To Our Shareholders,
For the quarter ended December 31, 2013, the net asset value (“NAV”) total return of The Gabelli Global Utility & Income Trust (the “Fund”) was 7.0%, compared with a total return of 2.8% for the Standard & Poor’s (“S&P”) 500 Utilities Index. The total return for the Fund’s publicly traded shares was 3.6%. The Fund’s NAV per share was $22.36, while the price of the publicly traded shares closed at $20.04 on the NYSE MKT.
Mario J. Gabelli, CFA
The Gabelli Global Utility & Income Trust Shareholder Commentary – December 31, 2013
Portfolio Manager
Comparative Results
Average Annual Returns through December 31, 2013 (a) Since
Inception Quarter 1 Year 3 Year 5 Year (05/28/04)———–— —–—— ——–— ——–— ———–——
Gabelli Global Utility & Income Trust NAV Total Return (b) . . . . . . . . . . . . . . . . . . . . . . . . 6.95% 21.56% 10.88% 11.42% 8.48% Investment Total Return (c) . . . . . . . . . . . . . . . . . . 3.60 7.32 7.49 12.65 7.21
S&P 500 Utilities Index . . . . . . . . . . . . . . . . . . . . . . . . . . 2.79 13.21 11.20 10.17 9.39 Lipper Utility Fund Average . . . . . . . . . . . . . . . . . . . . . . . 5.01 19.90 13.35 13.57 10.67 S&P 500 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.51 32.39 16.18 17.94 7.57 (a) Returns represent past performance and do not guarantee future results. Investment returns and the principal value
of an investment will fluctuate. When shares are redeemed, they may be worth more or less than their original cost. Current performance may be lower or higher than the performance data presented. Visit www.gabelli.com for performance information as of the most recent month end. Performance returns for periods of less than one year are not annualized. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The S&P 500 Utilities Index is an unmanaged indicator of electric and gas utility stock performance. The Lipper Utility Fund Average reflects the average performance of mutual funds classified in this particular category. The S&P 500 Index is an unmanaged indicator of stock market performance. Dividends are considered reinvested. You cannot invest directly in an index.
(b) Total returns and average annual returns reflect changes in the NAV per share, reinvestment of distributions at NAV on the ex-dividend date, and adjustments for rights offerings and are net of expenses. Since inception return is based on an initial NAV of $19.06.
(c) Total returns and average annual returns reflect changes in closing market values on the NYSE MKT and reinvestment of distributions and adjustments for rights offerings. Since inception return is based on an initial offering price of $20.00.
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Introduction
The S&P 500 Utilities Index provided a 13% total return in 2013 versus the 32% total return of the S&P 500 Index. While utility stocks significantly underperformed the roaring bull market, the return was above the 8% - 10% annual total return generally expected, and somewhat remarkable given the rise in interest rates, including 10 and 30 Year U.S. Treasury yields, which rose to 3.03% and 3.96% from 1.76% and 2.95%, respectively. Utility stock performance was aided by the strong overall market as well as solid fundamentals, but it was hampered by investor preference for growth and cyclical stocks over defensive stocks and rising interest rates. The U.S. economic recovery appears to be gaining strength, as indicated by higher employment rates, stronger GDP growth, and recovering housing markets.
Given the strong macroeconomic backdrop and comparatively modest utility earnings growth potential, electric and gas utility stocks have been largely neglected. In addition, some investors appear concerned with the potential for headwinds, including higher interest rates, stricter EPA standards, slower electric demand growth, ongoing weak power markets, and the impact of rooftop solar panels.
Investment Outlook
Fortunately for regulated utility investors, each of these factors is recognized through constructive regulatory principles, i.e., higher rates, including sales/revenue decoupling mechanisms, annual riders/trackers/adjustments, and higher returns on equity (ROE). As such, we continue to expect 4% - 6% annual earnings growth for the foreseeable future, and we are comfortable with the consensus regulated utility earnings growth outlook of 6.3% in 2014 and 4.9% in 2015. The median current dividend return of 3.9% is attractive, and the healthy 63% dividend payout of 2014 earnings provides an ample cushion for security as well as room for accelerated growth. Further, it appears that capital investment programs could become more manageable, or even more discretionary, following Mercury and Air Toxins (MATS) compliance in late 2015. Importantly, utility stocks are likely to experience the “uplift” associated with the following tailwinds, including potentially higher ROEs, increased transmission opportunities, ongoing consolidation, and the potential for value creating financial engineering such as the formation of alternative corporate structures such as a master limited partnership (MLP), YieldCo (separated tax-advantaged set of assets designed to produce shareholder value), or the spin-off of non-regulated generation.
As we look into 2014, we recommend that investors take advantage of the “2013 underperformance”, and continue to selectively build positions in utility stocks. We emphasize that the fundamentals of the utility sector remain strong, and include solid balance sheets, positive credit outlooks, and generally constructive state public utility commission (PUC) regulation. Interest rates, natural gas prices, and economic growth will continue to be major macro drivers of utility stock performance, while individual rate case decisions, service area growth, and consolidation are the more important micro drivers. In our opinion, utility stocks continue to offer a 3.9% current return, 4% - 6% dividend and earnings growth, and potential for upside associated with consolidation.
The global utility marketplace totals over $2 trillion in equity capitalization, which includes $600 billion in North America, $600 billion in Europe, $600 billion in Asia, and $200 billion in South America. The challenges of delivering low cost energy and water, with significant variations in natural resource (fuel) situations and political dynamics, have allowed for and fostered certain valuable core competencies, such as nuclear and renewable generation technological advancement across the world.
While there are fewer European utilities, they are significantly larger and more geographically diversified than the U.S.-based utilities. European utilities such as Iberdrola, Electricidade de Portugal, and Endesa are
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among the global leaders in renewable generation development. Electricité de France is the world’s largest nuclear operator, and National Grid is one of the world’s better transmission operators. Asia, South/Latin America, and certain developing regions offer greater demand growth, infrastructure investment opportunities, and potentially greater return potential. Following the events at Fukushima, the Japanese utilities have faced power supply challenges and could offer interesting opportunities. We expect continued investment and consolidation from abroad to result in cross integration, and to provide a wider range of investment opportunities.
Deal Activity
During the second half of 2013, two Southwestern utility merger deals were announced at premium prices. While the pace of consolidation has been relatively moderate over the past few years, the recent activity, combined with the long term consolidation trend, highlights the solid return potential of utility stocks. We continue to believe that selected small and mid-capitalization utilities offer healthy low risk returns, with the potential to be purchased at material premiums. The deals were:
• On December 11, 2013, Canadian utility Fortis Inc. announced an agreement to buy the Tucson, AZ electric utility, UNS Energy, for $60.25 per share, a 31% premium to the previous day’s close. The UNS offer price represents 20.0x and 18.6x P/E multiples of 2013 and 2014 earnings of $3.05 and $3.30 per share. The EV/EBITDA multiple is roughly 10.0x 2012, but 8.0x 2015 EBITDA.
• On December 19, 2013, NV Energy (NVE) was acquired by MidAmerican Energy Holdings Company (MEHC) for $23.75 in cash. The deal was announced on May 30, 2013, and the offer price represented a 23% premium over the previous day’s closing price. The deal valued NVE at 18.3x, 17.6x, and 16.5x 2013, 2014, and 2015 consensus earnings estimates, respectively, and an 8.9x multiple of 2013 estimated EBITDA. NVE will operate as a separate subsidiary of MEHC, and will continue to be headquartered in Las Vegas, NV.
Since 1995, the electric utility sector has experienced over 120 acquisition announcements and nearly 100 completed deals. Consolidation and merger activity was particularly active during the years 1995 - 2000, with fifty-eight announced deals, driven primarily by what appeared to be the pending deregulation of the electric utility sector. As such, utilities scrambled for merger partners in order to gain the scale and expertise deemed necessary to compete. Given that electric industry deregulation was essentially halted following the California electricity crisis of 2000 - 2001 and Enron debacle, merger activity moderated.
Since 2002, consolidation has not progressed at a pace that economic logic would suggest, primarily due to regulatory issues such as the sharing of cost savings, market power, or federal/state control issues. For example, on December 12, 2013, following the Mississippi Public Service Commission’s rejection of the merger, Entergy and ITC Holdings abandoned their agreement to merge ETR’s transmission assets into ITC. Separately, the Federal Energy Regulatory Commission’s (FERC) high standard for determining market power in its mid-2012 approval of the Duke Energy/Progress Energy merger hampered potential merger partners’ willingness to negotiate contiguous mergers. Finally, European macroeconomic struggles have sidelined the larger global utilities, which are currently in divestiture mode.
Nonetheless, we expect consolidation to continue for years to come, driven by ongoing challenges related to climate change and earnings growth. More recent mergers were driven by the desire for scale to spread costs of large infrastructure projects, diversify generation assets, or achieve synergies in non-regulated power. Mergers involving non-regulated power companies face minimal challenges, including NRG Energy’s pending
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purchase of generation from Edison Mission Energy and Dynegy’s December 2013 purchase of generation from Ameren. The Canadian utilities have been more active recently, including Fortis/CHG Energy in June of 2013, Emera’s 2010 purchase of Maine and Maritime and Gaz Metro’s mid-2012 purchase of Central Vermont.
