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<SEC-DOCUMENT>0000950172-03-002565.txt : 20030813
<SEC-HEADER>0000950172-03-002565.hdr.sgml : 20030813
<ACCEPTANCE-DATETIME>20030813152534
ACCESSION NUMBER:		0000950172-03-002565
CONFORMED SUBMISSION TYPE:	N-2/A
PUBLIC DOCUMENT COUNT:		6
FILED AS OF DATE:		20030813

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			GABELLI UTILITY TRUST
		CENTRAL INDEX KEY:			0001080720
		IRS NUMBER:				134046522
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-09243
		FILM NUMBER:		03840971

	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

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	GABELLI UTILITY FUND
		DATE OF NAME CHANGE:	19990225

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			GABELLI UTILITY TRUST
		CENTRAL INDEX KEY:			0001080720
		IRS NUMBER:				134046522
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-105467
		FILM NUMBER:		03840972

	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

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	GABELLI UTILITY FUND
		DATE OF NAME CHANGE:	19990225
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-2/A
<SEQUENCE>1
<FILENAME>ny412582.txt
<TEXT>

     As filed with the Securities and Exchange Commission on August 13, 2003
                                                 Securities Act File No. 105467

                                      Investment Company Act File No. 811-09243

===============================================================================

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM N-2

                              --------------------


         [ ]  Registration Statement under the Securities Act of 1933
         [X]  Pre-Effective Amendment No. 1
         [ ]  Post-Effective Amendment No.


                                     and/or


         [X]  Registration Statement under the Investment Company Act of
              1940 Amendment No. 9


                        (Check Appropriate Box or Boxes)

                              --------------------

                           THE GABELLI UTILITY TRUST
               (Exact Name of Registrant as Specified in Charter)

                              --------------------
                              One Corporate Center
                            Rye, New York 10580-1434
                    (Address of Principal Executive Offices)

       Registrant's Telephone Number, Including Area Code: (800) 422-3554

                                Bruce N. Alpert
                           The Gabelli Utility Trust
                              One Corporate Center
                            Rye, New York 10580-1434

                                 (914) 921-5100
                    (Name and Address of Agent for Service)

                              --------------------
                                   Copies to:

James E. McKee, Esq.                    Richard T. Prins, Esq.
The Gabelli Utility Trust               Skadden, Arps, Slate, Meagher & Flom LLP
One Corporate Center                    Four Times Square
Rye, New York 10580                     New York, New York 10036


<PAGE>


         Approximate date of proposed public offering: As soon as practicable
after the effective date of this Registration Statement.


         If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, as amended, other than securities offered in connection with a dividend
reinvestment plan, check the following box. [X]


       CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
===============================================================================
                                       Proposed
                                       Maximum
                         Aggregate     Maximum       Proposed
                          Amount       Offering      Aggregate      Amount of
Title of Securities       Being        Price Per     Offering     Registration
Being Registered        Registered     Share(1)      Price(2)        Fee
- -------------------------------------------------------------------------------
Shares of Common         7,500,000        9.26       69,450,000    $6,182(2)
beneficial interest
- -------------------------------------------------------------------------------

(1)    As calculated pursuant to Rule 457(c) under the Securities Act of 1933,
       as amended. Based on the average of the high and low sales prices
       reported on the New York Stock Exchange on August 11, 2003.
(2)    $76.00 previously paid.


       THE 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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

Notice to Canadian Residents:


These Securities Have Not Been Approved or Disapproved by any Securities or
Regulatory Authority in Canada. This Offering Will Not Be Made in any Province
of Canada Where it is Not Permitted by Law.


                                       2
<PAGE>
<TABLE>

                             CROSS-REFERENCE SHEET
                            PURSUANT TO RULE 481(a)
<CAPTION>


N-2 Item Number                                          Location in Part A (Caption)
- -------------------------------------------------------------------------------------------------------

PART A

<s> <c>                                                  <c>
1.  Outside Front Cover..................................Front Cover Page
2.  Inside Front and Outside Back Cover Page.............Front Cover Page
3.  Fee Table and Synopsis...............................Prospectus Summary; Table of Fees and Expenses
4.  Financial Highlights.................................Financial Highlights
5.  Plan of Distribution.................................The Offer
6.  Selling Shareholders.................................Not Applicable
7.  Use of Proceeds......................................Use of Proceeds
8.  General Description of the Registrant................Investment Objectives and Policies; The Offer;
                                                         Risk Factors and Special Considerations;
                                                         Dividends and Distributions; Capitalization
9.  Management...........................................Management of the Fund
10. Capital Stock........................................The Offer; Capitalization; Custodian, Transfer
                                                         Agent, Dividend-Disbursing Agent and Registrar;
                                                         Dividends and Distributions; Taxation
11. Defaults and Arrears on Senior Securities............Not Applicable
12. Legal Proceedings....................................Not Applicable
13. Table of Contents of the Statement of                Table of Contents of the Statement of Additional
    Additional Information...............................Information


                                                         Location in Statement of
PART B                                                   Additional Information
- ----------------------------------------------------------------------------------------------------------------------

14.   Cover Page.........................................Outside Front Cover Page
15.   Table of Contents..................................Outside Front Cover Page
16.   General Information and History....................Not Applicable
17.   Investment Objectives and Policies.................Investment Objectives; Investment Practices
18.   Management.........................................Management of the Fund
19.   Control Persons and Principal Holders..............Management of the Fund
20.   Investment Advisory and Other Services.............Management of the Fund
21.   Brokerage Allocation and Other Practices...........Portfolio Transactions
22.   Automatic Dividend Reinvestment and                Automatic Dividend Reinvestment and Voluntary
      Voluntary Cash Purchase Plan.......................Cash Purchase Plan
23.   Tax Status.........................................Taxation
24.   General Information................................General Information
25.   Beneficial Owner...................................Beneficial Owner
26.   Financial Statements...............................Financial Statements
</TABLE>


                                         3

<PAGE>

PART C

      Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.






                                       4

<PAGE>

PROSPECTUS

                          RIGHTS FOR           SHARES

                                  THE GABELLI
                                 UTILITY TRUST
                                 COMMON SHARES


      The Gabelli Utility Trust (the "Fund") is issuing transferable rights
("Rights") to its common shareholders of common shares of beneficial interest,
par value $.001 per share (the "Common Shares"). These Rights will allow you to
subscribe for new Common Shares of the Fund. For every three Rights that you
receive, you may buy one new Common Share of the Fund plus, in certain
circumstances, additional Common Shares pursuant to an over-subscription
privilege. You will receive one Right for each outstanding Common Share of the
Fund you own on August __, 2003 (the "Record Date") rounded up to the nearest
number of Rights evenly divisible by three. Fractional shares will not be
issued upon the exercise of the Rights. Accordingly, new Common Shares may be
purchased only pursuant to the exercise of Rights in integral multiples of
three.

      The Rights are transferable and will be admitted for trading on the New
York Stock Exchange ("NYSE") under the symbol "____." The Common Shares are
presently listed on the NYSE under the symbol "GUT." The new Common Shares
issued in this Rights offering (the "Offer") will also be listed under the
symbol "GUT." On ______, 2003 (the last trading date prior to the Common Shares
trading ex-Rights), the last reported net asset value per share of the Common
Shares was $____ and the last reported sales price per Common Share on the NYSE
was $____. The purchase price per Common Share (the "Subscription Price") will
be _____. The offer will expire at 5:00 p.m., New York Time, on September __,
2003, unless the Offer is extended as described in this Prospectus (the
"Expiration Date").

      The Fund is a non-diversified, closed-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The Fund's primary investment objective is long-term growth of capital
and income, which the Fund attempts to achieve by investing at least 80% of its
total assets in common stock and other debt or equity securities of foreign and
domestic companies involved to a substantial extent (e.g., at least 50% of the
assets, gross income or profits of such company is committed to or derived
from) in providing products, services or equipment for (i) the generation or
distribution of electricity, gas and water and (ii) telecommunications services
or infrastructure operations, such as airports, toll roads and municipal
services. Gabelli Funds, LLC (the "Investment Adviser") serves as investment
adviser to the Fund. An investment in the Fund is not appropriate for all
investors. We cannot assure you that the Fund's investment objective will be
achieved. FOR A DISCUSSION OF CERTAIN RISK FACTORS AND SPECIAL CONSIDERATIONS
WITH RESPECT TO OWNING COMMON SHARES OF THE FUND, SEE "RISK FACTORS AND SPECIAL
CONSIDERATIONS" ON PAGE __ OF THIS PROSPECTUS. The address of the Fund is One
Corporate Center, Rye, New York 10580 and its telephone number (914) 921-5070.


      This Prospectus sets forth certain information about the Fund an investor
should know before investing. Accordingly, this Prospectus should be retained
for future reference.


      A Statement of Additional Information dated August __, 2003 (the "SAI")
has been filed with the Securities and Exchange Commission and is incorporated
by reference in this Prospectus. The table of contents of the SAI appears on
page __ of this Prospectus. A copy of the SAI may be obtained without charge by
writing to the Fund at One Corporate Center, Rye, New York 10580-1434 or
calling the Fund toll-free at (800) 422-3554.


                            ________________________

<PAGE>

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIME.

                             SUBSCRIPTION                          PROCEEDS
                                 PRICE         SALES LOAD         TO FUND(1)
                          ----------------- ----------------   ----------------
Per Common Share..........       $____            None               $____
Total.....................    $__________         None           $_________(2)

(1) Before deduction of expenses incurred by the Fund, estimated at $_______.
(2) _________ shares representing $__________ of the proceeds can only be
    issued if the Common Shares on the Expiration Date are trading at or above
    their per share net asset value. In the event the Common Shares on the
    Expiration Date are not trading at or above their per share net asset
    value, then the maximum proceeds to the Fund will be $__________.

                            _______________________


      SHAREHOLDERS WHO DO NOT EXERCISE THEIR RIGHTS MAY, AT THE COMPLETION OF
THE OFFER, OWN A SMALLER PROPORTIONAL INTEREST IN THE FUND THAN IF THEY
EXERCISED THEIR RIGHTS. AS A RESULT OF THE OFFER YOU MAY EXPERIENCE DILUTION OR
ACCRETION OF THE AGGREGATE NET ASSET VALUE OF YOUR SHARES DEPENDING UPON
WHETHER THE FUND'S NET ASSET VALUE PER SHARE IS ABOVE OR BELOW THE SUBSCRIPTION
PRICE ON THE EXPIRATION DATE. The Fund cannot state precisely the extent of any
dilution or accretion at this time because the Fund does not know what the net
asset value per Common Share will be when the Offer expires or what proportion
of the Rights will be exercised. The Investment Adviser's parent company,
Gabelli Asset Management Inc. and its affiliates ("Affiliated Parties") may
purchase shares through the primary subscription and the over-subscription
privilege shares and Mr. Mario J. Gabelli, who may be deemed to control the
Fund's investment adviser, or his affiliated entities may also purchase
additional shares through the primary subscription and over-subscription
privilege and on the same terms as other shareholders.


                            _______________________


      This Prospectus sets forth concisely certain information about the Fund
that a prospective investor should know before investing. Investors are advised
to read and retain it for future reference. A Statement of Additional
Information dated August __, 2003 (the "SAI") containing additional information
about the Fund has been filed with the SEC and is incorporated by reference in
its entirety into this Prospectus. A copy of the SAI, the table of contents of
which appears on page __ of this Prospectus, may be obtained without charge by
contacting the Fund at (800) GABELLI (800) 422-3554) or (914) 921-5070. The SAI
will be sent within two Business Days (defined below) of receipt of a request.
Investors may also obtain the Statement of Additional Information, material
incorporated by reference, and other information about the Fund from the SEC's
website (http://www.sec.gov). Shareholder inquiries should be directed to the
Subscription Agent, EquiServe, at (800) 336-6983 or (781) 575-2000.


                            _______________________


                                August __, 2003



                                       2

<PAGE>

No dealer, salesperson or other person has been authorized to give any
information or to make any representations not contained in this prospectus. If
given or made, such information or representation must not be relied upon as
having been authorized by the Fund or the Fund's Investment Adviser. This
Prospectus does not constitute an offer to sell or the solicitation of an offer
to buy any security other than the Common Shares offered by this Prospectus,
nor does it constitute an offer to sell or the solicitation of an offer to buy
shares of Common Shares by anyone in any jurisdiction which such offer or
solicitation would be unlawful.

                            _______________________

                               TABLE OF CONTENTS
                                                                           PAGE
                                                                           ----


PROSPECTUS SUMMARY...........................................................1
TABLE OF FEES AND EXPENSES...................................................9
FINANCIAL HIGHLIGHTS........................................................10
THE OFFER...................................................................12
USE OF PROCEEDS.............................................................23
INVESTMENT OBJECTIVES AND POLICIES..........................................23
RISK FACTORS AND SPECIAL CONSIDERATIONS.....................................27
MANAGEMENT OF THE FUND......................................................34
DIVIDENDS AND DISTRIBUTIONS.................................................36
TAXATION....................................................................37
CAPITALIZATION..............................................................39
ANTI-TAKEOVER PROVISIONS OF THE DECLARATION OF TRUST AND BY-LAWS............44
CUSTODIAN, TRANSFER AGENT, DIVIDEND-DISBURSING AGENT AND REGISTRAR..........45
LEGAL MATTERS...............................................................45
EXPERTS.....................................................................45
FURTHER INFORMATION.........................................................45
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS...........................46
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION....................49




                                       i

<PAGE>

                               PROSPECTUS SUMMARY

      This summary highlights some information that is described more fully
elsewhere in this Prospectus. It may not contain all of the information that is
important to you. To understand the Offer fully, you should read the entire
document carefully, including the risk factors which can be found on page ___,
under the heading "Risk Factors and Special Considerations."


Purpose of the Offer


      The Board of Trustees of the Fund has determined that it would be in the
best interests of the Fund and its existing shareholders to increase the assets
of the Fund so that the Fund may be in a better position to take advantage of
investment opportunities that may arise. The Offer seeks to reward existing
shareholders by giving them the opportunity to purchase additional shares at a
price that may be below market and/or net asset value without incurring any
commission or charge. The distribution of the Rights, which themselves may have
intrinsic value, will also give non-participating shareholders the potential of
receiving a cash payment upon the sale of their Rights, which may be viewed as
partial compensation for the possible dilution of their interests in the Fund
as a result of the Offer.

      The Board of Trustees believes that increasing the size of the Fund may
lower the Fund's expenses as a proportion of average net assets because the
Fund's fixed costs can be spread over a larger asset base. There can be no
assurance that by increasing the size of the Fund, the Fund's expense ratio
will be lowered. The Board of Trustees also believes that a larger number of
outstanding shares and a larger number of beneficial owners of shares could
increase the level of market interest in and visibility of the Fund and improve
the trading liquidity of the Fund's shares on the NYSE.


Important Terms of the Offer


Total number of shares available for primary subscription.................______
Number of Rights you will receive for each outstanding
   share you own on the Record Date...............................One Right for
                                                                every one share*
Number of shares you may purchase with your Rights
   at the Subscription Price per share............................One share for
                                                           every three Rights**
Subscription Price........................................................$____
________________
*     The number of Rights to be issued to a shareholder on the Record Date
      will be rounded up to the nearest number of Rights evenly divisible by
      three.
**    Holders of Rights will be able to acquire additional Fund shares pursuant
      to an over-subscription privilege in certain circumstances.

