with the Equity Trust. Conversely, such information provided to the Investment Adviser and its affiliates by brokers and dealers through whom other clients of the Investment Adviser and its affiliates effect securities transactions may be useful to the Investment Adviser in providing services to the Equity Trust. Although investment decisions for the Equity Trust are made independently from those of the other accounts managed by the Investment Adviser and its affiliates, investments of the kind made by the Equity Trust may also be made by those other accounts. When the same securities are purchased for or sold by the Equity Trust and any of such other accounts, it is the policy of the Investment Adviser and its affiliates to allocate such purchases and sales in the manner deemed fair and equitable to all of the accounts, including the Equity Trust. Broker Non-Votes and Abstentions If a proxy which is properly executed and returned accompanied by instructions to withhold authority to vote represents a broker "non-vote" (that is, a proxy from a broker or nominee indicating that such person has not received instructions from the beneficial owner or other person entitled to vote shares on a particular matter with respect to which the broker or nominee does not have discretionary power), is unmarked or marked with an abstention (collectively, "abstentions"), the shares represented thereby will be considered to be present at the meeting for purposes of determining the existence of a quorum for the transaction of business. Under applicable law, abstentions do not constitute a vote "for" or "against" a matter and will be disregarded in determining the "votes cast" on an issue. Shareholders of the Equity Trust will be informed of the voting results of the Meeting in the Equity Trust's Semi-Annual Report dated June 30, 1999. SHAREHOLDER PROPOSALS All proposals by shareholders of the Equity Trust, which are intended to be presented at the Equity Trust's next Annual Meeting of Shareholders to be held in 2000, must be received by the Trust for consideration for inclusion in the Equity Trust's proxy statement and proxy relating to that meeting no later than November 22, 1999. OTHER MATTERS TO COME BEFORE THE MEETING The directors of the Equity Trust do not intend to present any other business at the Meeting, nor are they aware that any shareholder intends to do so. If, however, any other matters are properly brought before the Meeting, the persons named in the accompanying form of proxy will vote thereon in accordance with their judgment. It is important that proxies be returned promptly. Shareholders who do not expect to attend the Meeting are therefore urged to complete, sign, date and return the proxy card as soon as possible in the enclosed postage-paid envelope. REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholder and Board of Trustees of The Gabelli Utility Fund In our opinion, the accompanying statement of assets and liabilities presents fairly, in all material respects, the financial position of The Gabelli Utility Fund (the "Fund") at March 29, 1999 in conformity with generally accepted accounting principles. This financial statement is the responsibility of the Fund's management; our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit of this financial statement in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York 10036 March 30, 1999 THE GABELLI UTILITY FUND STATEMENT OF ASSETS AND LIABILITIES As of March 29, 1999 ASSETS Cash ........................................................ $100,000 Total Assets........................................... 100,000 LIABILITIES Total Liabilities...................................... 0 ---------- Net Assets, applicable to 10,000 shares of Common Stock, $.001 par value, issued and outstanding (authorized unlimited shares).......................... $100,000 Net Asset Value per share ($100,000 divided by 10,000 shares of Common Stock outstanding).......... $10.00 The accompanying notes are an integral part of this statement. - --------------------- NOTES TO STATEMENT OF ASSETS AND LIABILITIES (1) The Gabelli Utility Fund (the "Utility Fund") was organized on February 25, 1999 under the laws of the State of Delaware and will be registered under the Investment Company Act of 1940, as amended, as a non-diversified, closed-end management investment company. The Utility Fund has had no operations other than organizational matters and the issuance and sale and offering of 10,000 shares of Common Stock on March 29, 1999 to The Gabelli Equity Trust Inc. (the "Equity Trust"). Organizational expenses estimated at $330,000 will be borne by the Equity Trust. (2) The Gabelli Utility Fund intends to enter into an Investment Advisory Agreement with Gabelli Funds, LLC (the "Investment Adviser") pursuant to which the Investment Adviser will be responsible for providing investment management and advisory services to the Utility Fund. For its services, the Investment Adviser will receive a fee computed weekly and payable monthly at an annual rate of 1.00% of the Utility Fund's average weekly net assets. APPENDIX A INVESTMENT PRACTICES Securities Subject to Reorganization. The Equity Trust and the Utility Fund each may invest without limit in securities for which a tender or exchange offer has been made or announced and in securities of companies for which a merger, consolidation, liquidation or reorganization proposal has been announced if, in the judgment of the Investment Adviser, there is a reasonable prospect of high total return significantly greater than the brokerage and other transaction expenses involved. In general, securities which are the subject of such an offer or proposal sell at a premium to their historic market price immediately prior to the announcement of the offer or may also discount what the stated or appraised value of the security would be if the contemplated transaction were approved or consummated. Such investments may be advantageous when the discount significantly overstates the risk of the contingencies involved; significantly undervalues the securities, assets or cash to be received by shareholders of the prospective portfolio company as a result of the contemplated transaction; or fails adequately to recognize the possibility that the offer or proposal may be replaced or superseded by an offer or proposal of greater value. The evaluation of such contingencies requires unusually broad knowledge and experience on the part of the Investment Adviser which must appraise not only the value of the issuer and its component businesses as well as the assets or securities to be received as a result of the contemplated transaction but also the financial resources and business motivation of the offeror and the dynamics and business climate when the offer or proposal is in process. Since such investments are ordinarily short-term in nature, they will tend to increase the turnover ratio of the Equity Trust or the Utility Fund, as applicable, thereby increasing its brokerage and other transaction expenses. The Investment Adviser intends to select investments of the type described which, in its view, have a reasonable prospect of capital appreciation which is significant in relation to both risk involved and the potential of available alternative investments. Temporary Investments. Although under normal market conditions at least 65% of the Equity Trust's total assets will consist of a portfolio of equity securities of companies in a wide variety of industries and at least 65% of the Utility Fund's assets will consist of common stock and other securities of foreign and domestic companies involved in the utility industry, when a temporary defensive posture is believed by the Investment Adviser to be warranted ("temporary defensive periods"), the Equity Trust or the Utility Fund may without limitation hold cash or invest its assets in money market instruments and repurchase agreements in respect of those instruments. The money market instruments in which the Equity Trust or the Utility Fund may invest are obligations of the United States Government, its agencies or instrumentalities ("U.S. Government Securities"); commercial paper rated A-1 or higher by Standard & Poor's Corporation ("S&P") or Prime-1 by Moody's Investors Service, Inc. ("Moody's"); and certificates of deposit and bankers' acceptances issued by domestic branches of U.S. banks that are members of the Federal Deposit Insurance Corporation. For a description of such ratings, see Appendix D. During temporary defensive periods, the Utility Fund may also invest to the extent permitted by applicable law, and the Equity Trust may invest up to 10% of the market value of its total assets, in shares of money market mutual funds. Money market mutual funds are investment companies and the investments in those companies by the Equity Trust (and in some cases by the Utility Fund) are subject to certain other limitations under the Equity Trust's fundamental investment restrictions and applicable law. See Appendix B - Investment Restrictions. As a shareholder in a mutual fund, the Equity Trust or the Utility Fund will bear its ratable share of the funds's expenses, including management fees, and will remain subject to payment of the fees to the Investment Adviser, with respect to assets so invested. See "Investment Advisory and Other Services" in the Proxy Statement/Prospectus. Lower Rated Securities. The Equity Trust may invest up to 10%, and the Utility Fund may invest up to 25%, of its total assets in fixed-income securities rated in the lower rating categories of recognized statistical rating agencies, such as securities rated "CCC" or lower by S&P or "Caa" or lower by Moody's, or non-rated securities of comparable quality. These debt securities are predominantly speculative and involve major risk exposure to adverse conditions and are often referred to in the financial press as "junk bonds." Generally, such lower rated securities and unrated securities of comparable quality offer a higher current yield than is offered by higher rated securities, but also (i) will likely have some quality and protective characteristics that, in the judgment of the rating organizations, are outweighed by large uncertainties or major risk exposures to adverse conditions and (ii) are predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligation. The market values of certain of these securities also tend to be more sensitive to individual corporate developments and changes in economics conditions than higher quality bonds. In addition, such lower rated securities and comparable unrated securities generally present a higher degree of credit risk. The risk of loss due to default by these issuers is significantly greater because such lower rated securities and unrated securities of comparable quality generally are unsecured and frequently are subordinated to the prior payment of senior indebtedness. In light of these risks, the Investment Adviser, in evaluating the creditworthiness of an issue, whether rated or unrated, will take various factors into consideration, which may include, as applicable, the issuer's financial resources, its sensitivity to economic conditions and trends, the operating history of and the community support for the facility financed by the issue, the ability of the issuer's management and regulatory matters. In addition, the market value of securities in lower rated categories is more volatile than that of higher quality securities, and the markets in which such lower rated or unrated securities are traded are more limited than those in which higher rated securities are traded. The existence of limited markets may make it more difficult for each of the Equity Trust and the Utility Fund to obtain accurate market quotations for purposes of valuing its portfolio and calculating its net asset value. Moreover, the lack of a liquid trading market may restrict the availability of securities for Equity Trust and the Utility Fund to purchase and may also have the effect of limiting the ability of the Equity Trust and the Utility Fund to sell securities at their fair value to respond to changes in the economy or the financial markets. Lower rated debt obligations also present risks based on payment expectations. If an issuer calls the obligation for redemption, the Equity Trust or the Utility Fund may have to replace the security with a lower yielding security, resulting in a decreased return for investors. Also, as the principal value of bonds moves inversely with movements in interest rates, in the event of rising interest rates the value of the securities held by the Equity Trust and the Utility Fund may decline proportionately more than a portfolio consisting of higher rated securities. Investments in zero coupon bonds may be more speculative and subject to greater fluctuations in value due to changes in interest rates than bonds that pay interest currently. The Equity Trust and the Utility Fund each may invest in securities of issuers in default within their limitations on the purchase of fixed-income securities. The Equity Trust and the Utility Fund each will make an investment in securities of issuers in default only when the Investment Adviser believes that such issuers will honor their obligations or emerge from bankruptcy protection and the value of these securities will appreciate. By investing in securities of issuers in default, the Equity Trust or the Utility Fund bears the risk that these issuers will not continue to honor their obligations or emerge from bankruptcy protection or that the value of the securities will not appreciate. In addition to using recognized rating agencies and other sources, the Investment Adviser also performs its own analysis of issues in seeking investments that it believes to be underrated (and thus higher-yielding) in light of the financial condition of the issuer. Its analysis of issuers may include, among other things, current and anticipated cash flow and borrowing requirements, value of assets in relation to historical cost, strength of management, responsiveness to business conditions, credit standing and current anticipated results of operations. In selecting investments for the Equity Trust and the Utility Fund, the Investment Adviser may also consider general business conditions, anticipated changes in interest rates and the outlook for specific industries. Subsequent to its purchase by the Equity Trust or the Utility Fund, an issue of securities may cease to be rated or its rating may be reduced. In addition, it is possible that statistical rating agencies might change their ratings of a particular issue or reflect subsequent events on a timely basis. None of these events will require the sale of the securities by the Equity Trust or the Utility Fund, although the Investment Adviser will consider these events in determining whether the Equity Trust or the Utility Fund should continue to hold the securities. Fixed-income securities, including lower rated securities and comparable unrated securities, frequently have call or buy-back features that permit their issuers to call or repurchase the securities from their holders, such as the Equity Trust and the Utility Fund. If an issuer exercises these rights during periods of declining interest rates, the Equity Trust or the Utility Fund may have to replace the security with a lower yielding security, thus resulting in a decreased return for the Equity Trust or the Utility Fund. The market for certain lower rated and comparable unrated securities several years ago experienced a major economic recession. The recession adversely affected the value of such securities as well as the ability of certain issuers of such securities to repay principal and pay interest thereon. The market for those securities could react in a similar fashion in the event of any future economic recession. Options. A call option is a contract that, in return for a premium, gives the holder of the option the right to buy from the writer of the call option the security underlying the option at a specified exercise price at any time during the term of the option. The writer of the call option has the obligation, upon exercise of the option, to deliver the underlying security upon payment of the exercise price during the option period. A put option is the reverse of a call option, giving the holder the right to sell the security to the writer and obligating the writer to purchase the underlying security from the holder. A written call option is "covered" if the writer owns the underlying security covered by the call or has an absolute and immediate right to acquire that security without additional cash consideration (or for additional cash consideration held in a segregated account by its custodian) upon conversion or exchange of other securities held in its portfolio. A call option is also covered if the Equity Trust or the Utility Fund holds a call on the same security as the call written where the exercise price of the call held is (1) equal to or less than the exercise price of the call written or (2) greater than the exercise price of the call written if the difference is maintained by the Equity Trust or the Utility Fund in cash, U.S. Government Securities or other high grade short-term obligations in a segregated account held with its custodian. A written put option is "covered" if the Equity Trust or the Utility Fund maintains cash or other high grade short-term obligations with a value equal to the exercise price in a segregated account held with its custodian, or else holds a put on the same security as the put written where the exercise price of the put held is equal to or greater than the exercise price of the put written. If the Equity Trust or the Utility Fund has written an option, it may terminate its obligation by effecting a closing purchase transaction. This is accomplished by purchasing an option of the same series as the option previously written. However, once it has been assigned an exercise notice, the Equity Trust or the Utility Fund will be unable to effect a closing purchase transaction. Similarly, if the Equity Trust or the Utility Fund is the holder of an option it may liquidate its position by effecting a closing sale transaction. This is accomplished by selling an option of the same series as the option previously purchased. There can be no assurance that either a closing purchase or sale transaction can be effected when the Equity Trust or the Utility Fund so desires. The Equity Trust or the Utility Fund will realize a profit from a closing transaction if the price of the transaction is less than the premium received from writing the option or is more than the premium paid to purchase the option; the Equity Trust or the Utility Fund will realize a loss from a closing transaction if the price of the transaction is more than the premium received from writing the option or is less than the premium paid to purchase the option. Since call option prices generally reflect increases in the price of the underlying security, any loss resulting from the repurchase of a call option may also be wholly or partially offset by unrealized appreciation of the underlying security. Other principal factors affecting the market value of a put or a call option include supply and demand, interest rates, the current market price and price volatility of the underlying security and the time remaining until the expiration date. Gains and losses on investments in options depend, in part, on the ability of the Investment Adviser to predict correctly the effect of these factors. The use of options cannot serve as a complete hedge since the price movement of securities underlying the options will not necessarily follow the price movements of the portfolio securities subject to the hedge. An option position may be closed out only on an exchange which provides a secondary market for an option of the same series. Although the Equity Trust and the Utility Fund each will generally purchase or write only those options for which there appears to be an active secondary market, there is no assurance that a liquid secondary market on an exchange will exist for any particular option. In such event, it might not be possible to effect closing transactions in particular options, so that the Equity Trust or the Utility Fund would have to exercise its options in order to realize any profit and would incur brokerage commissions upon the exercise of call options and upon the subsequent disposition of underlying securities for the exercise of put options. If the Equity Trust or the Utility Fund, as a covered call option writer, is unable to effect a closing purchase transaction in a secondary market, it will not be able to sell the underlying security until the option expires or it delivers the underlying security upon exercise or otherwise covers the position. In addition to options on individual securities, the Equity Trust and the Utility Fund each may also purchase and sell call and put options on securities indexes. A stock index reflects in a single number the market value of many different stocks. Relative values are assigned to the stocks included in an index and the index fluctuates with changes in the market values of the stocks. The options give the holder the right to receive a cash settlement during the term of the option based on the difference between the exercise price and the value of the index. By writing a put or call option on a securities index, the Equity Trust or the Utility Fund is obligated, in return for the premium received, to make delivery of this amount. The Equity Trust or the Utility Fund may offset its position in stock index options prior to expiration by entering into an closing transaction on an exchange or it may let the option expire unexercised. The Equity Trust and the Utility Fund each also may buy or sell put and call options on foreign currencies. A put option on a foreign currency gives the purchaser of the option the right to sell a foreign currency at the exercise price until the option expires. A call option on a foreign currency gives the purchaser of the option the right to purchase the currency at the exercise price until the option expires. Currency options traded on U.S. or other exchanges may be subject to position limits which may limit the ability of the Equity Trust or the Utility Fund to reduce foreign currency risk using such options. Over-the-counter options differ from exchange-traded options in that they are two-party contracts with price and other terms negotiated between buyer and seller and generally do not have as much market liquidity as exchange-traded options. Over-the-counter options are illiquid securities. Use of options on securities indexes entails the risk that trading in the options may be interrupted if trading in certain securities included in the index is interrupted. Neither the Equity Trust nor the Utility Fund will purchase these options unless the Investment Adviser is satisfied with the development, depth and liquidity of the market and the Investment Adviser believes the options can be closed out. Price movements in the portfolio of the Equity Trust or the Utility Fund are unlikely to correlate precisely with movements in the level of an index and, therefore, the use of options on indexes cannot serve as a complete hedge and will depend, in part, on the ability of the Investment Adviser to predict correctly movements in the direction of the stock market generally or of a particular industry. Because options on securities indexes require settlement in cash, the Investment Adviser may be forced to liquidate portfolio securities to meet settlement obligations. The SEC considers over-the-counter options such as options on indexes illiquid securities. Although the Investment Adviser will attempt to take appropriate measures to minimize the risks relating to the Equity Trust's and the Utility Fund's writing of put and call options, there can be no assurance that the Equity Trust or the Utility Fund will succeed in any option-writing program it undertakes. Futures Contracts and Options on Futures. Neither the Equity Trust nor the Utility Fund will enter into futures contracts or options on futures contracts unless (i) the aggregate initial margins and premiums do not exceed 5% of the fair market value of its assets and (ii) the aggregate market value of its outstanding futures contracts and the market value of the currencies and futures contracts subject to outstanding options written by the Equity Trust or the Utility Fund, as the case may be, do not exceed 50% of the market value of its total assets. It is anticipated that these investments, if any, will be made by the Equity Trust or the Utility Fund solely for the purpose of hedging against changes in the value of its portfolio securities and in the value of securities it intends to purchase. Such investments will only be made if they are economically appropriate to the reduction of risks involved in the management of the Equity Trust or the Utility Fund. In this regard, the Equity Trust and the Utility Fund each may enter into futures contracts or options on futures for the purchase or sale of securities indices or other financial instruments including but not limited U.S. Government securities. A "sale" of a futures contract (or a "short" futures position) means the assumption of a contractual obligation to deliver the securities underlying the contract at a specified price at a specified future time. A "purchaser" of a futures contract (or a "long" futures position) means the assumption of a contractual obligation to acquire the securities underlying the contract at a specified future time. Certain futures contracts, including stock and bond index futures, are settled on a net cash payment basis rather than by the sale and delivery of the securities underlying the futures contracts. No consideration will be paid or received by the Equity Trust or the Utility Fund upon the purchase or sale of a futures contract. Initially, the Equity Trust or the Utility Fund will be required to deposit with the broker an amount of cash or cash equivalents equal to approximately 1% to 10% of the contract amount (this amount is subject to change by the exchange or board of trade on which the contract is traded and brokers or members of such board of trade may charge a higher amount). This amount is known as "initial margin" and is in the nature of a performance bond or good faith deposit on the contract. Subsequent payments, known as "variation margin," to and from the broker will be made daily as the price of the index or security underlying the futures contract fluctuates. At any time prior to the expiration of the futures contract, the Equity Trust or the Utility Fund may elect to close the position by taking an opposite position, which will operate to terminate its existing position in the contract. An option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in a futures contract at a specified exercise price at any time to the expiration of the option. Upon exercise of an option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's futures margin account attributable to that contract, which represents the amount by which the market price of the futures contract exceeds, in the case of a call, or is less than, in the case of a put, the exercise price of the option on the futures contract. The potential loss related to the purchase of an option on futures on contracts is limited to the premium paid for the option (plus transaction costs). Because the value of the option purchased is fixed at the point of sale, there are no daily cash payments by the purchaser to reflect changes in the value of the underlying contract; however, the value of the option does change daily and that change would be reflected in the net assets of the Equity Trust or the Utility Fund. Futures and options on futures entail certain risks, including but not limited to the following: no assurance that futures contracts or options on futures can be offset at favorable prices, possible reduction of the yield of the Equity Trust or the Utility Fund due to the use of hedging, possible reduction in value of both the securities hedged and the hedging instrument, possible lack of liquidity due to daily limits on price fluctuations, imperfect correlation between the contracts and the securities being hedged, losses from investing in futures transactions that are potentially unlimited and the segregation requirements described below. In the event the Equity Trust or the Utility Fund sells a put option or enters into long futures contracts, under current interpretations of the 1940 Act, an amount of cash, obligations of the U.S. Government and its agencies and instrumentalities or other high grade debt securities equal to the market value of the contract must be deposited and maintained in a segregated account with the custodian of the Equity Trust or the Utility Fund, as the case may be, to collateralize the positions, in order for the fund to avoid being treated as having issued a senior security in the amount of its obligations. For short positions in futures contracts and sales of call options, the Equity Trust or the Utility Fund may establish a segregated account (not with a futures commission merchant or broker) with cash obligations of the U.S. Government and its agencies and instrumentalities or other high grade debt securities that, when added to amounts deposited with a futures commission merchant or a broker as margin, equal the market value of the instruments or currency underlying the futures contracts or call options, respectively (but are no less than the stock price of the call option or the market price at which the short positions were established). Forward Currency Transactions. The Equity Trust and the Utility Fund each may hold currencies to meet settlement requirements for foreign securities and may engage in currency exchange transactions to protect against uncertainty in the level of future exchange rates between a particular foreign currency and the U.S. dollar or between foreign currencies in which its securities are or may be denominated. Forward currency contracts are agreements to exchange one currency for another at a future date. The date (which may be any agreed-upon fixed number of days in the future), the amount of currency to be exchanged and the price at which the exchange takes place will be negotiated and fixed for the term of the contract at the time that the Equity Trust or the Utility Fund enters into the contract. Forward currency contracts (1) are traded in a market conducted directly between currency traders (typically, commercial banks or other financial institutions) and their customers, (2) generally have no deposit requirements and (3) are typically consummated without payment of