Larger Utility Transactions Announced Since 1/1/2010 Date Value Premium Multiple Paid Date
Announced Target Entity Acquirer ($ Millions) Paid (%) EV/EBITDA (X) Type Closed 12/11/13 UNS Energy Fortis 4,300 31 8 Cash Pending 5/29/13 NVE Energy Mid-American 5,600 23 9 Cash Pending 5/28/13 New Mexico Gas TECO Energy 950 NA 11 Cash Pending 2/11/13 New England Gas Company Algonquin Power 74 NA 7.8 Cash Pending
12/20/12 EQT Distribution Assets Peoples Natural Gas 1,080 NA 9.5 Cash/Assets Pending 12/17/12 Missouri Gas & New England Gas Laclede Group 1,020 NA 10.8 Cash 9/1/2013 7/22/12 GenON NRG Energy Inc. 3,400 21 7.4 Stock 12/14/2012 2/21/12 CH Energy Group Fortis 1.267 10.5 10 Cash 6/27/2013 10/16/11 El Paso Corporation Kinder Morgan 38,000 37 10.5 Cash/Stock 5/24/2012 7/19/11 Southern Union Gas (a) Energy Transfer Equity 9,232 57 10 Cash/Stock 3/26/2012 6/23/11 Central Vermont P.S. (a) Gaz Metro 695 NMF 10.7 Cash 6/27/2012 4/28/11 Constellation Energy Exelon 10,500 18 6.6 Stock 3/12/2012 4/20/11 DPL, Inc. AES Corp. 4,700 9 7.2 Cash 11/28/2011 1/10/11 Progress Energy Duke Energy 25,700 7 8.4 Stock 7/2/2012
12/15/10 Dynegy, Inc. (a) Icahn Enterprises 5,000 NA $408/kilowatt Cash/Debt Terminated 12/9/10 Granite State Electric Co. Algonquin Power 285 9.2 Cash 7/3/2012 12/5/10 NICOR AGL Resources 3,100 22 7.7 Cash/Stock 12/9/2011 10/18/10 NSTAR Northeast Utilities 6,900 0 7.1 Stock 4/10/2012 5/25/10 CT/MA LDCs UIL Holdings Corp. 1,296 NA 9.4 Cash 11/16/2010 4/29/10 E.ON U.S. LLC PPL Corp. 7,625 NA 9.9 Cash 11/1/2010 4/21/10 Conectiv Energy Fleet Calpine Corp. 1,650 NA $427/kilowatt Cash 7/1/2010 4/11/10 Mirant Corp. RRI Energy Inc. 2,297 4 $228/kilowatt Stock 12/3/2010 3/12/10 Maine & Maritimes Corp. Emera Inc. 105 41 16.7 Cash 12/21/2010 2/11/10 Allegheny Energy Inc. FirstEnergy Corp. 8,500 32 7.1 Stock 2/25/2011
(a) Winning bid Source: Company documents, Gabelli & Company estimates
In addition to takeovers, utility stocks have and will likely continue to benefit from financial engineering, or the creation of alternative structures such as MLPs or YieldCos.
• On July 16, NRG Energy conducted a $430 million initial public offering (IPO) of a portion of its contracted generation capacity into a separate company called NRG Yield (NYLD). NYLD is a dividend- oriented equity that owns, operates, and acquires contracted renewable and conventional generation and thermal infrastructure assets. NYLD shares, which were priced at $22 per share, have performed strongly and currently trade at $38.80 per share.
• On July 25, ONEOK announced plans to separate its natural gas distribution business, with two million customers in OK, KS, and TX, into a separate, publicly traded company, to be called ONE Gas, with shares to be distributed in the first quarter of 2014.
• On November 6, Dominion Resources Inc. (D) announced plans to file an S-1 for an MLP of its Cove Point LNG facility and its interest in Blue Racer Midstream in the first quarter of 2014, with an expected issuance in mid-2014. D estimates Cove Point and Blue Racer would have “up to $1 billion of EBITDA” by 2018. In addition, D had roughly $1 billion of EBITDA potential to “drop-down” from other assets at Dominion East Ohio, Dominion Transmission, and the Iroquois Pipeline.
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COMMENTARY
While consolidation and financial engineering offer upside potential, investors harbor a number of concerns, including the potential for higher interest rates, higher gas prices, overly onerous EPA rules, anemic electric demand growth, and even some discussion of distributed generation technologies replacing the electric utility. Below, we briefly discuss each of these issues and how constructive regulatory principles recognize them.
• Higher interest rates: Treasury yields have risen considerably, and many investors fear that interest rates will continue to rise if the economy continues to strengthen. Similar to most equity investments, utility stocks are negatively impacted when interest rates rise. The current 3.9% utility dividend return is 130% of the 3.0% rate on the 10 Year U.S. Treasury. Should U.S. Treasury rates continue to rise, the utility dividend return becomes less compelling. In addition, the present value (or stock price) is often determined by the present value of future cash flows. As such, the higher interest rate (discount rate), the lower the present value, assuming all other variables hold constant.
Utility stocks often appear to be more sensitive to interest rates than other stocks, because the variables impacting changes in utility revenues and expenses, etc. are less sensitive to other factors. However, utility stocks pay higher dividends than other sectors, and so utility cash flows are less impacted by changes in interest rates. In addition, utility cost of capital, including ROEs, are set by state PUCs and should increase as interest rates rise.
• Higher gas prices: The abundance of shale gas supply and the sustained period of low prices are transforming the energy and utility industry. While natural gas prices have doubled over the past year, they remain at historically inexpensive levels, which has significant financial and operational implications. Regulated utilities pass on fuel prices to customers via frequent adjustments to customer bills, and so changes in gas prices are margin neutral. However, lower gas prices result in lower customer bills, and create a more favorable environment for base rate increases. Natural gas has become the fuel of choice for electric generation, and the multi-year price declines have minimized net retail electric rate increases and depressed wholesale power prices. The low wholesale power prices continue to depress non-regulated coal and nuclear generation. As a result, utilities have updated their investment plans to include new gas fired generation, accelerated retirement of smaller older coal plants, and the re-consideration of the development of new nuclear plants. The low gas price environment has also helped accelerate the retirement of older coal plants and some older single unit nuclear plants.
• Stricter EPA rules: With considerable investment, electric utilities continue to meet numerous EPA rules, particularly the late 2015 compliance with Mercury and Air Toxins rules, though extensions are possible through 2016 and 2017. On September 20, 2013, the EPA announced carbon emission rules for new sources of generation that effectively bar the construction of new coal facilities until technology that allows carbon sequestration is economically feasible. In June of 2014, the EPA is scheduled to propose standards for existing facilities. We expect this proposal to be controversial and to exert further pressure on coal-fired generation. Several other rules, including a Coal Ash disposal timeline and Coal Ash settling pond standards, are expected to be implemented by the end of 2014. While stricter environmental rules present operational challenges for regulated utilities, they also represent rate base investment, or earnings growth. However, higher costs of compliance negatively impact non-regulated coal-fired generation.
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• Modest electric demand growth: Since the beginning of the Great Recession in 2008, U.S. electric demand growth has been relatively anemic at a national average growth rate of ~1% per annum, though it varies by region. Historically, electric demand has been highly correlated with GDP growth. Conservation, efficiency, and distributed generation (solar panels, microturbines, fuel cells) played some role in negating growth, but unusual weather patterns, combined with exaggerated price elasticity during the weak economic times, continue to impact demand data. The housing market has been a difficult variable, as residential electric demand is highly influenced by the number of households. After a dramatic decline, it appears that housing is rapidly recovering in many regions. While our financial and valuation forecasts are based on the new consensus of lower electric demand growth (we assume ~1% per annum), we suspect that electric demand growth will return to historical trends as consumers’ budgets and outlooks improve.
• Distributed generation: The penetration rates of residential rooftop solar panels in most states are extremely low, but strong enough in California, Hawaii, and Arizona to warrant investment consideration. The rapid growth in these states is at least partially driven by subsidies, lease or financing models, and favorable net metering rules, but it is also due to improving technology and lower costs. The addition of rooftop solar panels negatively impacts electric demand, but customers remain dependent on the grid for reliability during absences of sunlight. Given that these states have decoupled revenues from sales, the lower demand does not negatively impact revenues but becomes a cost sharing challenge. Residential customers using distributed generation reduce their net energy usage and, therefore, their contribution to transmission and distribution costs. In order to maintain revenue levels, utilities raise electric rates on customers, causing non-self-generating customers to subsidize self-generating customers, who are usually higher income customers. Regulators have been proactive in evaluating cost sharing challenges, as seen by the passage of California Assembly Bill 327 on October 7, 2013, which allows the California Public Utility Commission (CPUC) to modify rate design.
We believe that regulators will continue to take action to limit the impacts of cost sharing when it becomes necessary. Further, we believe that major technological advances in battery storage would be required to significantly disrupt the long standing utility business model.
• Ongoing weak power markets: Competitive power markets have been weak since mid-2008 and, absent more material supply and/or demand changes, could remain weak for some time. Weak electric demand growth, a more robust electric grid, and an abundance of natural gas all offset higher power prices. As mentioned in our September 2013 commentary, the results of the May 24, 2013 PJM Interconnection capacity auction (the Northeastern region from the Midwest through MidAtlantic) 2016/2017 was disappointing. The auction to procure power supply for a three year period is conducted every May. Capacity pricing was down compared to the prior year’s auction, driven by increased power imports (transmission constraints were relieved), new capacity, and weaker electric demand. The number of non-regulated players continues to diminish, and many of the larger utilities have, and continue, to minimize non-regulated generation exposure.
• Potentially higher ROEs: Allowed ROEs have gradually declined over the past two decades, and they have likely bottomed at roughly 10%. The average allowed ROE through the first three quarters of 2013 (thirty-nine rate cases) was 10.02%, compared with the 2012 average awarded ROE of 10.15% (fifty- three rate cases). Given the recent rise in interest rates, we expect ROEs to remain near the 10% level. We emphasize that the absolute decline in profit levels has not been as significant as the decline in utility cost of capital, and this favorable spread has benefited utilities.
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The current spread between the average allowed ROE of 10.02% and the 10 Year U.S. Treasury yield of 3.0% is roughly 700 basis points. In addition, many regulatory jurisdictions encourage the investment through annual, semi-annual, or even quarterly riders, which results in more timely earnings growth. When combined with opportunities to invest and earn returns on a growing rate base, particularly via environmental compliance projects and higher earning transmission investments, we consider the allowed ROEs to be more than adequate to grow earnings and dividends at the consensus growth rates.
• Transmission opportunities: The FERC’s favorable incentive oriented regulation continues to make transmission investment one of the more compelling uses of capital for electric utilities. Allowed ROEs have ranged as high as 14% and, as a result, transmission growth opportunities command premium multiples and are among the more desirable projects sought by utility management teams. Not surprisingly, transmission investment continued to grow in 2013, nearly doubling from $8.6 billion in 2006 to $15.2 billion in 2013, and we expect transmission to be a focus for most management teams going forward. The level of announced project investment is expected to total approximately $41.6 billion from 2013 to 2015.