===============================================================================
                 Shareholders' inquiries should be directed to:

                                   EquiServe
                        (800) 336-6983 or (781) 575-2000
                                   or Gabelli

                            (800) GABELLI (422-3554)
===============================================================================

                                       1
<PAGE>


Over-subscription Privilege


      Shareholders on the Record Date ("Record Date Shareholders") who fully
exercise all Rights initially issued to them are entitled to buy those Fund
shares, referred to as "primary subscription shares" that were not bought by
other Rights holders. If enough primary subscription shares are available, all
such requests will be honored in full. If the requests for primary subscription
shares exceed the primary subscription shares available, the available primary
subscription shares will be allocated pro rata among those fully exercising
Record Date Shareholders who over-subscribe based on the number of Rights
originally issued to them by the Fund. Shares acquired pursuant to the
over-subscription privilege are subject to allotment, which is more fully
discussed under "The Offer -- Over-Subscription Privilege."


      In addition, in the event that the Fund's per share net asset value on
the Expiration Date is equal to or less than the Subscription Price, the Fund,
in its sole discretion, may determine to issue up to _________ additional
Common Shares, referred to as "secondary over-subscription shares," to satisfy
over-subscription requests in excess of the new Fund shares available for
primary subscription. The Fund, in its sole discretion, would also be able to
issue additional Common Shares in an amount of up to 20% of the sum of shares
issued pursuant to the primary subscription and secondary over-subscription.
Any such new Common Shares will be allocated and issued in conjunction with the
secondary over- subscription shares to Record Date Shareholders who are
eligible to receive secondary over-subscription shares. Should the Fund
determine to issue some or all of the secondary over-subscription shares, it
will be allocated only among Record Date Shareholders who submitted
over-subscription requests. Rights holders who are not Record Date Shareholders
may not participate in the secondary over-subscription. Secondary
over-subscription shares will be allocated pro rata among those fully
exercising Record Date Shareholders who over-subscribe based on the number of
Rights originally issued to them by the Fund.


      Fund shares acquired pursuant to the over-subscription privilege are
subject to allotment, which is more fully discussed under "The Offer --
Over-Subscription Privilege."


Method for Exercising Rights


      Except as described below, subscription certificates evidencing the
Rights ("Subscription Certificates") will be sent to Record Date Shareholders
or their nominees. If you wish to exercise your Rights, you may do so in the
following ways:

         (1)      Complete and sign the Subscription Certificate. Mail it in
                  the envelope provided or deliver it, together with payment in
                  full to EquiServe, Providence, Rhode Island (the
                  "Subscription Agent") at the address indicated on the
                  Subscription Certificate. Your completed and signed
                  Subscription Certificate and payment must be received by the
                  Expiration Date.

         (2)      Contact your broker, banker or trust company, which can
                  arrange, on your behalf, to guarantee delivery of payment and
                  delivery of a properly completed and executed Subscription
                  Certificate by the close of business on the third Business
                  Day after the Expiration Date pursuant to a notice of
                  guaranteed delivery. A fee may be charged for this service.
                  The notice of guaranteed delivery must be received by the
                  Expiration Date.

                                       2


<PAGE>

         Rights holders will have no right to rescind a purchase after the
Subscription Agent has received payment. See "The Offer -- Method of Exercise
of Rights" and "The Offer -- Payment for Shares."


Sale of Rights

         The Rights are transferable until the Expiration Date and have been
admitted for trading on the NYSE. Although no assurance can be given that a
market for the Rights will develop, trading in the Rights on the NYSE will
begin three Business Days prior to the Record Date and may be conducted until
the close of trading on the last NYSE trading day prior to the Expiration Date.
The value of the Rights, if any, will be reflected by the market price. Rights
may be sold by individual holders or may be submitted to the Subscription Agent
for sale. Any Rights submitted to the Subscription Agent for sale must be
received by the Subscription Agent on or before September __, 2003, one
Business Day prior to the Expiration Date, due to normal settlement procedures.
Trading of the Rights on the NYSE will be conducted on a when-issued basis
until and including the date on which the Subscription Certificates are mailed
to Record Date shareholders and thereafter will be conducted on a regular-way
basis until and including the last NYSE trading day prior to the Expiration
Date. The shares will begin trading ex- Rights two Business Days prior to the
Record Date. If the Subscription Agent receives Rights for sale in a timely
manner, it will use its best efforts to sell the Rights on the NYSE. The
Subscription Agent will also attempt to sell any Rights (i) a Rights holder is
unable to exercise because the Rights represent the right to subscribe for less
than one new Share (defined herein) or (ii) attributable to shareholders whose
record addresses are outside the United States and Canada or who have an AFO or
FPO address as described below under "Restrictions on Foreign Shareholders."
Any commissions will be paid by the selling Rights holders. Neither the Fund
nor the Subscription Agent will be responsible if Rights cannot be sold and
neither has guaranteed any minimum sales price for the Rights. If the Rights
can be sold, sales of these Rights will be deemed to have been effected at the
weighted average price received by the Subscription Agent on the day such
Rights are sold, less any applicable brokerage commissions, taxes and other
expenses. For purposes of this Prospectus, a "Business Day" shall mean any day
on which trading is conducted on the NYSE.


===============================================================================
        Shareholders are urged to obtain a recent trading price for the
         Rights on the New York Stock Exchange from their broker, bank,
                   financial advisor or the financial press.
===============================================================================


Offering Fees and Expenses


         Offering expenses incurred by the Fund are estimated to be $_______.


Restrictions on Foreign Shareholders


         The Fund will not mail Subscription Certificates to shareholders whose
record addresses are outside the United States and Canada or who have an APO or
FPO address. Shareholders whose addresses are outside the United States and
Canada or who have an APO or FPO address and who wish to subscribe to the Offer
either in part or in full should contact the Subscription Agent, EquiServe, by
written instruction or recorded telephone conversation no later than three
Business Days prior to the Expiration Date. The Fund will determine whether the
offering may be made to any such shareholder. This offering will not be made in
any jurisdiction where it would be unlawful to do so. If the


                                       3
<PAGE>

Subscription Agent has received no instruction by the third Business Day prior
to the Expiration Date or the Fund has determined that the offering may not be
made to a particular shareholder, the Subscription Agent will attempt to sell
all of such shareholder's Rights and remit the net proceeds, if any, to such
shareholder. If the Rights can be sold, sales of these Rights will be deemed to
have been effected at the weighted average price received by the Subscription
Agent on the day the Rights are sold, less any applicable brokerage
commissions, taxes and other expenses.[1]

Use of Proceeds


         We estimate the net proceeds of the Offer to be approximately
$__________. This figure is based on the Subscription Price per share of $____
and assumes all new Common Shares offered are sold and that the expenses
related to the Offer estimated at approximately $_______ are paid.

         The Investment Adviser expects to invest such proceeds in accordance
with the Fund's investment objectives and policies within six months after
receipt of such proceeds, depending on market conditions for the types of
securities in which the Fund principally invests. Pending such investment, the
proceeds will be held in high quality short-term debt securities and
instruments.


Important Dates to Remember


         Please note that the dates in the table below may change if the Offer
is extended.

<TABLE>

EVENT                                                                           DATE
- -----                                                                           ----

<S>                                                                                    <C>


Record Date.................................................................August __, 2003
Subscription Period..............................August __, 2003 through September __, 2003**
Expiration of the Offer*.................................................September __, 2003**
Payment for Guarantees of Delivery Due*..................................September __, 2003**
Confirmation to Participants.............................................September __, 2003**


</TABLE>

______________


*   A shareholder exercising Rights must deliver by 5:00 New York time on
    September __, 2003 either (a) a Subscription Certificate and payment
    for shares or (b) a notice of guaranteed delivery.
**  Unless the offer is extended to a date no later than September __, 2003.




Information Regarding the Fund

         The Fund is a closed-end non-diversified management investment company
organized under the laws of the State of Delaware on February 25, 1999. The
Fund's primary investment objective is long- term growth of capital and income,
which the Fund attempts to achieve by investing at least 80% of its total
assets in common stock and other securities of foreign and domestic companies
involved to a substantial extent in providing (i) products, services or
equipment for the generation or distribution of electricity, gas and water and
(ii) telecommunications services or infrastructure operations, such as

_________

[1]     Confirm offering in Canada w/ Canadian Counsel.


                                       4

<PAGE>


airports, toll roads and municipal services (collectively, the "Utility
Industry"). No assurance can be given that the Fund's investment objectives
will be achieved. See "Investment Objectives and Policies." The Fund's
outstanding Common Shares are listed and traded on the New York Stock Exchange
(the "NYSE"). The average weekly trading volume of the Fund's Common Shares on
the NYSE during the period from January 1, 2002 through December 31, 2002 was
______ shares. On July 31, 2003, the Fund issued 1,200,000 shares of 5.625%
Series A Cumulative Preferred Shares, liquidation preference $25 per share (the
"Series A Preferred Shares") and 1,000 shares of Series B Auction Market
Preferred Shares, liquidation preference $25,000 per share (the "Series B
Preferred Shares"). As of July 31, 2003, the net assets of the Fund were
approximately $__________.



Information Regarding the Investment Adviser



         The Investment Adviser has served as the investment adviser to the
Fund since its inception. The Investment Adviser also provides certain
administrative services to the Fund. The Investment Adviser and its affiliates
have been engaged in the business of providing investment advisory and
portfolio management services for over 25 years and as of March 31, 2003,
managed total assets of approximately $19.5 billion. The Fund pays the
Investment Adviser a monthly fee at the annual rate of 1.00% of the Fund's
average weekly net assets. The Investment Adviser's fee is subject to a
voluntary fee waiver under certain circumstances. See "Management of the Fund
- -- Investment Adviser." Since the Investment Adviser's fees are based on the
net assets of the Fund, the Investment Adviser will benefit from the Offer. In
addition, three Trustees who are "interested persons" of the Fund could benefit
indirectly from the Offer because of their interests in the Investment Adviser.
See "The Offer -- Purpose of the Offer."



Risk Factors and Special Considerations


         The following summarizes some of the matters that you should consider
before investing in the Fund through the Offer.


Dilution............................Shareholders who do not exercise their
                                    Rights may, at the completion of the Offer,
                                    own a smaller proportional interest in the
                                    Fund than if they exercise their Rights. As
                                    a result of the Offer you may experience
                                    dilution or in net asset value per share if
                                    the exercise price is below or above net
                                    asset value per share on the Expiration
                                    Date. If the Subscription Price per share
                                    is below the Fund's net asset value per
                                    share of the Fund's shares on the
                                    Expiration Date, you will experience an
                                    immediate dilution of the aggregate net
                                    asset value of your shares if you do not
                                    participate in the Offer and you will
                                    experience a reduction in the net asset
                                    value per share of your shares whether or
                                    not you participate in the Offer. The Fund
                                    cannot state precisely the extent of this
                                    dilution (if any) if you do not exercise
                                    your Rights because the Fund does not know
                                    what the net asset value per share will be
                                    when the Offer expires or what proportion
                                    of the Rights will be exercised. For
                                    example, assuming that all Rights are
                                    exercised, the Subscription Price is $____
                                    and the Fund's net asset value per share at
                                    the expiration of the Offer increases to
                                    $____, the Fund's net asset value per share



                                       5
<PAGE>

                                    (after payment of estimated offering
                                    expenses) would be reduced by approximately
                                    $____ (____%) per share. See "Risk Factors
                                    and Special Considerations -- Dilution." If
                                    you do not wish to exercise your Rights,
                                    you should consider selling them as set
                                    forth in this Prospectus. The Fund cannot
                                    give any assurance, however, that a market
                                    for the Rights will develop or that the
                                    Rights will have any marketable value.


Leveraging..........................As provided in the 1940 Act and subject to
                                    certain exceptions, the Fund may issue debt
                                    or preferred shares (such as the
                                    outstanding Series A and Series B Preferred
                                    Shares) so long as the Fund's total assets
                                    immediately after such issuance, 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 shares and debt outstanding. Such
                                    debt or preferred shares may be convertible
                                    in accordance with SEC staff guidelines
                                    which may permit the Fund to obtain
                                    leverage at more attractive rates. Use of
                                    leverage may magnify the impact on the
                                    holders of Common Shares 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
                                    shares when it may be disadvantageous to do
                                    so. Leveraging through the issuance of
                                    preferred shares requires that the holders
                                    of the preferred shares have class voting
                                    rights on various matters that could make
                                    it more difficult for the holders of the
                                    Common Shares to change the investment
                                    objectives or fundamental policies of the
                                    fund, to convert it to an open-end fund or
                                    make certain other changes. See "Risk
                                    Factors and Special Considerations" and
                                    "Special Investment Methods."



Market Loss.........................Shares of closed-end funds frequently trade
                                    at a market price that is less than the
                                    value of the net assets attributable to
                                    those shares, although for most of the
                                    Fund's life its shares have traded at a
                                    premium over net asset value per share. The
                                    possibility that shares of the Fund will
                                    trade at a discount from net asset value or
                                    at premiums that are unsustainable over the
                                    long term are risks separate and distinct
                                    from the risk that the Fund's net asset
                                    value will decrease. The risk of purchasing
                                    shares of a closed-end fund that might
                                    trade at a discount or unsustainable
                                    premium is more pronounced for investors
                                    who wish to sell their shares in a
                                    relatively short period of time 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


                                       6
<PAGE>

                                    performance. See "Risk Factors and Special
                                    Considerations-- Market Value and Net Asset
                                    Value.


Trading Premium.....................Historically, the Fund's Common Shares have
                                    traded at a premium to their net asset
                                    value per share. As of August __ 2003, this
                                    premium was ___%. There is no guarantee
                                    that this premium is sustainable either
                                    during the term of the Offer or over the
                                    long term. The issuance of additional
                                    Common Shares pursuant to the Offer and the
                                    related over-subscription and secondary
                                    over-subscription privileges may reduce or
                                    eliminate any premium that common
                                    shareholders may have otherwise received
                                    for their Common Shares.



Share Repurchases...................You will be free to dispose of your shares
                                    on the NYSE or other markets on which the
                                    shares may trade, but, because the Fund is
                                    a closed-end fund, you do not have the
                                    right to redeem your Common Shares. The
                                    Fund is authorized to repurchase its shares
                                    on the open market when the shares are
                                    trading at a discount of 10% or more from
                                    net asset value. Such repurchases are
                                    subject to the Fund maintaining asset
                                    coverage on its preferred shares and to
                                    certain notice and other requirements.
                                    There is no assurance that any action
                                    undertaken to repurchase shares will result
                                    in the shares trading at a price which
                                    approximates their net asset value. Share
                                    repurchases by the Fund would decrease the
                                    capital of the Fund and could have the
                                    effect of increasing the Fund's expense
                                    ratio.



Anti-takeover Provisions............Certain provisions of the Fund's
                                    Declaration of Trust may be regarded as
                                    "anti-takeover" provisions. Pursuant to
                                    these provisions only one of the three
                                    classes of trustees is elected each year,
                                    and the affirmative vote of the holders of
                                    75% of the outstanding voting shares of the
                                    Fund (together with a separate class vote
                                    by the holders of any preferred shares
                                    outstanding) is necessary to authorize
                                    amendments to the Fund's Declaration of
                                    Trust that would be necessary to convert
                                    the 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 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 Fund. In addition, the
                                    holders of the preferred shares have the
                                    authority to elect two trustees at all
                                    times and would have separate class voting
                                    rights on specified matters including
                                    conversion of the Fund to open-end status
                                    and certain reorganizations of the 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 Fund to open-end status.
                                    These provisions may


                                       7
<PAGE>

                                    have the effect of depriving Fund
                                    shareholders of an opportunity to sell
                                    their shares at a premium above the
                                    prevailing market price. See "Certain
                                    Provisions of the Declaration of Trust and
                                    By-laws."