any commissions. The Equity Trust or the Utility Fund, however, may enter into forward currency contracts requiring deposits or involving the payment of commissions. To assure that its forward currency contracts are not used to achieve investment leverage, the Equity Trust or the Utility Fund will segregate liquid assets consisting of cash, U.S. Government Securities or other liquid high grade debt obligations with its custodian, or a designated sub-custodian, in an amount at all times equal to or exceeding its commitment with respect to the contracts. The dealings of the Equity Trust and the Utility Fund in forward foreign exchange is limited to hedging involving either specific transactions or portfolio positions. Transaction hedging is the purchase or sale of one forward foreign currency for another currency with respect to specific receivables or payable of the Equity Trust or the Utility Fund accruing in connection with the purchase and sale of its portfolio securities or its payment of dividends and distributions. Position hedging is the purchase or sale of one forward foreign currency for another currency with respect to portfolio security positions denominated or quoted in the foreign currency to offset the effect of an anticipated substantial appreciation or depreciation, respectively, in the value of the currency relative to the U.S. dollar. In this situation, the Equity Trust or the Utility Fund also may, for example, enter into a forward contract to sell or purchase a different foreign currency for a fixed U.S. dollar amount where it is believed that the U.S. dollar value of the currency to be sold or bought pursuant to the forward contract will fall or rise, as the case may be, whenever there is a decline or increase, respectively, in the U.S. dollar value of the currency in which its portfolio securities are denominated (this practice being referred to as a "cross-hedge"). In hedging a specific transaction, the Equity Trust or the Utility Fund may enter into a forward contract with respect to either the currency in which the transaction is denominated or another currency deemed appropriated by the Investment Adviser. The amount the Equity Trust or the Utility Fund may invest in forward currency contracts is limited to the amount of its aggregate investments in foreign currencies. The use of forward currency contracts may involve certain risks, including the failure of the counterparty to perform its obligations under the contract, and such use may not serve as a complete hedge because of an imperfect correlation between movements in the prices of the contracts and the prices of the currencies hedged or used for cover. The Equity Trust and the Utility Fund each will only enter into forward currency contracts with parties which it believes to be creditworthy institutions. When Issued, Delayed Delivery Securities and Forward Commitments. The Equity Trust and the Utility Fund each may enter into forward commitments for the purchase or sale of securities, including on a "when issued" or "delayed delivery" basis, in excess of customary settlement periods for the type of security involved. In some cases, a forward commitment may be conditioned upon the occurrence of a subsequent event, such as approval and consummation of a merger, corporate reorganization or debt restructuring, i.e., a when, as and if issued security. When such transactions are negotiated, the price is fixed at the time of the commitment, with payment and delivery taking place in the future, generally a month or more after the date of the commitment. While it will only enter into a forward commitment with the intention of actually acquiring the security, the Equity Trust or the Utility Fund may sell the security before the settlement date if it is deemed advisable. Securities purchased under a forward commitment are subject to market fluctuation, and no interest (or dividends) accrues to the Equity Trust or the Utility Fund prior to the settlement date. Each of the Equity Trust and the Utility Fund will segregate with its custodian cash or liquid high-grade debt securities in an aggregate amount at least equal to the amount of its outstanding forward commitments. Short Sales. The Utility Fund may make short sales of securities. A short sale is a transaction in which the Utility Fund sells a security it does not own in anticipation that the market price of that security will decline. The market value of the securities sold short of any one insurer will not exceed either 5% of the Utility Fund's total assets or 5% of such issuer's voting securities. The Utility Fund will not make a short sale, if, after giving effect to such sale, the market value of all securities sold short exceeds 25% of the value of its assets or the Utility Fund's aggregate short sales of a particular class of securities exceeds 25% of the outstanding securities of that class. The Utility Fund may also make short sales "against the box" without respect to such limitations. In this type of short sale, at the time of the sale, the Utility Fund owns, or has the immediate and unconditional right to acquire at no additional cost, the identical security. The Utility Fund expects to make short sales both to obtain capital gains from anticipated declines in securities and as a form of hedging to offset potential declines in long positions in the same or similar securities. The short sale of a security is considered a speculative investment technique. When the Utility Fund makes a short sale, it must borrow the security sold short and deliver it to the broker-dealer through which it made the short sale in order to satisfy its obligation to deliver the security upon conclusion of the sale. The Utility Fund may have to pay a fee to borrow particular securities and is often obligated to pay over any payments received on such borrowed securities. The Utility Fund's obligation to replace the borrowed security will be secured by collateral deposited with the broker-dealer, usually cash, U.S. government securities or other highly liquid debt securities. The Utility Fund will also be required to deposit similar collateral with its custodian, Boston Safe Deposit and Trust Company ("Boston Safe"), and , to the extent, if any, necessary so that the value of both collateral deposits in the aggregate is at all times equal to the greater of the price at which the security is sold short of 100% of the current market value of the security sold short. Depending on arrangements made with the broker-dealer from which it borrowed the security regarding payment over of any payments received by the Utility Fund on such security, the Utility Fund may not receive any payments (including interest) on its collateral deposited with such broker-dealer. If the price of the security sold short increases between the time of the short sale and the time the Utility Fund replaces the borrowed security, the Utility Fund will incur a loss; conversely, if the price declines, the Utility Fund will realize a capital gain. Any gain will be decreased, any loss increased, by the transaction costs described above. Although the Utility Fund's gain is limited to the price at which it sold the security short, its potential loss is theoretically unlimited. To secure its obligations to deliver the securities sold short, the Utility Fund will deposit in escrow in a separate account with the custodian, an amount at least equal to the securities sold short or securities convertible into, or exchangeable for, the securities. The Utility Fund may close out a short position by purchasing and delivering an equal amount of securities sold short, rather than by delivering securities already held by the Utility Fund, because the Utility Fund may want to continue to receive interest and dividend payments on securities in its portfolio that are convertible into the securities sold short. Repurchase Agreements. The Equity Trust and the Utility Fund each may engage in repurchase agreement transactions involving money market instruments with banks, registered broker-dealers and government securities dealers approved by the Board of Directors. Neither the Equity Trust nor the Utility Fund will enter into repurchase agreements with the Investment Adviser or any of its affiliates. Under the terms of a typical repurchase agreement, the Equity Trust or the Utility Fund, as the case may be, would acquire an underlying debt obligation for a relatively short period (usually not more than one week) subject to an obligation of the seller to repurchase, and the Equity Trust or the Utility Fund, as the case may be, to resell, the obligation at an agreed price and time, thereby determining the yield during its holding period. Thus, repurchase agreements may be seen to be loans by the Equity Trust or the Utility Fund collateralized by the underlying debt obligation. This arrangement results in a fixed rate of return that is not subject to market fluctuations during the holding period. The value of the underlying securities will be at least equal to all times to the total amount of the repurchase obligation, including interest. The Equity Trust or the Utility Fund bears a risk of loss in the event that the other party to a repurchase agreement defaults on its obligations and the Equity Trust or the Utility Fund is delayed in or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period in which it seeks to assert these rights. The Investment Adviser, acting under the supervision of the Board of Directors of the Equity Trust or the Utility Fund, reviews the creditworthiness of those banks and dealers with which the Equity Trust or the Utility Fund, as the case may be, enters into repurchase agreements to evaluate these risks and monitors on an ongoing basis the value of the securities subject to repurchase agreements to ensure that the value is maintained at the required level. Leveraging. As provided in the 1940 Act and subject to certain exceptions, the Utility Fund may issue debt or preferred stock so long as the Utility Fund's total assets, less certain ordinary course liabilities, exceed 300% of the amount of the debt outstanding and exceed 200% of the sum of the amount of preferred stock and debt outstanding and the Equity Trust may issue debt for certain restricted purposes up to 10% of its total assets and preferred stock up to the 200% asset coverage limitation. Such debt or preferred stock may be convertible in accordance with SEC staff guidelines which may permit each fund to obtain leverage at attractive rates. Leverage entails two primary risks. The first risk is that the use of leverage magnifies the impact on the holders of common stock of changes in net asset value. For example, a fund that uses 33% leverage will show a 1.5% increase or decline in net asset value for each 1% increase or decline in the value of its total assets. The second risk is that the cost of leverage will exceed the return on the securities acquired with the proceeds of leverage, thereby diminishing rather than enhancing the return to holders of common stock. These two risks would generally make the fund's total return to holders of common stock more volatile. in addition, the fund may be required to sell investments in order to meet dividend or interest payments on the debt or preferred stock when it may be disadvantageous to do so. A decline in net asset value could affect the ability of the Equity Trust or the Utility Fund to make common stock dividend payments and such a failure to pay dividends or make distributions could result in the Equity Trust or the Utility Fund ceasing to qualify as a regulated investment company under the Code. See "Taxation". Finally, if the asset coverage for preferred stock or debt securities declines to less than 200% or 300%, respectively (as a result of market fluctuations or otherwise), the Equity Trust or the Utility Fund may be required to sell a portion of its investments to redeem the preferred stock or repay the debt when it may be disadvantageous to do so. APPENDIX B INVESTMENT RESTRICTIONS The Equity Trust and the Utility Fund operate under the following restrictions that constitute fundamental policies that, except as otherwise noted, cannot be changed without the affirmative vote of the holders of a majority of the outstanding voting securities of the Equity Trust or the Utility Fund, as the case may be. Except as otherwise noted, these investment restrictions apply to both the Equity Trust and the Utility Fund, and all percentage limitations set forth below apply immediately after a purchase or initial investment and any subsequent change in any applicable percentage resulting from market fluctuations does not require elimination of any security from the portfolio. 1. Neither the Equity Trust nor the Utility Fund may invest 25% or more of its total assets, taken at market value at the time of each investment, in the securities of issuers in any particular industry other than, in the case of the Utility Fund, the utility industry. This restriction does not apply to investments in U.S. Government Securities. 2. The Equity Trust may not purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition or reorganization, if more than 10% of the market value of the total assets of the Equity Trust would be invested in securities of other investment companies, more than 5% of the market value of the total assets of the Equity Trust would be invested in the securities of any one investment company or the Equity Trust would own more than 3% of any other investment company's securities; provided, however, this restriction shall not apply to securities of any investment company organized by the Equity Trust that are to be distributed pro rata as a dividend to its shareholders. The Utility Fund has no fundamental policy in this area. 3. Neither the Equity Trust nor the Utility Fund may purchase or sell commodities or commodity contracts except that the Equity Trust and the Utility Fund each may purchase or sell futures contracts and related options thereon if immediately thereafter (i) no more than 5% of its total assets are invested in margins and premiums and (ii) the aggregate market value of its outstanding futures contracts and market value of the currencies and futures contracts subject to outstanding options written by the Equity Trust or the Utility Fund, as the case may be, do not exceed 50% of the market value of its total assets. Neither the Equity Trust nor the Utility Fund may purchase or sell real estate, provided that each may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein. 4. Neither the Equity Trust nor the Utility Fund may purchase any securities on margin or, in the case of the Equity Trust, make short sales of securities, except that the Equity Trust and the Utility Fund each may obtain such short-term credit as may be necessary for the clearance of purchases and sales of portfolio securities. 5. Neither the Equity Trust nor the Utility Fund may make loans of money, except by the purchase of a portion of publicly distributed debt obligations (in the case of the Equity Trust) or private or publicly distributed debt obligations (in the case of the Utility Fund), entering into repurchase agreements (which in the case of the Equity Trust are limited to publicly traded debt obligations in which it may invest). The Equity Trust and the Utility Fund each reserves the authority to make loans of its portfolio securities to financial intermediaries in an aggregate amount not exceeding 20% of its total assets. Any such loans will only be made upon approval of, and subject to any conditions imposed by, the Board of Directors of the Equity Trust or of the Utility Fund, as the case may be. Because these loans are required to be fully collateralized at all times, the risk of loss in the event of default of the borrower should be slight. 6. The Utility Fund may borrow money to the extent permitted by applicable law. The 1940 Act currently requires that the Utility Fund have 300% asset coverage with respect to all borrowings other than temporary borrowings of up to 5% of the value of its total assets. The Equity Trust may not borrow money, except that it may borrow from banks and other financial institutions on an unsecured basis, in an amount not exceeding 10% of its total assets, to finance the repurchase of its shares as described above. See "Description of Common Stock of the Utility Fund and the Equity Trust Repurchase of Shares." The Equity Trust may borrow money on a secured basis from banks as a temporary measure for extraordinary or emergency purposes. Temporary borrowings may not exceed 5% of the value of the total assets of the Equity Trust at the time the loan is made. The Equity Trust may pledge up to 10% of the lesser of the cost or value of its total assets to secure temporary borrowings. The Equity Trust will not borrow for investment purposes. Immediately after any borrowing, the Equity Trust will maintain asset coverage of not less than 300% with respect to all borrowings. While the borrowing of the Equity Trust exceeds 5% of its total assets, the Equity Trust will make no further purchases of securities, although this limitation will not apply to repurchase transactions as described above. 7. Issue senior securities, except to the extent permitted by applicable law. 8. Underwrite securities of other issuers except insofar as the Equity Trust or the Utility Fund may be deemed an underwriter under the 1933 Act in selling portfolio securities; provided, however, this restriction shall not apply to securities of any investment company organized by the Equity Trust or the Utility Fund that are to be distributed pro rata as a dividend to its shareholders. 9. The Utility Fund may invest without limit in illiquid securities. The Equity Trust may not invest more than 10% of its total assets in illiquid securities, such as certain repurchase agreements with maturities in excess of seven days, or securities that have legal or contractual restrictions on resale. APPENDIX C AUTOMATIC DIVIDEND REINVESTMENT AND VOLUNTARY CASH PURCHASE PLAN Under the Equity Trust Plan and the substantially similar Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan adopted by the Utility Fund (each, the "Plan"), a shareholder whose Common Stock is registered in his own name will have all distributions reinvested automatically by State Street Bank and Trust Company ("State Street"), which is agent under the Plan, unless the shareholder elects to receive cash. Distributions with respect to shares registered in the name of a broker-dealer or other nominee (that is, in "street name") will be reinvested by the broker or nominee in additional shares under the Plan, unless the service is not provided by the broker or nominee or the shareholder elects to receive distributions in cash. Investors who own Common Stock registered in street name should consult their broker-dealers for details regarding reinvestment. All distributions to investors who do not participate in the Plan will be paid by check mailed directly to the record holder by State Street as dividend disbursing agent. Under the Plan, whenever the market price of the Common Stock is equal to or exceeds net asset value at the time shares are valued for purposes of determining the number of shares equivalent to the cash dividend or capital gains distribution, participants in such plan are issued shares of Common Stock, valued at the greater of (i) the net asset value as most recently determined or (ii) 95% of the then current market price of the Common Stock. The valuation date is the dividend or distribution payment date or, if that date is not a New York Stock Exchange trading day, the next preceding trading day. If the net asset value of the Common Stock at the time of valuation exceeds the market price of the Common Stock, participants will receive shares from the Equity Trust or the Utility Fund, as applicable, or acquired by the Plan agent in the market, valued at market price. As required by the 1940 Act, the shareholders of the Equity Trust and the Equity Trust as the sole shareholder of the Utility Fund has approved issuance of new shares by the relevant fund if the market price of such shares at the time is less than their net asset value per share. If the Equity Trust or the Utility Fund should declare a dividend or capital gains distribution payable only in cash, State Street will buy such investment company's Common Stock for such Plan in the open market, on the New York Stock Exchange or elsewhere, for the participants' accounts, except that State Street will endeavor to terminate purchases in the open market and cause the Equity Trust or the Utility Fund, as the case may be, to issue shares at net asset value if, following the commencement of such purchases, the market value of its Common Stock exceeds net asset value. Participants in the Plan have the option of making additional cash payments to State Street, monthly for the Equity Trust and twice per month for the Utility Fund, for investment in the shares as applicable. Such payments may be made in any amount from $250 to $10,000. State Street will use all funds received from participants to purchase Equity Trust shares or Utility Fund shares, as applicable, in the open market on the 15th of each month for the Equity Trust and on the 1st and 15th of each month for the Utility Fund. It is suggested that participants send voluntary cash payments to State Street in a manner that ensures that State Street will receive these payments approximately 10 days before the investment date. A participant may without charge withdraw a voluntary cash payment by written notice, if the notice is received by State Street at least 48 hours before such payment is to be invested. State Street maintains all shareholder accounts in the Plan and furnishes written confirmations of all transactions in the account, including information needed by shareholders for personal and tax records. Shares in the account of each Plan participant will be held by State Street in noncertificated form in the name of the participant, and each shareholder's proxy will include those shares purchased pursuant to the Plan. A Plan participant may send his share certificates to State Street so that the shares represented by such certificates will be held by State Street in the participant's shareholder account under the Plan. In the case of shareholders such as banks, brokers or nominees, which hold shares for others who are the beneficial owners, State Street will administer the Plan on the basis of the number of shares certified from time to time by the shareholder as representing the total amount registered in the shareholder's name and held for the account of beneficial owners who participate in the Plan. There is no charge to participants for reinvesting dividends or capital gains distributions payable in either stock or cash. State Street's fees for handling the reinvestment of such dividends and capital gains distributions are paid by the Equity Trust or Utility Fund, as the case may be. There are no brokerage charges with respect to shares issued directly by the Equity Trust or Utility Fund, as the case may be, as a result of dividends or capital gains distributions payable in stock or in cash. However, each participant bears a pro rata share of brokerage commissions incurred with respect to State Street's open market purchases in connection with the reinvestment of dividends or capital gains distributions. With respect to purchases from voluntary cash payments, State Street will charge $0.75 for each such purchase for a participant, plus a pro rata share of the brokerage commissions. Brokerage charges for purchasing small amounts of stock for individual accounts through the Plan are expected to be less than the usual brokerage charges for such transactions, as State Street will be purchasing shares for all participants in blocks and prorating the lower commission thus attainable. The automatic reinvestment of dividends and distributions will not relieve participants of any income tax which may be payable on such dividends or distributions. Experience under the Plan may indicate that changes are desirable. Accordingly, the Equity Trust and the Utility Fund each reserves the right to amend or terminate its respective Plan as applied to any voluntary cash payments made and any dividend or distribution paid subsequent to written notice of the change sent to the members of such Plan at least 90 days before the record date for such dividend or distribution. Each Plan also may be amended or terminated by State Street on at least 90 days' written notice to the respective participants in such Plan. All correspondence concerning the Plan should be directed to State Street at P.O. Box 8200, Boston, Massachusetts 02266-8200. APPENDIX D DESCRIPTION OF RATINGS Description of Moody's Investors Service, Inc.'s ("Moody's") Corporate Bond Ratings Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa: Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which made the long term risks appear somewhat larger than in Aaa securities. A: Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba: Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B: Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa: Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca: Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C: Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Note: Moody's may apply numerical modifiers 1, 2 and 3 in each generic rating classification from Aa through B in its corporate bond rating system. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category. Description of Standard & Poor's Corporation's ("S&P") Corporate Debt Ratings AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong. AA: Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree. A: Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB: Debt rated BBB is regarded as having adequate capacity to pay interest and repay principal. Whereas it normally exhibits protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than for debt in higher rated categories. BB, B, CCC, CC, C: Debt rated BB, B, CCC, CC and C is regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. BB indicates the lowest degree of speculative and C the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. C1: The rating C1 is reserved for income bonds on which no interest is being paid. D: Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D Rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized. Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. r: In July 1994, S&P added an "r" symbol to its ratings. The "r" symbol is attached to derivatives, hybrids and certain other obligations that S&P believes may experience high variability in expected returns due to non-credit risks created by the terms of the obligations. Description of Moody's Preferred Stock Ratings aaa: An issue which is rated aaa is considered to be a top-quality preferred stock. This rating indicates good asset protection and the least risk of dividend impairment within the universe of preferred stocks. aa: An issue which is rated aa is considered a high-grade preferred stock. This rating indicates that there is reasonable assurance that earnings and asset protection will remain relatively well maintained in the foreseeable future. a: An issue which is rated a is considered to be an upper medium grade preferred stock. While risks are judged to be somewhat greater than in the aaa and aa classifications, earnings and asset protection are nevertheless expected to be maintained at adequate levels. baa: An issue which is rated baa is considered to be medium grade, neither highly protected nor poorly secured. Earnings and asset protection appear adequate at present but may be questionable over any great length of time. ba: An issue which is rated ba is considered to have speculative elements and its future cannot be considered well assured. Earnings and asset protection may be very moderate and not well safeguarded during adverse periods. Uncertainty of position characterizes preferred stocks in this class. b: An issue which is rated b generally lacks the characteristics of a desirable investment. Assurance of dividend payments and maintenance of other terms of the issue over any long period of time may be small. caa: An issue which is rated caa is likely to be in arrears on dividend payments. This rating designation does not purport to indicate the future status of payment. ca: An issue which is rated ca is speculative in a high degree and is likely to be in arrears on dividends with little likelihood of eventual payment. c: This is the lowest rated class of preferred or preference stock. Issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Note: Moody's may apply numerical modifiers 1, 2 and 3 in each rating classification from "aa" through "b" in its preferred stock rating system. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category. Description of S&P's Preferred Stock Ratings AAA: This is the highest rating that may be assigned by S&P to a preferred stock issue and indicates an extremely strong capacity to pay the preferred stock obligations. AA: A preferred stock issue rated AA also qualifies as a high-quality fixed income security. The capacity to pay preferred stock obligations is very strong, although not as overwhelming as for issues rated AAA. A: An issue rated A is backed by a sound capacity to pay the preferred stock obligations, although it is somewhat more susceptible to the adverse effect of changes in circumstances and economic conditions. BBB: An issue rated BBB is regarded as backed by an adequate capacity to pay the preferred stock obligations. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to make payments for a preferred stock in this category than for issues in the A category. BB, B, CCC: Preferred stock rated BB, B, and CCC are regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay preferred stock obligations. BB indicates the lowest degree of speculation and CCC the highest degree of speculation. While such issues will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. CC: The rating CC is reserved for a preferred stock in arrears on dividends or sinking fund payments but that is currently paying. C: A preferred stock rated C is a non-paying issue. D: A preferred stock rated D is a non-paying issue with the issuer in default on debt instruments. Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. THE GABELLI UTILITY FUND PART C OTHER INFORMATION Item 15. Indemnification The response to this item is incorporated by reference to the caption "Description of Common Stock of the Utility Fund and the Equity Trust - - Limitation of Officers' and Directors' Liability" in Part A of this Registration Statement. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Registrant pursuant to the forgoing provisions, or otherwise, Registrant has been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act of 1933, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a director, officer or controlling person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. Item 16. Exhibits (1) Agreement and Declaration of Trust of Registrant.* (2) By-Laws of Registrant.* (3) Not Applicable. (4) Not Applicable. (5) Form of Registrant's Common Stock Certificate.* (6) Form of Investment Advisory Agreement between Registrant and Gabelli Funds, LLC* (7) Not Applicable. (8) Not Applicable. (9) (a) Form of Custodian Contract between Registrant and Boston Safe Deposit and Trust Company.* (9) (b) Form of Custodian Fee Schedule between Registrant and Boston Safe Deposit and Trust Company.* (9) (c) Form of Registrar, Transfer Agency and Service Agreement between Registrant and State Street Bank and Trust Company.* (9) (d) Form of Transfer Agent and Registrar Services Fee Agreement between Registrant and State Street Bank and Trust Company.* (10) Not Applicable. (11) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom LLP with respect to legality.* (12) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom LLP with respect to tax matters.* (13) Not Applicable. (14) Consents of PricewaterhouseCoopers LLP.* (15) Not Applicable. (16) Power of Attorney.* (17) (a)(i) Form of Proxy Card (holders of Common Stock).* (17) (a)(ii) Form of Proxy Card (holders of Cumulative Preferred Stock).* (17) (b) Purchase Agreement dated March 29, 1999 between Registrant and The Gabelli Equity Trust Inc.* (17) (c) Annual Report of The Gabelli Equity Trust Inc. to Shareholders for the fiscal year ended December 31, 1998.** (17) (d) Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan of Registrant.* - --------------- * Filed herewith. ** Incorporated by reference from The Gabelli Equity Trust Inc.'s Form N-30D as filed with the Securities and Exchange Commission on March 11, 1999. Item 17. Undertakings (1) The undersigned Registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is a part of this Registration Statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the reoffering prospectus will contain the information called for by the applicable registration form for reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a part of an amendment to the Registration Statement and will not be used until the amendment is effective, and that, in determining any liability under the Securities Act of 1933, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them. SIGNATURES As required by the Securities Act of 1933, this Registrant's Registration Statement has been signed on behalf of the Registrant, in the City of Rye, State of New York, on the 30th day of March, 1999. THE GABELLI UTILITY FUND By: /s/ Bruce N. Alpert ---------------------------- Bruce N. Alpert Treasurer POWER OF ATTORNEY Each person whose signature appears below on this Registration Statement hereby constitutes and appoints Mario J. Gabelli, Bruce N. Alpert and James E. McKee, and each of them, with full power to act without the other, his rue and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing) to sign any and all amendments to this Registration Statement (including post-effective amendments thereto), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This Power of Attorney may be executed in multiple counterparts, each of which shall be deemed an original but which taken together shall constitute one instrument. As required by the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. Signature Title Date /s/ Mario J. Gabelli Chairman of the Board, March 30, 1999 - -------------------- President, Chief Investment Mario J. Gabelli Officer and Trustee /s/ Bruce N. Alpert Chief Financial Officer March 30, 1999 - ------------------- Bruce N. Alpert - -------------------- Trustee March 30, 1999 Thomas E. Bratter /s/ Bill Callaghan Trustee March 30, 1999 - -------------------- Bill Callaghan - ---------------------- Trustee March 30, 1999 Felix J. Christiana /s/ Anthony J. Colavita Trustee March 30, 1999 - ----------------------- Anthony J. Colavita /s/ James P. Conn Trustee March 30, 1999 - ----------------- James P. Conn /s/ Vincent D. Enright Trustee March 30, 1999 - ---------------------- Vincent D. Enright /s/ Frank J. Fahrenkopf, Jr. Trustee March 30, 1999 - -------------------------- Frank J. Fahrenkopf, Jr. - -------------------------- Trustee March 30, 1999 John D. Gabelli - ------------------------- Trustee March 30, 1999 Karl Otto Pohl /s/ Anthony R. Pustorino Trustee March 30, 1999 - ------------------------ Anthony R. Pustorino - ------------------------- Trustee March 30, 1999 Salvatore J. Zizza EXHIBIT INDEX Exhibit Number Description (1) Agreement and Declaration of Trust of Registrant* (2) By-Laws of Registrant* (5) Form of Registrant's Common Stock Certificate.* (9) (a) Form of Custodian Contract between Registrant* and State Street Bank and Trust Company. (9) (b) Form of Custodian Fee Schedule between Registrant and State Street Bank and Trust Company.* (9) (c) Form of Registrar, Transfer Agency and Service Agreement between Registrant and State Street Bank and Trust Company.* (9) (d) Form of Transfer Agent and Registrar Services Fee Agreement.* (10) Form of Investment Advisory Agreement between Registrant and Gabelli Funds, LLC.* (11) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom LLP with respect to legality .* (12) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom LLP with respect to tax matters.* (14) Consents of PricewaterhouseCoopers LLP.** (16) Power of Attorney.* (17) (a)(i) Form of Proxy Card (holders of Common Stock).* (17) (a)(ii) Form of Proxy Card (holders of Cumulative Preferred Stock).* (17) (b) Purchase Agreement dated March 29, 1999 between Registrant and The Gabelli Equity Trust Inc.* (17) (c) Annual Report of The Gabelli Equity Trust Inc. to Shareholders for the fiscal year ended December 31, 1998.** (17) (d) Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan of Registrant.* - --------------- * Filed herewith. ** Incorporated by reference from The Gabelli Equity Trust Inc.'s Form N-30D as filed with the Securities and Exchange Commission on March 11, 1999. EX-1 2 EXHIBIT 1 - AGREEMENT AND DECLARATION OF TRUST EXHIBIT (1) THE GABELLI UTILITY FUND ____________________________________________ AGREEMENT AND DECLARATION OF TRUST ____________________________________________ MARCH 29, 1999 TABLE OF CONTENTS ARTICLE I The Trust 1.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . 3 1.3 Purpose and Powers of Trust . . . . . . . . . . . . . . . 5 ARTICLE II Trustees 2.1 Number and Qualification . . . . . . . . . . . . . . . . . 5 2.2 Term and Election . . . . . . . . . . . . . . . . . . . . 5 2.3 Resignation and Removal . . . . . . . . . . . . . . . . . 6 2.4 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . 6 2.5 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.6 Officers . . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE III Powers and Duties of Trustees 3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.2 Investments . . . . . . . . . . . . . . . . . . . . . . . 8 3.3 Legal Title . . . . . . . . . . . . . . . . . . . . . . . 9 3.4 Issuance and Repurchase of Shares . . . . . . . . . . . . 9 3.5 Borrow Money or Utilize Leverage . . . . . . . . . . . . 10 3.6 Collection and Payment . . . . . . . . . . . . . . . . . 10 3.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 By-Laws . . . . . . . . . . . . . . . . . . . . . . . . 11 3.9 Miscellaneous Powers . . . . . . . . . . . . . . . . . . 11 3.10 Delegation; Committees . . . . . . . . . . . . . . . . 11 3.11 Further Powers . . . . . . . . . . . . . . . . . . . . 12 ARTICLE IV Limitations of Liability and Indemnification 4.1 No Personal Liability of Shareholders, Trustees, etc. . 12 4.2 Mandatory Indemnification . . . . . . . . . . . . . . . 13 4.3 No Duty of Investigation; Notice in Trust Instruments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 14 4.4 Reliance on Experts, etc . . . . . . . . . . . . . . . . 15 ARTICLE V Shares of Beneficial Interest 5.1 Beneficial Interest . . . . . . . . . . . . . . . . . . 15 5.2 Classes and Series . . . . . . . . . . . . . . . . . . . 15 5.3 Issuance of Shares . . . . . . . . . . . . . . . . . . . 16 5.4 Rights of Shareholders . . . . . . . . . . . . . . . . . 16 5.5 Trust Only . . . . . . . . . . . . . . . . . . . . . . . 16 5.6 Register of Shares . . . . . . . . . . . . . . . . . . . 17 5.7 Transfer Agent and Registrar . . . . . . . . . . . . . . 17 5.8 Transfer of Shares . . . . . . . . . . . . . . . . . . . 17 5.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . 18 5.10 Net Asset Value . . . . . . . . . . . . . . . . . . . . 18 5.11 Distributions to Shareholders. . . . . . . . . . . . . 18 ARTICLE VI Shareholders 6.1 Meetings of Shareholders . . . . . . . . . . . . . . . . 19 6.2 Voting . . . . . . . . . . . . . . . . . . . . . . . . . 19 6.3 Notice of Meeting, Shareholder Proposals and Record Date 20 6.4 Quorum and Required Vote . . . . . . . . . . . . . . . . 20 6.5 Proxies, etc. . . . . . . . . . . . . . . . . . . . . . 21 6.6 Reports . . . . . . . . . . . . . . . . . . . . . . . . 22 6.7 Inspection of Records . . . . . . . . . . . . . . . . . 22 6.8 Shareholder Action by Written Consent . . . . . . . . . 22 ARTICLE VII Duration: Termination of Trust; Amendment; Mergers, Etc. 7.1 Duration . . . . . . . . . . . . . . . . . . . . . . . . 22 7.2 Termination. . . . . . . . . . . . . . . . . . . . . . . 22 7.3 Amendment Procedure. . . . . . . . . . . . . . . . . . . 23 7.4 Merger, Consolidation and Sale of Assets . . . . . . . . 24 7.5 Redemption; Conversion . . . . . . . . . . . . . . . . . 25 7.6 Certain Transactions . . . . . . . . . . . . . . . . . . 25 ARTICLE VIII Miscellaneous 8.1 Filing . . . . . . . . . . . . . . . . . . . . . . . . . 27 8.2 Resident Agent . . . . . . . . . . . . . . . . . . . . . 28 8.3 Governing Law . . . . . . . . . . . . . . . . . . . . . 28 8.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . 28 8.5 Reliance by Third Parties . . . . . . . . . . . . . . . 28 8.6 Provisions in Conflict with Law or Regulation . . . . . 29 THE GABELLI UTILITY FUND AGREEMENT AND DECLARATION OF TRUST AGREEMENT AND DECLARATION OF TRUST made as of the 29th day of March, 1999, by the Trustees hereunder, and by the holders of shares of beneficial interest issued hereunder as hereinafter provided. WHEREAS, this Trust has been formed to carry on business as set forth more particularly hereinafter; WHEREAS, this Trust is authorized to issue an unlimited number of its shares of beneficial interest all in accordance with the provisions hereinafter set forth; WHEREAS, the Trustees have agreed to manage all property coming into their hands as Trustees of a Delaware business trust in accordance with the provisions hereinafter set forth; and WHEREAS, the parties hereto intend that the Trust created by this Declaration and the Certificate of Trust filed with the Secretary of State of the State of Delaware on February 25th, 1999 shall constitute a business trust under the Delaware Business Trust Statute and that this Declaration shall constitute the governing instrument of such business trust. NOW, THEREFORE, the Trustees hereby declare that they will hold all cash, securities, and other assets which they may from time to time acquire in any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the following terms and conditions for the benefit of the holders from time to time of shares of beneficial interest in this Trust as hereinafter set forth. ARTICLE I The Trust 1.1 Name. This Trust shall be known as the "The Gabelli Utility Fund" and the Trustees shall conduct the business of the Trust under that name or any other name or names as they may from time to time determine. 1.2 Definitions. As used in this Declaration, the following terms shall have the following meanings: The terms "Affiliated Person", "Assignment", "Commission", "Interested Person" and "Principal Underwriter" shall have the meanings given them in the 1940 Act. "By-Laws" shall mean the By-Laws of the Trust as amended from time to time by the Trustees. "Code" shall mean the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. "Commission" shall mean the Securities and Exchange Commission. "Declaration" shall mean this Agreement and Declaration of Trust, as amended or amended and restated from time to time, including by way of any supplement authorizing or creating any class of Shares or any series of any such class. "Delaware Business Trust Statute" shall mean the provisions of the Delaware Business Trust Act, 12 Del. C. section3801, et. seq., as such Act may be amended from time to time. "Fundamental Policies" shall mean the investment policies and restrictions as set forth from time to time in any Prospectus or contained in any current Registration Statement of the Trust filed with the Securities and Exchange Commission or as otherwise adopted by the Trustees and the Shareholders in accordance with the requirements of the 1940 Act and designated as fundamental policies therein as they may be amended from time to time in accordance with the requirements of the 1940 Act. "Majority Shareholder Vote" shall mean a vote of a majority of the outstanding voting securities (as such term is defined in the 1940 Act) of the Trust or the applicable class or classes of such voting securities. "Person" shall mean and include natural persons, corporations, partnerships, trusts, limited liability companies, associations, joint ventures and other entities, whether or not legal entities, and governments and agencies and political subdivisions thereof. "Prospectus" shall mean the currently effective Prospectus of the Trust, if any, under the Securities Act of 1933, as amended. "Shareholders" shall mean as of any particular time the holders of record of outstanding Shares of the Trust, at such time. "Shares" shall mean the transferable units of beneficial interest into which the beneficial interest in the Trust shall be divided from time to time and includes fractions of Shares as well as whole Shares. All references to Shares shall be deemed to be Shares of any or all Series or classes or series thereof as the context may require. "Trust" shall mean the trust established by this Declaration, as amended from time to time, inclusive of each such amendment. "Trustees" shall mean the signatory to this Declaration, so long as he shall continue in office in accordance with the terms hereof, and all other persons who at the time in question have been duly elected or appointed and have qualified as trustees in accordance with the provisions hereof and are then in office. "Trust Property" shall mean as of any particular time any and all property, real or personal, tangible or intangible, which at such time is owned or held by or for the account of the Trust or the Trustees in such capacity. The "1933 Act" refers to the Securities Act of 1933 and the rules and regulations promulgated thereunder and exemptions therefrom covering the Trust and its affiliated persons, as amended from time to time. The "1940 Act" refers to the Investment Company Act of 1940 and the rules and regulations promulgated thereunder and exemptions granted therefrom, as amended from time to time. 1.3 Purpose and Powers of Trust. The Trust is established for the purpose of engaging in any activity not prohibited by Delaware law and shall have the power to engage in any such activity and in any activity incidental or related to any such activity. ARTICLE II Trustees 2.1 Number and Qualification. Prior to a public offering of Shares, there may be a sole Trustee and thereafter the number of Trustees shall be such number, not less than three or more than fifteen, as shall be set forth in a written instrument signed or adopted by a majority of the Trustees then in office. No reduction in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his term. An individual nominated as a Trustee shall be at least 21 years of age and not older than such age as shall be set forth in a written instrument signed or adopted by a majority of the Trustees then in office and shall not be under legal disability. Trustees need not own Shares and may succeed themselves in office. 2.2 Term and Election. The Board of Trustees shall be divided into three classes. Within the limits specified in Section 2.1, the number of the Trustees in each class shall be determined by resolution of the Board of Trustees. The initial term of office of the first class shall expire on the date of the first annual meeting of Shareholders or special meeting in lieu thereof. The initial term of office of the second class shall expire on the date of the second annual meeting of Shareholders or special meeting in lieu thereof. The initial term of office of the third class shall expire on the date of the third annual meeting of Shareholders or special meeting in lieu thereof. Upon expiration of the initial term of office of each class as set forth above and the expiration of each subsequent term of office of such class, the number of Trustees in such class, as determined by the Board of Trustees, shall be elected for a term expiring on the date of the third annual meeting of Shareholders or special meeting in lieu thereof following such expiration to succeed the Trustees whose terms of office expire. The Trustees shall be elected at an annual meeting of the Shareholders or special meeting in lieu thereof called for that purpose, except as provided in Section 2.4 of this Article, and each Trustee elected shall hold office until his or her successor shall have been elected and shall have qualified, except as provided in Section 2.3. 2.3 Resignation and Removal. Any Trustee may resign his trust (without need for prior or subsequent accounting) by an instrument in writing signed by him and delivered or mailed to the Chairman, if any, the President or the Secretary and such resignation shall be effective upon such delivery, or at a later date according to the terms of the instrument. Any Trustee may be removed (provided the aggregate number of Trustees after such removal shall not be less than the number required by Section 2.1 hereof) for cause at any time by written instrument, signed by two-thirds of the remaining Trustees, specifying the date when such removal shall become effective. Any Trustee may be removed (provided the aggregate number of Trustees after such removal shall not be less than the minimum number required by Section 2.1 hereof) without cause at any time by a written instrument, signed or adopted by two-thirds of the remaining Trustees or by vote of Shares having not less than two-thirds of the aggregate number of Shares entitled to vote in the election of such Trustee, specifying the date when such removal shall become effective. Upon the resignation or removal of a Trustee, or such persons otherwise ceasing to be a Trustee, such persons shall execute and deliver such documents as the remaining Trustees shall require for the purpose of conveying to the Trust or the remaining Trustees any Trust Property held in the name of the resigning or removed Trustee. Upon the incapacity or death of any Trustee, such Trustee's legal representative shall execute and deliver on such Trustee's behalf such documents as the remaining Trustees shall require as provided in the preceding sentence. 2.4 Vacancies. The term of office of a Trustee shall terminate and a vacancy shall occur in the event of the death, resignation, bankruptcy, adjudicated incompetence or other incapacity to perform the duties of the office, or removal, of a Trustee. Whenever a vacancy in the Board of Trustees shall occur, the remaining Trustees may fill such vacancy by appointing an individual having the qualifications described in this Article by a written instrument signed or adopted by a majority of the Trustees then in office or by election by the Shareholders, or may leave such vacancy unfilled or may reduce the number of Trustees (provided the aggregate number of Trustees after such reduction shall not be less than the minimum number required by Section 2.1 hereof). Any vacancy created by an increase in Trustees may be filled by the appointment of an individual having the qualifications described in this Article made by a written instrument signed by a majority of the Trustees then in office or by election by the Shareholders. No vacancy shall operate to annul this Declaration or to revoke any existing agency created pursuant to the terms of this Declaration. Whenever a vacancy in the number of Trustees shall occur, until such vacancy is filled as provided herein, the Trustees in office, regardless of their number, shall have all the powers granted to the Trustees and shall discharge all the duties imposed upon the Trustees by this Declaration. 2.5 Meetings. Meetings of the Trustees shall be held from time to time upon the call of the Chairman, if any, the President, the Secretary or any two Trustees. Regular meetings of the Trustees may be held without call or notice at a time and place fixed by the By-Laws or by resolution of the Trustees. Notice of any other meeting shall be mailed not less than 48 hours before the meeting or otherwise actually delivered orally or in writing not less than 24 hours before the meeting, but may be waived in writing by any Trustee either before or after such meeting. The attendance of a Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Trustee attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting has not been lawfully called or convened. The Trustees may act with or without a meeting. A quorum for all meetings of the Trustees shall be one- third of the Trustees. Unless provided otherwise in this Declaration of Trust, any action of the Trustees may be taken at a meeting by vote of a majority of the Trustees present (a quorum being present) or without a meeting by written consent of a majority of the Trustees or such other proportion as shall be specified herein for action at a meeting at which all Trustees then in office are present. Any committee of the Trustees, including an executive committee, if any, may act with or without a meeting. A quorum for all meetings of any such committee shall be a majority of the members thereof. Unless provided otherwise in this Declaration, any action of any such committee may be taken at a meeting by vote of a majority of the members present (a quorum being present) or without a meeting by written consent of a majority of the members or such other proportion as shall be specified herein for action at a meeting at which all committee members are present. With respect to actions of the Trustees and any committee of the Trustees, Trustees who are Interested Persons in any action to be taken may be counted for quorum purposes under this Section and shall be entitled to vote to the extent not prohibited by the 1940 Act. All or any one or more Trustees may participate in a meeting of the Trustees or any committee thereof by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other; participation in a meeting pursuant to any such communications system shall constitute presence in person at such meeting except as otherwise provided by the 1940 Act. 2.6 Officers. The Trustees shall elect a President, a Secretary and a Treasurer and may elect a Chairman who shall serve at the pleasure of the Trustees or until their successors are elected. The Trustees may elect or appoint or may authorize the Chairman, if any, or President to appoint such other officers or agents with such other titles and powers as the Trustees may deem to be advisable. A Chairman shall, and the President, Secretary and Treasurer may, but need not, be a Trustee. ARTICLE III Powers and Duties of Trustees 3.1 General. The Trustees shall owe to the Trust and its Shareholders the same fiduciary duties as owed by directors of corporations to such corporations and their stockholders under the general corporation law of the State of Delaware. The Trustees shall have exclusive and absolute control over the Trust Property and over the business of the Trust to the same extent as if the Trustees were the sole owners of the Trust Property and business in their own right, but with such powers of delegation as may be permitted by this Declaration. The Trustees shall have power to engage in any activity not prohibited by Delaware law. The enumeration of any specific power herein shall not be construed as limiting the aforesaid power. The Trustees may perform such acts as in their sole discretion are proper for conducting the business of the Trust. The powers of the Trustees may be exercised without order of or resort to any court. No Trustee shall, be obligated to give any bond or other security for the performance of any of his duties or powers hereunder. 3.2 Investments. The Trustees shall have power to: (a) manage, conduct, operate and carry on the business of an investment company; (b) subscribe for, invest in, reinvest in, purchase or otherwise acquire, hold, pledge, sell, assign, transfer, exchange, distribute or otherwise deal in or dispose of any and all sorts of property, tangible or intangible, including but not limited to securities of any type whatsoever, whether equity or non-equity, of any issuer, evidences of indebtedness of any person and any other rights, interests, instruments or property of any sort and to exercise any and all rights, powers and privileges of ownership or interest in respect of any and all such investments of every kind and description, including, without limitation, the right to consent and otherwise act with respect thereto, with power to designate one or more Persons to exercise any of said rights, powers and privileges in respect of any of said investments. The Trustees shall not be limited by any law limiting the investments which may be made by fiduciaries. 3.3 Legal Title. Legal title to all the Trust Property shall be vested in the Trustees as joint tenants except that the Trustees shall have power to cause legal title to any Trust Property to be held by or in the name of one or more of the Trustees, or in the name of the Trust, or in the name of any other Person as nominee, custodian or pledgee, on such terms as the Trustees may determine, provided that the interest of the Trust therein is appropriately protected. The right, title and interest of the Trustees in the Trust Property shall vest automatically in each person who may hereafter become a Trustee upon his due election and qualification. Upon the ceasing of any person to be a Trustee for any reason, such person shall automatically cease to have any right, title or interest in any of the Trust Property, and the right, title and interest of such Trustee in the Trust Property shall vest automatically in the remaining Trustees. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered. 3.4 Issuance and Repurchase of Shares. Subject to the provisions of this Declaration and applicable law, the Trustees shall have the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal in, Shares, including Shares in fractional denominations, and to apply to any such repurchase, redemption, retirement, cancellation or acquisition of Shares any funds or property whether capital or surplus or otherwise, to the full extent now or hereafter permitted by the laws of the State of Delaware governing business corporations. 3.5 Borrow Money or Utilize Leverage. The Trustees shall have the power to borrow money or otherwise obtain credit or utilize leverage in connection with the activities of the Trust to the maximum extent permitted by law regulation or order and to secure the same by mortgaging, pledging or otherwise subjecting as security the assets of the Trust, including the lending of portfolio securities, and to endorse, guarantee, or undertake the performance of any obligation, contract or engagement of any other person, firm, association or corporation. 3.6 Collection and Payment. The Trustees shall have power to collect all property due to the Trust; to pay all claims, including taxes, against the Trust Property or the Trust, the Trustees or any officer, employee or agent of the Trust; to prosecute, defend, compromise or abandon any claims relating to the Trust Property or the Trust, or the Trustees or any officer, employee or agent of the Trust; to foreclose any security interest securing any obligations, by virtue of which any property is owed to the Trust; and to enter into releases, agreements and other instruments. Except to the extent required for a Delaware business corporation, the Shareholders shall have no power to vote as to whether or not a court action, legal proceeding or claim should or should not be brought or maintained derivatively or as a class action on behalf of the Trust or the Shareholders. 3.7 Expenses. The Trustees shall have power to incur and pay out of the assets or income of the Trust any expenses which in the opinion of the Trustees are necessary or appropriate to carry out any of the purposes of this Declaration, and the business of the Trust, and to pay reasonable compensation from the funds of the Trust to themselves as Trustees. The Trustees shall fix the compensation of all officers, employees and Trustees. The Trustees may pay themselves such compensation for special services, including legal, underwriting, syndicating and brokerage services, as they in good faith may deem reasonable and reimbursement for expenses reasonably incurred by themselves on behalf of the Trust. The Trustees shall have the power, as frequently as they may determine, to cause each Shareholder to pay directly, in advance or arrears, for charges of distribution, of the custodian or transfer, shareholder servicing or similar agent, a pro rata amount as defined from time to time by the Trustees, by setting off such charges due from such Shareholder from declared but unpaid dividends or distributions owed such Shareholder and/or by reducing the number of shares in the account of such Shareholder by that number of full and/or fractional Shares which represents the outstanding amount of such charges due from such Shareholder. 3.8 By-Laws. The Trustees may adopt and from time to time amend or repeal By-Laws for the conduct of the business of the Trust. Such By- Laws shall be binding on the Trust and the Shareholders unless inconsistent with the provisions of this Declaration. 