As the economy rebounds, we expect further investment. As of March 2013, twenty-nine states and the District of Columbia have implemented renewable portfolio standards that range as high as 33% over the 2015 - 2030 timeframe. Connecting these generation assets to the grid poses a number of additional reliability and transportation issues, due to the intermittency of renewable generation and the need to transport power from where it is generated to load centers. The consultancy, The Brattle Group, anticipates that the U.S. will need $240 - $320 billion of transmission investment through 2030 to ensure reliability and meet all current and proposed renewable standards. Even without a robust economic recovery, we believe that investment levels would be even higher in the absence of notable related challenges, including the larger scale and long term nature of the projects.
In July of 2011, FERC Order 1000 authorized the cost sharing of larger regional transmission projects and opened up development opportunities to non-incumbent utilities. These rules allow pure play transmission companies to participate in projects throughout the country, and have led to an increase the number of multistate projects and projects required to bring renewable energy from where it is generated to where it is needed.
Utility Investment Opportunities to Continue Through 2015 and Beyond
We expect the utility capital investment cycle to continue through at least 2015. Capital investment grew from $41.1 billion in 2004 to $82.8 billion in 2008, with major spending on environmental control equipment, generation projects, and transmission. In 2012, utility capital expenditures were $90.5 billion, compared with $79 billion in 2011. The Edison Electric Institute currently projects industry spending at $95.2 billion in 2013, $92.8 billion in 2014, and $85.3 billion in 2015.
However, we believe heavy investment is likely to continue, should the EPA maintain its aggressive policy to reduce emissions, and we also believe that the mid-2014 GHG/carbon standards are likely to represent yet another round of investment. Further, we believe that utility investment will allow for more discretionary use of cash for investment in ongoing environmental needs, replacement of older generation, transmission, reliability, and smart grid technology. Finally, some utility boards could decide to raise dividend payout ratios.
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Gas and Renewables Taking Market Share from Coal and Nuclear
Over the next several years, we expect gas-fired generation to increase as a proportion of the overall generation mix. In 2012, coal-fired generation fell to 37.4% from 42.3% the previous year, while gas generation rose to 30.4% from 24.7%. Nuclear generation comprised 19% each year, and renewable forms will continue to increase. We expect 50,000 - 70,000 MWs of older and less efficient coal fired generation to retire by 2016, with a significant portion ending between the spring of 2015 and the spring of 2016. In addition, the nation’s 100 (previously 104) nuclear reactors were built in the 1970s and 1980s. They face increasing safety and operational standards, which accelerated following the Fukushima disaster. In late 2012 and 2013, several companies announced their intention to retire nuclear plants, totaling 4,200 MWs of capacity, which include: Entergy’s 620-MW Vermont Yankee (1972; 2014); Edison International’s Units 2 (1,100MW; 2022) and 3 (1,100 MW; 2022) of its 78%-owned (Sempra Energy owns 20%); San Onofre, Duke Energy’s 789-MW Crystal River (789 MWs; 1977 - 2016); and Dominion Resources Kewaunee Nuclear Station (556 MWs; 1974 - 2013).
Most of the nation’s plants have been relicensed, but the future of some, such as Indian Point 2 and 3 (1,025, 1040 MWs; 1974 - 2013, 1976 - 2015, respectively), continue to be debated. As plants age, we expect to see more retire, but not necessarily at the expense of the nuclear power industry. Most utilities and energy experts favor a diversified fuel mix, including nuclear, coal, gas, and renewables. There are currently four new nuclear units under construction, totaling 4,000 MWs (more than MWs being retired), in SC and GA, to be completed in 2017 - 2019. Several more have applied for licenses. The desire and ability to build new nuclear will be a function of gas prices, legislative/regulatory riders to recover financing costs during construction, and electric demand.
Our Approach
For several decades, utility companies have acquired other utilities and utility assets for the sake of gaining economies of scale and efficiency. The same forces that resulted in more than one hundred utility takeover announcements over the past two decades remain in place, and new forces have come into play that continue to drive this long term trend. Climate change and environmental policy have pressured marginal players. The pickup in merger activity reinforces the longterm bias of utilities to increase scale or gain a strategic benefit. Small companies are selling out at premium prices as the cost of staying in the game rises. The historically lengthy merger review and approval process appears to have eased, as policy makers come to understand the new economic dynamics.
Despite over ninety completed utility mergers/acquisitions since 1993, the electric and gas utility sector remains fragmented, with over sixty electric utilities and thirty gas utilities. This is fifty more than we need, from the standpoint of economic efficiency.
Our investments in regulated companies have primarily, though not exclusively, focused on fundamentally sound, reasonably priced, mid-cap and small-cap utilities that are likely acquisition targets for large utilities seeking increased bulk. We prefer utilities that operate in more constructive regulatory environments, possess lower carbon footprints, and/or have access to strategic geographies. We favor utilities with pending transmission line developments, and we focus on natural gas pipelines and storage operators as a way to take advantage of the growing demand for natural gas in the U.S.
Let’s Talk Stocks
The following are stock specifics on selected holdings of our Fund. Favorable earnings prospects do not necessarily translate into higher stock prices, but they do express a positive trend that we believe will develop over time. Individual securities mentioned are not necessarily representative of the entire portfolio. The share prices of the following holdings are stated in U.S. dollars or U.S. dollar equivalent terms as of December 31, 2013.
AES Corp. (AES - $14.51 - NYSE) is a global power company that owns distribution and generation assets on five continents in twenty-one countries, with a generating capacity of 37,761 MW and distribution networks in five countries, including larger utilities in the U.S. and Brazil. Since late 2011, AES has been undergoing a transformation to narrow its strategic focus, allocate capital efficiently, and improve existing operations. As a result, the company has sold ~$1.4 billion in non-core assets, and repurchased stock and debt. In early 2013, AES formed six strategic business units to include six focus regions, consisting of the U.S., Andes (Chile, Columbia, Argentina), Brazil, MCAC (Mexico, Central America, and the Caribbean), EMEA (Europe, Middle East and Africa), and Asia. Future capital investments and growth projects will focus in areas where a platform already exists. Additionally, the company instituted a quarterly dividend of $0.04 per share in the third quarter of 2012, and has since raised it to $0.05 per share quarter, with further plans to increase it in the future. With this new, focused approach to management, we regard AES as one of the better securities to allow the Fund to gain exposure to utility markets both inside and outside of the U.S.
Duke Energy Corp (DUK - $69.01 - NYSE) is based in Charlotte, NC. Since the completion of its merger with Progress Energy on July 2, 2012, Duke Energy is the largest utility in the nation, serving 7.2 million electric customers in six states (NC, SC, IN, OH, KY, and FL) with 58 GW of generation, and 500,000 natural gas customers in OH and KY. Its commercial and international businesses own and operate diverse power generation assets in North America and Latin America, including a portfolio of renewable energy assets. Regulatory scrutiny following the merger was mostly alleviated through a settlement with North Carolina regulators, in which former CEO Jim Rogers stepped down in July 2013. DUK will continue to benefit from synergies, increased flexibility, favorable long term demographics, and rate base investment opportunities, and operate in constructive regulatory environments. From 2013 - 2015, DUK expects to grow its earnings 4% - 6% annually, continue growing the dividend within a 65% - 70% payout ratio, and maintain strong, investment grade credit ratings.
Electric Power Development Co. Ltd. (9513 - $29.10 - Tokyo Stock Exchange), also known as J-Power, generates, transmits, distributes, and sells electric power using hydroelectric, wind power, nuclear, coal fired, and other thermal power stations throughout Japan. The company owns 17.8 GWs of installed capacity (8.4 GW’s of coal; 8.6 GW’s of hydro) in Japan and 4.5 GW’s overseas, including Indonesia, Thailand, and the U.S. Listed in 2004, J-Power is Japan’s only large scale wholesale power generator, owning 21% of the nation’s coal capacity and 19% of its hydro capacity. J-Power’s earnings are insulated from the current upheaval because its generation is sold via contract to the regional utilities (EPCO’s). In addition, the low cost hydro and coal capacity will be among the first dispatched, and could offer significant earnings, cash flow, and value upside, should the Japanese sector deregulate. The company has several overseas growth projects in the pipeline, including 2,000 MWs in Indonesia and ~2,300 MWs in Thailand. In October 2012, J-Power resumed construction of the Ohma Nuclear Plant, a 1,383 MW Advanced Boiling Water Reactor (JPY470 billion), which began in May of 2008 but had been suspended following the Fukushima nuclear disaster. J-Power generates free cash flow and emphasizes dividends, including an annual dividend of JPY70 per share over the past several years.
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Emera Inc. (EMA –$28.78 – Toronto Stock Exchange), based in Halifax, Nova Scotia, is a growing utility and energy company with 85% of earnings derived from the regulated utility business, which includes Nova Scotia Power (497,000 customers; 50% of earnings), Bangor Hydro (120,000 customers; 15% of earnings), Maine Public Service (36,000 customers; 1% of earnings), and the Caribbean utilities (193,000 customers; 5% of earnings). Another 10% of earnings comes from the Brunswick Pipeline. Emera’s strategy is focused on the transformation of the electricity industry to cleaner generation and the delivery of that clean energy to market. Over the last few years, the company has invested throughout the Atlantic region and beyond in an effort to lessen its reliance on the Nova Scotia market, including 1,050 MW of gas-fired generation in New England and plans to develop $7.7 billion of transmission investment to bring hydro power from Canada to Nova Scotia and into New England over the next decade. Emera also owns about a 24.5% interest in Algonquin Power, and the two Canadian power companies have partnered in several growth ventures.