Non-Diversified Status..............As a non-diversified investment company
                                    under the 1940 Act, the Fund is not limited
                                    in the proportion of its assets that may be
                                    invested in securities of a single issuer.
                                    As a result of investing a greater portion
                                    of its assets in the securities of a
                                    smaller number of issuers, the Fund may be
                                    more vulnerable to events affecting a
                                    single issuer and therefore subject to
                                    greater volatility than a fund that is more
                                    broadly diversified. Accordingly, an
                                    investment in the Fund may, under some
                                    circumstances, present greater risk to an
                                    investor than an investment in a
                                    diversified company. See "Risk Factors and
                                    Special Considerations-- Non-Diversified
                                    Status."

Foreign Securities..................There is no limitation on the amount of
                                    foreign securities in which the 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 Fund to be
                                    affected favorably or unfavorably by
                                    changes in currency exchange rates and
                                    revaluations of currencies. See "Investment
                                    Objectives and Policies" and "Risk Factors
                                    and Special Considerations."


Industry Risks......................Under normal market conditions, the Fund
                                    will invest 80% or more of its total assets
                                    in companies in the Utility Industry and,
                                    as a result, the value of the 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, technological
                                    innovations that may render existing
                                    products and equipment obsolete and
                                    increases in interest rates resulting in
                                    higher interest costs on borrowings needed
                                    for capital construction programs,
                                    including costs associated with compliance
                                    with environmental and other regulations.
                                    As a consequence of its concentration
                                    policy, the 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 Policies" and "Risk Factors and Special
                                    Considerations."


Key Personnel Dependence............The Investment Adviser is dependent upon
                                    the expertise of Mr. Mario J. Gabelli in
                                    providing advisory services with respect to
                                    the Fund's investments. If the Investment
                                    Adviser were to lose the services of Mr.
                                    Gabelli, its ability to service the Fund
                                    could be adversely affected. 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

                                       8
<PAGE>

                                    Investment Adviser.

Taxation............................The Fund intends to continue to be treated
                                    and qualify as a regulated investment
                                    company, for U.S. federal income tax
                                    purposes. Such qualification requires,
                                    among other things, compliance by the Fund
                                    with certain distribution requirements. The
                                    Fund is also, however, subject to certain
                                    statutory limitations on distributions on
                                    its Common Shares if the Fund fails to
                                    satisfy the 1940 Act's asset coverage
                                    requirements which could jeopardize the
                                    Fund's ability to meet the regulated
                                    investment company distribution
                                    requirements. See "Taxation" for a more
                                    complete discussion.


                           TABLE OF FEES AND EXPENSES

SHAREHOLDER TRANSACTION EXPENSES

Voluntary Cash Purchase Plan Purchase Fees...........................  $0.75 (1)

Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan
Sales Fees...........................................................  $2.50 (1)

ANNUAL  OPERATING  EXPENSES (as a percentage of net assets
attributable to Common Shares)


Management Fees...................................................... 1.00%  (2)


Other Expenses                                                        0.93%
                                                                     -----------

         Total Annual Operating Expenses............................. 1.93%  (2)
                                                                     -----------

(1)      Shareholders participating in the 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 "Automatic Dividend Reinvestment and Voluntary Cash
         Purchase Plan" in the SAI.


(2)      The Investment Adviser has voluntarily agreed to waive the portion of
         its investment advisory fee attributable to an amount of assets of the
         Fund equal to the aggregate stated value of its outstanding Series A
         Preferred Shares and/or Series B Preferred Shares for any calendar
         year in which the net asset value total return of the Fund allocable
         to the common shares, including distributions and the advisory fee
         subject to potential waiver, is less than (i) in the case of the
         Series A Preferred Shares, the stated annual dividend rate of such
         series and (ii) in the case of the Series B Preferred Shares, the net
         cost of capital to the Fund with respect to the Series B Preferred
         Shares for such year expressed as a percentage (including, without
         duplication, dividends paid by the Fund on the Series B Preferred
         Shares and the net cost to the Fund of any associated swap or cap
         transaction if the Fund hedges its Series B Preferred Shares dividend
         obligations). This waiver will apply separately to the portion of the
         Fund's assets attributable to the Series A Preferred Shares and Series
         B Preferred Shares for so long as any shares of such series remain
         outstanding.


                                       9
<PAGE>


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 the Fund. These amounts are based upon payment by
the 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 (2):


       1 YEAR              3 YEARS              5 YEARS              10 YEARS
       ------              -------              -------              --------
        $ -                  $ -                  $ -                  $ -

         The foregoing table is to assist you in understanding the various
costs and expenses that an investor in the 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 Fund's Common Shares.
Actual expenses and annual rates of return may be more or less than those
assumed for purposes of the Example.

                          ----------------------------

(2)      Amounts are exclusive of fees discussed in Note (1) above.

                              FINANCIAL HIGHLIGHTS

         The table below sets forth selected financial data for a Common Share
outstanding throughout the periods presented. The per share operating
performance and ratios for the fiscal years ended December 31, 2002, December
31, 2001, December 31, 2000 and the period ended December 31, 1999 have been
audited by PricewaterhouseCoopers LLP, the Fund's independent accountants, as
stated in their report which is incorporated by reference into the SAI. The
following information should be read in conjunction with the Financial
Statements and Notes thereto, which are incorporated by reference into the SAI.


                                       10
<PAGE>

Selected Data for a Common Share Outstanding Throughout Each Period

<TABLE>
<CAPTION>
                                         Six Months

                                         Ended June      Year Ended      Year Ended     Year Ended    Period Ended
                                          30, 2003      December 31,    December 31,    December 31,   December 31,
                                         (Unaudited)        2002            2001           2000          1999 (a)
                                         -------------  --------------  -------------- ------------- ---------------
OPERATING PERFORMANCE:

<S>                                          <C>              <C>              <C>           <C>             <C>
   Net asset value, beginning of period.     $   6.27         $   7.32         $ 8.21        $ 7.62          $ 7.50
                                             --------         ---------       -------        ------          ------
   Net investment income................         0.05             0.11        0.12(e)          0.15            0.08
   Net realized and unrealized gain(loss
   on investments.......................)        0.67            (0.62)       (0.32)(e)        1.44            0.19
                                                 ----           ------       ---------         ----            ----
   Total from investment operations.....         0.72            (0.51)         (0.20)         1.59            0.27
                                                 ----           ------       ---------         ----            ----
CHANGE IN NET ASSET VALUE
FROM TRANSACTIONS IN SHARES
OF BENEFICIAL INTEREST:

   Increase in net asset value from shar
   issued in rights offering............es      --                0.15          --            --              --
   Increase in net asset value from Trus
   share transactions...................t       --                0.03           0.01           -               -
                                               -----              ----         ------         -----           ---
DISTRIBUTIONS TO

SHAREHOLDERS:

   Net investment income................       (0.05)           (0.11)         (0.21)        (0.06)          (0.08)
   Net realized gain on investments.....        --              (0.36)         (0.49)        (0.94)          (0.07)
   Return of Capital....................       (0.31)           (0.25)          --            --              --
                                               ------          -------        -------        ------          ------
   Total distributions..................       (0.36)           (0.72)         (0.70)        (1.00)          (0.15)
                                               ------          -------        -------        ------          ------
NET ASSET VALUE, END OF PERIOD:              $   6.63          $ 6.27           $7.32         $8.21          $ 7.62
                                             ========          =======        -------        ======          ======
   Market value, end of period..........     $   9.61          $ 8.72           $9.33         $8.75          $ 7.63
                                             ========          =======        =======        ======          ======
   Net asset value total return + ......       10.29%          (6.79%)        (3.15%)        22.01%           3.62%
                                             ========          =======        =======        ======          ======
Total Investment Return ++ .............       14.95%            1.70%         15.82%        29.95%           3.70%
                                             ========          =======        =======        ======          ======
RATIOS TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:

   Net assets, end of period (in thousands)  $101,252         $ 95,111       $ 82,197      $ 90,669        $ 83,330
   Ratio of net investment income to
   average net assets (c)................    1.72%(b)            1.65%          1.57%         1.88%        2.27%(b)
   Ratio of operating expenses to average
   net assets (c)(d).....................    1.93%(b)            1.93%          2.00%         1.95%        1.85%(b)
   Portfolio turnover rate..............           3%              29%            41%           92%             37%
</TABLE>


_____________________
 +       Based on net asset value per share, adjusted for reinvestment of
         distributions. Total return for the period of less than one year is
         not annualized.

++       Based on market value per share, adjusted for reinvestment of
         distributions including the effects of shares issued pursuant to
         rights offering, assuming full subscription by shareholders. Total
         return for the period of less than one year is not annualized.

(a)      The Gabelli Utility Trust commenced investment operations on July 9,
         1999. (b) Annualized.

(c)      During the period ended December 31, 1999, the Utility Trust's
         administrator voluntarily reimbursed certain expenses. If such
         reimbursement had not occurred, the annualized ratios of net
         investment income and operating expenses to average net assets would
         have been 1.85% and 2.17%, respectively.

(d)      The ratios do not include a reduction of expenses for custodian fee
         credits on cash balances maintained with the custodian. Including such
         custodian fee credits for the six months ended June 30, 2003 and the
         year ended December 31, 2002, December 31, 2001 and the year ended
         December 31, 2000, the expense ratios would be 1.93%, 1.93%, 2.00% and
         1.93%, respectively.

(e)      2001's Net investment income per share and net realized and unrealized
         gain (loss) on investments were originally presented in the Financial
         Highlights without regard to the character of distributions paid
         during the year. Amounts as previously reported of $0.61 and $(0.81),
         respectively, have been revised to reflect reclassification of amounts
         based on the character of 2001 distributions.


                                       11
<PAGE>

                                   THE OFFER


Terms of the Offer



         The Fund is issuing to Record Date Shareholders Rights to subscribe
for additional Common Shares. Each Record Date Shareholder is being issued one
transferable Right for each Common Share owned on the Record Date. The Right
entitles the holder to acquire at the Subscription Price one Share for each
three Rights held rounded up to the nearest number of Rights evenly divisible
by three. Fractional shares will not be issued upon the exercise of the Rights.
Accordingly, Shares may be purchased only pursuant to the exercise of Rights in
integral multiples of three. In the case of Common Shares held of record by
Cede & Co. ("Cede"), as nominee for the Depository Trust Company ("DTC"), or
any other depository or nominee, the number of Rights issued to Cede or such
other depository or nominee will be adjusted to permit rounding up (to the
nearest number of Rights evenly divisible by three) of the Rights to be
received by beneficial owners for whom it is the holder of record only if Cede
or such other depository or nominee provides to the Fund on or before the close
of business on August __, 2003 written representation of the number of Rights
required for such rounding. Rights may be exercised at any time during the
period (the "Subscription Period"), which commences on August __, 2003, and
ends at 5:00 p.m., New York time, on September __, 2003 (the "Subscription
Period"), unless extended by the Fund to a date not later than September __,
2003, 5:00 p.m., New York time. See "Expiration of the Offer." The Right to
acquire one additional Share for each Right held during the Subscription Period
at the Subscription Price will be referred to in the remainder of this
Prospectus as the "Primary Subscription."

         In addition, any Record Date Shareholder who fully exercises all
Rights initially issued to him is entitled to subscribe for Common Shares
available for Primary Subscription (the "Primary Subscription Shares") that
were not subscribed for by other Rights holders on Primary Subscription. In
addition, in the event that the Common Shares on the Expiration Date are
trading at or above its per share net asset value, the Fund may, in its sole
discretion, issue up to an additional _____ shares (the "Secondary Over-
Subscription Shares") to satisfy over-subscription requests in excess of the
available Primary Subscription Shares. The Fund, in its sole discretion, would
also be able to issue additional Common Shares in an amount of up to 20% of the
sum of the Primary Subscription Shares and Secondary Over- Subscription Shares.
The entitlement to subscribe for un-subscribed Primary Subscription Shares, any
Secondary Over-Subscription Shares and any additional Common Shares will be
referred to in the remainder of this Prospectus as the "Over-Subscription
Privilege"). For purposes of determining the maximum number of Common Shares a
Record Date Shareholder may acquire pursuant to the Offer, broker-dealers whose
Common Shares are held of record by Cede, nominee for DTC, or by any other
depository or nominee, will be deemed to be the holders of the Rights that are
issued to Cede or such other depository or nominee on their behalf. Common
Shares acquired pursuant to the Over-Subscription Privilege are subject to
allotment, which is more fully discussed below under "Over-Subscription
Privilege."


         Officers of the Investment Adviser have advised the Fund that the
Affiliated Parties, as Record Date Shareholders, have been authorized to
purchase Common Shares through the Primary Subscription and the
Over-Subscription Privilege to the extent Common Shares become available to it
in accordance with the Primary Subscription and the allotment provisions of the
Over-Subscription Privilege. In addition, Mario J. Gabelli individually or his
affiliated entities, as a Record Date Shareholder, may also purchase Common
Shares through the Primary Subscription and the Over-Subscription Privilege.
Such

                                       12
<PAGE>

over-subscriptions by the Affiliated Parties and Mr. Gabelli may
disproportionately increase their already existing ownership resulting in a
higher percentage ownership of outstanding Common Shares if any Record Date
Shareholder fails to fully exercise its Rights. Any Common Shares acquired
whether by Primary Subscription or the Over-Subscription Privilege by the
Affiliated Parties or Mr. Gabelli, as "affiliates" of the Fund as that term is
defined under the Securities Act of 1933, as amended (the "Securities Act"),
may only be sold in accordance with Rule 144 under the Securities Act or
another applicable exemption or pursuant to an effective registration statement
under the Securities Act. In general, under Rule 144, as currently in effect,
an "affiliate" of the Fund is entitled to sell, within any three-month period,
a number of Common Shares that does not exceed the greater of 1% of the then
outstanding Common Shares or the average weekly reported trading volume of the
Common Shares during the four calendar weeks preceding such sale. Sales under
Rule 144 are also subject to certain restrictions on the manner of sale, to
notice requirements and to the availability of current public information about
the Fund. In addition, any profit resulting from the sale of Common Shares
under Rule 144, if the Common Shares are held for a period of less than six
months, will be returned to the Fund.

         Rights will be evidenced by Subscription Certificates. The number of
Rights issued to each holder will be stated on the Subscription Certificate
delivered to the holder. The method by which Rights may be exercised and shares
paid for is set forth below in "Method of Exercise of Rights" and "Payment for
Shares." A Rights holder will have no right to rescind a purchase after the
Subscription Agent has received payment. See "Payment for Shares" below. Common
Shares issued pursuant to an exercise of Rights will be listed on the NYSE.

         The Rights are transferable until the Expiration Date and will be
admitted for trading on the NYSE. Assuming a market exists for the Rights, the
Rights may be purchased and sold through usual brokerage channels and sold
through the Subscription Agent. Although no assurance can be given that a
market for the Rights will develop, trading in the Rights on the NYSE will
begin three Business Days before the Record Date and may be conducted until the
close of trading on the last NYSE trading day prior to the Expiration Date.
Trading of the Rights on the NYSE will be conducted on a when-issued basis
until and including the date on which the Subscription Certificates are mailed
to Record Date Shareholders and thereafter will be conducted on a regular way
basis until and including the last NYSE trading day prior to the Expiration
Date. The method by which Rights may be transferred is set forth below under
"Method of Transferring Rights." The Common Shares will begin trading ex-Rights
two Business Days prior to the Record Date.