3.9 Miscellaneous Powers. The Trustees shall have the power to: (a) employ or contract with such Persons as the Trustees may deem desirable for the transaction of the business of the Trust, including investment advisors, administrators, custodians, transfer agents, shareholder services providers, accountants, counsel, brokers, dealers and others; (b) enter into joint ventures, partnerships and any other combinations or associations; (c) purchase, and pay for out of Trust Property, insurance policies insuring the Shareholders, Trustees, officers, employees, agents, investment advisors, distributors, selected dealers or independent contractors of the Trust against all claims arising by reason of holding any such position or by reason of any action taken or omitted by any such Person in such capacity, whether or not constituting negligence, or whether or not the Trust would have the power to indemnify such Person against such liability; (d) establish pension, profit-sharing, share purchase, and other retirement, incentive and benefit plans for any Trustees, officers, employees and agents of the Trust; (e) make donations, irrespective of benefit to the Trust, for charitable, religious, educational, scientific, civic or similar purposes; (f) to the extent permitted by applicable law, indemnify any Person with whom the Trust has dealings, including without limitation any investment adviser, administrator, manager, transfer agent, custodian, distributor or selected dealer, or any other person as the Trustees may see fit to such extent as the Trustees shall determine; (g) guarantee indebtedness or contractual obligations of others; (h) determine and change the fiscal year of the Trust and the method in which its accounts shall be kept; and (i) adopt a seal for the Trust but the absence of such seal shall not impair the validity of any instrument executed on behalf of the Trust. 3.10 Delegation; Committees. The Trustees shall have the power, consistent with their continuing exclusive authority over the management of the Trust and the Trust Property, to delegate from time to time to such of their number or to officers, employees or agents of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Trustees or otherwise as the Trustees may deem expedient, to at least the same extent as such delegation is permitted to directors of a Delaware business corporation and is permitted by the 1940 Act, as well as any further delegations the Trustees may determine to be desirable, expedient or necessary in order to effect the purpose hereof. The Trustees may designate one or more committees each of which shall have all or such lesser portion of the power and authority of the entire Board of Trustees as the Trustees shall determine from time to time, except to the extent action by the entire Board of Trustees or particular Trustees is required by the 1940 Act. 3.11 Further Powers. The Trustees shall have the power to conduct the business of the Trust and carry on its operations in any and all of its branches and maintain offices both within and without the State of Delaware, in any and all states of the United States of America, in the District of Columbia, and in any and all commonwealths, territories, dependencies, colonies, possessions, agencies or instrumentalities of the United States of America and of foreign governments, and to do all such other things and execute all such instruments as they deem necessary, proper or desirable in order to promote the interests of the Trust although such things are not herein specifically mentioned. Any determination as to what is in the interests of the Trust made by the Trustees in good faith shall be conclusive. In construing the provisions of this Declaration, the presumption shall be in favor of a grant of power to the Trustees. ARTICLE IV Limitations of Liability and Indemnification 4.1 No Personal Liability of Shareholders, Trustees, etc. No Shareholder of the Trust shall be subject in such capacity to any personal liability whatsoever to any Person in connection with Trust Property or the acts, obligations or affairs of the Trust. Shareholders shall have the same limitation of personal liability as is extended to stockholders of a private corporation for profit incorporated under the general corporation law of the State of Delaware. No Trustee or officer of the Trust shall be subject in such capacity to any personal liability whatsoever to any Person, other than the Trust or its Shareholders, in connection with Trust Property or the affairs of the Trust, save only liability to the Trust or its Shareholders arising from bad faith, willful misfeasance, gross negligence or reckless disregard for his duty to such Person; and, subject to the foregoing exception, all such Persons shall look solely to the Trust Property for satisfaction of claims of any nature arising in connection with the affairs of the Trust. If any Shareholder, Trustee or officer, as such, of the Trust, is made a party to any suit or proceeding to enforce any such liability, subject to the foregoing exception, he shall not, on account thereof, be held to any personal liability. 4.2 Mandatory Indemnification. (a) The Trust shall indemnify the Trustees and officers of the Trust (each such person being an "indemnitee") against any liabilities and expenses, including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and reasonable counsel fees reasonably incurred by such indemnitee in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or investigative body in which he may be or may have been involved as a party or otherwise (other than, except as authorized by the Trustees, as the plaintiff or complainant) or with which he may be or may have been threatened, while acting in any capacity set forth above in this Section 4.2 by reason of his having acted in any such capacity, except with respect to any matter as to which he shall not have acted in good faith in the reasonable belief that his action was in the best interest of the Trust or, in the case of any criminal proceeding, as to which he shall have had reasonable cause to believe that the conduct was unlawful, provided, however, that no indemnitee shall be indemnified hereunder against any liability to any person or any expense of such indemnitee arising by reason of (i) willful misfeasance, (ii) bad faith, (iii) gross negligence (negligence in the case of Affiliated Indemnitees), or (iv) reckless disregard of the duties involved in the conduct of his position (the conduct referred to in such clauses (i) through (iv) being sometimes referred to herein as "disabling conduct"). Notwithstanding the foregoing, with respect to any action, suit or other proceeding voluntarily prosecuted by any indemnitee as plaintiff, indemnification shall be mandatory only if the prosecution of such action, suit or other proceeding by such indemnitee was authorized by a majority of the Trustees. (b) Notwithstanding the foregoing, no indemnification shall be made hereunder unless there has been a determination (1) by a final decision on the merits by a court or other body of competent jurisdiction before whom the issue of entitlement to indemnification hereunder was brought that such indemnitee is entitled to indemnification hereunder or, (2) in the absence of such a decision, by (i) a majority vote of a quorum of those Trustees who are neither Interested Persons of the Trust nor parties to the proceeding ("Disinterested Non-Party Trustees"), that the indemnitee is entitled to indemnification hereunder, or (ii) if such quorum is not obtainable or even if obtainable, if such majority so directs, independent legal counsel in a written opinion conclude that the indemnitee should be entitled to indemnification hereunder. All determinations to make advance payments in connection with the expense of defending any proceeding shall be authorized and made in accordance with the immediately succeeding paragraph (c) below. (c) The Trust shall make advance payments in connection with the expenses of defending any action with respect to which indemnification might be sought hereunder if the Trust receives a written affirmation by the indemnitee of the indemnitee's good faith belief that the standards of conduct necessary for indemnification have been met and a written undertaking to reimburse the Trust unless it is subsequently determined that he is entitled to such indemnification and if a majority of the Trustees determine that the applicable standards of conduct necessary for indemnification appear to have been met. In addition, at least one of the following conditions must be met: (1) the indemnitee shall provide adequate security for his undertaking, (2) the Trust shall be insured against losses arising by reason of any lawful advances, or (3) a majority of a quorum of the Disinterested Non-Party Trustees, or if a majority vote of such quorum so direct, independent legal counsel in a written opinion, shall conclude, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is substantial reason to believe that the indemnitee ultimately will be found entitled to indemnification. (d) The rights accruing to any indemnitee under these provisions shall not exclude any other right to which he may be lawfully entitled. (e) Notwithstanding the foregoing, subject to any limitations provided by the 1940 Act and this Declaration, the Trust shall have the power and authority to indemnify Persons providing services to the Trust to the full extent provided by law as if the Trust were a corporation organized under the Delaware General Corporation Law provided that such indemnification has been approved by a majority of the Trustees. 4.3 No Duty of Investigation; Notice in Trust Instruments, etc. No purchaser, lender, transfer agent or other person dealing with the Trustees or with any officer, employee or agent of the Trust shall be bound to make any inquiry concerning the validity of any transaction purporting to be made by the Trustees or by said officer, employee or agent or be liable for the application of money or property paid, loaned, or delivered to or on the order of the Trustees or of said officer, employee or agent. Every obligation, contract, undertaking, instrument, certificate, Share, other security of the Trust, and every other act or thing whatsoever executed in connection with the Trust shall be conclusively taken to have been executed or done by the executors thereof only in their capacity as Trustees under this Declaration or in their capacity as officers, employees or agents of the Trust. The Trustees may maintain insurance for the protection of the Trust Property, its Shareholders, Trustees, officers, employees and agents in such amount as the Trustees shall deem adequate to cover possible liability, and such other insurance as the Trustees in their sole judgment shall deem advisable or is required by the 1940 Act. 4.4 Reliance on Experts, etc. Each Trustee and officer or employee of the Trust shall, in the performance of its duties, be fully and completely justified and protected with regard to any act or any failure to act resulting from reliance in good faith upon the books of account or other records of the Trust, upon an opinion of counsel, or upon reports made to the Trust by any of the Trust's officers or employees or by any advisor, administrator, manager, distributor, selected dealer, accountant, appraiser or other expert or consultant selected with reasonable care by the Trustees, officers or employees of the Trust, regardless of whether such counsel or other person may also be a Trustee. ARTICLE V Shares of Beneficial Interest 5.1 Beneficial Interest. The interest of the beneficiaries hereunder shall be divided into an unlimited number of shares of beneficial interest, par value $.001 per share. All Shares issued in accordance with the terms hereof, including, without limitation, Shares issued in connection with a dividend in Shares or a split of Shares, shall be fully paid and nonassessable when the consideration determined by the Trustees (if any) therefor shall have been received by the Trust. 5.2 Classes and Series . The Trustees shall have the authority, without the approval of the holders of any Shares of the Trust, to classify and reclassify issued and unissued Shares into one or more classes and one or more series of any or all of such classes, each of which classes and series thereof shall have such designations, powers, preferences, voting, conversion and other rights, limitations, qualifications and terms and conditions as the Trustees shall determine from time to time with respect to each such class or series; provided, however, that no reclassification of any issued and outstanding Shares and no modifications of any of the designations, powers, preferences, voting, conversion or other rights, limitations, qualifications and terms and conditions of any issued and outstanding Shares may be made by the Trustees without the affirmative vote of the holders of Shares specified in Section 7.3(a). The initial class of Shares of the Trust shall be designated as "Common Shares", subject to redesignation as aforesaid. To the extent expressly determined by the Trustees as aforesaid, all consideration received by the Trust for the issue or sale of Shares of a class, together with all income, earnings, profits and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation thereof, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall irrevocably belong to such class subject only to the rights of the creditors, and all liabilities allocable to such class shall be charged thereto. 5.3 Issuance of Shares. The Trustees, in their discretion, may from time to time without vote of the Shareholders issue Shares of any class or any series of any such class to such party or parties and for such amount and type of consideration, including cash or property, at such time or times, and on such terms as the Trustees may determine, and may in such manner acquire other assets (including the acquisition of assets subject to, and in connection with the assumption of, liabilities) and businesses. The Trustees may from time to time divide or combine the Shares of any class or any series of any such class into a greater or lesser number without thereby changing the proportionate beneficial interest in such Shares. Issuances and repurchases of Shares may be made in whole Shares and/or l/l,000ths of a Share or multiples thereof as the Trustees may determine. 5.4 Rights of Shareholders. The Shares shall be personal property giving only the rights in this Declaration specifically set forth. The ownership of the Trust Property of every description and the right to conduct any business herein before described are vested exclusively in the Trustees, and the Shareholders shall have no interest therein other than the beneficial interest conferred by their Shares, and they shall have no right to call for any partition or division of any property, profits, rights or interests of the Trust nor can they be called upon to share or assume any losses of the Trust or, subject to the right of the Trustees to charge certain expenses directly to Shareholders, as provided in the last sentence of Section 3.7, suffer an assessment of any kind by virtue of their ownership of Shares. The Shares shall not entitle the holder to preference, preemptive, appraisal, conversion or exchange rights (except as specified in this Section 5.4, in Section 7.4 or as specified by the Trustees in the designation or redesignation of any class or series thereof of the Shares). 5.5 Trust Only. It is the intention of the Trustees to create only the relationship of Trustee and beneficiary between the Trustees and each Shareholder from time to time. It is not the intention of the Trustees to create a general partnership, limited partnership, joint stock association, corporation, bailment or any form of legal relationship other than a trust. Nothing in this Declaration shall be construed to make the Shareholders, either by themselves or with the Trustees, partners or members of a joint stock association. 5.6 Register of Shares. A register shall be kept at the Trust or any transfer agent duly appointed by the Trustees under the direction of the Trustees which shall contain the names and addresses of the Shareholders and the number of Shares held by them respectively and a record of all transfers thereof. Separate registers shall be established and maintained for each class and each series of each class. Each such register shall be conclusive as to who are the holders of the Shares of the applicable class and series and who shall be entitled to receive dividends or distributions or otherwise to exercise or enjoy the rights of Shareholders. No Shareholder shall be entitled to receive payment of any dividend or distribution, nor to have notice given to him as herein provided, until he has given his address to a transfer agent or such other officer or agent of the Trustees as shall keep the register for entry thereon. It is not contemplated that certificates will be issued for the Shares; however, the Trustees, in their discretion, may authorize the issuance of share certificates and promulgate appropriate fees therefore and rules and regulations as to their use. 5.7 Transfer Agent and Registrar. The Trustees shall have power to employ a transfer agent or transfer agents, and a registrar or registrars, with respect to the Shares. The transfer agent or transfer agents may keep the applicable register and record therein, the original issues and transfers, if any, of the said Shares. Any such transfer agent and registrars shall perform the duties usually performed by transfer agents and registrars of stock in a corporation, as modified by the Trustees. 5.8 Transfer of Shares. Shares shall be transferable on the records of the Trust only by the record holder thereof or by its agent thereto duly authorized in writing, upon delivery to the Trustees or a transfer agent of the Trust of a duly executed instrument of transfer, together with such evidence of the genuineness of each such execution and authorization and of other matters as may reasonably be required. Upon such delivery the transfer shall be recorded on the applicable register of the Trust. Until such record is made, the Shareholder of record shall be deemed to be the holder of such Shares for all purposes hereof and neither the Trustees nor any transfer agent or registrar nor any officer, employee or agent of the Trust shall be affected by any notice of the proposed transfer. Any person becoming entitled to any Shares in consequence of the death, bankruptcy, or incompetence of any Shareholder, or otherwise by operation of law, shall be recorded on the applicable register of Shares as the holder of such Shares upon production of the proper evidence thereof to the Trustees or a transfer agent of the Trust, but until such record is made, the Shareholder of record shall be deemed to be the holder of such for all purposes hereof, and neither the Trustees nor any transfer agent or registrar nor any officer or agent of the Trust shall be affected by any notice of such death, bankruptcy or incompetence, or other operation of law. 5.9 Notices. Any and all notices to which any Shareholder hereunder may be entitled and any and all communications to any Shareholder shall be deemed duly served or given if mailed, postage prepaid, addressed to any Shareholder of record at his last known address as recorded on the applicable register of the Trust and may be sent together with any such notice or other communication to another Shareholder at the same address. 5.10 Net Asset Value. The value of the assets of the Trust, the amount of liabilities of the Trust and the net asset value of each outstanding Share of Common Shares of the Trust shall be determined at such time or times on such days as the Trustees may determine, in accordance with the 1940 Act. The method of determination of net asset value shall be determined by the Trustees. The power and duty to make net asset value determinations and calculations may be delegated by the Trustees. 5.11 Distributions to Shareholders. (a) The Trustees shall from time to time distribute among the Shares such proportion of the net profits, surplus (including paid-in surplus), capital, or assets held by the Trustees as they may deem proper or as may otherwise be determined in the instrument setting forth the terms of such Shares such class or series of Shares, which need not be ratable with respect to distributions in respect of Shares of any other class or series thereof of the Trust. Such distributions may be made in cash or property (including without limitation any type of obligations of the Trust or any assets thereof) or any combination thereof. (b) Distributions may be made to the Shareholders entitled to such distribution of record at the time such distribution is declared or at such later date as shall be determined by the Trust prior to the date of payment. (c) The Trustees may always retain from any source such amount as they may deem necessary to pay the debts or expenses of the Trust or to meet obligations of the Trust, or as they otherwise may deem desirable to use in the conduct of its affairs or to retain for future requirements or extensions of the business of the Trust. ARTICLE VI Shareholders 6.1 Meetings of Shareholders. The Trust may, but shall not be required to, hold annual meetings of the holders of any class or series of Shares. An annual or special meeting of Shareholders may be called at any time only by the Trustees; provided, however, that if May 31 of any year shall have passed and the Trustees shall not have called an annual meeting of Shareholders for such year, the Trustees shall call a meeting for the purpose of voting on the removal of one or more Trustees or the termination of any investment advisory agreement, upon written request of holders of Shares of the Trust having in the aggregate not less than a majority of the votes of the outstanding Shares of the Trust entitled to vote on the matter or matters in question, such request specifying the purpose or purposes for which such meeting is to be called. Any meeting of Shareholders shall be held within or without the State of Delaware on such day and at such time as the Trustees shall designate. 6.2 Voting. Shareholders shall have no power to vote on any matter except matters on which a vote of Shares is required by applicable law, this Declaration or resolution of the Trustees. Any matter required to be submitted for approval of any of the Shares and affecting one or more classes or series shall require approval by the required vote of Shares of the affected class or classes and series voting together as a single class and, if such matter affects one or more classes or series thereof differently from one or more other classes or series thereof or from one or more series of the same class, approval by the required vote of Shares of such other class or classes or series or series voting as a separate class shall be required in order to be approved with respect to such other class or classes or series or series; provided, however, that except to the extent required by the 1940 Act, there shall be no separate class votes on the election or removal of Trustees or the selection of auditors for the Trust. Shareholders of a particular class or series thereof shall not be entitled to vote on any matter that affects the rights or interests of only one or more other classes or series of such other class or classes or only one or more other series of the same class. There shall be no cumulative voting in the election or removal of Trustees. 6.3 Notice of Meeting, Shareholder Proposals and Record Date. Notice of all meetings of Shareholders, stating the time, place and purposes of the meeting, shall be given by the Trustees by mail to each Shareholder of record entitled to vote thereat at its registered address, mailed at least 10 days before the meeting or otherwise in compliance with applicable law. Except with respect to an annual meeting, at which any business required by the 1940 Act may be conducted, only the business stated in the notice of the meeting shall be considered at such meeting. Subject to the provisions of applicable law, any Shareholder wishing to include a proposal to be considered at an annual meeting must submit such proposal to the Trust at least 30 days in advance of such meeting. Any adjourned meeting may be held as adjourned one or more times without further notice not later than 130 days after the record date. For the purposes of determining the Shareholders who are entitled to notice of and to vote at any meeting the Trustees may, without closing the transfer books, fix a date not more than 100 days prior to the date of such meeting of Shareholders as a record date for the determination of the Persons to be treated as Shareholders of record for such purposes. 6.4 Quorum and Required Vote. (a) The holders of one-third of the outstanding Shares of the Trust on the record date present in person or by proxy shall constitute a quorum at any meeting of the Shareholders for purposes of conducting business on which a vote of all Shareholders of the Trust is being taken. The holders of one-third of the outstanding Shares of a class or classes on the record date present in person or by proxy shall constitute a quorum at any meeting of the Shareholders of such class or classes for purposes of conducting business on which a vote of Shareholders of such class or classes is being taken. The holders of one-third of the outstanding Shares of a series or series on the record date present in person or by proxy shall constitute a quorum at any meeting of the Shareholders of such series or series for purposes of conducting business on which a vote of Shareholders of such series or series is being taken. Shares underlying a proxy as to which a broker or other intermediary states its absence of authority to vote with respect to one or more matters shall be treated as present for purposes of establishing a quorum for taking action on any such matter only to the extent so determined by the Trustees at or prior to the meeting of Shareholders at which such matter is to be considered. (b) Subject to any provision of applicable law, this Declaration or resolution of the Trustees specifying or requiring a greater or lesser vote requirement for the transaction of any matter of business at any meeting of Shareholders, (i) the affirmative vote of a plurality of the Shares entitled to vote for the election of any Trustee or Trustees shall be the act of such Shareholders with respect to the election of such Trustee or Trustees, (ii) the affirmative vote of a majority of the Shares present in person or represented by proxy and entitled to vote on any other matter shall be the act of the Shareholders with respect to such matter, and (iii) where a separate vote of one or more classes or series is required on any matter, the affirmative vote of a majority of the Shares of such class or classes or series or series present in person or represented by proxy at the meeting shall be the act of the Shareholders of such class or classes or series or series with respect to such matter. 6.5 Proxies, etc. At any meeting of Shareholders, any holder of Shares entitled to vote thereat may vote by proxy, provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Secretary, or with such other officer or agent of the Trust as the Secretary may direct, for verification prior to the time at which such vote shall be taken. Pursuant to a resolution of a majority of the Trustees, proxies may be solicited in the name of one or more Trustees or one or more of the officers or employees of the Trust. Only Shareholders of record shall be entitled to vote. Each full Share shall be entitled to one vote and each fractional Share shall be entitled to a vote equal to its fraction of a full Share. When any Share is held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such Share, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Share. A proxy purporting to be given by or on behalf of a Shareholder of record on the record date for a meeting shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. If the holder of any such Share is a minor or a person of unsound mind, and subject to guardianship or to the legal control of any other person as regards the charge or management of such Share, he may vote by his guardian or such other person appointed or having such control, and such vote may be given in person or by proxy. The Trustees shall have the authority to make and modify from time to time regulations regarding the validity of proxies. In addition to signed proxies, such regulations may authorize facsimile, telephonic, Internet and other methods of appointing a proxy that are subject to such supervision by or under the direction of the Trustees as the Trustees shall determine. 6.6 Reports. The Trustees shall cause to be prepared and sent to Shareholders at least annually and more frequently to the extent and in the form required by law, regulation or any exchange on which Trust Shares are listed a report of operations containing financial statements of the Trust prepared in conformity with generally accepted accounting principles and applicable law. 6.7 Inspection of Records. The records of the Trust shall be open to inspection by Persons who have been holders of record of at least $25,000 in net asset value or liquidation preference of Shares for a continuous period of not less than six months to the same extent and for the same purposes as is permitted under the Delaware General Business Corporation Law to shareholders of a Delaware business corporation. 6.8 Shareholder Action by Written Consent. Any action which may be taken by Shareholders by vote may be taken without a meeting if the holders of all of the Shares entitled to vote thereon consent to the action in writing and the written consents are filed with the records of the meetings of Shareholders. Such consent shall be treated for all purposes as a vote taken at a meeting of Shareholders. ARTICLE VII Duration: Termination of Trust; Amendment; Mergers, Etc. 7.1 Duration. Subject to termination in accordance with the provisions of Section 7.2 hereof, the Trust created hereby shall have perpetual existence. 