NextEra Energy Inc. (NEE - $85.62 - NYSE) is the holding company for Florida Power & Light (FP&L), the largest electric utility in Florida, and NextEra Energy Resources (NER), a leading wholesale power generator. We regard NEE as one of the better positioned electric companies to grow earnings and dividends over the next several years. FP&L operates one of the premier utility franchises in the nation, with favorable long term demographics and above average rate base growth potential, due to the power plant rate adjustments, flexible amortization, and other regulatory mechanisms. Additionally, NER owns and operates the nation’s largest renewable power portfolio, with a significant pipeline of future growth opportunities. Given a 54% payout of our 2013 earnings estimate and 5% - 7% annual earnings growth forecast, we expect 8% annual dividend growth through 2016 to achieve the targeted 55% payout ratio. In January 2013, as part of a four year plan, FP&L implemented a $350 million annual base rate increase premised on an allowed ROE of 10.5% (+/-100 basis points). Importantly, FP&L can raise rates to recognize $3.5 billion of power plant modernization projects. In addition, NEE currently expects up to $1.5 billion in free cash (after dividends and capital expenditures) flow in 2014, absent new growth projects, that could be used for stock buybacks or higher dividends.
NiSource Inc. (NI - $32.88 - NYSE) is based in Merrillville, IN. Through its regulated gas utility, NiSource serves more than 3.3 million natural gas customers in IN, KY, MA, MD, OH, PA, and VA, and through its regulated electric utility it serves 455,000 electric customers in IN. NI’s Columbia Pipeline Group (CPG) owns 15,000 miles of interstate pipelines and operates one of the nation’s largest natural gas storage systems, with a footprint in the Marcellus and Utica Shale production regions. NI expects 3% - 5% annual dividend growth and targets a 60% - 70% payout ratio. NI remains focused on low risk infrastructure investments that support earnings growth of 5% - 7%. Over the next 15 - 20 years, NI plans to spend $25 - $30 billion, approximately $10 billion at the gas utility, $6 - $8 billion at the electric utility, and $8 - $10 billion at CPG.
Northeast Utilities (NU - $42.39 - NYSE) is New England’s largest electric and gas distribution utility and delivery system, serving 3.6 million customers. On April 10, 2012, NU, headquartered in Hartford, CT, completed its merger with NSTAR, headquartered in Boston, MA. NST shareholders received 1.312 shares of NU, creating an even stronger New England distribution utility. Northeast Utilities serves 2.1 million customers in CT, NH, and MA, and NSTAR serves 1.5 million electric and gas customers in Eastern and Central MA. We believe that the combined company will be able to take advantage of its larger scale and scope to execute on a number of regulated investment projects, including expanding infrastructure to serve more natural gas customers. NST’s strong balance sheet allows for the funding of the combined transmission investment opportunities, including the Northern Pass, which is designed to bring enormous hydro capacity from Quebec into New England, New England reliability (the NEEWS Projects), and smaller projects within their service territory. We consider NU to be one of the better transmission plays and, given merger synergies and larger scale, we expect an enhanced earnings growth profile (the higher end of ~6% - 9% regulated earnings per share CAGR).
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OGE Energy Corp. (OGE- $33.90 -NYSE) is the parent company of Oklahoma Gas and Electric Company (OG&E), a regulated electric utility, and Enable Midstream Partners, of which OGE owns a 28.5% limited partner stake and a 50% general partner stake. Enable was formed on May 1, 2013, when OGE combined their Enogex assets with CenterPoint Energy’s interstate pipelines. Enable will have over $11 billion in assets. It will own and operate 8,400 miles of interstate pipe, 11,000 miles of gathering lines, 90 Bcf of natural gas storage, and eleven processing plants. In late November 2013, OGE and CenterPoint Energy filed the S-1 for the initial public offering of the Enable partnership. Further driving earnings growth will be investment in the utility’s base infrastructure and ~$1.6 billion in electric transmission over the next five years.
Severn Trent plc (SVT - $28.23 - London Stock Exchange) is an international provider of water and wastewater services. Severn Trent Water, the UK-based regulated water and wastewater utility, serves over 4.2 million households and businesses in the Midlands and Mid-Wales. The regulated UK utility business provides steady and modestly growing returns. As one of the UK’s premier water and wastewater providers, Severn Trent is well positioned to provide needed expertise and infrastructure investment opportunities in less developed regions across the world. Severn Trent Services, the non-regulated water and waste water service division of the company, which focuses on water purification projects and operating plants and systems for municipalities, has a growing presence in Europe, the Middle East, and Asia. In May, a consortium made a conditional offer for the company that represented a ~30% premium to the share price, and subsequently raised the offer when management said they would decline it. In June, the consortium withdrew the offer, but we still consider SVT to have significant takeover potential.
The Southern Company (SO - $41.11 - NYSE), one of the largest regulated electric utilities in the U.S., provides service to 4.4 million customers and owns 46,000 megawatts of generating capacity throughout four states in the Southeast. We consider SO to be one of the higher quality and lower risk U.S. utilities due to its strong management team, financial and operating track record, historically constructive regulatory environment, and growing service territory. The company faces significant investment necessary to bring a large coal fired generation portfolio into EPA compliance, but we expect such investment to be recognized by regulators. Issues in the construction of 2,200 MW of new nuclear generation at the Vogtle site have been resolved, and completion is expected in 2017 and 2018. We expect the company to continue its long term track record of strong earnings and dividend growth for the foreseeable future.
January 28, 2014
Note: The views expressed in this Shareholder Commentary reflect those of the Portfolio Manager only through the end of the period stated in this Shareholder Commentary. The Portfolio Manager’s views are subject to change at any time based on market and other conditions. The information in this Shareholder Commentary represents the opinions of the individual Portfolio Manager and is not intended to be a forecast of future events, a guarantee of future results, or investment advice. Views expressed are those of the Portfolio
Top Ten Holdings December 31, 2013
Invensys plc Koninklijke KPN NV Sky Deutschland AG Leap Wireless International Inc. Severn Trent plc
Millicom International Cellular S.A. Rogers Communications Inc. Cablevisions Systems Corp. Cable & Wireless Communications plc Northeast Utilities
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Manager and may differ from those of other portfolio managers or of the Firm as a whole. This Shareholder Commentary does not constitute an offer of any transaction in any securities. Any recommendation contained herein may not be suitable for all investors. Information contained in this Shareholder Commentary has been obtained from sources we believe to be reliable, but cannot be guaranteed.
Portfolio Manager Compensation
Mr. Gabelli’s incentive-based, variable compensation structure and dollar amount have been fully disclosed each year since April of 2000 in the annual proxy statement for GAMCO Investors, Inc. (NYSE:GBL). Mr. Gabelli receives no base salary, no annual bonus, and no stock options.
As founder and portfolio manager of The Gabelli Global Utility & Income Trust, Mr. Gabelli received $59,756 in calendar year 2012. For the Fund’s first twelve months of operation starting in May 2004, Mr. Gabelli received less than $130,000. Mario J. Gabelli and various entities he is deemed to control owned 242,102 and 67,859 common and preferred shares, respectively, of the Fund with a total value of $4,851,714 and $3,437,058 in the common and preferred shares, respectively, as of December 31, 2013. Mr. Gabelli may not have one hundred percent pecuniary interest in some of the entities he is deemed to control.
Monthly Distribution Policy
The Board has reaffirmed the continuation of the Fund’s monthly distribution policy for the first quarter of 2014. Pursuant to its distribution policy, the Fund paid $0.10 per share cash distributions on October 24, 2013, November 21, 2013, and December 19, 2013 to common shareholders of record on October 17, 2013, November 14, 2013, and December 13, 2013, respectively, for a total distribution of $0.30 per share during the fourth quarter of 2013.
Under the Fund’s initial distribution policy, the Fund pays a minimum annual distribution of 6% of the initial public offering price of $20.00 per share. Pursuant to this policy, the Fund intends to pay a distribution of $0.10 per share each month and, if necessary, an adjusting distribution in December which includes any additional income and realized net capital gains in excess of the monthly distributions for that year to satisfy the minimum distribution requirements of the Internal Revenue Code.
Each quarter, the Board reviews the amount of any potential distribution and the income, capital gain, or capital available. The Board will continue to monitor the Fund’s distribution level, taking into consideration the Fund’s net asset value and the financial market environment. The Fund’s distribution policy is subject to modification by the Board at any time. The distribution rate should not be considered the dividend yield or total return on an investment in the Fund.
All or part of the distribution may be treated as long term capital gain or qualified dividend income (or a combination of both) for individuals, each subject to the maximum federal income tax rate, which is currently 20% in taxable accounts for individuals. In addition, for taxable years beginning on or after January 1, 2013, certain U.S. shareholders who are individuals, estates, or trusts and whose income exceeds certain thresholds will be required to pay a 3.8% Medicare tax on their “net investment income,” which includes dividends received from the Fund and capital gains from the sale or other disposition of shares of the Fund.
If the Fund does not generate sufficient earnings (dividends and interest income and realized net capital gain) equal to or in excess of the aggregate distributions paid by the Fund in a given year, then the amount distributed in excess of the Fund’s earnings would be deemed a return of capital. Since this would be
13
considered a return of a portion of a shareholder’s original investment, it is generally not taxable and is treated as a reduction in the shareholder’s cost basis. Under federal tax regulations, some or all of the return of capital distributed by the Fund may be taxable as ordinary income in certain circumstances. This may occur when the Fund has a capital loss carry forward, net capital gains are realized in a fiscal year, and distributions are made in excess of investment company taxable income.
Long term capital gains, qualified dividend income, ordinary income, and paid-in capital, if any, will be allocated on a pro-rata basis to all distributions to common shareholders for the year. Based on the distribution allocations of the Fund as of December 31, 2013, the total distributions paid to common shareholders in 2013 represent approximately 21% from net investment income, 12% from net capital gains, and 67% from paid-in capital. The estimated components of each distribution are updated and provided to shareholders of record in a notice accompanying the distribution and are available on our website (www.gabelli.com). All shareholders with taxable accounts will receive written notification regarding the components and tax treatment for all 2013 distributions in early 2014 via Form 1099-DIV.