         Nominees who hold the Fund's Common Shares for the account of others,
such as banks, brokers, trustees or depositories for securities, should notify
the respective beneficial owners of such shares as soon as possible to
ascertain such beneficial owners' intentions and to obtain instructions with
respect to the Rights. If the beneficial owner so instructs, the nominee will
complete the Subscription Certificate and submit it to the Subscription Agent
with proper payment. In addition, beneficial owners of the Common Shares or
Rights held through such a nominee should contact the nominee and request the
nominee to effect transactions in accordance with such beneficial owner's
instructions.


Purpose of the Offer


         The Board of Trustees of the Fund has determined that it would be in
the best interests of the Fund and the shareholders to increase the assets of
the Fund available for investment thereby permitting the Fund to be in a better
position to more fully take advantage of investment opportunities that may


                                       13
<PAGE>

arise. The Offer seeks to reward existing shareholders by giving them the right
to purchase Shares at a price that may be below market and/or net asset value
without incurring any commission charge. The distribution to shareholders of
transferable Rights, which themselves may have intrinsic value, will also
afford non-subscribing shareholders the potential of receiving a cash payment
upon sale of such Rights, receipt of which may be viewed as partial
compensation for the possible dilution of their interests in the Fund.

         The Fund's Investment Adviser will benefit from the Offer because the
Investment Adviser's fee is based on the average net assets of the Fund. See
"Management of the Fund." It is not possible to state precisely the amount of
additional compensation the Investment Adviser will receive as a result of the
Offer because the proceeds of the Offer will be invested in additional
portfolio securities which will fluctuate in value. However, assuming all
Rights are exercised and that the Fund receives the maximum proceeds of the
Offer, the annual compensation to be received by the Investment Adviser would
be increased by approximately $______. Three of the Fund's Trustees, including
Mario J. Gabelli, who voted to authorize the Offer are "interested persons" of
the Investment Adviser within the meaning of the 1940 Act and may benefit
indirectly from the Offer because of their interest in the Investment Adviser.
See "Management of the Fund" in the SAI. In determining that the Offer was in
the best interest of shareholders, the Fund's Board of Trustees was cognizant
of this benefit as well as the possible participation of the Affiliated Parties
and Mr. Gabelli in the Offer as shareholders on the same basis as other
shareholders.

         The Fund may, in the future and at its discretion, choose to make
additional rights offerings from time to time for a number of shares and on
terms which may or may not be similar to the Offer. Any such future rights
offering will be made in accordance with the 1940 Act. Under the laws of
Delaware, the state in which the Fund is organized, and the Trust's Declaration
of Trust, the Board of Trustees is authorized to make rights offerings without
obtaining shareholder approval. The staff of the Securities and Exchange
Commission ("SEC") has interpreted the 1940 Act as not requiring shareholder
approval of a rights offering at a price below the then current net asset value
so long as certain conditions are met, including a good faith determination by
the Fund's Board of Trustee's that such offering would result in a net benefit
to existing shareholders.


Over-subscription Privilege


         If all of the Rights initially issued are not exercised, any Primary
Subscription Shares for which subscriptions have not been received will be
offered, by means of the Over-Subscription Privilege, to Record Date
Shareholders who have exercised all the Rights initially issued to them and who
wish to acquire additional Common Shares. Record Date Shareholders who exercise
all the Rights initially issued to them will have the opportunity to indicate
on the Subscription Certificate how many Shares they are willing to acquire
pursuant to the Over-Subscription Privilege. If sufficient Primary Subscription
Shares remain after the Primary Subscriptions have been exercised, all
over-subscription requests will be honored in full. If sufficient Primary
Subscription Shares are not available to honor all subscription requests, the
available Common Shares will be allocated among those Record Date Shareholders
who over-subscribe based on the number of Rights originally issued to them by
the Fund.


         In addition, the Board of Trustees of the Fund has established a
Pricing Committee which is authorized, in the event that the Fund's per share
net asset value on the Expiration Date is at or below the Subscription Price,
to direct the Fund to issue Secondary Over-Subscription Shares to satisfy over-

                                       14
<PAGE>

subscription requests in excess of the available Primary Subscription Shares.
The Fund would also be able to issue additional Common Shares in an amount of
up to 20% of the sum of the Primary Subscription Shares and Secondary
Over-Subscription Shares to satisfy over-subscription requests in these
circumstances. Should the Pricing Committee determine to issue some or all of
these Secondary Over-Subscription Shares and any additional Common Shares, they
will be allocated only among Record Date Shareholders that submitted
over-subscription requests. Rights holders who are not Record Date Shareholders
may not participate in the secondary over-subscription. Secondary
Over-Subscription Shares and any additional Common Shares will be allocated pro
rata among those fully exercising Record Date Shareholders who over-subscribe
based on the number of Rights originally issued to them by the Fund. Any
Secondary Over-Subscription Shares issued by the Fund, collectively with any
Primary Subscription Shares not subscribed for through the Primary
Subscription, and any additional Common Shares, will be referred to in this
Prospectus as the "Excess Shares."


         The percentage of Excess Shares each over-subscribing Record Date
Shareholder may acquire will be rounded down to result in delivery of whole
Common Shares; provided, however, that if a pro rata allocation results in any
holder being allocated a greater number of Excess Shares than the holder
subscribed for pursuant to the exercise of such holder's Over-Subscription
Privilege, then such holder will be allocated only such number of Excess Shares
as such holder subscribed for and the remaining Excess Shares will be allocated
among all other holders then entitled to receive Excess Shares whose
over-subscription requests have not been fully honored. The allocation process
may be iterative in order to assure that the total number of Excess Shares is
distributed in accordance with the method described above.

The formula to be used in allocating the Excess Shares is as follows:

Record Date Shareholder's Position           x          Excess Shares Remaining
- ----------------------------------
Total Record Date Position
 of All Over-Subscribers

         The Fund will not offer or sell any Common Shares which are not
subscribed for under the Primary Subscription or the Over-Subscription
Privilege.


The Subscription Price


         The Subscription Price for the Shares to be issued pursuant to the
Rights will be $____.


         The Fund announced the Offer on August __, 2003. The net asset value
per Common Share at the close of business on August __, 2003 (the last date
prior to the Fund's announcement of the Offer), was $___. The last reported
sale price of a Common Share on the NYSE on that date was $___, representing a
__% premium in relation to the then current net asset value per share and a
premium in relation to the Subscription Price.



Sales by Subscription Agent



         Holders of Rights who are unable or do not wish to exercise any or all
of their Rights may instruct the Subscription Agent to sell any unexercised
Rights. The Subscription Certificates representing the Rights to be sold by the
Subscription Agent must be received on or before September __,



                                       15
<PAGE>

2003. Upon the timely receipt of the appropriate instructions to sell Rights,
the Subscription Agent will use its best efforts to complete the sale and will
remit the proceeds of sale, net of commissions, to the holders. If the Rights
can be sold, sales of the Rights will be deemed to have been effected at the
weighted average price received by the Subscription Agent on the day such
Rights are sold. The selling Rights holder will pay all brokerage commissions
incurred by the Subscription Agent. These sales may be effected by the
Subscription Agent through Gabelli & Company, Inc., a registered broker-dealer
and an affiliate of the Investment Adviser, at a commission of up to $0.02 per
Right, provided that, if the Subscription Agent is able to negotiate a lower
brokerage commission with an independent broker, the Subscription Agent will
execute these sales through that independent broker. Gabelli & Company, Inc.
may also act on behalf of its clients to purchase or sell Rights in the open
market and be compensated for its services. The Subscription Agent will
automatically attempt to sell any unexercised Rights that remain unclaimed as a
result of Subscription Certificates being returned by the postal authorities as
undeliverable as of the fourth Business Day prior to the Expiration Date. These
sales will be made net of commissions on behalf of the nonclaiming holders of
Rights. Proceeds from those sales will be held by EquiServe, in its capacity as
the Fund's transfer agent, for the account of the nonclaiming holder of rights
until the proceeds are either claimed or escheated. There can be no assurance
that the Subscription Agent will be able to complete the sale of any of these
Rights and neither the Fund nor the Subscription Agent has guaranteed any
minimum sales price for the Rights. All of these Rights will be sold at the
market price, if any, on the NYSE or through an unaffiliated market maker if no
market exists on the NYSE.



Method of Transferring Rights


         The Rights evidenced by a single Subscription Certificate may be
transferred in whole by endorsing the Subscription Certificate for transfer in
accordance with the accompanying instructions. A portion of the Rights
evidenced by a single Subscription Certificate (but not fractional Rights) may
be transferred by delivering to the Subscription Agent a Subscription
Certificate properly endorsed for transfer, with instructions to register the
portion of the Rights evidenced thereby in the name of the transferee (and to
issue a new Subscription Certificate to the transferee evidencing the
transferred Rights). In this event, a new Subscription Certificate evidencing
the balance of the Rights will be issued to the Rights holder or, if the Rights
holder so instructs, to an additional transferee.

         Holders wishing to transfer all or a portion of their Rights (but not
fractional Rights) should allow at least three Business Days prior to the
Expiration Date for (i) the transfer instructions to be received and processed
by the Subscription Agent, (ii) a new Subscription Certificate to be issued and
transmitted to the transferee or transferees with respect to transferred
Rights, and to the transferor with respect to retained rights, if any, and
(iii) the Rights evidenced by the new Subscription Certificates to be exercised
or sold by the recipients thereof. Neither the Fund nor the Subscription Agent
shall have any liability to a transferee or transferor of Rights if
Subscription Certificates are not received in time for exercise or sale prior
to the Expiration Date.

         Except for the fees charged by the Subscription Agent (which will be
paid by the Fund as described below), all commissions, fees and other expenses
(including brokerage commissions and transfer taxes) incurred in connection
with the purchase, sale or exercise of Rights will be for the account of the
transferor of the Rights, and none of these commissions, fees or expenses will
be paid by the Fund or the Subscription Agent.


                                       16
<PAGE>

         The Fund anticipates that the Rights will be eligible for transfer
through, and that the exercise of the Primary Subscription and
Over-Subscription may be effected through, the facilities of DTC (Rights
exercised through DTC are referred to as "DTC Exercised Rights").


Expiration of the Offer



         The Offer will expire at 5:00 p.m., New York time, on September __,
2003, unless extended by the Fund to a date not later than September __, 2003,
5:00 p.m., New York time (the "Expiration Date"). Rights will expire on the
Expiration Date and thereafter may not be exercised.



Subscription Agent


         The Subscription Agent is EquiServe, Att: Corporate Actions, P.O. Box
43025, Providence, R.I. 02940-3025. The Subscription Agent will receive from the
Fund an amount estimated to be $______ comprised of the fee for its services and
the reimbursement for certain expenses related to the Offer. INQUIRIES BY ALL
HOLDERS OF RIGHTS SHOULD BE DIRECTED TO P.O. BOX 43025, PROVIDENCE, R.I.
02940-3025 (TELEPHONE (800) 336-6983 OR (781) 575-2000); HOLDERS MAY ALSO
CONSULT THEIR BROKERS OR NOMINEES.


Method of Exercise of Rights


         Rights may be exercised by filling in and signing the reverse side of
the Subscription Certificate and mailing it in the envelope provided, or
otherwise delivering the completed and signed Subscription Certificate to the
Subscription Agent, together with payment for the Shares as described below
under "Payment for Shares." Rights may also be exercised through a Rights
holder's broker, who may charge the Rights holder a servicing fee in connection
with such exercise.

         Completed Subscription Certificates must be received by the
Subscription Agent prior to 5:00 p.m., New York time, on the Expiration Date
(unless payment is effected by means of a notice of guaranteed delivery as
described below under "Payment for Shares"). The Subscription Certificate and
payment should be delivered to EquiServe at the following address:

If By Mail:                     P.O. Box 43025
                                Reporting Services, Inc.
                                Providence, RI 02940-3025

If By Hand:                     Securities Transfer and Reporting Services, Inc.
                                c/o EquiServe
                                100 Williams St. Galleria

                                New York, NY 10038

If By Overnight Courier:        EquiServe
                                Attn:  Corporate Actions
                                40 Campanelli Drive
                                Braintree, MA 02184


                                       17
<PAGE>


Payment for Shares


         Holders of Rights who acquire Shares on Primary Subscription or
pursuant to the Over- Subscription Privilege may choose between the following
methods of payment:

(1)      A subscription will be accepted by the Subscription Agent if, prior to
         5:00 p.m., New York time, on the Expiration Date, the Subscription
         Agent has received a notice of guaranteed delivery by telegram or
         otherwise from a bank, a trust company, or a NYSE member, guaranteeing
         delivery of (i) payment of the full Subscription Price for the Common
         Shares subscribed for on the Primary Subscription and any additional
         Common Shares subscribed for pursuant to the Over- Subscription
         Privilege and (ii) a properly completed and executed Subscription
         Certificate. The Subscription Agent will not honor a notice of
         guaranteed delivery if a properly completed and executed Subscription
         Certificate and full payment is not received by the Subscription Agent
         by the close of business on the third Business Day after the
         Expiration Date. The notice of guaranteed delivery may be delivered to
         the Subscription Agent in the same manner as Subscription Certificates
         at the addresses set forth above, or may be transmitted to the
         Subscription Agent by facsimile transmission (fax number (781)
         380-3388; telephone number to confirm receipt (781) 575-4816).

(2)      Alternatively, a holder of Rights can send the Subscription
         Certificate together with payment in the form of a check for the
         Shares subscribed for on Primary Subscription and additional Common
         Shares subscribed for pursuant to the Over-Subscription Privilege to
         the Subscription Agent based on the Subscription Price of $___ per
         Share. To be accepted, the payment, together with the executed
         Subscription Certificate, must be received by the Subscription Agent
         at the addresses noted above prior to 5:00 p.m., New York time, on the
         Expiration Date. The Subscription Agent will deposit all stock
         purchase checks received by it prior to the final due date into a
         segregated interest-bearing account pending proration and distribution
         of Common Shares. The Subscription Agent will not accept cash as a
         means of payment for Common Shares.

         EXCEPT AS OTHERWISE SET FORTH BELOW, A PAYMENT PURSUANT TO THIS METHOD
         MUST BE IN UNITED STATES DOLLARS BY MONEY ORDER OR CHECK DRAWN ON A
         BANK LOCATED IN THE CONTINENTAL UNITED STATES, MUST BE PAYABLE TO THE
         GABELLI UTILITY TRUST, AND MUST ACCOMPANY AN EXECUTED SUBSCRIPTION
         CERTIFICATE TO BE ACCEPTED. If the aggregate

         Subscription Price paid by a Record Date Shareholder is insufficient
         to purchase the number of Common Shares that the holder indicates are
         being subscribed for, or if a Record Date Shareholder does not specify
         the number of Common Shares to be purchased, then the Record Date
         Shareholder will be deemed to have exercised first, the Primary
         Subscription Rights (if not already fully exercised) and second, the
         Over-Subscription Privilege to the full extent of the payment
         tendered. If the aggregate Subscription Price paid by such holder is
         greater than the Common Shares he has indicated an intention to
         subscribe, then the Rights holder will be deemed to have exercised
         first, the Primary Subscription Rights (if not already fully
         subscribed) and second, the Over-Subscription Privilege to the full
         extent of the excess payment tendered.

         Any payment required from a holder of Rights must be received by the
Subscription Agent on the Expiration Date, or if the Rights holder has elected
to make payment by means of a notice of guaranteed delivery, on the third
Business Day after the Expiration Date. All payments by a holder of Rights must
be in United States dollars by money order or check drawn on a bank located in
the continental United


                                       18
<PAGE>

States of America and payable to The Gabelli Utility Trust. Whichever of the
two methods of payment described above is used, issuance and delivery of
certificates for the Shares purchased are subject to collection of checks and
actual payment pursuant to any notice of guaranteed delivery.