7.2 Termination. (a) The Trust may be dissolved, after two thirds of the Trustees have approved a resolution therefor, upon approval by Shares having at least 75% of the votes of all of the Shares outstanding on the record date for such meeting, voting as a single class except to the extent required by the 1940 Act. Upon the dissolution of the Trust: (i) The Trust shall carry on no business except for the purpose of winding up its affairs. (ii) The Trustees shall proceed to wind up the affairs of the Trust and all of the powers of the Trustees under this Declaration shall continue until the affairs of the Trust shall have been wound up, including the power to fulfill or discharge the contracts of the Trust, collect its assets, sell, convey, assign, exchange, merger where the Trust is not the survivor, transfer or otherwise dispose of all or any part of the remaining Trust Property to one or more Persons at public or private sale for consideration which may consist in whole or in part in cash, securities or other property of any kind, discharge or pay its liabilities, and do all other acts appropriate to liquidate its business; provided that any sale, conveyance, assignment, exchange, merger in which the Trust is not the survivor, transfer or other disposition of all or substantially all the Trust Property of the Trust shall require approval of the principal terms of the transaction and the nature and amount of the consideration with the same vote as required for dissolution pursuant to paragraph (a) above. (iii) After paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and refunding agreements, as they deem necessary for their protection, the Trustees may distribute the remaining Trust Property, in cash or in kind or partly each, among the Shareholders according to their respective rights. (b) After the winding up and termination of the Trust and distribution to the Shareholders as herein provided, a majority of the Trustees shall execute and lodge among the records of the Trust an instrument in writing setting forth the fact of such termination and shall execute and file a certificate of cancellation with the Secretary of State of the State of Delaware. Upon termination of the Trust, the Trustees shall thereupon be discharged from all further liabilities and duties hereunder, and the rights and interests of all Shareholders shall thereupon cease. 7.3 Amendment Procedure. (a) Other than Sections 2.2, 2.3, 6.1, 6.8, 7.2, 7.3, 7.4, 7.5 and 7.6 and other than as set forth in the last sentence of this Section 7.3(a), this Declaration may be amended, after a majority of the Trustees have approved a resolution therefor, by the affirmative vote of the holders of not less than a majority of the affected Shares outstanding on the record date and present and voting on such amendment. Sections 2.2, 2.3, 6.1, 7.2, 7.3, 7.4, 7.5 and 7.6 may be amended, after a majority of the Trustees have approved a resolution therefor by the affirmative vote of the holders of not less than 75% of the affected Shares outstanding on the record date. The Trustees also may amend this Declaration without any vote of Shareholders for any of the purposes set forth in Section 6.2, to change the name of the Trust or any class or series, to make any change that does not adversely affect the relative rights or preferences of any class or series of Shares or to conform this Declaration to the requirements of the 1940 Act or any other applicable law, but the Trustees shall not be liable for failing to do so. (b) Nothing contained in this Declaration shall permit the amendment of this Declaration to impair the exemption from personal liability of the Shareholders, Trustees, officers, employees and agents of the Trust or to permit assessments upon Shareholders. (c) An amendment duly adopted by the requisite vote of the Board of Trustees and, if required, Shareholders as aforesaid, shall become effective at the time of such adoption or at such other time as may be designated by the Board of Trustees or Shareholders, as the case may be. A certification signed by a majority of the Trustees setting forth an amendment and reciting that it was duly adopted by the Trustees and, if required, Shareholders as aforesaid, or a copy of the Declaration, as amended, and executed by a majority of the Trustees, shall be conclusive evidence of such amendment when lodged among the records of the Trust or at such other time designated by the Board. Notwithstanding any other provision hereof, until such time as Shares are issued and outstanding, this Declaration may be terminated or amended in any respect by the affirmative vote of a majority of the Trustees or by an instrument signed by a majority of the Trustees. 7.4 Merger, Consolidation and Sale of Assets. Subject to Section 7.6, the Trust may merge or consolidate with any other corporation, association, trust or other organization or may sell, lease or exchange all or substantially all of the Trust Property or the property, including its good will, upon such terms and conditions and for such consideration when and as authorized by two-thirds of the Trustees and approved by the affirmative vote of the holders of not less than 75% of the affected Shares outstanding on the record date for the meeting of Shareholders to approve such transaction, and any such merger, consolidation, sale, lease or exchange shall be determined for all purposes to have been accomplished under and pursuant to the statutes of the State of Delaware. 7.5 Redemption; Conversion. No holder of Shares of any class or series, other than in accordance with the provisions of Section 23(c) of the 1940 Act and other than to the extent expressly determined by the Trustees with respect to Shares qualifying as preferred stock pursuant to Section 18(a) of the 1940 Act, shall have any right to require the Trust or any person controlled by the Trust to purchase any of such holder's Shares. The Trust may be converted at any time from a "closed-end company" to an "open-end company" as those terms are defined by the 1940 Act, upon the approval of such a proposal, together with the necessary amendments to this Declaration to permit such a conversion, by a majority of the Trustees then in office, by the holders of not less than 75% of the Trust's outstanding Shares entitled to vote thereon and by such vote or votes of the holders of any class or classes or series of Shares as may be required by the 1940 Act. From time to time, the Trustees may consider recommending to the Shareholders a proposal to convert the Trust from a "closed-end company" to an "open-end company." Upon the recommendation and subsequent adoption of such a proposal and the necessary amendments to this Declaration to permit such a conversion of the Trust's outstanding Shares entitled to vote, the Trust shall, upon complying with any requirements of the 1940 Act and state law, become an "open-end" investment company. 7.6 Certain Transactions. (a) Notwithstanding any other provision of this Declaration and subject to the exceptions provided in paragraph (d) of this Section, the types of transactions described in paragraph (c) of this Section shall require the affirmative vote or consent of the holders of eighty percent (80%) of the Shares of each class outstanding and entitled to vote, voting as a class, when a Principal Shareholder (as defined in paragraph (b) of this Section) is a party to the transaction. Such affirmative vote or consent shall be in addition to the vote or consent of the holders of Shares otherwise required by law or by the terms of any class or series of preferred stock, whether now or hereafter authorized, or any agreement between the Trust and any national securities exchange. (b) The term "Principal Shareholder" shall mean any Person which is the beneficial owner, directly or indirectly, of five percent (5%) or more of the outstanding Shares and shall include any affiliate or associate, as such terms are defined in clause (ii) below, of such Person. For the purposes of this Section, in addition to the Shares which a Person beneficially owns directly, (a) any Person shall be deemed to be the beneficial owner of any Shares (i) which it has the right to acquire pursuant to any agreement or upon exercise of conversion rights or warrants, or otherwise (but excluding share options granted by the Trust) or (ii) which are beneficially owned, directly or indirectly (including Shares deemed owned through application of clause (i) above), by any other Person with which its "affiliate" or "associate" (as defined below) has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of Shares, or which is its "affiliate" or "associate" as those terms are defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934 as in effect on the date of initial adoption of this Declaration, and (b) the outstanding Shares shall include Shares deemed owned through application of clauses (i) and (ii) above but shall not include any other Shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights or warrants, or otherwise. (c) This Section shall apply to the following transactions: (i) The merger or consolidation of the Trust or any subsidiary of the Trust with or into any Principal Shareholder. (ii) The issuance of any securities of the Trust to any Principal Shareholder for cash (other than pursuant to any automatic dividend reinvestment plan or any offering in which such Principal Shareholder acquires securities that do not increase the percentage of any class of Shares beneficially owned by such Principal Shareholder). (iii) The sale, lease or exchange of all or any substantial part of the assets of the Trust to any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period.) (iv) The sale, lease or exchange to the Trust or any subsidiary thereof, in exchange for securities of the Trust of any assets of any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purposes of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period). (v) The purchase by the Trust or any Person controlled by the Trust of any Common Shares of the Trust from such Principal Shareholder or any person to whom such Principal Shareholder shall have transferred such Common Shares. (d) The provisions of this Section shall not be applicable to (i) any of the transactions described in paragraph (c) of this Section if two- thirds of the Board of Trustees of the Trust shall by resolution have approved a memorandum of understanding with such Principal Shareholder with respect to and substantially consistent with such transaction prior to the time such Person shall have become a Principal Shareholder, or (ii) any such transaction with any corporation of which a majority of the outstanding shares of all classes of a stock normally entitled to vote in elections of directors is owned of record or beneficially by the Trust and its subsidiaries and of which such Person is not a Principal Shareholder. (e) The Board of Trustees shall have the power and duty to determine for the purposes of this Section on the basis of information known to the Trust whether (i) a Person beneficially owns five percent (5%) or more of the outstanding Shares, (ii) a Person is an "affiliate" or "associate" (as defined above) of another, (iii) the assets being acquired or leased to or by the Trust or any subsidiary thereof constitute a substantial part of the assets of the Trust and have an aggregate fair market value of less than $1,000,000, and (iv) the memorandum of understanding referred to in paragraph (d) hereof is substantially consistent with the transaction covered thereby. Any such determination shall be conclusive and binding for all purposes of this Section. ARTICLE VIII Miscellaneous 8.1 Filing. This Declaration and any amendment (including any supplement) hereto shall be filed in such places as may be required or as the Trustees deem appropriate. Each amendment shall be accompanied by a certificate signed and acknowledged by a Trustee stating that such action was duly taken in a manner provided herein, and shall, upon insertion in the Trust's minute book, be conclusive evidence of all amendments contained therein. A restated Declaration, containing the original Declaration and all amendments theretofore made, may be executed from time to time by a majority of the Trustees and shall, upon insertion in the Trust's minute book, be conclusive evidence of all amendments contained therein and may thereafter be referred to in lieu of the original Declaration and the various amendments thereto. 8.2 Resident Agent. The Trust shall maintain a resident agent in the State of Delaware, which agent shall initially be The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801 The Trustees may designate a successor resident agent, provided, however, that such appointment shall not become effective until written notice thereof is delivered to the office of the Secretary of the State. 8.3 Governing Law. This Declaration is executed by a majority of the Trustees and delivered in the State of Delaware and with reference to the laws thereof, and the rights of all parties and the validity and construction of every provision hereof shall be subject to and construed according to the laws of said State and reference shall be specifically made to the business corporation law of the State of Delaware as to the construction of matters not specifically covered herein or as to which an ambiguity exists, although such law shall not be viewed as limiting the powers otherwise granted to the Trustees hereunder and any ambiguity shall be viewed in favor of such powers. 8.4 Counterparts. This Declaration may be simultaneously executed in several counterparts, each of which shall be deemed to be an original, and such counterparts, together, shall constitute one and the same instrument, which shall be sufficiently evidenced by any such original counterpart. 8.5 Reliance by Third Parties. Any certificate executed by an individual who, according to the records of the Trust, or of any recording office in which this Declaration may be recorded, appears to be a Trustee hereunder, certifying to: (a) the number or identity of Trustees or Shareholders, (b) the name of the Trust, (c) the due authorization of the execution of any instrument or writing, (d) the form of any vote passed at a meeting of Trustees or Shareholders, (e) the fact that the number of Trustees or Shareholders present at any meeting or executing any written instrument satisfies the requirements of this Declaration, (f) the form of any By Laws adopted by or the identity of any officers elected by the Trustees, or (g) the existence of any fact or facts which in any manner relate to the affairs of the Trust, shall be conclusive evidence as to the matters so certified in favor of any person dealing with the Trustees and their successors. 8.6 Provisions in Conflict with Law or Regulation. (a) The provisions of this Declaration are severable, and if the Trustees shall determine, with the advice of counsel, that any of such provisions is in conflict with the 1940 Act, the regulated investment company provisions of the Internal Revenue Code or with other applicable laws and regulations, the conflicting provision shall be deemed never to have constituted a part of this Declaration; provided, however, that such determination shall not affect any of the remaining provisions of this Declaration or render invalid or improper any action taken or omitted prior to such determination. (b) If any provision of this Declaration shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of this Declaration in any jurisdiction. IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as of the day and year first above written. By: /s/ Bruce N. Alpert -------------------------- Bruce N. Alpert EX-2 3 EXHIBIT 2 - BY-LAWS EXHIBIT (2) BY-LAWS OF THE GABELLI UTILITY FUND TABLE OF CONTENTS Page ARTICLE I Shareholder Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Proxies; Voting . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 Fixing Record Dates . . . . . . . . . . . . . . . . . . . . . . 1 1.4 Inspectors of Election . . . . . . . . . . . . . . . . . . . . 1 1.5 Records at Shareholder Meetings . . . . . . . . . . . . . . . . 2 ARTICLE II Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.1 Annual and Regular Meetings . . . . . . . . . . . . . . . . . . 2 2.2 Chairman; Records . . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE III Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3.1 Officers of the Trust . . . . . . . . . . . . . . . . . . . . . 3 3.2 Election and Tenure . . . . . . . . . . . . . . . . . . . . . . 3 3.3 Removal of Officers . . . . . . . . . . . . . . . . . . . . . . 3 3.4 Bonds and Surety . . . . . . . . . . . . . . . . . . . . . . . 4 3.5 Chairman, President, and Vice Presidents . . . . . . . . . . . 4 3.6 Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 3.7 Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3.8 Other Officers and Duties . . . . . . . . . . . . . . . . . . . 5 ARTICLE IV Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 4.1 Depositories . . . . . . . . . . . . . . . . . . . . . . . . . 6 4.2 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4.3 Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE V Stock Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 5.1 Transfer Agents, Registrars and the Like . . . . . . . . . . . 6 5.2 Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . 6 5.3 Registered Shareholders . . . . . . . . . . . . . . . . . . . . 7 ARTICLE VI Amendment of By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 7 6.1 Amendment and Repeal of By-Laws . . . . . . . . . . . . . . . . 7 THE GABELLI UTILITY FUND BY-LAWS These By-Laws are made and adopted pursuant to Section 3.9 of the Declaration of Trust establishing The Gabelli Utility Fund dated as of March 29, 1999, as from time to time amended (hereinafter called the "Declaration"). All words and terms capitalized in these By-Laws shall have the meaning or meanings set forth for such words or terms in the Declaration. ARTICLE I Shareholder Meetings 1.1 Chairman. The Chairman, if any, shall act as chairman at all meetings of the Shareholders; in the Chairman's absence, the Trustee or Trustees present at each meeting may elect a temporary chairman for the meeting, who may be one of themselves. 1.2 Proxies; Voting. Shareholders may vote either in person or by duly executed proxy and each full share represented at the meeting shall have one vote, all as provided in Article 10 of the Declaration. 1.3 Fixing Record Dates. For the purpose of determining the Shareholders who are entitled to notice of or to vote or act at any meeting, including any adjournment thereof, or who are entitled to participate in any dividends, or for any other proper purpose, the Trustees may from time to time, without closing the transfer books, fix a record date in the manner provided in Section 10.3 of the Declaration. If the Trustees do not prior to any meeting of Shareholders so fix a record date or close the transfer books, then the date of mailing notice of the meeting or the date upon which the dividend resolution is adopted, as the case may be, shall be the record date. 1.4 Inspectors of Election. In advance of any meeting of Shareholders, the Trustees may appoint Inspectors of Election to act at the meeting or any adjournment thereof. If Inspectors of Election are not so appointed, the Chairman, if any, of any meeting of Shareholders may, and on the request of any Shareholder or Shareholder proxy shall, appoint Inspectors of Election of the meeting. The number of Inspectors shall be either one or three. If appointed at the meeting on the request of one or more Shareholders or proxies, a majority of Shares present shall determine whether one or three Inspectors are to be appointed, but failure to allow such determination by the Shareholders shall not affect the validity of the appointment of Inspectors of Election. In case any person appointed as Inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the Trustees in advance of the convening of the meeting or at the meeting by the person acting as chairman. The Inspectors of Election shall determine the number of Shares outstanding, the Shares represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies, shall receive votes, ballots or consents, shall hear and determine all challenges and questions in any way arising in connection with the right to vote, shall count and tabulate all votes or consents, determine the results, and do such other acts as may be proper to conduct the election or vote with fairness to all Shareholders. If there are three Inspectors of Election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. On request of the Chairman, if any, of the meeting, or of any Shareholder or Shareholder proxy, the Inspectors of Election shall make a report in writing of any challenge or question or matter determined by them and shall execute a certificate of any facts found by them. 1.5 Records at Shareholder Meetings. At each meeting of the Shareholders, there shall be made available for inspection at a convenient time and place during normal business hours, if requested by Shareholders, the minutes of the last previous Annual or Special Meeting of Shareholders of the Trust and a list of the Shareholders of the Trust, as of the record date of the meeting or the date of closing of transfer books, as the case may be. Such list of Shareholders shall contain the name and the address of each Shareholder in alphabetical order and the number of Shares owned by such Shareholder. Shareholders shall have such other rights and procedures of inspection of the books and records of the Trust as are granted to shareholders of a Delaware business corporation. ARTICLE II Trustees 2.1 Annual and Regular Meetings. Meetings of the Trustees shall be held from time to time upon the call of the Chairman, if any, the President, the Secretary or any two Trustees. Regular meetings of the Trustees may be held without call or notice and shall generally be held quarterly. Neither the business to be transacted at, nor the purpose of, any meeting of the Board of Trustees need be stated in the notice or waiver of notice of such meeting, and no notice need be given of action proposed to be taken by unanimous written consent. 2.2 Chairman; Records. The Chairman, if any, shall act as chairman at all meetings of the Trustees; in absence of a chairman, the Trustees present shall elect one of their number to act as temporary chairman. The results of all actions taken at a meeting of the Trustees, or by unanimous written consent of the Trustees, shall be recorded by the person appointed by the Board of Trustees as the meeting secretary. ARTICLE III Officers 3.1 Officers of the Trust. The officers of the Trust shall consist of a Chairman, if any, a President, a Secretary, a Treasurer and such other officers or assistant officers as may be elected or authorized by the Trustees. Any two or more of the offices may be held by the same Person, except that the same person may not be both President and Secretary. The Chairman, if any, shall be a Trustee, but no other officer of the Trust need be a Trustee. 3.2 Election and Tenure. At the initial organization meeting, the Trustees shall elect the Chairman, if any, President, Secretary, Treasurer and such other officers as the Trustees shall deem necessary or appropriate in order to carry out the business of the Trust. Such officers shall serve at the pleasure of the Trustees or until their successors have been duly elected and qualified. The Trustees may fill any vacancy in office or add any additional officers at any time. 3.3 Removal of Officers. Any officer may be removed at any time, with or without cause, by action of a majority of the Trustees. This provision shall not prevent the making of a contract of employment for a definite term with any officer and shall have no effect upon any cause of action which any officer may have as a result of removal in breach of a contract of employment. Any officer may resign at any time by notice in writing signed by such officer and delivered or mailed to the Chairman, if any, President, or Secretary, and such resignation shall take effect immediately upon receipt by the Chairman, if any, President, or Secretary, or at a later date according to the terms of such notice in writing. 3.4 Bonds and Surety. Any officer may be required by the Trustees to be bonded for the faithful performance of such officer's duties in such amount and with such sureties as the Trustees may determine. 3.5 Chairman, President, and Vice Presidents. The Chairman, if any, shall, if present, preside at all meetings of the Shareholders and of the Trustees and shall exercise and perform such other powers and duties as may be from time to time assigned to such person by the Trustees. Subject to such supervisory powers, if any, as may be given by the Trustees to the Chairman, if any, the President shall be the chief executive officer of the Trust and, subject to the control of the Trustees, shall have general supervision, direction and control of the business of the Trust and of its employees and shall exercise such general powers of management as are usually vested in the office of President of a corporation. Subject to direction of the Trustees, the Chairman, if any, and the President shall each have power in the name and on behalf of the Trust or any of its Series to execute any and all loans, documents, contracts, agreements, deeds, mortgages, registration statements, applications, requests, filings and other instruments in writing, and to employ and discharge employees and agents of the Trust. Unless otherwise directed by the Trustees, the Chairman, if any, and the President shall each have full authority and power, on behalf of all of the Trustees, to attend and to act and to vote, on behalf of the Trust at any meetings of business organizations in which the Trust holds an interest, or to confer such powers upon any other persons, by executing any proxies duly authorizing such persons. The Chairman, if any, and the President shall have such further authorities and duties as the Trustees shall from time to time determine. In the absence or disability of the President, the Vice-Presidents in order of their rank as fixed by the Trustees or, if more than one and not ranked, the Vice-President designated by the Trustees, shall perform all of the duties of the President, and when so acting shall have all the powers of and be subject to all of the restrictions upon the President. Subject to the direction of the Trustees, and of the President, each Vice-President shall have the power in the name and on behalf of the Trust to execute any and all instruments in writing, and, in addition, shall have such other duties and powers as shall be designated from time to time by the Trustees or by the President. 3.6 Secretary. The Secretary shall maintain the minutes of all meetings of, and record all votes of, Shareholders, Trustees and the Executive Committee, if any. The Secretary shall be custodian of the seal of the Trust, if any, and the Secretary (and any other person so authorized by the Trustees) shall affix the seal, or if permitted, facsimile thereof, to any instrument executed by the Trust which would be sealed by a Delaware business corporation executing the same or a similar instrument and shall attest the seal and the signature or signatures of the officer or officers executing such instrument on behalf of the Trust. The Secretary shall also perform any other duties commonly incident to such office in a Delaware business corporation, and shall have such other authorities and duties as the Trustees shall from time to time determine. 3.7 Treasurer. Except as otherwise directed by the Trustees, the Treasurer shall have the general supervision of the monies, funds, securities, notes receivable and other valuable papers and documents of the Trust, and shall have and exercise under the supervision of the Trustees and of the President all powers and duties normally incident to the office. The Treasurer may endorse for deposit or collection all notes, checks and other instruments payable to the Trust or to its order. The Treasurer shall deposit all funds of the Trust in such depositories as the Trustees shall designate. The Treasurer shall be responsible for such disbursement of the funds of the Trust as may be ordered by the Trustees or the President. The Treasurer shall keep accurate account of the books of the Trust's transactions which shall be the property of the Trust, and which together with all other property of the Trust in the Treasurer's possession, shall be subject at all times to the inspection and control of the Trustees. Unless the Trustees shall otherwise determine, the Treasurer shall be the principal accounting officer of the Trust and shall also be the principal financial officer of the Trust. The Treasurer shall have such other duties and authorities as the Trustees shall from time to time determine. Notwithstanding anything to the contrary herein contained, the Trustees may authorize any adviser, administrator, manager or transfer agent to maintain bank accounts and deposit and disburse funds of any Series of the Trust on behalf of such Series. 3.8 Other Officers and Duties. The Trustees may elect such other officers and assistant officers as they shall from time to time determine to be necessary or desirable in order to conduct the business of the Trust. Assistant officers shall act generally in the absence of the officer whom they assist and shall assist that officer in the duties of the office. Each officer, employee and agent of the Trust shall have such other duties and authority as may be conferred upon such person by the Trustees or delegated to such person by the President. ARTICLE IV Miscellaneous 4.1 Depositories. In accordance with Section 3.9 of the Declaration, the funds of the Trust shall be deposited in such custodians as the Trustees shall designate and shall be drawn out on checks, drafts or other orders signed by such officer, officers, agent or agents (including the adviser, administrator or manager), as the Trustees may from time to time authorize. 4.2 Signatures. All contracts and other instruments shall be executed on behalf of the Trust by its properly authorized officers, agent or agents, as provided in the Declaration or By-laws or as the Trustees may from time to time by resolution provide. 4.3 Seal. The Trust is not required to have any seal, and the adoption or use of a seal shall be purely ornamental and be of no legal effect. The seal, if any, of the Trust, or any Series of the Trust, if any, may be affixed to any instrument, and the seal and its attestation may be lithographed, engraved or otherwise printed on any document with the same force and effect as if it had been imprinted and affixed manually in the same manner and with the same force and effect as if done by a Delaware business corporation. The presence or absence of a seal shall have no effect on the validity, enforceability or binding nature of any document or instrument that is otherwise duly authorized, executed and delivered. ARTICLE V Stock Transfers 5.1 Transfer Agents, Registrars and the Like. As provided in Section 6.9 of the Declaration, the Trustees shall have authority to employ and compensate such transfer agents and registrars with respect to the Shares of the various Series of the Trust as the Trustees shall deem necessary or desirable. In addition, the Trustees shall have power to employ and compensate such dividend disbursing agents, warrant agents and agents for the reinvestment of dividends as they shall deem necessary or desirable. Any of such agents shall have such power and authority as is delegated to any of them by the Trustees. 