Series A Cumulative Puttable and Callable Preferred Shares
The Fund’s Series A Cumulative Puttable and Callable Preferred Shares paid a $0.75 per share cash distribution on December 26, 2013 to preferred shareholders of record on December 18, 2013. The Series A Preferred Shares, which trade on the NYSE MKT under the symbol “GLU Pr A”, were issued on June 19, 2013 at $50.00 per share and pay distributions quarterly. The Series A Preferred Shares have an annual dividend rate of 6.00% for the four dividend periods ending on or prior to June 26, 2014 and 3.00% for the subsequent eight dividend periods ending on or prior to June 26, 2016. Within the dividend period ending June 26, 2016, the Fund’s Board of Trustees will determine a fixed annual dividend rate that will apply for all subsequent dividend periods, which will be 200 basis points over the yield of the ten year U.S. Treasury Note, but in no case will the annual dividend rate be less than 3.00% or greater than 5.00%. The Series A Preferred will be non-callable for five years from the date of issuance, unless the redemption is necessary in the judgment of the Fund’s Board of Trustees to maintain the Fund’s status as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and may be put back to the Fund by shareholders during the 30-day period prior to each of June 26, 2015 and June 26, 2018. The next distribution is scheduled for March 2014.
The Board shares the Investment Advisor’s view that the issuance of Preferred Shares is designed to benefit the common shareholders. To the extent that the Fund earns in excess of the dividend rate on the Preferred Shares, additional value will thereby be created for its common shareholders.
All or part of the distribution may be treated as long-term capital gain or qualified dividend income (or a combination of both) for individuals, each subject to the maximum federal income tax rate, which is currently 20% in taxable accounts for individuals. In addition, for taxable years beginning on or after January 1, 2013, certain U.S. shareholders who are individuals, estates or trusts and whose income exceeds certain thresholds will be required to pay a 3.8% Medicare tax on their “net investment income”, which includes dividends received from the Fund and capital gains from the sale or other disposition of shares of the Fund.
Long-term capital gains, qualified dividend income, and ordinary income, if any, will be allocated on a pro- rata basis to all distributions to preferred shareholders for the year. Based on the distribution allocations of the Fund as of December 31, 2013, the total distributions paid to preferred shareholders in 2013 would include approximately 63% from net investment income and 37% from net capital gains. The estimated components
14
of each distribution are updated and provided to shareholders of record in a notice accompanying the distribution and are available on our website (www.gabelli.com). All shareholders with taxable accounts will receive written notification regarding the components and tax treatment for all 2013 distributions in early 2014 via Form 1099-DIV.
www.gabelli.com
Please visit us on the Internet. Our homepage at www.gabelli.com contains information about GAMCO Investors, Inc., the Gabelli/GAMCO Closed-End Funds and Mutual Funds, IRAs, 401(k)s, current and historical quarterly reports, closing prices, and other current news. We welcome your comments and questions via e-mail at closedend@gabelli.com.
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e-delivery
We are pleased to offer electronic delivery of Gabelli fund documents. Shareholders of our closed-end funds can now elect to receive e-mail announcements regarding available materials, including shareholder commentaries and Fund reports. For more information or to register for e-delivery, please visit our website at www.gabelli.com.
THE GABELLI GLOBAL UTILITY & INCOME TRUST One Corporate Center Rye, NY 10580-1422
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that the Fund may from time to time purchase its common shares in the open market when the Fund’s shares are trading at a discount of 10% or more from the net asset value of the shares. The Fund may also from time to time purchase shares of its preferred stock in the open market when the preferred shares are trading at a discount to the liquidation value.
The Net Asset Value per share appears in the Publicly Traded Funds column, under the heading “Specialized Equity Funds,” in Monday’s The Wall Street Journal. It is also listed in Barron’s Mutual Funds/Closed End Funds section under the heading “Specialized Equity Funds.” The Net Asset Value per share may be obtained each day by calling (914) 921-5070 or visiting www.gabelli.com. The NASDAQ symbol for the Net Asset Value per share is “XGLUX.”
This report is printed on recycled paper.
Portfolio Manager Biography Mario J. Gabelli, CFA, is Chairman and Chief Executive Officer of GAMCO Investors, Inc. that he founded in 1977 and Chief Investment Officer – Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc. Mr. Gabelli is a summa cum laude graduate of Fordham University and holds an MBA degree from Columbia Business School and Honorary Doctorates from Fordham University and Roger Williams University.
We have separated the portfolio manager’s commentary from the financial statements and investment portfolio due to corporate governance regulations stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that the content of the portfolio manager’s commentary is unrestricted. The financial statements and investment portfolio are mailed separately from the commentary. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at www.gabelli.com.
THE GABELLI GLOBAL UTILITY & INCOME TRUST One Corporate Center Rye, NY 10580-1422
t 800-GABELLI (800-422-3554) f 914-921-5118 e info@gabelli.com
GABELL I .COM
James P. Conn Former Managing Director & Chief Investment Officer, Financial Security Assurance Holdings Ltd.
Mario d’Urso Former Italian Senator
Vincent D. Enright Former Senior Vice President & Chief Financial Officer, KeySpan Corp.
Michael J. Melarkey Partner, Avansino, Melarkey, Knobel, Mulligan & McKenzie
Salvatore M. Salibello, CPA Partner, BDO Seidman, LLP
Salvatore J. Zizza Chairman, Zizza & Associates Corp.
OFFICERS
David I. Schachter Vice President
Adam E. Tokar Vice President & Ombudsman
INVESTMENT ADVISER
Gabelli Funds, LLC One Corporate Center Rye, New York 10580-1422
CUSTODIAN
COUNSEL
TRANSFER AGENT AND REGISTRAR
Computershare Trust Company, N.A.
Shareholder Commentary December 31, 2013
GLU Dec/2013
To Our Shareholders,
For the year ended December 31, 2013, the net asset value (“NAV”) total return of The Gabelli Global Utility & Income Trust (the “Fund”) was 21.5%, compared with a total return of 13.2% for the Standard & Poor’s (“S&P”) 500 Utilities Index. The total return for the Fund’s publicly traded shares was 7.3%. The Fund’s NAV per share was $22.36, while the price of the publicly traded shares closed at $20.04 on the NYSE MKT. See below for additional performance information.
Enclosed are the schedule of investments and financial statements as of December 31, 2013.
Sincerely yours,
Average Annual Returns through December 31, 2013 (a) (Unaudited)
1 Year 3 Year 5 Year
Since Inception (05/28/04)
Gabelli Global Utility & Income Trust NAV Total Return (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.54% 10.88% 11.42% 8.47% Investment Total Return (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.32 7.49 12.65 7.21
S&P 500 Utilities Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.21 11.20 10.17 9.39 Lipper Utility Fund Average . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.90 13.35 13.57 10.67 S&P 500 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.39 16.18 17.94 7.57 (a) Returns represent past performance and do not guarantee future results. Investment returns and the principal value of an
investment will fluctuate. When shares are redeemed, they may be worth more or less than their original cost. Current performance may be lower or higher than the performance data presented. Visit www.gabelli.com for performance information as of the most recent month end. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The S&P 500 Utilities Index is an unmanaged indicator of electric and gas utility stock performance. The Lipper Utility Fund Average reflects the average performance of open-end mutual funds classified in this particular category. The S&P 500 Index is an unmanaged indicator of stock market performance. Dividends are considered reinvested. You cannot invest directly in an index.
(b) Total returns and average annual returns reflect changes in the NAV per share, reinvestment of distributions at NAV on the ex-dividend date, and adjustments for right offerings and are net of expenses. Since inception return is based on an initial NAV of $19.06.
(c) Total returns and average annual returns reflect changes in closing market values on the NYSE MKT, reinvestment of distributions, and adjustments for the rights offering. Since inception return is based on an initial offering price of $20.00.
The Gabelli Global Utility & Income Trust Annual Report — December 31, 2013
The following table presents portfolio holdings as a percent of total investments as of December 31, 2013:
The Gabelli Global Utility & Income Trust
Energy and Utilities: Integrated . . . . . . . 22.1% U.S. Government Obligations. . . . . . . . . 22.1% Telecommunications . . . . . . . . . . . . . . . . 11.8% Cable and Satellite . . . . . . . . . . . . . . . . . . 10.7% Wireless Communications. . . . . . . . . . . . 7.7% Energy and Utilities: Services . . . . . . . . 5.5% Energy and Utilities: Water . . . . . . . . . . . 3.2% Energy and Utilities: Natural Gas
Integrated . . . . . . . . . . . . . . . . . . . . . . . . 3.2% Energy and Utilities: Natural Gas
Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7% Energy and Utilities: Electric
Transmission and Distribution . . . . . . 1.6% Aerospace . . . . . . . . . . . . . . . . . . . . . . . . . 1.5% Entertainment . . . . . . . . . . . . . . . . . . . . . . 1.4% Energy and Utilities: Oil. . . . . . . . . . . . . . 1.2% Electronics . . . . . . . . . . . . . . . . . . . . . . . . . 1.1% Food and Beverage . . . . . . . . . . . . . . . . . 1.1%
Diversified Industrial. . . . . . . . . . . . . . . . . 0.9% Financial Services . . . . . . . . . . . . . . . . . . 0.6% Specialty Chemicals. . . . . . . . . . . . . . . . . 0.5% Metals and Mining . . . . . . . . . . . . . . . . . . 0.5% Building and Construction . . . . . . . . . . . . 0.3% Transportation . . . . . . . . . . . . . . . . . . . . . . 0.3% Business Services . . . . . . . . . . . . . . . . . . 0.3% Independent Power Products and
Energy Traders . . . . . . . . . . . . . . . . . . . 0.2% Real Estate . . . . . . . . . . . . . . . . . . . . . . . . 0.2% Environmental Services. . . . . . . . . . . . . . 0.1% Machinery. . . . . . . . . . . . . . . . . . . . . . . . . . 0.1% Energy and Utilities: Alternative
Energy . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1% Retail. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0%*
* Amount represents less than 0.05%.
The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Shareholders may obtain this information at www.gabelli.com or by calling the Fund at 800-GABELLI (800-422-3554).The Fund’s Form N-Q is available on the SEC’s website at www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.