         Within ten Business Days following the Expiration Date (the
"Confirmation Date"), a confirmation will be sent by the Subscription Agent to
each holder of Rights (or, if the Common Shares are held by Cede or any other
depository or nominee, to Cede or such other depository or nominee), showing
(i) the number of Shares acquired pursuant to the Primary Subscription, (ii)
the number of Shares, if any, acquired pursuant to the Over-Subscription
Privilege, (iii) the per share and total purchase price for the Common Shares
and (iv) any excess to be refunded by the Fund to such holder as a result of
payment for Common Shares pursuant to the Over-Subscription Privilege which the
holder is not acquiring. Any payment required from a holder of Rights must be
received by the Subscription Agent on the Expiration Date, or if the Rights
holder has elected to make payment by means of a notice of guaranteed delivery,
on the third Business Day after the Expiration Date. Any excess payment to be
refunded by the Fund to a holder of Rights, or to be paid to a holder of Rights
as a result of sales of Rights on his behalf by the Subscription Agent or
exercises by Record Date Shareholders of their Over- Subscription Privileges,
and all interest accrued on the holder's excess payment will be mailed by the
Subscription Agent to the holder within fifteen Business Days after the
Expiration Date. Interest on the excess payment will accrue through the date
that is one Business Day prior to the mail date of the reimbursement check. All
payments by a holder of Rights must be in United States dollars by money order
or check drawn on a bank located in the continental United States of America
and payable to The Gabelli Utility Trust except that holders of Rights who are
residents of Canada may make payment in U.S. dollars by money order or check
drawn on a bank located in Canada.


         Whichever of the two methods described above is used, issuance and
delivery of certificates for the Common Shares purchased are subject to
collection of checks and actual payment pursuant to any notice of guaranteed
delivery.

         A Rights holder will have no right to rescind a purchase after the
Subscription Agent has received payment either by means of a notice of
guaranteed delivery or a check.

         If a holder of Rights who acquires Common Shares pursuant to the
Primary Subscription or the Over-Subscription Privilege does not make payment
of any amounts due, the Fund reserves the right to take any or all of the
following actions: (i) find other purchasers for such subscribed-for and
unpaid-for Common Shares; (ii) apply any payment actually received by it toward
the purchase of the greatest whole number of Common Shares which could be
acquired by such holder upon exercise of the Primary Subscription or the
Over-Subscription Privilege; (iii) sell all or a portion of the Common Shares
purchased by the holder, in the open market, and apply the proceeds to the
amounts owed; and (iv) exercise any and all other rights or remedies to which
it may be entitled, including, without limitation, the right to set off against
payments actually received by it with respect to such subscribed Common Shares
and to enforce the relevant guaranty of payment.

         Holders who hold Common Shares for the account of others, such as
brokers, trustees or depositories for securities, should notify the respective
beneficial owners of the Common Shares as soon as possible to ascertain such
beneficial owners' intentions and to obtain instructions with respect to the
Rights. If the beneficial owner so instructs, the record holder of the Rights
should complete Subscription Certificates and submit them to the Subscription
Agent with the proper payment. In addition, beneficial


                                       19
<PAGE>

owners of Common Shares or Rights held through such a holder should contact the
holder and request the holder to effect transactions in accordance with the
beneficial owner's instructions.

         The instructions accompanying the Subscription Certificates should be
read carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES TO
THE FUND.

         The method of delivery of Subscription Certificates and payment of the
subscription price to the Subscription Agent will be at the election and risk
of the Rights holders, but if sent by mail it is recommended that the
certificates and payments be sent by registered mail, properly insured, with
return receipt requested, and that a sufficient number of days be allowed to
ensure delivery to the subscription agent and clearance of payment prior to
5:00 p.m., New York time, on the Expiration Date. Because uncertified personal
checks may take at least five Business Days to clear, you are strongly urged to
pay, or arrange for payment, by means of a certified or cashier's check or
money order.

         All questions concerning the timeliness, validity, form and
eligibility of any exercise of Rights will be determined by the Fund, whose
determinations will be final and binding. The Fund in its sole discretion may
waive any defect or irregularity, or permit a defect or irregularity to be
corrected within such time as it may determine, or reject the purported
exercise of any Right. Subscriptions will not be deemed to have been received
or accepted until all irregularities have been waived or cured within such time
as the Fund determines in its sole discretion. Neither the Fund nor the
Subscription Agent will be under any duty to give notification of any defect or
irregularity in connection with the submission of Subscription Certificates or
incur any liability for failure to give such notification.


Delivery of Stock Certificates


         Certificates representing Common Shares purchased pursuant to the
Primary Subscription will be delivered to subscribers as soon as practicable
after the corresponding Rights have been validly exercised and full payment for
the Common Shares has been received and cleared. Certificates representing
Common Shares purchased pursuant to the Over-Subscription Privilege will be
delivered to subscribers as soon as practicable after the Expiration Date and
after all allocations have been effected. Participants in the Fund's Automatic
Dividend Reinvestment and Voluntary Cash Purchase Plan (the "Plan") will be
issued Rights for the Common Shares held in their accounts in the Plan.
Participants wishing to exercise these Rights must exercise the Rights in
accordance with the procedures set forth above in "Method of Exercise of
Rights" and "Payment for Shares." Rights will not be exercised automatically by
the Plan. Plan participants exercising their Rights will receive their Primary
and Over-Subscription Shares via an uncertificated credit to their existing
account. To request a stock certificate, participants in the Plan should check
the appropriate box on the Subscription Certificate. These Common Shares will
remain subject to the same investment option as previously selected by the Plan
participant.


Foreign Restrictions



         Subscription Certificates will only be mailed to Record Date
Shareholders whose addresses are within the United States and Canada (other
than an APO or FPO address). Record Date Shareholders whose addresses are
outside the United States and Canada or who have an APO or FPO address and who
wish to subscribe to the Offer either in part or in full should contact the
Subscription Agent, EquiServe, by written instruction or recorded telephone
conversation no later than three Business Days prior to the


                                       20
<PAGE>

Expiration Date. The Fund will determine whether the offering may be made to
any such shareholder. If the Subscription Agent has received no instruction by
the third Business Day prior to the Expiration Date or the Fund has determined
that the Offering may not be made to a particular shareholder, the Subscription
Agent will attempt to sell all of such shareholder's Rights and remit the net
proceeds, if any, to such shareholders. If the Rights can be sold, sales of
these Rights will be deemed to have been effected at the weighted average price
received by the Subscription Agent on the day the Rights are sold, less any
applicable brokerage commissions, taxes and other expenses.


         Under the securities laws of the Province of Ontario, investors
residing in Ontario may, subject to compliance with all applicable regulatory
requirements, transfer either the Rights or the Shares to be acquired upon the
exercise of such Rights (i) through a dealer registered in Ontario that effects
the transaction through the facilities of the NYSE or other exchange or market
outside of Canada; (ii) to a person or company outside of Canada, or (iii)
through certain other means as provided under and in compliance with Ontario
securities laws.


Federal Income Tax Consequences to Shareholders


         For U.S. federal income tax purposes, neither the receipt nor the
exercise of the Rights will result in taxable income to you. Moreover, you will
not realize a loss if you do not exercise the Rights. The holding period for a
Common Share acquired upon exercise of a Right begins with the date of
exercise. The basis for determining gain or loss upon the sale of a share
acquired upon the exercise of a Right will be equal to the sum of:


        o     the subscription price per share,

        o     any servicing fee charged to you by your broker,
              bank or trust company, and

        o     the basis, if any, in the Rights that you exercised.


         A gain or loss recognized upon a sale of a Common Share acquired upon
the exercise of a Right will be a capital gain or loss assuming the Common
Share is held as a capital asset at the time of sale. This gain or loss will be
a long-term capital gain or loss if the Common Share has been held at the time
of sale for more than one year.

         As noted above, your basis in Common Shares issued under the Offer
includes your basis in the Rights underlying those Shares. Assuming that, as
the Fund expects, the aggregate fair market value of the Rights at the time
they are distributed is less than 15% of the aggregate fair market value of the
Fund's Common Shares at such time, the basis of the Rights issued to you will
be zero unless you elect to allocate your basis of previously owned Common
Shares to the Rights issued to you in the Offer. This allocation is based upon
the relative fair market value of such Common Shares and the Rights as of the
date of distribution of the Rights. Thus, if you make such an election and the
Rights are later exercised, the basis in the Common Shares you originally owned
will be reduced by an amount equal to the basis allocated to the Rights. This
election must be made in a statement attached to your federal income tax return
for the year in which the Rights are distributed. If the Rights expire without
exercise, you will realize no loss and you will not be permitted to allocate a
portion of your basis in the Common Shares to the unexercised Rights.


                                       21
<PAGE>


         The foregoing is a general summary of the material United States
federal income tax consequences of the receipt and exercise of Rights. The
discussion is based upon applicable provisions of the Internal Revenue Code of
1986, as amended (the "Code"), U.S. Treasury regulations thereunder and other
authorities currently in effect, and does not address state, local or foreign
taxes. The Code and Treasury regulations thereunder are subject to change by
legislative or administrative action, possibly with retroactive effect. You
should consult your tax advisors regarding specific questions as to federal,
state, local or foreign taxes. You should also review the discussion of certain
tax considerations affecting yourself and the Fund set forth under "Taxation."



Employee Plan Considerations


         Rights holders that are employee benefit plans subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), including
corporate savings and 401(k) plans, Keogh Plans of self-employed individuals
and Individual Retirement Accounts ("IRA") (each a "Benefit Plan" and
collectively, "Benefit Plans"), should be aware that additional contributions
of cash in order to exercise Rights may be treated as Benefit Plan
contributions and, when taken together with contributions previously made, may
subject a Benefit Plan to excise taxes for excess or nondeductible
contributions. In the case of Benefit Plans qualified under Section 401(a) of
the Code, additional cash contributions could cause the maximum contribution
limitations of Section 415 of the Code or other qualification rules to be
violated. Benefit Plans contemplating making additional cash contributions to
exercise Rights should consult with their counsel prior to making such
contributions.

         Benefit Plans and other tax exempt entities, including governmental
plans, should also be aware that if they borrow in order to finance their
exercise of Rights, they may become subject to the tax on unrelated business
taxable income ("UBTI") under Section 511 of the Code. If any portion of an IRA
is used as security for a loan, the portion so used is also treated as
distributed to the IRA depositor.

         ERISA contains prudence and diversification requirements and ERISA and
the Code contain prohibited transaction rules that may impact the exercise of
Rights. Among the prohibited transaction exemptions issued by the Department of
Labor that may exempt a Benefit Plan's exercise of Rights are Prohibited
Transaction Exemption 84-24 (governing purchases of shares in investment
companies) and Prohibited Transaction Exemption 75-1 (covering sales of
securities).

         Due to the complexity of these rules and the penalties for
noncompliance, Benefit Plans should consult with their counsel regarding the
consequences of their exercise of Rights under ERISA and the Code.


                                       22


<PAGE>

                                USE OF PROCEEDS


         The net proceeds of the Offer, assuming all Primary Subscription
Shares offered hereby are sold, are estimated to be approximately $__________,
before deducting expenses payable by the Fund estimated at approximately
$__________. The net proceeds of the Offer assuming all Secondary
Oversubscription Shares and all additional Common Shares are sold in addition
to all Primary Subscription Shares, are estimated to be approximately $_______,
before deducting expenses payable by the Fund estimated to be $________. The
Investment Adviser anticipates that investment of the proceeds, in accordance
with the Fund's investment objectives and policies, will be invested promptly
as investment opportunities are identified, depending on market conditions and
the availability of appropriate securities, and is anticipated to take not more
than approximately six months.


                       INVESTMENT OBJECTIVES AND POLICIES

         The Fund is a closed-end non-diversified management investment company
organized under the laws of the State of Delaware on February 25, 1999.


         The primary objective of the Fund is long-term growth of capital and
income, which the Fund attempts to achieve by investing at least 80% of its
total assets in common stock and other debt or equity securities of foreign and
domestic companies involved to a substantial extent (e.g., at least 50% of the
assets, gross income or net profits of a company is committed to or derived
from) in providing products, services or equipment for (i) the generation or
distribution of electricity, gas and water and (ii) telecommunications services
or infrastructure operations, such as airports, toll roads and municipal
services (collectively, the "Utility Industry"). The remaining 20% of its
assets may be invested in other securities including stocks, debt obligations
and money market instruments, as well as certain derivative instruments in the
utility industry or other industries. Morever, should extraordinary conditions
affecting such sectors or securities markets as a whole warrant, the Fund may
temporarily be primarily invested in money market instruments. When the Fund is
invested in these instruments for temporary or defensive purposes it may not
achieve its investment objective.

         The investment policy of the Fund relating to the type of securities
in which 80% of the Fund's total assets must be invested may be changed by the
Board of Trustees without shareholder approval. Shareholders will, however,
receive at least 60 days prior notice of any change in this policy.


         Although many companies in the Utility Industry traditionally pay
above average dividends, the Fund intends to focus on those companies whose
securities have the potential to increase in value. The 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, weather, the level of demand for
services, and the risks associated with constructing and operating nuclear
power facilities. These factors may change rapidly. The Fund emphasizes quality
in selecting utility investments, and generally 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 Fund intends
to position itself to take advantage of trends in consolidation.

         Under normal circumstances the Fund will invest in securities of
issuers located in countries other than the United States and may invest in
such foreign securities without limitation. Investing in

                                       23
<PAGE>

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
Fund to be affected favorably or unfavorably by changes in currency exchange
rates and revaluations of currencies.


Investment Methodology of the Fund


         In selecting securities for the Fund, the Investment Adviser normally
will consider the following factors, among others:


         o    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;
         o    the potential for capital appreciation of the securities;
         o    the interest or dividend income generated by the securities;
         o    the prices of the securities relative to other comparable
              securities;
         o    whether the securities are entitled to the benefits of call
              protection or other protective covenants;
         o    the existence of any anti-dilution protections or guarantees of
              the security; and
         o    the number of issuers in the Fund's portfolio.

         The Investment Adviser's investment philosophy with respect to debt
and equity securities is 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.



Temporary Defensive Investments


         During temporary defensive periods and during inopportune periods to
be fully invested, the Fund 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 will provide financial support
to U.S. government-sponsored instrumentalities if it is not obligated to do so
by law. During temporary defensive periods, the Fund may not achieve its
investment objective.


Options


         On behalf of the Fund, the Investment Adviser may, subject to the
guidelines of the Board of Trustees, purchase or sell, i.e., write, options on
securities, securities indices and foreign currencies


                                       24
<PAGE>

which are listed on a national securities exchange or in the U.S.
over-the-counter ("OTC") markets as a means of achieving additional return or
of hedging the value of the Fund's portfolio. The Fund may write covered call
options on common stocks that it owns or has an immediate right to acquire
through conversion or exchange of other securities in an amount not to exceed
25% of total assets or invest up to 10% of its total assets in the purchase of
put options on common stocks that the Fund owns or may acquire through the
conversion or exchange of other securities that it owns.

         A call option is a contract that gives the holder of the option the
right to buy from the writer (seller) of the call option, in return for a
premium paid, 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 a contract that gives the holder of the option the
right to sell to the writer (seller), in return for the premium, the underlying
security at a specified price during the term of the option. The writer of the
put, who receives the premium, has the obligation to buy the underlying
security upon exercise, at the exercise price during the option period.

         If the 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. There can be no
assurance that a closing purchase transaction can be effected when the Fund so
desires.

         An exchange-traded option may be closed out only on an exchange which
provides a secondary market for an option of the same series. Although the Fund
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.