5.2 Transfer of Shares. The Shares of the Trust shall be transferable on the books of the Trust only upon delivery to the Trustees or a transfer agent of the Trust of proper documentation as provided in Section 5.8 of the Declaration. The Trust, or its transfer agents, shall be authorized to refuse any transfer unless and until presentation of such evidence as may be reasonably required to show that the requested transfer is proper. 5.3 Registered Shareholders. The Trust may deem and treat the holder of record of any Shares as the absolute owner thereof for all purposes and shall not be required to take any notice of any right or claim of right of any other person. ARTICLE VI Amendment of By-Laws 6.1 Amendment and Repeal of By-Laws. In accordance with Section 3.9 of the Declaration, only the Trustees shall have the power to amend or repeal the By-Laws or adopt new By-Laws at any time. Action by the Trustees with respect to the By-Laws shall be taken by an affirmative vote of a majority of the Trustees. The Trustees shall in no event adopt By-Laws which are in conflict with the Declaration, and any apparent inconsistency shall be construed in favor of the related provisions in the Declaration. EX-5 4 EXHIBIT (5) - TEMPORARY CERTIFICATE EXHIBIT (5) TEMPORARY CERTIFICATE: EXCHANGEABLE FOR DEFINITIVE ENGRAVED CERTIFICATE WHEN READY FOR DELIVERY COMMON SHARES OF BENEFICIAL INTEREST THE GABELLI UTILITY FUND FORMED UNDER THE LAWS OF THE STATE OF DELAWARE THIS CERTIFICATE IS TRANSFERABLE IN BOSTON, MASSACHUSETTS AND NEW YORK, NEW YORK CUSIP [ ] SEE REVERSE FOR CERTAIN DEFINITIONS THIS CERTIFIES THAT is the owner of FULLY PAID AND NON-ASSESSABLE COMMON SHARES OF BENEFICIAL INTEREST OF THE GABELLI UTILITY FUND transferable on the books of the Trust by the holder hereto in person or by duly authorized Attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be subject to all the provisions of the Agreement and Declaration of the Trust and the ByLaws of the Trust, and all amendments thereof, copies of which are on file at the principal office of the Trust and with the Transfer Agent. This Certificate is not valid until countersigned and registered by the Transfer Agent and Registrar. Witness the facsimile seal of the Trust and the facsimile signatures of its duly authorized officers. DATED: Countersigned and Registered: STATE STREET BANK AND TRUST COMPANY (BOSTON, MASSACHUSETTS.) Chairman of the Board TRANSFER AGENT AND REGISTRAR BY AUTHORIZED SIGNATURE Secretary AUTHORIZED SIGNATURE President THE GABELLI UTILITY FUND A full statement of the designations and any preferences, conversions and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the common shares of beneficial interest which the Trust is authorized to issues, and the differences in the relative rights and preferences between the shares of each series to the extent that they have been set and the authority of the Board of Trustees to set the relative nights and preferences of subsequent series will be furnished by the Trust and any shareholder, without charge, upon request to the Secretary of the Trust at its principal office. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common UNIF GIFT MIN ACT____ Custodian____ (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors JT TEN - as joint tenants with right Act________________________ of survivorship and not as (State) tenants in common Additional abbreviations may also be used though not in the above list. For value Received, ______________________ hereby sells, assigns and transfers unto NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER. PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE _________________________________________________________________________ PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ ____________________________________________________________________Shares of the Common Shares of beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint_______________________________________________________Attorney to transfer the said Shares on the books of the within-named Trust, with full power of substitution in the premises. Dated ___________________ ______________________________ EX-9 5 EXHIBIT (9)(A) - CUSTODY AGREEMENT EXHIBIT (9)(a) 3/98 NON-ERISA W/O RE CUSTODY AGREEMENT BY AND BETWEEN AND BOSTON SAFE DEPOSIT AND TRUST COMPANY TABLE OF CONTENTS SECTION PAGE 1. Establishment of/Additions to Account . . . . . . . . . . . . . . . 1 2. Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3. Authorized Parties . . . . . . . . . . . . . . . . . . . . . . . . . 1 4. Authorized Instructions . . . . . . . . . . . . . . . . . . . . . . 2 5. Directed Powers of Custodian . . . . . . . . . . . . . . . . . . . . 2 6. Discretionary Powers of Custodian . . . . . . . . . . . . . . . . . 3 7. Duties of Custodian . . . . . . . . . . . . . . . . . . . . . . . . 4 8. Contractual Income and Settlement . . . . . . . . . . . . . . . . . 5 9. Tax Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 10. Non-Account Assets . . . . . . . . . . . . . . . . . . . . . . . . . 6 11. Reporting and Recordkeeping . . . . . . . . . . . . . . . . . . . . 6 12. Standard of Care . . . . . . . . . . . . . . . . . . . . . . . . . . 7 13. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 14. Compensation and Expenses . . . . . . . . . . . . . . . . . . . . . 8 15. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 8 16. Amendment or Termination . . . . . . . . . . . . . . . . . . . . . . 8 17. Governing, Law and Legal Proceedings . . . . . . . . . . . . . . . . 8 18. Representations . . . . . . . . . . . . . . . . . . . . . . . . . . 9 19. Necessary Parties . . . . . . . . . . . . . . . . . . . . . . . . . 9 20. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . 9 TAXPAYER IDENTIFICATION NUMBER CERTIFICATION . . . . . . . . . . . . . 11 CUSTODY AGREEMENT THIS CUSTODY AGREEMENT made as of __________________, 19__ ("Agreement") by and between _______________________________, a ____________________________ organized under the laws of _______________________________ ("Client") and Boston Safe Deposit and Trust Company, a Massachusetts trust company ("Custodian"). WITNESSETH: WHEREAS, the Client and the Custodian desire to establish a custody account to provide for the safekeeping and recordkeeping of certain property of the Client; NOW, THEREFORE, the Client and the Custodian, each intending to be legally bound, agree as follows: 1. Establishment of/Additions to Account The Client hereby appoints Boston Safe Deposit and Trust Company as Custodian for any property acceptable to the Custodian which the Client may deposit to the Custodian's care ("Account"). The Custodian shall have no responsibility for any property until it in fact is received by the Custodian or its agents or subcustodians. "Property" as used herein shall not include any direct interest in real property, leaseholds or mineral interests. 2. Distributions The Custodian shall make distributions or transfers out of the Account pursuant to Authorized Instructions, as defined below. In making payments to service providers pursuant to Authorized Instructions, the Client acknowledges that the Custodian is acting as a paying agent, and not as the payor, for tax information reporting and withholding purposes. 3. Authorized Parties The Client shall furnish the Custodian with a written list of the names and signatures of all persons authorized to direct the Custodian on behalf of the Client under the terms of this Agreement. In addition, the Client may appoint and remove one or more investment managers ("Investment Manager") for such portion of the Account as the Client shall designate to the Custodian in writing. The Investment Manager shall furnish the Custodian with a written list of the names and signatures of the person or persons who are authorized to represent the Investment Manager in dealings with the Custodian. The Custodian shall be entitled to deal with any person or entity so identified by the Client or Investment Manager ("Authorized Party or Authorized Parties") until notified otherwise in writing. The Custodian shall be under no duty to question any direction of an Authorized Party with respect to the portion of the Account over which such Authorized Party has authority, to review any Property held in the Account, to make any suggestions with respect to the investment and reinvestment of the assets in the Account, or to evaluate or question the performance of any Authorized Party. The Custodian shall not be responsible or liable for any diminution of value of any securities or other property held by the Custodian (or its subcustodians). 4. Authorized Instructions All directions and instructions to the Custodian from an Authorized Party shall be in writing, by facsimile transmission, electronic transmission, or any other method specifically agreed to in writing by the Client and the Custodian, provided the Custodian may, in its discretion, accept oral directions and instructions and may require confirmation in writing. The Custodian shall be fully protected in acting in accordance with all such directions and instructions ("Authorized Instructions") which it reasonably believes to have been given by an Authorized Party or in failing to act in the absence thereof. 5. Directed Powers of Custodian The Custodian shall have and exercise the following powers and authority in the administration of the Account upon the direction of an Authorized Party: a. Settle purchases and sales and engage in other transactions, including free receipts and deliveries, exchanges and other voluntary corporate actions, with respect to securities or other property received by the Custodian; b. Execute proxies for any stocks, bonds or other securities held in the Account; c. Lend the assets of the Account in accordance with the terms and conditions of a separate securities lending agreement; and d. Take any and all actions necessary to settle transactions in futures and/or options contracts, short-selling programs, foreign exchange or foreign exchange contracts, swaps and other derivative investments. Settlements of transactions may be effected in trading and processing practices customary in the jurisdiction or market where the transaction occurs. The Client acknowledges that this may, in certain circumstances, require the delivery of cash or securities (or other property) without the concurrent receipt of securities (or other property) or cash and, in such circumstances, the Client shall have responsibility for nondelivery of securities or other property (or late delivery) or nonreceipt of payment (or late payment) by the counterparty. 6. Discretionary Powers of Custodian The Custodian shall have and exercise the following powers and authority in the administration of the Account: a. Appoint sub-custodians (including a corporate affiliate of the Custodian), domestic or foreign, as to part or all of the Account; b. Hold property in nominee name, in bearer form or in book entry form, in a clearinghouse corporation or in a depository, so long as the Custodian's records clearly indicate that the assets held are a part of the Account; c. Commence or defend suits or legal proceedings and represent the Account in all suits or legal proceedings in any court or before any other body or tribunal as the Custodian shall deem necessary to protect the Account; d. Employ suitable agents and legal counsel, who may be counsel for the Client, and, as a part of its reimbursable expenses under this Agreement, pay their reasonable compensation and expenses. The Custodian shall be entitled to rely on and may act upon advice of counsel on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice; e. Take all action necessary to pay for authorized transactions, including exercising the power to borrow or raise monies from the Custodian in its corporate capacity or an affiliate of the Custodian and shall hold any property in the Account as security for advances made to the Account for any such authorized transactions, including disbursements or expenses, or the purchase or sale of foreign exchange, or of contracts for foreign exchange. The Custodian shall be entitled to collect from the Account sufficient cash for reimbursement, and if such cash is insufficient, dispose of the assets of the Account to the extent necessary to obtain reimbursement; f. Make, execute and deliver any and all documents, agreements or other instruments in writing as is necessary or desirable for the accomplishment of any of the powers in this Agreement; and g. Generally take all action, whether or not expressly authorized, which the Custodian may deem necessary or desirable for the fulfillment of its duties hereunder. The powers described in this Section 6 may be exercised by the Custodian with or without Authorized Instructions, but where the Custodian acts on Authorized Instructions, the Custodian shall be fully protected as described in Section 4. Without limiting the generality of the foregoing, the Custodian shall not be liable for the acts or omissions of any subcustodian appointed under paragraph (a) of this Section 6 pursuant to Authorized Instructions including, but not limited to, any broker-dealer or other entity designated by the Client or Investment Manager to hold any property of the Account as collateral or otherwise pursuant to investment strategy. 7. Duties of Custodian The Custodian shall perform or cause its agents or subcustodians to perform the following duties with respect to the Account: a. Hold the property in safekeeping facilities of the Custodian or of other custodian banks or clearing corporations, in the United States or elsewhere; provided that the Custodian shall not be responsible for any losses resulting from the deposit or maintenance of securities or other property (in accordance with market practice, custom, or regulation) with any recognized foreign or domestic clearing facility, book-entry system, centralized custodial depository, or similar organization; b. Collect all income payable to and all distributions due to the Account and sign on the Account's behalf all declarations, affidavits, and certificates of ownership required to collect income and principal payments; provided that the Custodian shall not be responsible for the failure to receive payment of (or late payment of) distributions with respect to securities or other property held in the Account; c. Subject to the timely receipt of notice from an issuer or Authorized Party, collect all proceeds from securities, certificates of deposit or other investments which may mature or be called; d. Submit or cause to be submitted to the Client or the Investment Manager, as designated by the Client, information actually received by the Custodian regarding ownership rights pertaining to property held in the Account; e. Attend to involuntary corporate actions; f. Determine the fair market value of the Account as of such dates as the Client and the Custodian may agree upon, in accordance with methods consistently followed and uniformly applied. In determining fair market value of the Account, the Custodian shall be protected in relying on values recommended by an Authorized Party; and g. Render periodic statements for property held hereunder. 8. Contractual Income and Settlement a. Contractual Income. The Custodian shall credit the Account with income and maturity proceeds on securities on contractual payment date net of any taxes or upon actual receipt as agreed between the Custodian and the Client. To the extent the Client and the Custodian have agreed to credit income on contractual payment date, the Custodian may reverse such accounting entries with back value to the contractual payment date if the Custodian reasonably believes that it will not receive such amount. b. Contractual Settlement. The Custodian will attend to the settlement of securities transactions on the basis of either contractual settlement date accounting or actual settlement date accounting as agreed between the Client and the Custodian. To the extent the Client and the Custodian have agreed to settle certain securities transactions on the basis of contractual settlement date accounting, the Custodian may reverse with back value to the contractual settlement date any entry relating to such contractual settlement where the related transaction remains unsettled in accordance with established procedures. 9. Tax Law a. The Custodian shall use reasonable efforts to assist the Authorized Party, to the extent the Authorized Party has provided necessary information, with respect to any tax obligations, including responsibility for taxes, withholding, certification and reporting requirements, claims for exemptions or refund, interest, penalties and other expenses ("Tax Obligations"). The Client shall cause the Authorized Party to notify the Custodian in writing of any such Tax Obligations. The Custodian shall have no responsibility or liability for any Tax Obligations now or hereafter imposed on the Client or the Account by any taxing authorities, domestic or foreign. b. To the extent the Custodian is responsible under any applicable law for any Tax Obligation, the Client shall cause the Authorized Party to inform the Custodian of all Tax Obligations, shall direct the Custodian with respect to the performance of such Tax Obligations and shall provide the Custodian with the necessary funds and all information required by the Custodian to meet such Tax Obligations. 10. Non-Account Assets The Client may request the Custodian to perform a recordkeeping function with respect to property held by others and not otherwise subject to the terms of this Agreement. To the extent the Custodian shall agree to perform this service, its sole responsibility shall be to accurately reflect information on its books which it has received from an Authorized Party. 11. Reporting and Recordkeeping If, within ninety (90) days after the Custodian mails to the Client a statement with respect to the Account, the Client has not given the Custodian written notice of any exception or objection thereto, the statement shall be deemed to have been approved, and in such case, the Custodian shall not be liable for any matters in such statements. The Client shall have the right, at its own expense and with prior written notice to the Custodian, to inspect the Custodian's books and records directly relating to the Account during normal business hours or to designate an accountant to make such inspection. 12. Standard of Care In performing its duties under this Agreement, the Custodian shall exercise the same care and diligence that it would devote to its own property in like circumstances. The duties of the Custodian shall only be those specifically undertaken pursuant to this Agreement. The Custodian shall not be responsible or liable for any losses or damages suffered by the Client arising as a result of the insolvency of any subcustodian, except to the extent the Custodian was negligent in its selection or continued retention of such subcustodian. The Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Agreement and shall be held harmless in acting upon any notice, request, direction, instruction, consent, certification or other instrument believed by it to be genuine and delivered by an Authorized Party. The Custodian shall not be liable for any act or omission of any other person in carrying out any responsibility imposed upon such person and under no circumstances shall the Custodian be liable for any indirect, consequential or special damages with respect to the role as Custodian. 13. Force Majeure Notwithstanding anything in this Agreement to the contrary contained herein, the Custodian shall not be responsible or liable for its failure to perform under this Agreement or for any losses to the Account resulting from any event beyond the reasonable control of the Custodian, its agents or subcustodians, including but not limited to nationalization, strikes, expropriation, devaluation, seizure, or similar action by any governmental authority, de facto or de jure; or enactment, promulgation, imposition or enforcement by any such governmental authority of currency restrictions, exchange controls, levies or other charges affecting the Account's property; or the breakdown, failure or malfunction of any utilities or telecommunications systems; or any order or regulation of any banking or securities industry including changes in market rules and market conditions affecting the execution or settlement of transactions or acts of war, terrorism, insurrection or revolution; or acts of God; or any other similar event. This Section shall survive the termination of this Agreement. 14. Compensation and Expenses The Custodian shall be entitled to compensation for services under this Agreement as mutually agreed. The Client acknowledges that, as part of the Custodian's compensation, the Custodian may earn interest on balances, including disbursement balances and balances arising from purchase and sale transactions. The Custodian shall also be entitled to reimbursement for reasonable expenses incurred by it in the discharge of its duties under this Agreement. The Custodian is authorized to charge and collect from the Account any and all fees and expenses earned unless such fees and expenses are paid directly by the Client. To the extent the Custodian advances funds to the Account for disbursements or to effect the settlement of purchase transactions, the Custodian shall be entitled to collect from the Account either (i) with respect to domestic assets, an amount equal to what would have been earned on the sums advanced (an amount approximating the "federal funds" interest rate) or (ii) with respect to non-domestic assets, the rate applicable to the appropriate foreign market. 15. Indemnification The Client shall indemnify and hold harmless the Custodian from all liability and expense, including reasonable counsel fees and expenses, arising out of the performance of its obligations under this Agreement, except as a result of the Custodian's own negligence or willful misconduct. This indemnification shall survive the termination of this Agreement. 16. Amendment or Termination This Agreement may be amended by written agreement of the Client and the Custodian and may be terminated by either party upon ninety (90) days' notice in writing to the other party. 17. Governing, Law and Legal Proceedings This Agreement shall be construed in accordance with and governed by the laws of the Commonwealth of Massachusetts. The parties hereby expressly waive, to the full extent permitted by applicable law, any right to trial by jury with respect to any judicial proceeding arising from or related to this Agreement. 18. Representations The Client and the Custodian hereby each represent and warrant to the other that it has full authority to enter into this Agreement upon the terms and conditions hereof and that the individual executing this Agreement on its behalf has the requisite authority to bind the Client or the Custodian to this Agreement 19. Necessary Parties All of the understandings, agreements, representations and warranties contained herein are solely for the benefit of the Client and the Custodian and there are no other parties who are intended to be benefitted, in any way whatsoever, by this Agreement. 20. Execution in Counterparts This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and said counterparts shall constitute but one and the same instrument and may be sufficiently evidenced by one counterpart. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above. Authorized Signer of: Authorized Officer of: _______________________ BOSTON SAFE DEPOSIT (Client) AND TRUST COMPANY By:____________________ By: ______________________ Name: Name: Title: Title: Date:__________________ Date: _____________________ Address for Notice: Address for Notice: ________________________ One Cabot Road ________________________ Medford, MA 02155 ________________________ Attention: _________________ Taxable: _______________ or Tax Exempt: _____________ (Under IRC Section: _____) __________________________ Fiscal Year TAXPAYER IDENTIFICATION NUMBER CERTIFICATION By signing below the Client hereby certifies under penalties of perjury that the taxpayer identification number provided below is correct and that the Client is not subject to backup withholding on reportable payments credited to the Client's Account by the Custodian. The Client may not be subject to back-up withholding either because (a) the Client is exempt from back-up withholding because it is an "exempt recipient", (b) the Client has not been notified by the Internal Revenue Service that it is subject to back-up withholding for failure to report all interest or dividends, or (c) the IRS has notified the Client that it is no longer subject to back-up withholding. (If (a), (b), or (c) do not apply, please cross out.) FAILURE TO SIGN BELOW AND PROVIDE A VALID TAXPAYER IDENTIFICATION NUMBER MAY REQUIRE THAT THE CUSTODIAN APPLY FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% (OR THE RATE AS REQUIRED BY LAW) ON ALL REPORTABLE PAYMENTS MADE TO THE ACCOUNT ESTABLISHED UNDER THIS AGREEMENT. THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING. __________________________ (CLIENT) BY: _______________________ NAME: _____________________ TITLE: ____________________ ____________________________ TAXPAYER IDENTIFICATION NUMBER EX-9 6 EXHIBIT (9)(B) - PROPOSED CUSTODY FEE SCHEDULE EXHIBIT (9)(b) Mellon Trust Proposed Custody Fee Schedule The Gabelli Funds February 2, 1999 Mellon Trust, acting as custodian for the mutual fund assets of Gabelli Equity and Gabelli Value, would base its compensation according to the schedule which follows. Core custody administration services provided by Mellon Trust include transaction processing, preparation of cash availability and forecasting as well as providing daily custody reports. Core Custody services includes global safekeeping of assets, transaction, settlement, foreign exchange, income collection, corporation action processing and basic online inquiry. Mellon Trust will pass though to the client any expenses including, but not limited to, courier expense, registration and application fees, stamp duties, telex charges, custom reporting or custom programming, internal/external tax, legal or consulting costs and proxy voting expenses. Asset-based fees and transactions will be calculated and payable on a monthly basis. If funds are left uninvested at the Custodian by the Fund, an earnings credit will be give at the 90 day T-Bill rate on 90% of the uninvested balance. Monthly credit balances will roll forward to offset future Custodian charges. However, all unused credits will expire at the end of the calendar year. Credit balances are used exclusively to offset custody charges. They will not apply to investment related expenses and may not be transferred. Mellon is willing to guarantee the attached fee schedule for three years. However, should the nature of the account change dramatically, Mellon reserves the right to renegotiate its compensation based on the situation that exists in the account at such time. If non-standard or special services are requested, Mellon may negotiate additional compensation accordingly. Domestic Fee Schedule Asset Based Fees: 1 basis points (.0001) on the first $ 1 billion of market value of assets 1/2 basis points (.0005) on the market value of assets in excess $1 billion Transaction Fees: $ 6.50 per DTC/PTC transaction $ 6.50 per Fed transaction $ 30.00 per physical transaction $ 5.00 per paydown $ 3.00 per Fed Wire Delivery $ 5.00 per wire in/out $ 7.00 per futures transaction $ 30.00 per non-Mellon foreign exchange $ 25.00 per option round-trip $ 250.00 per broker relationship (assumes utilization of Mellon boilerplate agreement) Global Fee Schedule: Network Based Charges: Category 1 4 basis points Category 2 6 basis points Category 3 8 basis points Category 4 15 basis points Category 5 20 basis points Category 6 40 basis points Transaction Fees: Category 1 Canada, Euroclear, France, Germany, Japan, Italy, $20.00 Netherlands, Spain, Sweden, Switzerland, United Kingdom Category 2 Australia, Belgium, CEDEL, Ireland, Luxembourg, $40.00 Mexico, New Zealand, Norway, South Africa Category 3 Argentina, Austria, Brazil, Denmark, Finland, $50.00 Hong Kong, Portugal, Singapore, Sri Lanka, Thailand, Turkey Category 4 Czech Republic, Greece, Israel, Poland, South Korea $50.00 Zimbabwe Category 5 Bangladesh, Bermuda, Botswana, Ghana, Hungary, $60.00 Indonesia, Kenya, Malaysia, Mauritius, Pakistan, Peru Philippines, Slovak Republic, Taiwan, Uruguay Category 6 Chile, China, Colombia, Cyprus, Egypt, India, Jordan, $85.00 Venezuela EX-9 7 EXHIBIT (9)(C) - TRANSFER AGENCY AND SERVICE AGREEMENT EXHIBIT (9)(c) REGISTRAR, TRANSFER AGENCY AND SERVICE AGREEMENT between GABELLI UTILITY FUND and STATE STREET BANK AND TRUST COMPANY TABLE OF CONTENTS ARTICLE 1 TERMS OF APPOINTMENT; DUTIES OF THE BANK . . . . . . . . . . 3 ARTICLE 2 FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE BANK . . . . . . . . . 6 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE FUND . . . . . . . . . 7 ARTICLE 5 DATA ACCESS AND PROPRIETARY INFORMATION . . . . . . . . . . 8 ARTICLE 6 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 10 ARTICLE 7 STANDARD OF CARE . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE 8 COVENANTS OF THE FUND AND THE BANK . . . . . . . . . . . . 13 ARTICLE 9 TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . 14 ARTICLE 10 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE 11 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE 12 MASSACHUSETTS LAW TO APPLY . . . . . . . . . . . . . . . . 16 ARTICLE 13 FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE 14 CONSEQUENTIAL DAMAGES . . . . . . . . . . . . . . . . . . 16 ARTICLE 15 MERGER OF AGREEMENT . . . . . . . . . . . . . . . . . . . 16 ARTICLE 16 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE 17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE 18 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . 17 REGISTRAR, TRANSFER AGENCY AND SERVICE AGREEMENT AGREEMENT made as of the ___________________ day of ____________________, 1999, by and between Gabelli Utility Fund a _____________________ corporation, having its principal office and place of business at ______________________________ (the "Fund"), and STATE STREET BANK AND TRUST, Gabelli, a Massachusetts trust company having its principal office and place of business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Bank"). WHEREAS, the Fund desires to appoint the Bank as its registrar, transfer agent, dividend disbursing agent and agent in connection with certain other activities and the Bank desires to accept such appointment; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: ARTICLE 1 TERMS OF APPOINTMENT; DUTIES OF THE BANK 1.01 Subject to the terms and conditions set forth in this Agreement, the Fund hereby employs and appoints the Bank to act as, and the Bank agrees to act as registrar, transfer agent for the Fund's authorized and issued shares of its common stock ("Shares"), dividend disbursing agent and agent in connection with any dividend reinvestment plan as set out in the prospectus of the Fund, corresponding to the date of this Agreement. 