Proxy Voting
The Fund files Form N-PX with its complete proxy voting record for the twelve months ended June 30, no later than August 31 of each year. A description of the Fund’s proxy voting policies, procedures, and how the Fund voted proxies relating to portfolio securities is available without charge, upon request, by (i) calling 800-GABELLI (800-422-3554); (ii) writing to The Gabelli Funds at One Corporate Center, Rye, NY 10580-1422; or (iii) visiting the SEC’s website at www.sec.gov.
Summary of Portfolio Holdings
Shares Cost Market Value
COMMON STOCKS — 77.5% ENERGY AND UTILITIES — 39.8% Alternative Energy — 0.1% U.S. Companies
6,500 Ormat Technologies Inc.. . . . . . . . . . $ 179,303 $ 176,865
Electric Transmission and Distribution — 1.6% Non U.S. Companies
6,000 Algonquin Power & Utilities Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . 30,772 41,459
13,000 Fortis Inc.. . . . . . . . . . . . . . . . . . . . . . . . 401,125 372,652 8,775 National Grid plc, ADR . . . . . . . . . . . 401,681 573,183 5,000 Red Electrica Corporacion SA. . . . . 227,553 333,609
U.S. Companies 3,000 Consolidated Edison Inc. . . . . . . . . . 143,440 165,840
38,000 Pepco Holdings Inc. . . . . . . . . . . . . . . 720,883 726,940 6,000 Twin Disc Inc. . . . . . . . . . . . . . . . . . . . . 139,074 155,340
2,064,528 2,369,023
150,000 A2A SpA . . . . . . . . . . . . . . . . . . . . . . . . . 276,010 175,506 8,000 Areva SA† . . . . . . . . . . . . . . . . . . . . . . . 256,191 209,107
12,000 BP plc, ADR. . . . . . . . . . . . . . . . . . . . . . 513,193 583,320 9,000 Chubu Electric Power Co. Inc. . . . . 190,737 116,143
152,000 Datang International Power Generation Co. Ltd., Cl. H . . . . . . 59,610 70,175
1,400 E.ON SE . . . . . . . . . . . . . . . . . . . . . . . . . 24,642 25,837 7,500 E.ON SE, ADR. . . . . . . . . . . . . . . . . . . . 167,141 138,599 9,760 EDP - Energias de Portugal SA,
ADR. . . . . . . . . . . . . . . . . . . . . . . . . . . 262,599 356,923 10,000 Electric Power Development Co.
Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . 252,321 291,046 6,000 Emera Inc. . . . . . . . . . . . . . . . . . . . . . . . 163,066 172,671
10,000 Endesa SA† . . . . . . . . . . . . . . . . . . . . . . 256,647 320,539 70,000 Enel SpA. . . . . . . . . . . . . . . . . . . . . . . . . 404,630 305,654 28,000 Enersis SA, ADR . . . . . . . . . . . . . . . . . 166,650 419,720 1,000 Eni SpA . . . . . . . . . . . . . . . . . . . . . . . . . . 24,751 24,061
217,100 Hera SpA . . . . . . . . . . . . . . . . . . . . . . . . 426,556 492,798 18,000 Hokkaido Electric Power Co.
Inc.† . . . . . . . . . . . . . . . . . . . . . . . . . . 271,540 206,647 18,000 Hokuriku Electric Power Co. . . . . . . 274,290 243,909 17,000 Huaneng Power International Inc.,
ADR. . . . . . . . . . . . . . . . . . . . . . . . . . . 551,217 616,250 94,987 Iberdrola SA . . . . . . . . . . . . . . . . . . . . . 497,004 605,674 5,000 Iberdrola SA, ADR. . . . . . . . . . . . . . . . 181,697 127,750
34,000 Korea Electric Power Corp., ADR† . . . . . . . . . . . . . . . . . . . . . . . . . 392,916 564,740
17,000 Kyushu Electric Power Co. Inc.† . . 270,794 216,637 10,000 Shikoku Electric Power Co. Inc.† . 171,759 149,558
Shares Cost Market Value
10,000 The Chugoku Electric Power Co. Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 170,328 $ 155,351
19,000 The Kansai Electric Power Co. Inc.† . . . . . . . . . . . . . . . . . . . . . . . . . . 283,000 218,127
10,000 Tohoku Electric Power Co. Inc.† . . 158,898 112,335 2,500 Verbund AG. . . . . . . . . . . . . . . . . . . . . . 62,274 53,360
U.S. Companies 2,000 ALLETE Inc.. . . . . . . . . . . . . . . . . . . . . . 71,269 99,760
21,000 Ameren Corp. . . . . . . . . . . . . . . . . . . . . 816,820 759,360 30,000 American Electric Power Co. Inc. . 943,467 1,402,200 1,500 Avista Corp.. . . . . . . . . . . . . . . . . . . . . . 27,915 42,285 7,000 Black Hills Corp. . . . . . . . . . . . . . . . . . 193,684 367,570
500 Cleco Corp. . . . . . . . . . . . . . . . . . . . . . . 9,790 23,310 500 CMS Energy Corp. . . . . . . . . . . . . . . . 4,875 13,385
10,000 Dominion Resources Inc.. . . . . . . . . 406,566 646,900 23,000 Duke Energy Corp.(a) . . . . . . . . . . . . 1,049,205 1,587,230 4,000 El Paso Electric Co.. . . . . . . . . . . . . . . 77,953 140,440 1,834 FirstEnergy Corp. . . . . . . . . . . . . . . . . 65,874 60,485
35,000 Great Plains Energy Inc. . . . . . . . . . . 783,130 848,400 22,000 Hawaiian Electric Industries Inc. . . 541,164 573,320 29,500 Integrys Energy Group Inc. . . . . . . . 1,408,474 1,605,095 12,000 MGE Energy Inc. . . . . . . . . . . . . . . . . . 393,736 694,800 14,000 NextEra Energy Inc. . . . . . . . . . . . . . . 654,896 1,198,680 45,000 NiSource Inc. . . . . . . . . . . . . . . . . . . . . 908,189 1,479,600 50,000 Northeast Utilities(a) . . . . . . . . . . . . . 1,026,475 2,119,500 13,000 NorthWestern Corp. . . . . . . . . . . . . . . 391,049 563,160 39,000 OGE Energy Corp. . . . . . . . . . . . . . . . . 481,892 1,322,100 14,000 Otter Tail Corp. . . . . . . . . . . . . . . . . . . . 352,319 409,780 1,000 PG&E Corp. . . . . . . . . . . . . . . . . . . . . . . 33,930 40,280
16,000 Pinnacle West Capital Corp. . . . . . . 650,094 846,720 4,200 PPL Corp.. . . . . . . . . . . . . . . . . . . . . . . . 117,280 126,378
32,000 Public Service Enterprise Group Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,065,920 1,025,280
18,000 SCANA Corp. . . . . . . . . . . . . . . . . . . . . 646,320 844,740 2,000 TECO Energy Inc. . . . . . . . . . . . . . . . . 33,510 34,480
30,000 The AES Corp. . . . . . . . . . . . . . . . . . . . 272,995 435,300 2,000 The Empire District Electric Co. . . . 41,522 45,380
40,000 The Southern Co. . . . . . . . . . . . . . . . . 1,178,050 1,644,400 25,000 UNS Energy Corp.. . . . . . . . . . . . . . . . 1,002,212 1,496,250 15,000 Vectren Corp. . . . . . . . . . . . . . . . . . . . . 360,570 532,500 37,000 Westar Energy Inc. . . . . . . . . . . . . . . . 783,109 1,190,290 9,000 Wisconsin Energy Corp. . . . . . . . . . . 154,181 372,060
32,000 Xcel Energy Inc.. . . . . . . . . . . . . . . . . . 541,913 894,080
24,220,809 32,457,935
80,000 Snam SpA . . . . . . . . . . . . . . . . . . . . . . . 288,733 447,489
U.S. Companies 2,000 Anadarko Petroleum Corp.. . . . . . . . 162,314 158,640
The Gabelli Global Utility & Income Trust Schedule of Investments — December 31, 2013
See accompanying notes to financial statements.