Futures Contracts and Options Thereon



         The Fund may purchase and sell financial futures contracts and options
thereon which are traded on a commodities exchange or board of trade for
certain hedging, yield enhancement and risk management purposes, in accordance
with regulations of the Commodity Futures Trading Commission ("CFTC") and the
Fund's fundamental investment restrictions. These futures contracts and related
options may be on debt securities, financial indices, securities indices, U.S.
government securities and foreign currencies. A financial futures contract is
an agreement to purchase or sell an agreed amount of securities or currencies
at a set price for delivery in the future.



Forward Currency Exchange Contracts


         The Fund may enter into forward foreign currency exchange contracts to
protect the value of its portfolio against future changes in the level of
currency exchange rates. The Fund may enter into such contracts on a spot,
i.e., cash, basis at the rate then prevailing in the currency exchange market
or on a forward basis, by entering into a forward contract to purchase or sell
currency. A forward contract on foreign currency is an obligation to purchase
or sell a specific currency at a future date, which may be any fixed number of
days agreed upon by the parties from the date of the contract at a price set on
the date of the contract. The Fund's dealings in forward contracts will be
limited to hedging involving either


                                       25

<PAGE>

specific transactions or portfolio positions, and the amount the Fund may
invest in forward currency contracts is limited to the amount of its aggregate
investments in foreign currencies. The Fund will only enter into forward
currency contracts with parties which it believes to be creditworthy.


Leveraging



         As provided in the 1940 Act and subject to compliance with the Fund's
investment objectives, policies and restrictions, the Fund may issue debt or
preferred shares (such as the outstanding Series A or Series B Preferred
Shares) so long as the Fund's total assets immediately after such issuance,
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 shares and
debt outstanding. Such debt or preferred shares may be convertible in
accordance with SEC staff guidelines which may permit the Fund to obtain
leverage at more attractive rates.


         Further information on the investment objectives and policies of the
Fund are set forth in the SAI.


Investment Restrictions


         The Fund has adopted certain investment restrictions as fundamental
policies of the Fund. Under the 1940 Act, a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities of
the Fund, as defined in the 1940 Act. The Fund's investment restrictions are
more fully discussed under "Investment Restrictions" in the SAI.


Portfolio Turnover


         The Fund buys and sells securities to accomplish its investment
objective. The investment policies of the Fund may lead to frequent changes in
investments, particularly in periods of rapidly fluctuating interest or
currency exchange rates. The portfolio turnover may be higher than that of
other investment companies.


         Portfolio turnover generally involves some expense to the Fund,
including brokerage commissions or dealer mark-ups and other transaction costs
on the sale of securities and reinvestment in other securities and may result
in taxable gains being passed to shareholders. The portfolio turnover rate is
computed by dividing the lesser of the amount of the long-term securities
purchased or securities sold by the average monthly value of securities owned
during the year (excluding securities whose maturities at acquisition were one
year or less). Higher portfolio turnover may decrease the after-tax return to
individual investors to the extent it results in a decrease of the long term
capital gains portion of distributions to shareholders.



         The portfolio turnover rates of the Fund for the fiscal years ending
December 31, 2002, December 31, 2001 and December 31, 2000 were 29%, 41% and
92% respectively.



Other Investments


         The Fund is permitted to invest in securities subject to
reorganization, lower rated securities and repurchase agreements and enter into
forward commitments for the purchase or sale of securities, including on a
"when issued" or "delayed delivery" basis and the Fund may make short sales of
securities. See "Investment


                                       26
<PAGE>

Objectives and Policies" in the SAI for a discussion of these investments and
techniques and the risks associated with them.


Long-term Objective


         The Fund is intended for investors seeking long-term capital growth
and income. The Fund is not meant to provide a vehicle for those who wish to
play short-term swings in the stock market. An investment in shares of the 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 Offering.

                    RISK FACTORS AND SPECIAL CONSIDERATIONS

         There are a number of risks that an investor should consider in
evaluating the Fund. You should read this entire Prospectus and the SAI before
you decide whether to exercise your Rights. In addition, you should consider
the matters set forth below.


Principal Risks Associated with the Fund



Dilution



         If you do not exercise all of your Rights, you may own a smaller
proportional interest in the Fund when the Offer is over. In addition, you will
experience an immediate dilution of the aggregate net asset value of your
shares if you do not participate in the Offer and will experience a reduction
in the net asset value per share of your shares whether or not you exercise
your Rights, if the Subscription Price is below the Fund's net asset value per
share on the Expiration Date because:

         o    the offered Common Shares are being sold at less than their
              current net asset value.

         o    you will indirectly bear the expenses of the Offer.

         o    the number of Common Shares outstanding after the Offer will have
              increased proportionately more than the increase in the amount of
              the Fund's net assets.

         On the other hand, if the Subscription Price is above the Fund's net
asset value per share on the Expiration Date (as it was on the date of this
Prospectus), you may experience an immediate dilution of the aggregate net
asset value per share your shares if you do not exercise your Rights and an
immediate increase in the net asset value per share of your shares whether or
not you participate in the Offer because:

         o    the offered Common Shares are being sold at more than their
              current net asset value after deducting the expenses of the
              Offer.

         o    the number of Common Shares outstanding after the Offer will have
              increased proportionately less than the increase in the amount of
              the Fund's net assets.


         Furthermore, if you do not participate in the Over-Subscription
Privilege, your percentage ownership may also be diluted. The Fund cannot state
precisely the amount of any dilution because it is not known at


                                       27


<PAGE>

this time what the net asset value per share will be on the Expiration Date or
what proportion of the Rights will be exercised. The impact of the Offer on net
asset value per share is shown by the following examples, assuming a $____
Subscription Price:

Scenario 1:  (assumes net asset value per share is above subscription price)(1)

NAV.................................................................  $
                                                                       --------
Subscription Price..................................................  $
                                                                       --------
Reduction in NAV($)(2)..............................................  $
                                                                       --------
Reduction in NAV(%).................................................          %
                                                                       --------

Scenario 2:  (assumes net asset value per share is below subscription price)(1)

NAV.................................................................  $
                                                                      --------
Subscription Price..................................................  $
                                                                      --------
Increase in NAV($)(2)...............................................  $
                                                                      --------
Increase in NAV(%)...................................................      %
                                                                      --------

__________________


(1)      Both examples assume full primary and primary over-subscription
         privilege exercise. Actual amounts may vary due to rounding.


(2)      Assumes $_________ in estimated offering expenses.

         If you do not wish to exercise your Rights, you should consider
selling them as set forth in this Prospectus. Any cash you receive from selling
your Rights should serve as partial compensation for any possible dilution of
your interest in the Fund. The Fund cannot give assurance, however, that a
market for the Rights will develop or that the Rights will have any marketable
value.


Industry Risks



         Under normal market conditions, the Fund will invest at least 80% of
its total assets in foreign and domestic companies involved in the Utility
Industry and, as a result, the value of the Common 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, technological innovations that may render existing products and
equipment obsolete and increasing interest rates resulting in high interest
costs on borrowings needed for capital construction programs, including costs
associated with compliance with environmental and other regulations.

         Sector Risk. The Fund concentrates its investments in the Utility
Industry. As a result, the Fund's investments may be subject to greater risk
and market fluctuation than a fund that had securities representing a broader
range of investment alternatives. The prices of securities issued by
traditional utility companies may change in response to interest rate changes.
Generally, when interest rates go up, the value of securities issued by
traditional utility companies goes down. Conversely, when interest rates go
down, the value of securities issued by utility companies goes up. There is no
guarantee that this relationship will hold in the future.

         Government Regulation. There are substantial differences between the
regulatory practices and policies in various jurisdictions, and any given
regulatory agency may make major shifts in policy from time to time. There is
no assurance that regulatory authorities will, in the future, permit rate
increases or that such


                                       28
<PAGE>

increases will be adequate to permit the payment of dividends on common stocks
by companies subject to such regulatory provisions. Additionally, existing and
possible future regulatory legislation may make it even more difficult for
these utilities to obtain adequate relief.

         Various regulatory regimes also impose limitations on the percentage
of the shares of a public utility held by a fund as an investment for its
clients. These limitations may unfavorably restrict the ability of the Fund to
make certain investments.

         Deregulation. Changing regulation constitutes one of the
industry-specific risks for the Fund, especially with respect to its
investments in traditionally regulated public utilities and partially regulated
utility companies. Domestic and foreign regulators monitor and control utility
revenues and costs, and therefore may limit utility profits and dividends paid
to investors, which could result in reduced income to the Fund. Regulatory
authorities also may restrict a company's access to new markets, thereby
diminishing the company's long-term prospects. The deregulation of certain
utility companies may eliminate restrictions on profits and dividends, but may
also subject these companies to greater risks of loss. Deregulation of the
utility industry could have a positive or negative impact on the Fund. The
Investment Adviser believes that certain utility companies' fundamentals should
continue to improve as the industry undergoes deregulation. Companies may seek
to strengthen their competitive positions through mergers and takeovers. The
loosening of the government regulation of utilities should encourage
convergence within the industry. Improving earnings prospects, strong cash
flows, share repurchases and takeovers from industry consolidation may tend to
boost share prices. However, as has occurred in California and elsewhere,
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. Individual sectors of the utility market are subject to
additional risks. These risks can apply to all utility companies - regulated or
fully or partially deregulated and unregulated. For example, telecommunications
companies have been affected by technological developments leading to increased
competition, as well as changing regulation of local and long-distance
telephone services and other telecommunications businesses. Certain
telecommunications companies have been adversely affected by the new
competitive climate.

         Financing. Historically, companies in the Utility Industry have
encountered difficulties in obtaining financing for construction programs
during inflationary periods. Issuers experiencing difficulties in financing
construction programs may also experience lower profitability, which can result
in reduced income to the Fund.

         Equipment and Supplies. Traditional utility companies face the risk of
lengthy delays and increased costs associated with the design, construction,
licensing and operation of their facilities. Moreover, technological
innovations may render existing plants, equipment or products obsolete.
Increased costs and a reduction in the availability of fuel (such as oil, coal,
nuclear or natural gas) also may adversely affect the profitability of utility
companies.

         Electric utilities may be burdened by unexpected increases in fuel and
other operating costs. They may also be negatively affected when long-term
interest rates rise. Long-term borrowings are used to finance most utility
investments, and rising interest rates lead to higher financing costs and
reduced earnings. There are also the considerable costs associated with
environmental compliance, nuclear waste clean-up, and safety regulation.
Increasingly, regulators are calling upon electric utilities to bear these
added costs, and there is a risk that these costs will not be fully recovered
through an increase in revenues.


                                       29
<PAGE>

         Among gas companies, there has been a move to diversify into oil and
gas exploration and development, making investment returns more sensitive to
energy prices. In the case of the water utility sector, the industry is highly
fragmented, and most water supply companies find themselves in mature markets,
although upgrading of fresh water and waste water systems is an expanding
business.

Risks to Holders of Common Shares of Leveraging and Issuance of
Senior Securities

         The Fund utilizes leverage through the issuance of preferred shares,
currently the Series A Preferred and Series B Preferred Shares. Leverage
entails two primary risks. The first risk is that the use of leverage magnifies
the impact on the common shareholders of changes in net asset value. For
example, a fund that uses 33% leverage (that is, $50 of leverage per $100 of
common equity) 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 common shareholders. These two risks generally make the Fund's total
return to common shareholders more volatile. In addition, the Fund might be
required to sell investments in order to meet dividend or interest payments on
the debt or preferred shares when it may be disadvantageous to do so.

         As provided in the 1940 Act and subject to certain exceptions, the
Fund may issue debt or preferred shares so long as the Fund's total assets
immediately after such issuance, less certain ordinary course liabilities,
exceed 300% of the amount of the debt outstanding and exceed 200% of the sum of
the amount of the preferred shares and debt outstanding. Such debt or preferred
shares may be convertible in accordance with SEC guidelines which may permit
the registrant to obtain leverage at more attractive rates. A leveraged capital
structure creates certain special risks and potential benefits not associated
with unleveraged funds having similar investment objectives and policies. Any
investment income or gains from the capital represented by preferred shares or
debt which is in excess of the dividends payable thereon will cause the total
return of the common shares to be higher than would otherwise be the case.
Conversely, if the investment performance of the capital represented by
preferred shares or debt fails to cover the dividends payable thereon, the
total return of the common shares would be less or, in the case of negative
returns, would result in higher negative returns to a greater extent than would
otherwise be the case. The requirement under the 1940 Act to pay in full
dividends on preferred shares or interest on debt before any dividends may be
paid on the Common Shares means that dividends on the Common Shares from
earnings may be reduced or eliminated. Although an inability to pay dividends
on the Common Shares could conceivably result in the Fund ceasing to qualify as
a regulated investment company under the Code, which would be materially
adverse to the holders of the Common Shares, the risk to Common Shares may be
avoided through the use of mandatory redemption of the Fund's preferred shares
designed to ensure that the Fund maintains the necessary asset coverage.



Non-diversified Status


         The Fund is classified as a "non-diversified" investment company under
the 1940 Act, which means that the Fund is not limited by the 1940 Act in the
proportion of its assets that may be invested in the securities of a single
issuer. However, the Fund 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 U.S. federal income tax if all of its earnings are
distributed to shareholders. See "Taxation --Taxation of the Fund." Because the
Fund, as a non-diversified investment company, may invest in the securities of
individual issuers to a greater degree than a diversified investment company,
an investment in the Fund may present greater risk


                                       30
<PAGE>

to an investor than an investment in a diversified company because the
investment risk may be concentrated in fewer securities.


Market Value and Net Asset Value


         Shares of closed-end investment companies frequently trade at a
discount from net asset value, although for most of the Fund's life its shares
have traded at a premium over net asset value per share. The possibility that
shares of a closed-end fund will trade at a discount from net asset value or at
premiums that are unsustainable over the long term are risks separate and
distinct from the risk that the Fund's net asset value will decrease. The risk
of holding shares of a closed-end fund that might trade at a discount or
unsustainable premium is more pronounced for shareholders who wish to sell
their shares in a relatively short period of time after acquiring them because,
for those investors, realization of a gain or loss on their investments is
likely to be more dependent upon the existence of a premium or discount than
upon portfolio performance. The Common Shares are not subject to redemption.
Shareholders desiring liquidity may, subject to applicable securities laws,
trade their shares in the Fund on the NYSE 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.


Trading Premium

         Historically, the Fund's Common Shares have traded at a premium to
their net asset value. As of August __ 2003, this premium was ___%. There is no
guarantee that this premium is sustainable either during the term of this Offer
or over the long term. The issuance of additional Common Shares pursuant to the
Offer and the Over-Subscription Privilege may reduce or eliminate any premium
that common shareholders may have otherwise received for their Common Shares.

Lower Rated Securities

         The 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, Inc., or non-rated securities of comparable quality. These
debt securities are predominantly speculative and involve major risk exposure
to adverse conditions. Debt securities rated lower than "BBB" by S&P or "Baa"
by Moody's are often referred to in the financial press as "junk bonds."



Foreign Securities


         There is no limitation on the amount of foreign securities in which
the 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 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.


                                       31
<PAGE>

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 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 Fund may also invest in debt
securities of foreign governments.