1.02 The Bank agrees that it will perform the following services: (a) In accordance with procedures established from time to time by agreement between the Fund and the Bank, the Bank shall: (i) Issue and record the appropriate number of Shares as authorized and hold such shares in the appropriate Shareholder account (ii) Effect transfers of Shares by the registered owners thereof upon receipt of appropriate documentation; (iii) Prepare and transmit payments for dividends and distributions declared by the Fund; (iv) Act as agent for Shareholders pursuant to the dividend reinvestment and cash purchase plan as amended from time to time in accordance with the terms of the agreement to be entered into between the Shareholders and the Bank in substantially the form attached as Exhibit hereto; (v) Issue replacement certificates for those certificates alleged to have been lost, stolen or destroyed upon receipt by the Bank of indemnification satisfactory to the Bank and protecting the Bank and the Fund, and the Bank at its option, may issue replacement certificates in place of mutilated stock certificates upon presentation thereof and without such indemnity. (b) In addition to and neither in lieu nor in contravention of the services set forth in the above paragraph (a), the Bank shall: (i) perform all of the customary services of a registrar, transfer agent, dividend disbursing agent and agent of the dividend reinvestment anc cash purchase plan as described in Article 1 consistent with those requirements in effect as of the date of this agreement. The detailed definition, frequency, limitations and associated costs (if any) set out in the attached fee schedule, include but are not limited to: maintaining all Shareholder accounts, preparing Shareholder meeting lists, mailing proxies, and mailing Shareholder reports to current Shareholders, withholding taxes on U.S. resident and non-resident alien accounts where applicable, preparing and filing U.S. Treasury Department Forms 1099 and other appropriate forms required with respect to dividends and distributions by federal authorities for all registered Shareholders. (c) The Bank shall provide additional services on behalf of the Fund (i.e., escheatment services) which may be agreed upon in writing between the Fund and the Bank. ARTICLE 2 FEES AND EXPENSES 2.01 For the performance by the Bank pursuant to this Agreement, the Fund agrees to pay the Bank an annual maintenance fee as set out in the initial fee schedule attached hereto. Such fees and out-of-pocket expenses and advances identified under Section 2.02 below may be changed from time to time subject to mutual written agreement between the Fund and the Bank. 2.02 In addition to the fee paid under Section 2.01 above, the Fund agrees to reimburse the Bank for out-of-pocket expenses, including but not limited to confirmation production, postage, forms, telephone, microfilm, microfiche, tabulating proxies, records storage, or advances incurred by the Bank for the items set out in the fee schedule attached hereto. In addition, any other expenses incurred by the Bank at the request or with the consent of the Fund, will be reimbursed by the Fund. 2.03 The Fund agrees to pay all fees and reimbursable expenses within five days following the receipt of the respective billing notice. Postage and the cost of materials for mailing of dividends, proxies, Fund reports and other mailings to all Shareholder accounts shall be advanced to the Bank by the Fund at least seven (7) days prior to the mailing date of such materials. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE BANK The Bank represents and warrants to the Fund that: 3.01 It is a trust company duly organized and existing and in good standing under the laws of the Commonwealth of Massachusetts. 3.02 It is duly qualified to carry on its business in the Commonwealth of Massachusetts. 3.03 It is empowered under applicable laws and by its Charter and By-Laws to enter into and perform this Agreement. 3.04 All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement. 3.05 It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE FUND The Fund represents and warrants to the Bank that: 4.01 It is a corporation duly organized and existing and in good standing under the laws of Maryland. 4.02 It is empowered under applicable laws and by its Articles of Incorporation and By-Laws to enter into and perform this Agreement 4.03 All corporate proceedings required by said Articles of Incorporation and By-Laws have been taken to authorize it to enter into and perform this Agreement. 4.04 It is a closed-end, diversified investment company registered under the Investment Company Act of 1940, as amended. 4.05 To the extent required by federal securities laws a registration statement under the Securities Act of 1933, as amended is currently effective and appropriate state securities law filings have been made with respect to all Shares of the Fund being offered for sale; information to the contrary will result in immediate notification to the Bank. 4.06 It shall make all required filings under federal and state securities laws. ARTICLE 5 DATA ACCESS AND PROPRIETARY INFORMATION 5.01 The Fund acknowledges that the data bases, computer programs, screen formats, interactive design techniques, and other information furnished to the Fund by the Bank are provided solely in connection with the services rendered under this Agreement and constitute copyrighted trade secrets or proprietary information of substantial value to the Bank. Such databases, programs, formats, designs, techniques and other information are collectively referred to below as "Proprietary Information." The Fund agrees that it shall treat all Proprietary Information to any person or organization except as expressly permitted hereunder. The Fund agrees for itself and its employees and agents: (a) to use such programs and databases (i) solely on the Fund computers, or (ii) solely from equipment at the locations agreed to between the Fund and the Bank and (iii) in accordance with the Bank's applicable user documentation; (b) to refrain from copying or duplicating in any way (other than in the normal course of performing processing on the Fund's computers) any part of any Proprietary Information; (c) to refrain from obtaining unauthorized access to any programs, data or other information not owned by the Fund, and if such access is accidentally obtained, to respect and safeguard the same Proprietary Information; (d) to refrain from causing or allowing information transmitted from the Bank's computer to the Funds' terminal to be retransmitted to any other computer terminal or other device except as expressly permitted by the Bank, (such permission not to be unreasonably withheld); (e) that the Fund shall have access only to those authorized transactions as agreed to between the Fund and the Bank; and (f) to honor reasonable written requests made by the Bank to protect at the Bank's expense the rights of the Bank in Proprietary Information at common law and under applicable statues. 5.02 If the transactions available to the Fund include the ability to originate electronic instructions to the Bank in order to (i) effect the transfer or movement of cash or Shares or (ii) transmit Shareholder information or other information, then in such event the Bank shall be entitled to rely on the validity and authenticity of such instruction without undertaking any further inquiry as long as such instruction is undertaken in conformity with security procedures established by the Bank from time to time. ARTICLE 6 INDEMNIFICATION 6.01 The Bank shall not be responsible for, and the Fund shall indemnify and hold the Bank harmless from and against, any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to: (a) All actions of the Bank or its agents or subcontractors required to be taken pursuant to this Agreement; provided that such actions are taken in good faith and without negligence or willful misconduct. (b) The Fund's lack of good faith, negligence or willful misconduct which arise out of the breach of any representation or warranty of the Fund hereunder. (c) The reliance on or use by the Bank or its agents or subcontractors of information, records, documents or services which (i) are received by the Bank or its agents or subcontractors, and (ii) have been prepared, maintained or performed by the Fund or any other person or firm on behalf of the Fund including but not limited to any previous transfer agent registrar. (d) The reliance on, or the carrying out by the Bank or its agents or subcontractors of any instructions or requests of the Fund. (e) The offer or sale of Shares in violation of any requirement under the federal securities laws or regulations or the securities laws or regulations of any state that such Shares be registered in such state or in violation of any stop order or other determination or ruling by any federal agency or any state with respect to the offer or sale of such Shares in such State. 6.02 At any time the Bank may apply to any officer of the Fund for instructions, and may consult with legal counsel with respect to any matter arising in connection with the services to be performed by the Bank under this Agreement, and the Bank and its agents or subcontractors shall not be liable and shall be indemnified by the Fund for any action taken or omitted by it in reliance upon such instructions or upon the opinion of such counsel. The Bank, its agents and subcontractors shall be protected and indemnified in acting upon any paper or document furnished by or on behalf of the Fund, reasonably believed to be genuine and to have been signed by the proper person or persons, or upon any instruction, information, data, records or documents provided the Bank or its agents or subcontractors by telephone, in person, machine readable input, telex, CRT data entry or other similar means authorized by the Fund, and shall not be held to have notice thereof from the Fund. The Bank, its agents and subcontractors shall also be protected and indemnified in recognizing stock certificates which are reasonably believed to bear the proper manual or facsimile signatures of the officers of the Fund, and the proper countersignature of any former transfer agent or former registrar, or of a co-transfer agent or co-registrar. 6.03 In order that the indemnification provisions contained in this Article 6 shall apply, upon the assertion of a claim for which the Fund may be required to indemnify the Bank, the Bank shall promptly notify the Fund in writing of such assertion, and shall keep the Fund advised with respect to all developments concerning such claim. The Fund shall have the option to participate with the Bank in the defense of such claim or to defend against said claim in its own name or in the name of the Bank. The Bank shall in no case confess any claim or make any compromise in any case in which the Fund may be required to indemnify the Bank except with the Fund's prior written consent. ARTICLE 7 STANDARD OF CARE 7.01 The Bank shall at all times act in good faith and agrees to use its best efforts within reasonable limits to insure the accuracy of all services performed under this Agreement, but assumes no responsibility and shall not be liable for loss or damage due to errors unless said errors are caused by its negligence, bad faith, or willful misconduct of that of its employees. ARTICLE 8 COVENANTS OF THE FUND AND THE BANK 8.01 The Fund shall promptly furnish to the Bank the following: (a) A certified copy of the resolution of the Board of Directors of the Fund authorizing the appointment of the Bank and the execution and delivery of this Agreement. (b) A copy of the Articles of Incorporation and By-Laws of the Fund and all amendments thereto. 8.02 The Bank hereby agrees to establish and maintain facilities and procedures reasonably acceptable to the Fund for safekeeping of stock certificates, check forms and facsimile signature imprinting devices, if any; and for the preparation or use, and for keeping account of, such certificates, forms and devices. 8.03 The Bank shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable. To the extent required by Section 31 of the Investment Company Act of 1940, as amended, and the Rules thereunder, the Bank agrees that all such records prepared or maintained by the Bank relating to the services to be performed by the Bank hereunder are the property of the Fund and will be preserved, maintained and made available in accordance with such Section and Rules, and will be surrendered promptly to the Fund on and in accordance with its request. 8.04 The Bank and the Fund agree that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be requested by a governmental entity or as may be required by law. 8.05 In cases of any requests or demands for the inspection of the Shareholder records of the Fund, the Bank will endeavor to notify the Fund and to secure instructions from an authorized officer of the Fund as to such inspection. The Bank reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by its counsel that it may be held liable for the failure to exhibit the Shareholder records to such person. ARTICLE 9 TERMINATION OF AGREEMENT 9.01 This Agreement may be terminated by either party upon one hundred twenty (120) days written notice to the other. 9.02 Should the Fund exercise its right to terminate, all out-of- pocket expenses associated with the movement of records and material will be borne by the Fund. Additionally, the Bank reserves the right to charge for any other reasonable expenses associated with such termination and/or a charge equivalent to the average of three (3) month's fees. ARTICLE 10 ASSIGNMENT 10.01 Except as provided in Section 10.03 below, neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the written consent of the other party. 10.02 This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns. 10.03 The Bank may, without further consent on the part of the Fund, subcontract for the performance hereof with (i) Boston EquiServe Limited Partnership., a Massachusetts limited partnership ("Boston EquiServe"), which is duly registered as a transfer agent pursuant to Section 17A(c)(2) of the Securities Exchange Act of 1934 ("Section 17A(c)(2)"), or (ii) a Boston EquiServe affiliate duly registered as a transfer agent pursuant to Section 17A(c)(2), provided, however, that the Bank shall be as fully responsible to the Fund for the acts and omissions of any subcontractor as it is for its own acts and omissions. ARTICLE 11 AMENDMENT 11.01 This Agreement may be amended or modified by a written agreement executed by both parties and authorized or approved by a resolution of the Board of Directors of the Fund. ARTICLE 12 MASSACHUSETTS LAW TO APPLY 12.01 This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of The Commonwealth of Massachusetts. ARTICLE 13 FORCE MAJEURE 13.01 In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes, equipment or transmission failure or damage reasonably beyond its control, or other causes reasonably beyond its control, such party shall not be liable for damages to the other for any damages resulting from such failure to perform or otherwise from such causes. ARTICLE 14 CONSEQUENTIAL DAMAGES 14.01 Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement or for any consequential damages arising out of any act or failure to act hereunder. ARTICLE 15 MERGER OF AGREEMENT 15.01 This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject hereof whether oral or written. ARTICLE 16 SURVIVAL 16.01 All provisions regarding indemnification, warranty, liability and limits thereon, and confidentiality and/or protection of proprietary rights and trade secrets shall survive the termination of this Agreement. ARTICLE 17 SEVERABILITY 17.01 If any provision or provisions of this Agreement shall be held to be invalid, unlawful, or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired. ARTICLE 18 COUNTERPARTS 18.01 This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers, as of the day and year first above written. Gabelli Utility Fund BY: __________________________ State Street Bank and Trust Company BY: ____________________________ EX-9 8 EXHIBIT (9)(D) - TRANSFER AGENT AND REGISTRAR SERVICES FEE AGREEMENT EXHIBIT (9)(d) STATE STREET BANK AND TRUST COMPANY TRANSFER AGENT AND REGISTRAR SERVICES FEE AGREEMENT FOR ALL GABELLI CLOSED-END FUNDS ONGOING TRANSFER AGENT FEES $6.00 per shareholder account per annum for open accounts and $4.00 per closed shareholder account per annum. Includes the issuance and registration of the first 1,500 credit certificates in a calendar years, per fund. Excess credits beyond 1,500 to be billed at $1.25 each within a calendar year. For each dividend reinvestment per participant $.75 For each optional cash infusion $.75 ACCOUNT MAINTENANCE SERVICES Establishing new accounts Preparation and mailing of W-9 solicitation to new accounts without T.I.N.'s Address changes Processing T.I.N. changes Processing routine and non-routine transfers of ownership Issuance of credit certificates (see limits) Posting debit and credit transactions Providing a daily transfer journal of ownership changes Responding to written shareholder communications Responding to shareholder telephone inquiries; toll-free number Placing and releasing stop transfers Replacing lost certificates Registration of credit certificates (see limits) DIVIDEND DISBURSEMENT SERVICES Generate and mail twelve dividend checks per annum with one enclosure Replace lost dividend checks Processing of backup withholding and remittance Processing of non-resident alien withholding and remittance Preparation and filing of Federal Tax Forms 1099 and 1042 Preparation and filing of State Tax Information as directed DIVIDEND REINVESTMENT SERVICES PROVIDED Processing optional cash investments and acknowledging same The reinvestment of dividend proceeds for participants Participant withdrawal or sell requests Preparation, mailing and filing of Federal Tax Form 1099B for sales Preparation and mailing of reinvestment statements ANNUAL MEETING SERVICES Coordination of mailing of proxies, proxy statement, annual report and business reply envelope (all out-of-pocket expenses, including printing of proxy cards, postage, and envelope costs will be billed as incurred) Providing one set of labels of banks, brokers and nominees for broker search Providing an annual Meeting Record Date list Tabulation of returned proxies Daily reporting of tabulation results Interface support during solicitation effort Providing one Inspector of Election at Annual Meeting (out-of-pocket travel expenses billed as cost as incurred) Providing an Annual Meeting Final Voted list ADDRESSING AND MAILING SERVICES One complete statistical report annually -Shareholders by state -Shareholders by classification code -Shareholders by share grouping Geographical Analysis monthly TERMS OF FEE AGREEMENT Minimum $1,000. per month MISCELLANEOUS All out-of-pocket expenses such as postage, stationery, etc. will be billed as incurred ADDITIONAL SERVICES Services over and above this Fee Schedule will be invoiced in accordance with our current Schedule of Services or priced by appraisal. STATE STREET BANK AND TRUST COMPANY STOCK TRANSFER AGENT FEE AGREEMENT FOR ALL GABELLI CLOSED-END FUNDS FEE AGREEMENT EFFECTIVE DATE: 4/1/95 REQUIRED SIGNATURES: ______________________________________ State Street Bank and Trust Company Date Name: Charles V. Rossi Title: Vice President ____________________________________ Gabelli Funds, Inc. Date Name: Title: EX-10 9 EXHIBIT 10 - INVESTMENT ADVISORY AGREEMENT EXHIBIT (10) INVESTMENT ADVISORY AGREEMENT ___________________, 1999 Gabelli Funds, LLC One Corporate Center Rye, New York 10580-1434 Dear Sir: The Gabelli Utility Fund (the "Fund"), a business trust organized under the laws of the state of Delaware, confirms its investment advisory agreement with Gabelli Funds, LLC, (the "Adviser") as follows: 1. Investment Description; Appointment The Fund desires to employ its capital by investing and reinvesting in investments of the kind and in accordance with the limitations specified in its Agreement and Declaration of Trust, as amended from time to time (the "Declaration of Trust"), and in its Registration Statement on Form N-2 under the Investment Company Act of 1940, as amended (the "1940 Act") as from time to time in effect (the "Registration Statement") and in such manner and to such extent as may from time to time be approved by the Fund's Board of Trustees. Copies of the Declaration of Trust and the Registration Statement have been submitted to the Adviser. The Fund desires to employ and hereby appoints the Adviser to act as its investment Adviser and to oversee the administration of all aspects of the Fund's business and affairs and provided, or arrange for others whom it believes to be competent to provide, certain services as specified in subparagraph (b) below. The Adviser accepts the appointment and agrees to furnish the services set forth below for the compensation set forth below. Nothing contained herein shall be construed to restrict the Fund's right to hire its own employees or to contract for administrative services to be performed by third parties, including but not limited to, the calculation of the net asset value of the Fund's shares. 2. Services (a) INVESTMENT ADVICE. Subject to the direction and control of the Fund's Board of Trustees, the Adviser will (i) act in strict conformity with the Declaration of Trust, the 1940 Act and the Investment Advisers Act of 1940, as the same may from time to time be amended, (ii) manage the Fund's assets in accordance with the Fund's investment objective and policies as stated in the Registration Statement, (iii) make investment decisions for the Fund and (iv) place purchase and sale orders on behalf of the Fund. In rendering those services, the Adviser will provide investment research and supervision of the Fund's investments and conduct a continual program of investment, evaluation and, if appropriate, sale and reinvestment of the Fund's assets. In addition, the Adviser will furnish the Fund with whatever statistical information the Fund may reasonably request with respect to the securities that the Fund may hold or contemplate purchasing. (b) ADMINISTRATION. The specific services to be provided or arranged for by the Adviser for the Fund are (i) maintaining the Fund's books and records, such as journals, ledger accounts and other records in accordance with application laws and regulations to the extent not maintained by the Fund's custodian, transfer agent or dividend disbursing agent; (ii) initiating all money transfers to the Fund's custodian and from the Fund's custodian for the payment of the Fund's expenses, investments, and dividends; (iii) reconciling account information and balances among the Fund's custodian, transfer agent, dividend disbursing agent and the Adviser; (iv) providing the Fund, upon request, with such office space and facilities, utilities and office equipment as are adequate for the Fund's needs; (v) preparing, but not paying for, all reports by the Fund to its shareholders and all reports and filings required to maintain registration and qualification of the Fund's shares under federal and state law including the updating of the Fund's Registration Statement, when necessary; (vi) supervising the calculation of net asset value of the Fund's shares; and (vii) preparing notices and agendas for meetings of the Fund's shareholders and the Fund's Board of Trustees as well as minutes of such meetings in all matters required by applicable law to be acted upon by the Board of Trustees. 3. Brokerage In executing transactions for the Fund and selecting brokers or dealers, the Adviser will use its best efforts to seek the best overall terms available. In assessing the best overall terms available for any transaction on behalf of the Fund, the Adviser will consider all factors it deems relevant including, but not limited to, the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer and the reasonableness of any commission for the specific transaction and on a continuing basis. In selecting brokers or dealers to execute a particular transaction and in evaluating the best overall terms available, the Adviser may consider the brokerage and research services provided to the Fund and/or other accounts over which the Adviser or an affiliate of the Adviser exercises investment discretion. 4. Information Provided to the Fund The Adviser will keep the Fund informed of developments materially affecting the Fund, and will, on its own initiative, furnish the Fund from time to time with whatever information the Adviser believes is appropriate for this purpose. 5. Standard of Care The Adviser shall exercise its best judgment in rendering the services described in paragraphs 2 and 3 above. The Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the matters of which this Agreement relates, provided that nothing in this paragraph shall be deemed to protect or purport to protect the Adviser against any liability to the Fund or to its shareholders to which the Adviser would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or by reason of the Adviser's reckless disregard of its obligations and duties under this Agreement. 6. Compensation In consideration of the services rendered pursuant to this Agreement, the Fund will pay the Adviser a monthly fee, on the first business day of each month a fee for the previous month at the annual rate equal to 1.00% of the Fund's average weekly net assets. Upon any termination of this Agreement before the end of a month, the fee for such part of that month shall be prorated according to the proportion that such period bears to the full monthly period and shall be payable upon the date of termination of this Agreement. For the purpose of determining fees payable to the Adviser, the value of the Fund's net assets shall be computed at the times and in the manner specified in the Registration Statement. 7. Expenses The Adviser will bear all expenses in connection with the performance of its services under this Agreement. The Fund will bear certain other expenses to be incurred in its operation, including: expenses for legal and independent accountants' services, costs of printing proxies, stock certificates and shareholder reports, charges of the custodian, any sub- custodian and transfer and dividend paying agent, expenses in connection with the Automatic Dividend Reinvestment and Cash Purchase Plan, Securities and Exchange Commission fees, fees and expenses of unaffiliated directors, accounting and pricing costs, membership fees in trade associations, fidelity bond coverage for the Fund's officers and employees, directors' and officers' errors and omissions insurance coverage, interest, brokerage costs, taxes, stock exchange listing fees and expenses, all expenses of computing the Fund's net asset value per share, including any equipment or services obtained solely for the purpose of pricing shares or valuing the Fund's investment portfolios, expenses of qualifying the Fund's shares for sale in various states, litigation and other extraordinary or non-recurring expenses, and other expenses properly payable by the Fund. 8. Services to Other Companies or Accounts The Fund understands that the Adviser now acts and will continue to act as investment Adviser to other investment companies and may act in the future as investment Adviser to other investment companies or portfolios, and the Fund has no objection to the Adviser so acting, provided that whenever the Fund and one or more other portfolios of or investment companies advised by the Adviser have available funds for investment, investments suitable and appropriate for each will be allocated in a manner believed to be equitable to each entity. The Fund recognizes that in some cases this procedure may adversely affect the size of the position obtainable for the Fund. In addition, the Fund understands that the Adviser's duties under this Agreement will not devote their full time to such service and nothing contained herein shall be deemed to limit or restrict the right of the Adviser or any affiliate of the Adviser to engage in and devote time and attention to other businesses or to render services of whatever kind of nature. 