3
COMMON STOCKS (Continued) ENERGY AND UTILITIES (Continued) Natural Gas Integrated (Continued) U.S. Companies (Continued)
2,200 Apache Corp. . . . . . . . . . . . . . . . . . . . . $ 185,719 $ 189,068 12,000 CONSOL Energy Inc. . . . . . . . . . . . . . 452,508 456,480 1,000 Energen Corp.. . . . . . . . . . . . . . . . . . . . 30,935 70,750
14,000 Kinder Morgan Inc.. . . . . . . . . . . . . . . 259,445 504,000 21,000 National Fuel Gas Co.. . . . . . . . . . . . . 694,641 1,499,400 4,000 ONEOK Inc. . . . . . . . . . . . . . . . . . . . . . . 51,437 248,720
30,000 Spectra Energy Corp.. . . . . . . . . . . . . 634,201 1,068,600
2,759,933 4,643,147
1,500 Enagas SA . . . . . . . . . . . . . . . . . . . . . . . 37,053 39,197 1,890 GDF Suez . . . . . . . . . . . . . . . . . . . . . . . . 49,337 44,448
11,454 GDF Suez, ADR . . . . . . . . . . . . . . . . . . 362,710 271,116
U.S. Companies 16,764 AGL Resources Inc. . . . . . . . . . . . . . . 667,385 791,764 11,000 Atmos Energy Corp. . . . . . . . . . . . . . . 271,115 499,620 1,800 Chesapeake Utilities Corp. . . . . . . . . 52,334 108,036 4,500 Piedmont Natural Gas Co. Inc. . . . . 105,090 149,220 8,000 Southwest Gas Corp. . . . . . . . . . . . . . 204,008 447,280 4,500 The Laclede Group Inc. . . . . . . . . . . . 143,720 204,930
1,892,752 2,555,611
Oil — 1.2% Non U.S. Companies
1,000 Niko Resources Ltd.† . . . . . . . . . . . . 2,671 2,391 1,000 PetroChina Co. Ltd., ADR. . . . . . . . . 79,302 109,740
10,000 Petroleo Brasileiro SA, ADR . . . . . . 186,815 137,800 9,000 Royal Dutch Shell plc, Cl. A, ADR . 460,931 641,430
U.S. Companies 10,000 Atlas Resource Partners LP. . . . . . . 197,047 204,800 2,000 Chevron Corp. . . . . . . . . . . . . . . . . . . . 120,100 249,820 2,000 ConocoPhillips . . . . . . . . . . . . . . . . . . . 57,018 141,300 2,500 Devon Energy Corp. . . . . . . . . . . . . . . 94,760 154,675 1,000 Exxon Mobil Corp. . . . . . . . . . . . . . . . 45,500 101,200
1,244,144 1,743,156
Services — 5.5% Non U.S. Companies
10,000 ABB Ltd., ADR . . . . . . . . . . . . . . . . . . . 123,092 265,600 620,000 Invensys plc . . . . . . . . . . . . . . . . . . . . . 4,811,157 5,220,739 120,000 Weatherford International Ltd.†. . . 1,685,931 1,858,800
U.S. Companies 10,000 AZZ Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 359,505 488,600
Shares Cost Market Value
200 Donaldson Co. Inc. . . . . . . . . . . . . . . . $ 7,180 $ 8,692 3,500 Halliburton Co. . . . . . . . . . . . . . . . . . . . 110,825 177,625
7,097,690 8,020,056
Water — 3.2% Non U.S. Companies
5,000 Consolidated Water Co. Ltd. . . . . . . 60,554 70,500 115,000 Severn Trent plc. . . . . . . . . . . . . . . . . . 2,667,241 3,246,920 37,090 United Utilities Group plc . . . . . . . . . 366,828 412,432
U.S. Companies 10,000 Aqua America Inc.. . . . . . . . . . . . . . . . 119,790 235,900
5,400 California Water Service Group . . . 76,295 124,578 4,000 Middlesex Water Co. . . . . . . . . . . . . . 75,033 83,760
16,000 SJW Corp. . . . . . . . . . . . . . . . . . . . . . . . 260,936 476,640
3,626,677 4,650,730
Diversified Industrial — 0.9% Non U.S. Companies
9,000 Bouygues SA . . . . . . . . . . . . . . . . . . . . 300,585 339,497 11,000 Jardine Matheson Holdings Ltd. . . 597,394 575,410 11,000 Jardine Strategic Holdings Ltd. . . . 371,394 352,000
1,269,373 1,266,907
Environmental Services — 0.1% Non U.S. Companies
500 Suez Environnement Co. . . . . . . . . . 0 8,959 12,000 Veolia Environnement SA. . . . . . . . . 184,423 195,708
184,423 204,667
9,000 NRG Energy Inc. . . . . . . . . . . . . . . . . . 217,490 258,480
TOTAL ENERGY AND UTILITIES . . 44,757,122 58,346,577
COMMUNICATIONS — 30.1% Cable and Satellite — 10.7% Non U.S. Companies
35,000 British Sky Broadcasting Group plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387,280 489,170
10,000 Cogeco Inc. . . . . . . . . . . . . . . . . . . . . . . 195,069 461,097 58,000 Rogers Communications Inc.,
Cl. B . . . . . . . . . . . . . . . . . . . . . . . . . . 2,299,382 2,624,500 395,000 Sky Deutschland AG† . . . . . . . . . . . . 3,508,734 4,347,228
U.S. Companies 125,000 Cablevision Systems Corp., Cl. A . 2,128,393 2,241,250
200 Charter Communications Inc., Cl. A† . . . . . . . . . . . . . . . . . . . . . . . . . 25,037 27,352
13,000 Comcast Corp., Cl. A, Special . . . . . 281,627 648,440 25,000 DIRECTV† . . . . . . . . . . . . . . . . . . . . . . . 633,442 1,727,250 30,000 DISH Network Corp., Cl. A†. . . . . . . 551,620 1,737,600
The Gabelli Global Utility & Income Trust Schedule of Investments (Continued) — December 31, 2013
See accompanying notes to financial statements.
4
COMMON STOCKS (Continued) COMMUNICATIONS (Continued) Cable and Satellite (Continued) U.S. Companies (Continued)
6,000 EchoStar Corp., Cl. A†. . . . . . . . . . . . $ 150,819 $ 298,320 5,500 Liberty Global plc, Cl. A† . . . . . . . . . 146,144 489,445 5,500 Liberty Global plc, Cl. C† . . . . . . . . . 139,226 463,760 1,000 Time Warner Cable Inc.. . . . . . . . . . . 128,520 135,500
10,575,293 15,690,912
Telecommunications — 11.7% Non U.S. Companies
34,000 BCE Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 884,186 1,471,860 11,000 Belgacom SA . . . . . . . . . . . . . . . . . . . . 273,950 325,430 2,102 Bell Aliant Inc.(b). . . . . . . . . . . . . . . . . 51,669 53,031
898 Bell Aliant Inc. . . . . . . . . . . . . . . . . . . . 23,812 22,597 24,000 BT Group plc, ADR . . . . . . . . . . . . . . . 797,407 1,515,120 37,000 Deutsche Telekom AG, ADR . . . . . . 615,333 638,620 29,651 Global Telecom Holding,
GDR†(c) . . . . . . . . . . . . . . . . . . . . . . 111,809 99,331 1,375,000 Koninklijke KPN NV† . . . . . . . . . . . . . 4,141,296 4,432,006
15,000 Koninklijke KPN NV, ADR . . . . . . . . . 114,993 47,670 8,000 Manitoba Telecom Services Inc. . . 249,141 223,601 5,000 Orange SA, ADR . . . . . . . . . . . . . . . . . 59,302 61,750
29,651 Orascom Telecom Media and Technology Holding SAE, GDR(b). . . . . . . . . . . . . . . . . . . . . . . . 43,481 14,233
100,000 Portugal Telecom SGPS SA. . . . . . . 727,258 434,723 1,200 Swisscom AG . . . . . . . . . . . . . . . . . . . . 384,765 633,462 1,000 Swisscom AG, ADR . . . . . . . . . . . . . . 43,980 52,890
20,000 Telecom Italia SpA . . . . . . . . . . . . . . . 19,045 19,838 9,300 Telefonica Brasil SA, ADR . . . . . . . . 161,522 178,746
39,300 Telefonica Deutschland Holding AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265,009 324,391
49,263 Telefonica SA, ADR. . . . . . . . . . . . . . . 718,984 804,957 30,000 Telekom Austria AG . . . . . . . . . . . . . . 354,921 227,156 23,000 Telenet Group Holding NV . . . . . . . . 1,047,596 1,372,438 16,000 VimpelCom Ltd., ADR . . . . . . . . . . . . 146,091 207,040
U.S. Companies 27,000 AT&T Inc. . . . . . . . . . . . . . . . . . . . . . . . . 758,355 949,320 40,000 CenturyLink Inc. . . . . . . . . . . . . . . . . . 1,272,180 1,274,000 63,064 Cincinnati Bell Inc.† . . . . . . . . . . . . . . 190,690 224,508 31,845 Sprint Corp.† . . . . . . . . . . . . . . . . . . . . 180,561 342,334 1,000 T-Mobile US Inc. . . . . . . . . . . . . . . . . . 22,694 33,640
22,000 Verizon Communications Inc.. . . . . 760,341 1,081,080
14,420,371 17,065,772
Wireless Communications — 7.7% Non U.S. Companies
1,000 America Movil SAB de CV, Cl. L, ADR. . . . . . . . . . . . . . . . . . . . . . . . . . . 15,150 23,370
Shares Cost Market Value
2,300,000 Cable & Wireless Communi- cations plc . . . . . . . . . . . . . . . . . . . . $ 1,457,218 $ 2,142,396
30,400 Millicom International Cellular SA, SDR. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,179,706 3,027,309
4,000 Mobile TeleSystems OJSC, ADR . . 54,874 86,520 2,000 SK Telecom Co. Ltd., ADR . . . . . . . . 40,399 49,240
11,000 Turkcell Iletisim Hizmetleri A/S, ADR† . . . . . . . . . . . . . . . . . . . . . . . . . 158,724 146,850
45,000 Vodafone Group plc, ADR . . . . . . . . 1,382,873 1,768,950
U.S. Companies 200,000 Leap Wireless International Inc.† . 3,289,922 3,480,000 90,000 NII Holdings Inc.†. . . . . . . . . . . . . . . . 451,770 247,500 7,500 United States Cellular Corp. . . . . . . 264,225 313,650
9,294,861 11,285,785
4,000 European Aeronautic Defence and Space Co. NV. . . . . . . . . . . . . . . . . . 280,487 307,112
90,000 Rolls-Royce Holdings plc. . . . . . . . . 628,651 1,900,212 7,740,000 Rolls-Royce Holdings plc,
Cl. C†(d) . . . . . . . . . . . . . . . . . . . . . . 12,500 12,817
921,638 2,220,141
500 Acciona SA . . . . . . . . . . . . . . . . . . . . . . 25,414 28,728
Business Services — 0.3% Non U.S. Companies
4,000 Sistema JSFC, GDR(c) . . . . . . . . . . . 95,619 128,480
U.S. Companies 8,000 Diebold Inc. . . . . . . . . . . . . . . . . . . . . . . 241,784 264,080
337,403 392,560
95,000 Sony Corp., ADR . . . . . . . . . . . . . . . . . 1,879,000 1,642,550
Entertainment — 1.4% Non U.S. Companies
15,000 Grupo Televisa SAB, ADR. . . . . . . . . 451,306 453,900 60,000 Vivendi SA . . . . . . . . . . . . . . . . . . . . . . . 1,574,482 1,581,098
2,025,788 2,034,998
15,000 Kinnevik Investment AB, Cl. A . . . . 421,004 698,011
The Gabelli Global Utility & Income Trust Schedule of Investments (Continued) — December 31, 2013
See accompanying notes to financial statements.