Special Risks of Derivative Transactions



         Participation in the options or futures markets and in currency
exchange transactions involves investment risks and transaction costs to which
the Fund would not be subject absent the use of these strategies. If the
Investment Adviser's predictions of movements in the direction of the
securities, foreign currency and interest rate markets are inaccurate, the
consequences to the Fund may leave the Fund in a worse position than if it had
not used such strategies. Risks inherent in the use of options, foreign
currency, futures contracts and options on futures contracts, securities
indices and foreign currencies include:

         o    dependence on the Investment Adviser's ability to predict
              correctly movements in the direction of interest rates,
              securities prices and currency markets;

         o    imperfect correlation between the price of options and futures
              contracts and options thereon and movements in the prices of the
              securities or currencies being hedged;

         o    the fact that skills needed to use these strategies are different
              from those needed to select portfolio securities;

         o    the possible absence of a liquid secondary market for any
              particular instrument at any time;

         o    the possible need to defer closing out certain hedged positions
              to avoid adverse tax consequences;

         o    the possible inability of the Fund to purchase or sell a security
              at a time that otherwise would be favorable for it to do so, or
              the possible need for the Fund to sell a security at a
              disadvantageous time due to a need for the Fund to maintain
              "cover" or to segregate securities in connection with the hedging
              techniques; and

         o    the creditworthiness of counterparties. For a further
              description, see "Risk Factors and Special Considerations --
              Futures Transactions" and "Risk Factors and Special
              Considerations -- Forward Currency Exchange Contracts."

                                       32


Futures Transactions

         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 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 fluctuation, imperfect correlation between the contracts
and the securities being hedged, losses from investing in futures transactions
that are potentially unlimited and the segregation requirements for such
transactions. For a further description, see "Investment Objectives and
Policies -- Investment Practices" in the SAI.


Forward Currency Exchange Contracts


         The use of forward currency contracts may involve certain risks,
including the failure of the counter party to perform its obligations under the
contract, and that the use of forward contracts 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. For a
further description of such investments, see "Investment Objectives and
Policies -- Investment Practices" in the SAI.



         The class voting rights of preferred shares could make it more
difficult for the Fund to take certain actions that may, in the future, be
proposed by the Board and/or the holders of Common Shares, such as a merger,
exchange of securities, liquidation or alteration of the rights of a class of
the 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 issuance of preferred shares convertible into Common Shares might
also reduce the net income and net asset value per share of the Common Shares
upon conversion. Such income dilution would occur if the 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 shares convertible into one Common Share. 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.



Dependence on Key Personnel

         The Investment Adviser is dependent upon the expertise of Mr. Mario J.
Gabelli in providing advisory services with respect to the Fund's investments.
If the Investment Adviser were to lose the services of Mr. Gabelli, its ability
to service the Fund could be adversely affected. 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.

                            MANAGEMENT OF THE FUND

         The Fund's Board of Trustees (who, with its officers, are described in
the SAI) has overall responsibility for the management of the Fund. The Board
of Trustees decides upon matters of general policy and reviews the actions of
the Investment Adviser and the Administrator (as defined below). Pursuant to an
Investment Advisory Agreement with the Fund, the Investment Adviser, under the
supervision of the Fund's

                                      33

<PAGE>

Board of Trustees, provides a continuous investment program for the Fund's
portfolio; provides investment research and makes and executes recommendations
for the purchase and sale of securities; and provides all facilities and
personnel, including officers required for its administrative management and
pays the compensation of all officers and directors of the Fund who are its
affiliates. As compensation for its services and the related expenses borne by
the Investment Adviser, the Fund pays the Investment Adviser a fee, computed
daily and payable monthly, equal, on an annual basis, to 1.00% of the Fund's
average weekly net assets, which is higher than that paid by most mutual funds.
However, the Investment Adviser has voluntarily agreed to waive the portion of
its investment advisory fee attributable to an amount of assets of the Fund
equal to the aggregate stated value of, as the case may be, its outstanding
Series A Preferred Shares and/or Series B Preferred Shares for any calendar
year in which the net asset value total return of the Fund allocable to the
common shares, including distributions and the advisory fee subject to
potential waiver, is less than (i) in the case of the Series A Preferred
Shares, the stated annual dividend rate of such series and (ii) in the case of
the Series B Preferred Shares, the net cost of capital to the Fund with respect
to the Series B Preferred Shares for such year expressed as a percentage
(including, without duplication, dividends paid by the Fund on the Series B
Preferred Shares and the net cost to the Fund of any associated swap or cap
transaction if the Fund hedges its Series B Preferred Shares dividend
obligations). This waiver will apply to the portion of the Fund's assets
attributable to the Series A Preferred Shares and Series B Preferred Shares,
respectively, for so long as any shares of such series remain outstanding. For
purposes of the calculation of the fees payable to the Investment Adviser by
the Fund, average weekly net assets of the 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.
For purposes of the calculation of the fees payable to the Investment Adviser
by the Fund, average weekly net assets of the 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.

         Gabelli Funds, LLC acts as the Fund's Investment Adviser pursuant to
an advisory agreement with the Fund. The Investment Adviser is a New York
corporation with principal offices located at One Corporate Center, Rye, New
York 10580. The Investment Adviser was organized in 1999 and is the successor
to Gabelli Funds, Inc., which was organized in 1980. As of March 31, 2003, the
Investment Adviser acted as registered investment adviser to 19 management
investment companies with aggregate net assets of $8.4 billion. The Investment
Adviser, together with other affiliated investment advisers noted below had
assets under management totaling approximately $19.5 billion as of March 31,
2003. GAMCO Investors, Inc., an affiliate of the Investment Adviser, acts as
investment adviser for individuals, pension trusts, profit sharing trusts and
endowments, and as a sub-adviser to management investment companies having
aggregate assets of $9.2 billion under management as of March 31, 2003. Gabelli
Fixed Income LLC, an affiliate of the Investment Adviser, acts as investment
adviser for The Treasurer's Fund and separate accounts having aggregate assets
of $1.4 billion under management as of March 31, 2003. Gabelli Advisers, Inc.,
an affiliate of the Investment Adviser, acts as investment manager to the
Gabelli Westwood Funds having aggregate assets of $441 million under management
as of March 31, 2003.



         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 NYSE 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
a majority of the capital stock of Gabelli Asset Management Inc.


                                      34
<PAGE>

         The Investment Adviser is obligated to pay expenses associated with
providing the services contemplated by the Investment Advisory Agreement
between the Fund and the Investment Adviser (the "Advisory Agreement")
including compensation of and office space for its officers and employees
connected with investment and economic research, trading and investment
management and administration of the Fund, as well as the fees of all trustees
of the Fund who are affiliated with the Investment Adviser.



         The Advisory Agreement contains provisions relating to the selection
of securities brokers to effect the portfolio transactions of the Fund. Under
those provisions, the Investment Adviser may (1) direct Fund portfolio
brokerage to Gabelli & Company, Inc. or other broker-dealer affiliates of the
Investment Adviser; and (2) pay commissions to brokers other than Gabelli &
Company, Inc. which are higher than might be charged by another qualified
broker to obtain brokerage and/or research services considered by the
Investment Adviser to be useful or desirable for its investment management of
the Fund and/or its other advisory accounts or those of any investment adviser
affiliated with it. The SAI contains further information about the Advisory
Agreement including a more complete description of the advisory and expense
arrangements, exculpatory and brokerage provisions, as well as information on
the brokerage practices of the Fund.


         Canadian shareholders should note, to the extent applicable, that
there may be difficulty enforcing any legal rights against the Investment
Adviser because it is resident outside Canada and all of its assets are
situated outside Canada.


Portfolio Manager



         Mario J. Gabelli is the leader of a team which is primarily
responsible for the day-to-day management of the Fund. Mr. Gabelli has served
as Chairman, President and Chief Investment Officer of the Investment Adviser
since 1980. Mr. Gabelli also serves as Portfolio Manager for several other
funds in the Gabelli fund family. Because of the diverse nature of Mr.
Gabelli's responsibilities, he will devote less than all of his time to the
day-to-day management at the Fund. Over the past five years, Mr. Gabelli has
served as Chairman of the Board and Chief Executive Officer of Gabelli Asset
Management Inc.; Chief Investment Officer of GAMCO Investors, Inc.; Vice
Chairman of the Board and Chief Executive Officer of Lynch Corporation, a
diversified manufacturing company, and Lynch Interactive Corporation, a
multimedia and communications services company.



Non-Resident Trustee


         Karl Otto Pohl, a trustee of the Fund, resides outside the United
States and all or a significant portion of his assets are located outside the
United States. He has no authorized agent in the United States to receive
service of process. As a result, it may not be possible for investors to effect
service of process within the United States or to enforce against him in United
States courts judgments predicated upon civil liability provisions of United
States securities laws. It may also not be possible to enforce against him in
foreign courts judgments of United States courts or liabilities in original
actions predicated upon civil liability provisions of the United States
securities laws.


Sub-Administrator


         The Investment Adviser has entered into sub-administration agreement
with PFPC Inc. (the "Sub- Administrator") pursuant to which the
Sub-Administrator provides certain administrative services necessary for the
Fund's operations which do not include the investment advisory and portfolio
management services


                                      35
<PAGE>

provided by the Investment Adviser. For these services and the related expenses
borne by the Sub- Administrator, the Investment Adviser pays a prorated monthly
fee at the annual rate of .0275% of the first $10 billion of the aggregate
average net assets of the Fund and all other funds advised by the Investment
Adviser and administered by the Sub-Administrator, .0125% of the aggregate
average net assets exceeding $10 billion and .01% of the aggregate average net
assets in excess of $15 billion. The Sub-Administrator has its principal office
at 3200 Horizon Drive, King of Prussia, Pennsylvania 19406.


Portfolio Transactions


         Principal transactions are not entered into with affiliates of the
Fund. However, Gabelli & Company may execute transactions in the
over-the-counter markets on an agency basis and receive a stated commission
therefrom. For a more detailed discussion of the Fund's brokerage allocation
practice, see the SAI under "Portfolio Transactions."

                          DIVIDENDS AND DISTRIBUTIONS


         The Fund may retain for reinvestment, and pay the resulting federal
income taxes on, its net capital gain, if any, although the Fund reserves the
authority to distribute its net capital gain in any year. The Fund has a
policy, which may be modified at any time by its Board of Trustees, of paying
distributions on its common shares of $0.06 per share per month. This policy
permits holders of common shares to realize a predictable, but not assured,
level of cash flow and some liquidity periodically with respect to their common
shares without having to sell shares. To avoid paying income tax at the
corporate level, the Fund will distribute substantially all of its investment
company taxable income and realized capital gains. In the event that the Fund's
investment company taxable income and realized capital gains exceed the total
of the Fund's monthly distributions, the Fund intends to pay such excess once a
year. If, for any calendar year, the total monthly distributions exceed
investment company taxable income and net capital gain, the excess will
generally be treated as a tax-free return of capital up to the amount of a
shareholder's tax basis in the shares. The amount treated as a tax-free return
of capital will reduce a shareholder's tax basis in the shares, thereby
increasing such shareholder's potential gain or reducing his or her potential
loss on the sale of the shares. Any amounts distributed to a shareholder in
excess of the basis in the shares will generally be taxable to the shareholder
as capital gain. See "Taxation" below.

         In the event the Fund distributes amounts in excess of its investment
company taxable income and net capital gain, such distributions will decrease
the Fund's total assets and, therefore, have the likely effect of increasing
the Fund's expense ratio. In addition, in order to make such distributions, the
Fund might have to sell a portion of its investment portfolio at a time when
independent investment judgment might not dictate such action.

         The Fund, along with other closed-end registered investment companies
advised by the Investment Adviser, has obtained an exemption from Section 19(b)
of the 1940 Act and Rule 19b-1 thereunder permitting the Fund to make periodic
distributions of long-term capital gains provided that any distribution policy
of the Fund with respect to its common shares calls for periodic (e.g.,
quarterly or semi-annually, but in no event more frequently than monthly)
distributions in an amount equal to a fixed percentage of the Fund's average
net asset value over a specified period of time or market price per common
share at or about the time of distribution or pay-out of a fixed dollar amount.
The Fund's current policy is to make monthly distributions to holders of its
common shares. The exemption also permits the Fund to make distributions with
respect to its preferred shares in accordance with such shares' terms.


                                      36
<PAGE>

                                   TAXATION


Taxation of the Fund


         The Fund has qualified and elected to be taxed as a regulated
investment company under Subchapter M of the Code. Accordingly, the Fund must,
among other things, (a) derive in each taxable year at least 90% of its gross
income (including tax-exempt interest) from dividends, interest, payments with
respect to certain securities loans, and gains from the sale or other
disposition of stock, securities or foreign currencies, or other income
(including but not limited to gain from options, futures and forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies; and (b) diversify its holdings so that, at the end of each fiscal
quarter (i) at least 50% of the market value of the Fund's total assets is
represented by cash and cash items, U.S. government securities, the securities
of other regulated investment companies and other securities, with such other
securities limited, in respect of any one issuer, to an amount not greater than
5% of the value of the Fund's total assets and not more than 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
market value of the Fund's total assets is invested in the securities of any
issuer (other than U.S. government securities and the securities of other
regulated investment companies) or of any two or more issuers that the Fund
controls and that are determined to be engaged in the same business or similar
or related trades or businesses.

         As a regulated investment company, the Fund generally is not subject
to U.S. federal income tax on income and gains that it distributes each taxable
year to shareholders, if at least 90% of the sum of the Fund's (i) investment
company taxable income (which includes, among other items, dividends, interest
and the excess of any net short-term capital gains over net long-term capital
losses and other taxable income other than any net capital gain (as defined
below) reduced by deductible expenses) determined without regard to the
deduction for dividends paid and (ii) its net tax exempt interest (the excess
of its gross tax exempt interest over certain disallowed deductions). The Fund
intends to distribute at least annually substantially all of such income.

         Amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax at the Fund level. To avoid the tax, the Fund must distribute during each
calendar year an amount equal to the sum of (1) at least 98% of its ordinary
income (not taking into account any capital gains or losses) for the calendar
year, (2) at least 98% of its capital gains in excess of its capital losses
(adjusted for certain ordinary losses) for a one-year period generally ending
on October 31 of the calendar year (unless, an election is made by a fund with
a November or December year-end to use the fund's fiscal year), and (3) certain
undistributed amounts from previous years on which the fund paid no U.S.
federal income tax. While the Fund intends to distribute any income and capital
gains in the manner necessary to minimize imposition of the 4% excise tax,
there can be no assurance that sufficient amounts of the Fund's taxable income
and capital gains will be distributed to avoid entirely the imposition of the
tax. In that event, the Fund will be liable for the tax only on the amount by
which it does not meet the foregoing distribution requirement.

         If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gains)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits.


                                      37
<PAGE>


Taxation of the Shareholders

         Distributions paid to you by the Fund from its ordinary income or from
an excess of net short-term capital gains over net long-term capital losses
(together referred to hereinafter as "ordinary income dividends") are taxable
to you as ordinary income to the extent of the Fund's earning and profits. Such
dividends (if designated by the Fund) may qualify (provided holding periods and
other requirements are met) (i) for the dividends received deduction in the
case of corporate stockholders to the extent the Fund's income consist of
qualifying dividend income from U.S. corporations, and (ii) under the recently
enacted Jobs and Growth Tax Relief Reconciliation Act of 2003 (effective for
taxable years after December 31, 2002 through December 31, 2008) ("2003 Tax
Act"), as qualified dividend income eligible for a reduced rate to individuals
(maximum 15% decreasing to 5% for individuals in lower tax brackets) to the
extent that the Fund receives qualified dividend income. Qualified dividend
income is, in general, dividend income from taxable domestic corporations and
certain foreign corporations (e.g., generally, foreign corporations
incorporated in a possession of the United States or in certain countries with
a comprehensive tax treaty with the United States, or, the stock of which is
readily tradable on an established securities market in the United States).
Distributions made to you from an excess of net long-term capital gains over
net short-term capital losses ("capital gain dividends"), including capital
gain dividends credited to you but retained by the Fund, are taxable to you as
long-term capital gains, regardless of the length of time you have owned Fund
shares. Under the 2003 Tax Act, the maximum tax rate on net long-term capital
gain of individuals is reduced generally from 20% to 15% (5% for individuals in
lower brackets) for such gain realized after May 6, 2003 and before January 1,
2009. Distributions in excess of the Fund's earnings and profits will first
reduce the adjusted tax basis of your shares and, after such adjusted tax basis
is reduced to zero, will constitute capital gains to you (assuming the shares
are held as a capital asset). Generally, not later than 60 days after the close
of its taxable year, the Fund will provide you with a written notice
designating the amount of any qualified dividend income dividends or capital
gain dividends and other distributions.