9. Use of the Word "Gabelli" It is understood and agreed that the word "Gabelli" is the Adviser's property for copyright and other purposes. The Fund further agrees that the word "Gabelli" in its name is derived from the name of Mario J. Gabelli and such name may freely be used by the Adviser of other investment companies, entities or products. The Fund further agrees that, in the event that the Adviser shall cease to act as an investment Adviser to the Fund, the Fund shall promptly take all necessary and appropriate action to change its name to one that does not include the word "Gabelli"; provided, however, that the Fund may continue to use such name if the Adviser consents in writing to such use. 10. Term of Agreement This Agreement shall become effective on the date it is approved by the shareholders of the Fund and shall continue in effect for two years and thereafter shall continue for successive annual periods, provided such continuance is specifically approved at least annually in accordance with the requirements of the 1940 Act. This Agreement is terminable, without penalty, on 60 days' written notice by the Fund's Board of Trustees, by vote of holders of a majority of the Fund's shares, or by the Adviser. This Agreement will also terminate automatically in the event of its assignment (as defined in the 1940 Act and the rules thereunder). If the foregoing is in accordance with your understanding, kindly indicate your acceptance of this Agreement by signing and returning the enclosed copy. Very truly yours, THE GABELLI UTILITY FUND By: ____________________________ Name: Title: Agreed to and Accepted: GABELLI FUNDS, LLC By: _____________________________ Name: Title: EX-11 10 EXHIBIT 11 - LETTER EXHIBIT (11) March 30, 1999 The Gabelli Utility Fund One Corporate Center Rye, NY 10580 Re: The Gabelli Utility Fund Registration on Form N-14 Ladies and Gentlemen: We have acted as special counsel to The Gabelli Utility Fund, a business trust formed under the Delaware Business Trust Act (the "Fund"), in connection with the registration by the Fund of 8,000,000 shares of the Fund's Common Shares of Beneficial Interest, par value $.001 per share (the "Shares"). In connection with this opinion, we have examined originals or copies (including facsimile transmission), certified or otherwise identified to our satisfaction, of (i) the Registration Statement on Form N-14 (File No. 333-72983), as filed with the Securities and Exchange Commission (the "Commission") on February 26, 1999 under the Securities Act of 1933, as amended (the "1933 Act"), and Pre-Effective Amendment No. 1 thereto, as filed with the Commission on March 30, 1999, (such Registration Statement, as so amended, being hereinafter referred to as the "Registration Statement"); (ii) a specimen certificate representing the Shares; (iii) the Agreement and Declaration of Trust of the Fund, as currently in effect (the "Declaration"); (iv) the By-Laws of the Fund, as currently in effect; and (v) certain resolutions of the Board of Trustees of the Fund relating to the issuance and sale of the Shares and related matters. We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such records of the Fund and such agreements, certificates of public officials, certificates of officers or other representatives of the Fund and others, and such other documents, certificates and records as we have deemed necessary or appropriate as a basis for the opinions set forth herein. In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed, facsimile or photostatic copies and the authenticity of the originals of such latter documents. In making our examination of documents executed or to be executed by parties other than the Fund, we have assumed that such parties had or will have the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action, corporate or other, and execution and delivery by such parties of such documents and the validity and binding effect thereof. As to any facts material to the opinions expressed herein which we have not independently established or verified, we have relied upon statements and representations of officers and other representatives of the Fund and others. Members of our firm are admitted to the bar in the States of New York and Delaware, and we do not express any opinion as to any laws other than the Delaware Business Trust Act. Based upon and subject to the foregoing, we are of the opinion that when Pre-Effective Amendment No. 1 to the Registration Statement becomes effective, and, upon consommation of the transaction contemplated by the Registration Statement, the issuance and sale of the Shares will have been duly authorized, and the Shares will be validly issued, fully paid and nonassessable. We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement. We also consent to the reference to our firm under the caption "Legal Matters" in the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the 1933 Act or the rules and regulations of the Commission. Very truly yours, /s/ Skadden, Arps, Slate, Meagher & Flom LLP EX-12 11 EXHIBIT 12 - OPINION EXHIBIT (12) March 30, 1999 The Gabelli Utility Fund One Corporate Center Rye, New York 10580 Ladies and Gentlemen: We have acted as special counsel to the Gabelli Utility Fund (the "Utility Fund"), a Delaware business trust, in connection with the proposed issuance of all the common stock of Utility Fund to the Gabelli Equity Trust Inc. (the "Equity Trust") in exchange for a portion of the assets of Equity Trust, and the subsequent distribution of all the outstanding common shares of Utility Fund common stock by Equity Trust to the holders of record of Equity Trust's common stock. This opinion is being furnished to you, at your request, in connection with the filing of the Registration Statement on Form N-14 (File No. 333-72983) with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act") on March 30, 1999 (the "Registration Statement"). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Registration Statement. In rendering our opinion set forth below, we have examined, and with your consent relied upon the accuracy and completeness (which we have neither investigated nor verified) of the facts, information and representations contained in originals or copies certified or otherwise identified to our satisfaction of the Registration Statement and such other documents and corporate records as we have deemed necessary or appropriate as a basis for our opinions set forth below. In addition, we have assumed that (i) the transactions will be consummated as described in the Registration Statement and (ii) the Registration Statement reflects all the material facts relating to the transactions. Our opinion is conditioned upon, among other things, the continuing accuracy and completeness of the facts information and representations contained in the Registration Statement. Any material change or inaccuracy in the facts referred to, set forth or assumed herein, or in the Registration Statement (giving effect to all events occurring subsequent to the effective date of the Registration Statement) may affect the conclusions stated herein. We have also assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such documents. In rendering our opinion set forth below, we have considered applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations promulgated thereunder (the "Regulations"), pertinent judicial authorities, rulings of the Internal Revenue Service and such other authorities as we have considered relevant. It should be noted that such laws, the Code, the Regulations, judicial decisions and administrative interpretations are subject to change at any time and, in some circumstances, with retroactive effect. Additionally, there can be no assurance that contrary positions may not be taken by the Internal Revenue Service. A material change in any of the authorities upon which our opinion is based could affect our conclusions herein. Based solely upon and subject to the foregoing and other limitations, qualifications, exceptions and assumptions set forth herein, we are of the opinion that: The discussion in the Proxy Statement/Prospectus that forms part of the Registration Statement under the captions "Proxy Statement/Prospectus Summary Federal Income Tax Consequences of the Transaction," "The Transaction Federal Income Tax Consequences of the Transaction" and "Taxation" insofar as such discussion purports to summarize the material United States federal income tax consequences of the distribution of shares of common stock of Utility Fund to the Equity Trust shareholders, and subject to the qualifications and exceptions referred to therein, accurately summarizes such consequences in all material respects. Except as expressly set forth above, we express no other opinion. This opinion is for your benefit and is not to be used, circulated, quoted or otherwise referred to for any purpose, except we consent to the filing of this opinion as an Exhibit to the Registration Statement. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Securities and Exchange Commission thereunder. The opinion expressed herein is as of the date hereof, and we disclaim any undertaking to advise you of changes of facts stated or assumed herein or any subsequent changes in applicable law. Very truly yours, /s/ Skadden, Arps, Slate, Meagher & Flom LLP EX-14 12 EXHIBIT 14 - CONSENT EXHIBIT 14 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Proxy Statement/Prospectus constituting part of this Registration Statement on Form N-14 of our report dated March 30, 1999, relating to the statement of assets and liabilities of The Gabelli Utility Fund at March 29, 1999. We also consent to the reference to us under the heading "Experts" in such Proxy Statement/Prospectus. CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Proxy Statement/Prospectus constituting part of this Registration Statement on Form N-14 (the "Registration Statement") of our report dated February 25,1999, relating to the financial statements and financial highlights appearing in the December 31,1998 Annual Report to the Shareholders of The Gabelli Equity Trust Inc. which are also incorporated by reference into the Registration Statement. We also consent to the reference to us under the heading "Experts" in such Proxy Statement/Prospectus. EX-17 13 EXHIBIT (17)(A)(I) Exhibit (17)(a)(i) |X| PLEASE MARK VOTES AS IN THIS EXAMPLE For Against Abstain |_| |_| |_| 1) To consider and vote upon a proposal to THE GABELLI distribute to Equity Trust shareholders EQUITY TRUST INC. of approximately $75 million of the Equity Trust's net assets in the HOLDERS form of shares of The Gabelli Utility Fund OF a newly organized closed-end, registered COMMON STOCK investment company; and For Withhold For All All Authority Except |_| |_| |_| 2) To elect three (3) Directors of the Equity Trust: Bill Callaghan, Frank J. Fahrenkopf, Jr., Salvatore J. Zizza; and Note: If you do not wish your shares voted "For" a a particular nominee(s), mark the "For All Except" box and strike a line through the name(s) of the nominee(s). Your shares will be voted for the remaining nominee(s) For Against Abstain |_| |_| |_| 3) To ratify the selection of PricewaterhouseCoopers LLP as the independent accountants of the Equity Trust for the year ending December 31, 1999; and 4) To consider and vote upon such other matters as may come before said meeting or any adjournment thereof. Please be sure to sign and date this Proxy. Date - -------------------------------------------------------------------- Shareholder sign here Co-owner sign here - -------------------------------------------------------------------- Mark box at right if comments |_| or address changes have been noted on the reverse side of this card.
DETACH CARD THE GABELLI EQUITY TRUST INC. Dear Shareholder: Please take note of the important information enclosed with this Proxy Ballot. The enclosed proxy materials discuss the proposed transaction in detail. Your vote counts, and you are strongly encouraged to exercise your right to vote your shares. Please mark the boxes on the proxy card to indicate how your shares shall be voted. Then sign the card, detach it and return your proxy vote in the enclosed postage paid envelope. Your vote must be received prior to the Annual Meeting of Shareholders, May 17, 1999. Thank you in advance for your prompt consideration of these matters. Sincerely, The Gabelli Equity Trust Inc. The Gabelli Equity Trust Inc. This proxy is solicited on behalf of the Directors The undersigned hereby appoints Mario J. Gabelli, Bruce N. Alpert and James E. McKee, and each of them, attorneys and proxies of the undersigned, with full powers of substitution and revocation, to represent the undersigned and to vote on behalf of the undersigned all shares of The Gabelli Equity Trust Inc. (the "Equity Trust") which the undersigned is entitled to vote at the Annual Meeting of Shareholders of the Equity Trust to be held On May 17, 1999 at 9:00 a.m., and at any adjournments thereof. The undersigned hereby acknowledges receipt of the Notice of Meeting and Proxy Statement/Prospectus and hereby instructs said attorneys and proxies to vote said shares as indicated herein, in their discretion, the proxies are authorized to vote upon such other business as may properly come before the Meeting. A majority of the proxies present, and acting at the Meeting in person or by substitute (or, if only one shall be so present, then that one) shall have and may exercise all of the power and authority of said proxies hereunder. The undersigned hereby revokes any proxy previously given. This proxy, if properly executed, will be voted in the manner directed by the undersigned shareholder. If no direction is made, this proxy will be voted FOR the proposed transaction. Please refer to the Proxy Statement/Prospectus for a discussion of the proposed transaction. - --------------------------------------------------------------------------- PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE Please sign this proxy exactly as your name appears on the books of the Equity Trust. Joint owners should each sign personally. Trustees and other fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a majority must sign. If a corporation, the signature should be that of an authorized officer who should state his or her title. - --------------------------------------------------------------------------- HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS? - ---------------------------------- -------------------------------- - ---------------------------------- -------------------------------- - ---------------------------------- -------------------------------- - ---------------------------------- -------------------------------- EX-17 14 EXHIBIT (17)(A)(II) Exhibit (17)(a)(ii) |X| PLEASE MARK VOTES AS IN THIS EXAMPLE For Against Abstain |_| |_| |_| 1) To consider and vote upon a proposal to THE GABELLI distribute to Equity Trust shareholders EQUITY TRUST INC. of approximately $75 million of the Equity Trust's net assets in the HOLDERS form of shares of The Gabelli Utility Fund OF a newly organized closed-end, registered CUMULATIVE investment company; and PREFERRED STOCK For Withhold For All All Authority Except |-| |-| |-| 2) To elect three (3) Directors of the Equity Trust: Bill Callaghan, Frank J. Fahrenkopf, Jr., Salvatore J. Zizza; and Note: If you do not wish your shares voted "For" a a particular nominee(s), mark the "For All Except" box and strike a line through the name(s) of the nominee(s). Your shares will be voted for the remaining nominee(s) For Against Abstain |_| |_| |_| 3) To ratify the selection of PricewaterhouseCoopers LLP as the independent accountants of the Equity Trust for the year ending December 31, 1999; and 4) To consider and vote upon such other matters as may come before said meeting or any adjournment thereof. Please be sure to sign and date this Proxy. Date Shareholder sign here Co-owner sign here - --------------------------------------------------------------- Mark box at right if comments |_| or address changes have been noted on the reverse side of this card.
DETACH CARD THE GABELLI EQUITY TRUST INC. Dear Shareholder: Please take note of the important information enclosed with this Proxy Ballot. The enclosed proxy materials discuss the proposed transaction in detail. Your vote counts, and you are strongly encouraged to exercise your right to vote your shares. Please mark the boxes on the proxy card to indicate how your shares shall be voted. Then sign the card, detach it and return your proxy vote in the enclosed postage paid envelope. Your vote must be received prior to the Annual Meeting of Shareholders, May 17, 1999. Thank you in advance for your prompt consideration of these matters. Sincerely, The Gabelli Equity Trust Inc. The Gabelli Equity Trust Inc. This proxy is solicited on behalf of the Directors The undersigned hereby appoints Mario J. Gabelli, Bruce N. Alpert and James E. McKee, and each of them, attorneys and proxies of the undersigned, with full powers of substitution and revocation, to represent the undersigned and to vote on behalf of the undersigned all shares of The Gabelli Equity Trust Inc. (the "Equity Trust") which the undersigned is entitled to vote at the Annual Meeting of Shareholders of the Equity Trust to be held On May 17, 1999 at 9:00 a.m., and at any adjournments thereof. The undersigned hereby acknowledges receipt of the Notice of Meeting and Proxy Statement/Prospectus and hereby instructs said attorneys and proxies to vote said shares as indicated herein, in their discretion, the proxies are authorized to vote upon such other business as may properly come before the Meeting. A majority of the proxies present, and acting at the Meeting in person or by substitute (or, if only one shall be so present, then that one) shall have and may exercise all of the power and authority of said proxies hereunder. The undersigned hereby revokes any proxy previously given. This proxy, if properly executed, will be voted in the manner directed by the undersigned shareholder. If no direction is made, this proxy will be voted FOR the proposed transaction. Please refer to the Proxy Statement/Prospectus for a discussion of the proposed transaction. - --------------------------------------------------------------------------- PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE Please sign this proxy exactly as your name appears on the books of the Equity Trust. Joint owners should each sign personally. Trustees and other fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a majority must sign. If a corporation, the signature should be that of an authorized officer who should state his or her title. - ----------------------------------------------------------------------------- HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS? - --------------------------------- ------------------------------- - --------------------------------- ------------------------------- - --------------------------------- ------------------------------- - --------------------------------- ------------------------------- EX-17 15 EXHIBIT 17(B) - PURCHASE AGREEMENT EXHIBIT (17)(b) PURCHASE AGREEMENT The Gabelli Utility Fund, a business trust organized under the laws of the State of Delaware (the "Fund"), and The Gabelli Equity Trust Inc. (the "Equity Trust"), a corporation organized under the laws of the State of Maryland, hereby agree as follows: 1. The Fund offers to the Equity Trust and the Equity Trust hereby purchases from the Fund 10,000 shares of common stock, par value $.001 per share, of the Fund (the "Shares") at a price of $10 per Share. The Equity Trust hereby acknowledges that it has been advised that the Shares, which are not represented by certificates, have been recorded for the account of the Equity Trust in the records of the Fund's transfer agent and the Fund hereby acknowledges receipt from the Equity Trust of $100,000 in full payment for the Shares. 2. The Equity Trust represents and warrants to the Fund that the Shares are being acquired for investment purposes and not for the purpose of distribution. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the 29th day of March 1999. THE GABELLI UTILITY FUND Attest: By: /s/ Bruce N. Alpert ------------------------- Name: Bruce N. Alpert /s/ Gus Coutsouros Title: Treasurer ------------------------ THE GABELLI EQUITY TRUST INC. Attest: By: /s/ Marc S. Diagonale ---------------------------- Name: Marc S. Diagonale James E. McKee Title: Vice President -------------------------- EX-17 16 EXHIBIT 17(D) - VOLUNTARY CASH PURCHASE PLAN EXHIBIT (17)(d) TERMS AND CONDITIONS OF AUTOMATIC DIVIDEND REINVESTMENT AND VOLUNTARY CASH PURCHASE PLAN 1. Each shareholder (a "Shareholder") holding shares of common stock ("Shares") of The Gabelli Utility Fund (the "Fund") will automatically be a participant in the Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan (the "Plan"), unless the Shareholder specifically elects to receive all dividends and capital gains in cash paid by check mailed directly to the Shareholder (or sent to the Shareholder's bank account) by State Street Bank and Trust Company as agent under the Plan (the "Agent"). The Agent will open an account for each Shareholder under the Plan in the same name in which such Shareholder's shares of Common Stock are registered. 2. Whenever the Fund declares a capital gains distribution or an income dividend payable in Shares or cash, participating Shareholders will take the distribution or dividend entirely in Shares and the Agent will automatically receive the Shares, including fractions, for the Shareholder's account. The process is as follows: Whenever the market price per Share is equal to or exceeds the net asset value at the time Shares are valued for the purpose of determining the number of Shares equivalent to the cash dividend or capital gains distribution (the "Valuation Date"), participants will be issued Shares at the greater of (i) net asset value or (ii) 95% of the then current market price of the Shares. The Valuation Date is the dividend or distribution payment date or, if that date is not a New York Stock Exchange trading day, the next trading day. If the net asset value of the Shares on the Valuation Date exceeds the market price of the Shares at that time, participants will receive shares from the Fund valued at market price. If the Fund should declare a dividend or capital gains distribution payable only in cash, the Agent will, as purchasing agent for the participants, buy Shares in the open market, on the New York Stock Exchange (the "exchange") or elsewhere, for the participants' accounts after the payment date, except that the Agent will endeavor to terminate purchases in the open market and cause the Fund to issue the remaining Shares if, following the commencement of the purchases, the market value of the Shares exceeds that day's closing net asset value. These remaining shares will be issued by the Fund at a price equal to the greater of (i) net asset value or (ii) 95% of the then current market price. In a case where the Agent has terminated open market purchases and caused the issuance of remaining Shares by the Fund, the number of shares received by the participant in respect of the cash dividend or distribution will be based on the weighted average of prices paid for Shares purchased in the open market and the price at which the Fund issues remaining Shares. To the extent that the Agent is unable to terminate purchases in the open market before the Agent has completed its purchases, or remaining Shares cannot be issued by the Fund because the Fund declared a dividend or distribution payable only in cash, and the market price exceeds the net asset value of the Shares, the average Share purchase price paid by the Agent may exceed the net asset value of the Shares, resulting in the acquisition of fewer Shares than if the dividend or capital gains distribution had been paid in Shares issued by the Fund. The Agent will apply all cash received as a dividend or capital gains distribution to purchase shares of common stock on the open market as soon as practicable after the payment date of the dividend or capital gains distribution, but in no event later than 45 days after that date, except when necessary to comply with applicable provisions of the federal securities laws. 3. For all purposes of the Plan: (a) the market price of Fund Shares on a particular date shall be the last sale price on the Exchange on that date or, if no sale occurred on the Exchange on that date, then the mean between the closing bid and asked quotations for the Shares on the Exchange on such date and (b) net asset value per share on a particular date shall be as determined by or on behalf of the Fund. 4. The open-market purchases provided for above may be made on any securities exchange on which the Shares of the Fund are traded, in the over-the-counter market or in negotiated transactions, and may be on such terms as to price, delivery and otherwise as the Agent shall determine. Funds held by the Agent uninvested will not bear interest, and it is understood that, in any event, the Agent shall have no liability in connection with any inability to purchase Shares within 45 days after the initial date of such purchase as herein provided, or with the timing of any purchases effected. The Agent shall have no responsibility as to the value of the Shares of the Fund acquired for the Shareholder's account. 5. The Agent will hold Shares acquired pursuant to the Plan in non- certificated form in the Agent's name or that of its nominee. The Agent will forward to the Shareholder any proxy solicitation material and will vote any Shares so held for the Shareholder only in accordance with the proxy returned by her or him to the Fund. Upon the Shareholder's written request, the Agent will deliver to her or him, without charge, a certificate or certificates for the full Shares. 6. The Agent will confirm to the Shareholder each acquisition made for her or his account as soon as practicable but not later than 60 days after the date thereof. Although the Shareholder may from time to time have an individual fractional interest (computed to four decimal places) in a Share of the Fund, no certificates for a fractional Share will be issued. However, dividends and distributions on fractional Shares will be credited to the Shareholder's account. In the event of a termination of a Shareholder's account under the Plan, the Agent will adjust for any such undivided fractional interest in cash at the opening market value of the Shares at the time of termination. 7. Any stock dividends or split Shares distributed by the Fund on Shares held by the Agent for the Shareholder will be credited to the Shareholder's account. In the event that the Fund makes available to the Shareholder rights to purchase additional Shares or other securities, the Shares held for a Shareholder under the Plan will be added to other shares held by the Shareholder in calculating the number of rights to be issued to such Shareholder. 8. The Agent's service fee for handling capital gains distributions or income dividends will be paid by the Fund. The Shareholder will be charged a pro rata share of brokerage commissions on all open market purchases. 9. A Shareholder wishing to terminate her or his account under the Plan may do so by written or telephone notification to the Agent of such intent. If such notice is received by the Agent less than 10 days prior to any dividend or distribution record date, then such termination shall be immediately effective with respect to all shares then held in the Shareholder's account except that any shares to be received pursuant to the reinvestment of dividends or distributions shall be terminated on the first trading day after such shares have been credited to the Shareholder's account. Upon any termination the Agent will cause a certificate or certificates for the full Shares held for the Shareholder under the Plan and cash adjustment for any fraction to be delivered to her or him. If the Shareholder elects by notice to the Agent in writing in advance of such termination to have the Agent sell part or all of her or his shares and remit the proceeds to her or him, the Agent is authorized to deduct $2.50 per transaction plus brokerage commissions for this transaction from the proceeds. 10. Shareholders have the option of sending additional funds, two times per month, in any amount from $250 to $10,000, for the purchase on the open market of shares of the common stock of the Fund for Shareholder's accounts. Voluntary payments will be invested on or shortly after the 1st or the 15th of each month, and in no event more than 45 days after such dates except where temporary curtailment or suspension of purchases is necessary to comply with applicable provisions of federal securities law. Funds not received at least five business days before the 1st or the 15th will be held for investment on the next investment date. Shareholders may withdraw their entire voluntary cash payment by written notice not less that 48 hours before such payment is to be invested. 11. Investments of voluntary cash payments and other open-market purchases provided for above may be made on any securities exchange where the Fund's Common stock is traded, in the over-the-counter market or in negotiated transactions and may be on such terms as to price, delivery and otherwise as the Agent shall determine. Funds held by the Agent uninvested will not bear interest, and it is understood that, in any event, the Agent shall have no liability in connection with any inability to purchase shares within 45 days after the initial date of such purchase as herein provided, or with the timing of any Purchases effected. The Agent shall have no responsibility as to the value of the common stock of the Fund acquired for the Shareholders' account. For the Purposes of cash investments the Agent may commingle Shareholder funds with those of other Shareholders of the Fund for whom the Agent also acts as Agent, and the average price (including brokerage commissions) of all shares purchased by the Agent shall be the price per share allocable to the Shareholder in connection therewith. The cost per transaction is $0.75. 12. The Agent may hold Shareholder's shares acquired pursuant to Shareholder authorization, together with the shares of other Shareholders of the Fund acquired pursuant to similar authorization, in non-certificated form in the name of the Agent or that of the Agent's nominee. The Agent will forward to each Shareholder any proxy solicitation material and will vote any shares held for the Shareholder only in accordance with the proxy returned by the Shareholder to the Fund. Upon written request the Agent will deliver to the Shareholder, without charge, a certificate or certificates for the full shares. 13. These terms and conditions may be amended or supplemented by the Agent or the Fund at any time or times but, except when necessary or appropriate to comply with applicable law or the rules or policies of the Securities and Exchange Commission or any other regulatory authority, only by mailing to the Shareholder appropriate written notice at least 90 days prior to the effective date thereof. The amendment or supplement shall be deemed to be accepted by the Shareholder unless, prior to the effective date thereof, the Agent receives written notice of the termination of the Shareholder account under the Plan. Any such amendment may include an appointment by the Fund of a successor agent in its place and stead under these terms and conditions, with full power and authority to perform all or any of the acts to be performed by the Agent. Upon any such appointment of an Agent for the purpose of receiving dividends and distributions, the Fund will be authorized to pay to such successor Agent, for Shareholders' accounts, all dividends and distributions payable on Shares held in the Shareholders' name or under the Plan for retention or application by such successor Agent as provided in these terms and conditions. 14. In the case of Shareholders, such as banks, brokers or nominees, which hold Shares for others who are the beneficial owners, the Agent wflI administer the Plan on the basis of the number of Shares certified from time to time by the Shareholders as representing the total amount registered in the Shareholder's name and held for the account of beneficial owners who are to participate in the Plan. 15. The Agent shall at all times act in good faith and agree to use its best efforts within reasonable limits to insure the accuracy of all services performed under this agreement and to comply with applicable law, but assumes no responsibility and shall not be liable for loss or damage due to errors unless the errors are caused by its negligence, bad faith or willful misconduct or that of its employees. -----END PRIVACY-ENHANCED MESSAGE-----