5
4,000 Hartford Financial Services Group Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 136,142 $ 144,920
557,146 842,931
Food and Beverage — 1.1% Non U.S. Companies
30,000 Davide Campari-Milano SpA . . . . . . 264,479 250,929 1,000 Diageo plc . . . . . . . . . . . . . . . . . . . . . . . 32,986 33,119 4,500 Diageo plc, ADR. . . . . . . . . . . . . . . . . . 586,201 595,890 3,000 Heineken NV . . . . . . . . . . . . . . . . . . . . . 203,985 202,559 6,000 Nestlé SA . . . . . . . . . . . . . . . . . . . . . . . . 420,868 439,213 1,000 Pernod Ricard SA . . . . . . . . . . . . . . . . 122,560 113,922
1,631,079 1,635,632
Metals and Mining — 0.5% Non U.S. Companies
6,200 Compania de Minas Buenaventura SA, ADR. . . . . . . . . . . . . . . . . . . . . . . 64,838 69,564
U.S. Companies 30,000 Peabody Energy Corp.. . . . . . . . . . . . 545,802 585,900
610,640 655,464
6,000 Brookfield Asset Management Inc., Cl. A. . . . . . . . . . . . . . . . . . . . . . 149,494 232,980
344 Brookfield Property Partners LP . . 7,444 6,859
156,938 239,839
Specialty Chemicals — 0.5% Non U.S. Companies
109,200 AZ Electronic Materials SA. . . . . . . . 706,902 714,281
Transportation — 0.3% U.S. Companies
TOTAL OTHER . . . . . . . . . . . . . . . . . . . 9,370,942 11,096,239
Shares Cost Market Value
CONVERTIBLE PREFERRED STOCKS — 0.1% COMMUNICATIONS — 0.1% Telecommunications — 0.1% U.S. Companies
1,600 Cincinnati Bell Inc., 6.750% Cv. Pfd., Ser. B . . . . . . . $ 42,282 $ 72,976
WARRANTS — 0.0% COMMUNICATIONS — 0.0% Wireless Communications — 0.0% Non U.S. Companies
6,000 Bharti Airtel Ltd., expire 08/04/16†(b) . . . . . . . . . . . . . . . . . . 28,648 32,063
Principal Amount
CONVERTIBLE CORPORATE BONDS — 0.3% OTHER — 0.3% Building and Construction — 0.3% U.S. Companies
$ 500,000 Layne Christensen Co. 4.250%, 11/15/18 . . . . . . . . . . . . . 500,000 501,563
U.S. GOVERNMENT OBLIGATIONS — 22.1% 32,444,000 U.S. Treasury Bills,
0.030% to 0.100%††, 03/20/14 to 06/05/14(e) . . . . . . . 32,434,188 32,437,842
TOTAL INVESTMENTS — 100.0% . . . . . . . . . . . . . . $121,423,707 146,529,729
Settlement Date
3,650,000(f) Deliver British Pounds in exchange for United States Dollars 6,042,955(g) . . . . . . 01/31/14 (68,616)
11,000,000(h)Deliver Euros in exchange for United States Dollars 15,132,439(g) . . . . . 01/31/14 (83,734)
TOTAL FORWARD FOREIGN EXCHANGE CONTRACTS . . . . . . . . . . . . . . . . . . . (152,350)
The Gabelli Global Utility & Income Trust Schedule of Investments (Continued) — December 31, 2013
See accompanying notes to financial statements.
6
$ 1 Rolls-Royce Holdings plc, Cl. C(i). 06/27/14 $ 7,119 (4,300,000 Shares)
1,027,481 Rolls-Royce Holdings plc(i) . . . . . . 06/27/14 27,827 (50,000 Shares)
TOTAL EQUITY CONTRACT FOR DIFFERENCE SWAP AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 34,946
Market Value
PREFERRED STOCK (1,032,428 preferred shares outstanding) . . . . . . . . . . . . . . . . . (51,621,400)
NET ASSETS — COMMON SHARES (4,118,534 common shares outstanding). . . . . . . . . . . . . . . . . . $ 92,102,748
NET ASSET VALUE PER COMMON SHARE ($92,102,748 ÷ 4,118,534 shares outstanding) . . . . . . . . . . . . . $ 22.36
(a) Securities, or a portion thereof, with a value of $1,002,600, were reserved and/or pledged with the custodian for forward foreign exchange contracts and equity contract for difference swap agreements.
(b) Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2013, the market value of Rule 144A securities amounted to $99,327 or 0.07% of total investments.
(c) Security purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. At December 31, 2013, the market value of Regulation S securities amounted to $227,811 or 0.16% of total investments, which were valued as follows:
Acquisition Shares Issuer
4,000 Sistema JSFC, GDR . . . . . . 09/05/06 95,619 32.1200
(d) At December 31, 2013, the Fund held an investment in a restricted and illiquid security amounting to $12,817 or 0.01% of total investments, which was valued as follows:
Acquisition Shares Issuer
7,740,000 Rolls-Royce Holdings plc, Cl. C . . . . . . . . . . . . . . . . . 10/23/13 $12,500 $0.0017
(e) At December 31, 2013, $22,050,000 of the principal amount was pledged as collateral for equity contract for difference swap agreements and forward foreign exchange contracts.
(f) Principal amount denoted in British Pounds. (g) At December 31, 2013, the Fund had entered into forward foreign exchange
contracts with State Street Bank and Trust Co. (h) Principal amount denoted in Euros. (i) At December 31, 2013, the Fund had entered into equity contract for difference
swap agreements with The Goldman Sachs Group, Inc. † Non-income producing security. †† Represents annualized yield at date of purchase.
ADR American Depositary Receipt GDR Global Depositary Receipt JSFC Joint Stock Financial Corporation OJSC Open Joint Stock Company SDR Swedish Depositary Receipt
Geographic Diversification
North America . . . . . . . . . . . . . . . . 62.1% $ 90,988,963 Europe. . . . . . . . . . . . . . . . . . . . . 33.0 48,383,746 Japan . . . . . . . . . . . . . . . . . . . . . 2.3 3,352,302 Asia/Pacific . . . . . . . . . . . . . . . . . . 1.6 2,337,555 Latin America. . . . . . . . . . . . . . . . . 0.9 1,353,600 Africa/Middle East . . . . . . . . . . . . . . 0.1 113,563 Total Investments . . . . . . . . . . . . . . 100.0% $146,529,729
The Gabelli Global Utility & Income Trust Schedule of Investments (Continued) — December 31, 2013
See accompanying notes to financial statements.
7
Assets: Investments, at value (cost $121,423,707) . . . . . . $146,529,729 Foreign currency, at value (cost $1,089). . . . . . . . 1,111 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,599 Receivable for investments sold . . . . . . . . . . . . . . . 396,337 Dividends and interest receivable. . . . . . . . . . . . . . 258,826 Unrealized appreciation on swap contracts . . . . . 34,946 Deferred offering expense . . . . . . . . . . . . . . . . . . . . 68,228 Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,903 Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,301,679
Liabilities: Distributions payable . . . . . . . . . . . . . . . . . . . . . . . . . 51,621 Payable for Fund shares redeemed. . . . . . . . . . . . 151,091 Payable for investments purchased . . . . . . . . . . . . 3,036,361 Payable for payroll expenses . . . . . . . . . . . . . . . . . 39,414 Payable for investment advisory fees . . . . . . . . . . 60,524 Payable for accounting fees . . . . . . . . . . . . . . . . . . 3,750 Unrealized depreciation on forward foreign
exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . 152,350 Other accrued expenses . . . . . . . . . . . . . . . . . . . . . 82,420 Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,577,531
Preferred Shares: Series A Cumulative Preferred Shares ($50
liquidation value, $0.001 par value, 1,200,000 shares authorized with 1,032,428 shares issued and outstanding) . . . . . . . . . . . . . . . . . . . . 51,621,400
Net Assets Attributable to Common Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 92,102,748
Net Assets Attributable to Common Shareholders Consist of: Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 67,524,009 Distributions in excess of net investment
income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (314,347) Accumulated net realized loss on investments,
swaps contracts, and foreign currency transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (96,913)
Net unrealized appreciation on investments. . . . . 25,106,022 Net unrealized appreciation on swap contracts . . 34,946 Net unrealized depreciation on foreign currency
translations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (150,969) Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 92,102,748
Net Asset Value per Common Share: ($92,102,748 ÷ 4,118,534 shares outstanding at
$0.001 par value; unlimited number of shares authorized) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $22.36
Investment Income: Dividends (net of foreign withholding taxes of
$98,119). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,822,069 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,123 Total Investment Income . . . . . . . . . . . . . . . . . . . . . 2,839,192
Expenses: Investment advisory fees . . . . . . . . . . . . . . . . . . . . . . 535,801 Payroll expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,268 Shareholder communications expenses . . . . . . . . . 63,873 Trustees’ fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,500 Legal and audit fees . . . . . . . . . . . . . . . . . . . . . . . . . . 50,554 Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,508 Accounting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000 Shareholder services fees . . . . . . . . . . . . . . . . . . . . . 21,120 Miscellaneous expenses. . . . . . . . . . . . . . . . . . . . . . . 21,080 Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 959,704 Less: Custodian fee credits. . . . . . . . . . . . . . . . . . . . . . . . . . (252) Net Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 959,452 Net Investment Income . . . . . . . . . . . . . . . . . . . . . . 1,879,740
Net Realized and Unrealized Gain/(Loss) on Investments, Swap Contracts, and Foreign Currency: Net realized gain on investments . . . . . . . . . . . . . . . 1,261,621 Net realized gain on swap contracts . . . . . . . . . . . . 336,684 Net realized loss on foreign currency
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (539,909) Net realized gain on investments, swap
contracts, and foreign currency transactions . . . 1,058,396 Net change in unrealized appreciation/
depreciation: on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,541,008 on swap contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 22,702 on foreign currency translations . . . . . . . . . . . . . . (150,499)
Net change in unrealized appreciation/ depreciation on investments, swap contracts, and foreign currency translations . . . . . . . . . . . . . 13,413,211
Net Realized and Unrealized Gain/(Loss) on Investments, Swap Contracts, and Fo