         The sale or other disposition of Common Shares of the Fund will
generally result in capital gain or loss to you, and will be long-term capital
gain or loss if the shares have been held for more than one year at the time of
sale. Any loss upon the sale or exchange of Fund shares held for six months or
less will be treated as long-term capital loss to the extent of any capital
gain dividends received (including amounts credited as an undistributed capital
gain dividend) by you. A loss realized on a sale or exchange of shares of the
Fund will be disallowed if other Fund shares are acquired (whether through the
automatic reinvestment of dividends or otherwise) within a 61-day period
beginning 30 days before and ending 30 days after the date that the shares are
disposed of. In such case, the basis of the shares acquired will be adjusted to
reflect the disallowed loss. Present law taxes both long-term and short-term
capital gains of corporations at the rates applicable to ordinary income. For
non-corporate taxpayers, however, short-term capital gains will currently be
taxed at the rate applicable to ordinary income (maximum 35%) while long-term
capital gains generally will be taxed at the rate applicable to long-term
capital gain (maximum 15% decreasing to 5% for taxpayers in the lower brackets.


         Dividends and other taxable distributions are taxable to you even
though they are reinvested in additional shares of the Fund. If the Fund pays
you a dividend in January which was declared in the previous October, November
or December to shareholders of record on a specified date in one of such
months, then such dividend will be treated for tax purposes as being paid by
the Fund and received by you on December 31 of the year in which the dividend
was declared.


                                      38
<PAGE>

         The Fund is required in certain circumstances to backup withholding on
taxable dividends and certain other payments paid to non-corporate holders of
the Fund's shares who do not furnish the Fund with their correct taxpayer
identification number (in the case of individuals, their social security
number) and certain certifications, or who are otherwise subject to backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
from payments made to you may be refunded or credited against your U.S. federal
income tax liability, if any, provided that the required information is
furnished to the Internal Revenue Service.

         The foregoing is a general and abbreviated summary of the provisions
of the Code and the Treasury regulations in effect as they directly govern the
taxation of the Fund and its shareholders. These provisions are subject to
change by legislative or administrative action, and any such change may be
retroactive. A more complete discussion of the tax rules applicable to the Fund
can be found in the Statement of Additional Information which is incorporated
by reference into this prospectus. Shareholders are urged to consult their tax
advisers regarding specific questions as to U.S. federal, foreign, state, local
income or other taxes.

                                CAPITALIZATION


Common Shares


         The Fund is authorized to issue an unlimited number of shares of
beneficial interest, par value $.001 per share, in multiple classes and series
thereof as determined from time to time by the Board of Trustees. The Board of
Trustees of the Fund has authorized issuance of an unlimited number of shares
of two classes, the Common Shares and preferred shares. Each share within a
particular class or series thereof has equal voting, dividend, distribution and
liquidation rights. When issued, in accordance with the terms thereof, the
Common Shares will be fully paid and non-assessable. Common Shares are not
redeemable and have no preemptive, conversion or cumulative voting rights.


Preferred Shares



         The Fund has issued 1,200,000 Series A Preferred Shares and 1,000
Series B AMPS. The Board of Trustees reserves the right to issue additional
preferred shares, including Series A Preferred or Series B AMPS, from time to
time, subject to the restrictions in the Fund's governing documents and the
1940 Act.

         The Series A Preferred Shares have a liquidation preference of $25 per
share and the Series B Preferred Shares have a liquidation preference of
$25,000 per share. Upon a liquidation, each holder of Series A Preferred Shares
or Series B Preferred Shares will be entitled to receive out of the assets of
the Fund available for distribution to shareholders (after payment of claims of
the Fund's creditors but before any distributions with respect to the Fund's
common shares or any other shares of the Fund ranking junior to the Series A
Preferred Shares and Series B Preferred Shares as to liquidation payments) an
amount per share equal to such share's liquidation preference plus any
accumulated but unpaid dividends (whether or not earned or declared) to the
date of distribution. The Series A Preferred Shares and the Series B Preferred
Shares will rank on a parity with any other series of preferred shares of the
Fund as to the payment of dividends and the distribution of assets upon
liquidation. Series A Preferred Shares and Series B Preferred Shares each carry
one vote per share on all matters on which such shares are entitled to vote.
The Series A Preferred Shares and the Series B Preferred Shares are fully paid
and nonassessable and have no preemptive, exchange or conversion rights. The
Board of Trustees may by resolution classify or reclassify any authorized but
unissued


                                      39
<PAGE>

capital shares of the Fund from time to time by setting or changing the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or terms or conditions of redemption. The Fund will
not issue any class of shares senior to the Series A Preferred Shares and/or
Series B Preferred Shares.

         The following table shows the number of shares of (i) capital shares
authorized, (ii) capital shares unissued and (iii) capital shares outstanding
for each class of authorized securities of the Fund as of July 31, 2003.


<TABLE>
<CAPTION>
                                                                   Amount Held by
                                                                   Company or for         Amount
             Title of Class                  Amount Authorized    its Own Account       Outstanding

<S>                                              <C>                   <C>                  <C>
Common Shares............................        unlimited              none
Preferred Shares.........................        unlimited              none

         Series A Preferred Shares.......                                                    _
         Series B Preferred Shares.......                                                    _


</TABLE>


         The Common Shares are listed and traded on the NYSE under the symbol
"GUT." The average weekly trading volume of the Common Shares on the NYSE for
the 12 months ended December 31, 2002 was 151,271 shares. The following table
sets forth for the quarters indicated the high and low closing prices on the
NYSE per share of the Common Shares and the net asset value and the premium or
discount from net asset value at which the Common Shares was trading, expressed
as a percentage of net asset value, at each of the high and low closing prices
provided.


                                                                  PREMIUM OR
                                                                   DISCOUNT
                     MARKET PRICE (1)     NET ASSET VALUE (2)     AS % OF NAV
                   ------------------    --------------------   ----------------
QUARTER ENDED       HIGH         LOW     HIGH          LOW       HIGH        LOW
- -------------       ----         ---     ----          ---       ----        ---
3/31/01
6/30/01
9/30/01
12/31/01
3/31/02
6/30/02
9/30/02
12/31/02

___________________

(1) As reported on the NYSE
(2) Based on the Fund's computations.


                                      40
<PAGE>




Effects of Leverage



         The only obligation that the Fund has to the holders of the preferred
shares is to pay the applicable dividend rate. Any return earned in excess of
the stated dividend rate would directly benefit common stockholders; however,
any shortfall from the stated rate would negatively affect the Fund's common
shareholders. The following table is designed to assist you in understanding
the effects of the existing leverage on your shares of the Fund's common
shares. The table assumes that 1,200,000 shares of Series A Preferred Shares
are issued and outstanding and 1,000 shares of Series B Preferred Shares are
issued and outstanding and that the blended dividend rate for the Fund's
preferred shares is ____. The assumed returns appearing in the table are
hypothetical and actual returns may be greater or less than those appearing in
the table.


<TABLE>
<CAPTION>
<S>                                         <C>            <C>          <C>           <C>          <C>
Assumed return on portfolio (net of
expenses)..............................    -10.00%        -5.00%        0.00%         5.00%        10.00%

Corresponding return to common               - %            - %          - %           - %          - %
stockholder............................
</TABLE>


         The following factors associated with leveraging could increase the
investment risk and volatility of the price of the Common Shares:

         o    leveraging exaggerates any increase or decrease in the value of
              the Common Shares;

         o    the dividend requirements on the Fund's preferred shares may
              exceed the income from the portfolio securities purchased with
              the proceeds from the issuance of preferred shares;

         o    a decline in net asset value results if the investment
              performance of the additional securities purchased fails to
              cover their cost to the Fund (including any dividend
              requirements of preferred shares);

         o    a decline in net asset value could affect the ability of the
              Fund to make Common Share dividend payments;

         o    a failure to pay dividends or make distributions on its common
              shares could result in the Fund's ceasing to qualify as a
              regulated investment company under the Code; and

         o    if the asset coverage for the Fund's preferred shares declines
              to less than two hundred percent (as a result of market
              fluctuations or otherwise), the Fund may be required to sell a
              portion of its investments when it may be disadvantageous to do
              so.


         Pursuant to Section 18 of the 1940 Act, it is unlawful for the Fund,
as a registered closed-end investment company, to issue any class of senior
security, or to sell any senior security that it issues, unless it can satisfy
certain "asset coverage." The asset coverage with respect to a senior security
representing indebtedness means the ratio of the value of the Fund's total
assets (less all liabilities and indebtedness not represented by senior
securities) to the aggregate amount of the Fund's senior securities
representing indebtedness. The asset coverage with respect to a senior security
representing stock means the ratio of the value of the Fund's total assets
(less all liabilities and indebtedness not represented by senior securities) to
the


                                      41
<PAGE>

aggregate amount of the Fund's senior securities representing indebtedness plus
the aggregate liquidation preference of the Fund's outstanding preferred
shares.


         If, as is the case with the Fund, a registered investment company's
senior securities are equity securities, such securities must have an asset
coverage of at least 200% immediately following its issuance. If a registered
investment company's senior securities represent indebtedness, such
indebtedness must have an asset coverage of at least 300% immediately after
their issuance. Subject to certain exceptions, during any period following
issuance that the Fund fails to satisfy these asset coverage ratios, it will,
among other things, be prohibited from declaring any dividend or declaring any
other distribution in respect of its common shares except a dividend payable in
Common Shares issued by the Fund. A registered investment company may, to the
extent permitted by the 1940 Act, segregate assets or "cover" transactions in
order to avoid the creation of a class of senior security.



         Any rating received by the Fund on its preferred shares, or on any
other senior security that it may issue, is an assessment by the applicable
rating agency of the capacity of the Fund to satisfy its obligations on its
senior securities. However, the "AAA" rating on the Fund's Series A and Series
B Preferred Shares does not eliminate or mitigate the risks associated with
investing in the Fund's common shares. In addition, should a rating on the
Fund's preferred shares be lowered or withdrawn by the relevant rating agency,
there may be an adverse effect on the market value of the Fund's preferred
shares and the Fund may also be required to redeem all or part of its
outstanding preferred shares. If the Fund were required to redeem its preferred
shares (in whole or part) as a result of the change in or withdrawal of the
rating, the common shares of the Fund would lose the benefits associated with a
leveraged capital structure.



Voting Rights



         Except as otherwise stated in this Prospectus and as otherwise
required by applicable law, holders of shares of the Series A and Series B
Preferred Shares and any other outstanding preferred shares of the Fund will be
entitled to one vote per share on each matter submitted to a vote of
shareholders and will vote together with holders of shares of the Common Shares
as a single class.



         In connection with the election of the Fund's trustees, holders of the
Fund's Series A Preferred Shares, Series B Preferred Shares and any other
outstanding preferred shares, voting as a single class, will be entitled at all
times to elect two of the Fund's trustees, and the remaining trustees will be
elected by holders of Common Shares and holders of shares of preferred shares
voting together as a single class. In addition, if (i) at any time dividends on
the outstanding Series A Preferred, Series B AMPS and/or any other preferred
shares are unpaid in an amount equal to at least two full years' dividends
thereon and sufficient cash or specified securities have not been deposited
with the applicable paying agent for the payment of such accumulated dividends
or (ii) at any time holders of any other series of preferred shares are
entitled to elect a majority of the trustees of the Fund under the 1940 Act or
the Statements of Preferences creating such shares, then the number or
composition of trustees constituting the Board of Trustees will be adjusted
such that, when added to the two trustees elected exclusively by the holders of
the Series A Preferred Shares, Series B Preferred Shares and other series of
preferred shares as described above, would then constitute a simple majority of
the Board of Trustees as so adjusted. Such additional trustees will be elected
by the holders of the Series A Preferred Shares, Series B Preferred Shares and
the other series of preferred shares, voting together as a single class, at a
special meeting of shareholders which will be called as soon as practicable and
will be held not less than 10 or more than 20 days after the mailing date of
the meeting notice. Such additional trustees will be elected at a special
meeting of preferred shareholders that will be called and held as soon as
practicable.


                                      42
<PAGE>


         If the Fund thereafter pays, or declares and sets apart for payment in
full, all dividends payable on all outstanding shares of preferred shares for
all past dividend periods, the additional voting rights of the preferred
shareholders as described above will cease, and the terms of office of all of
the additional trustees elected by the preferred shareholders (but not of the
directors with respect to whose election the holders of Common Shares were
entitled to vote or the two trustees the preferred shareholders have the right
to elect as a separate class in any event) will terminate automatically.



         So long as shares of the Fund's preferred shares are outstanding, the
Fund will not, without the affirmative vote of the holders of a majority of the
shares of preferred shares outstanding at the time, voting separately as one
class, amend, alter or repeal the provisions of its Declaration of Trust, as
amended and supplemented (including the Statement of Preferences thereto) (the
"Charter'), whether by merger, consolidation or otherwise, so as to materially
adversely affect any of the contract rights of the preferred stockholders
expressly set forth in the Charter. To the extent permitted under the 1940 Act,
in the event shares of more than one series of preferred shares are
outstanding, the Fund will not approve any of the actions set forth in the
preceding sentence which materially adversely affects the contract rights
expressly set forth in the Charter of a holder of shares of a series of
preferred shares differently than those of a holder of shares of any other
series of preferred shares without the affirmative vote of at least a majority
of votes entitled to be cast by holders of the preferred shares of each series
materially adversely affected and outstanding at such time (each such
materially adversely affected series voting separately as a class). Unless a
higher percentage is provided for under the Charter, the affirmative vote of a
majority (as defined in the 1940 Act) of the votes entitled to be cast by
holders of outstanding shares of the Fund's preferred shares, voting as a
separate class, will be required to approve any plan of reorganization
adversely affecting such stock or any action requiring a vote of security
holders under Section 13(a) of the 1940 Act, including, among other things,
open-ending the Fund and changing the Fund's investment objective or changing
the investment restrictions described as fundamental policies under "Investment
Restrictions" in the SAI.



         The class vote of holders of shares of the preferred shares described
above in each case will be in addition to a separate vote of the requisite
percentage of shares of Common Shares and preferred shares, voting together as
a single class, necessary to authorize the action in question. The foregoing
voting provisions, however, will not apply to any preferred shares that have
been (i) redeemed or (ii) called for redemption, and for which sufficient
deposit assets have been provided to the dividend-disbursing agent to effect
such redemption at or prior to the time when the act with respect to which such
vote otherwise would be required will occur.


             ANTI-TAKEOVER PROVISIONS OF THE DECLARATION OF TRUST
                                  AND BY-LAWS

         The Fund presently has provisions in its Declaration of Trust and
By-Laws (together, its "Governing Documents") which could have the effect of
limiting, in each case, (i) the ability of other entities or persons to acquire
control of the Fund, (ii) the Fund's freedom to engage in certain transactions,
or (iii) the ability of the Fund's trustees or shareholders to amend the
Governing Documents or effectuate changes in the Fund's management. These
provisions of the Governing Documents of the Fund may be regarded as
"anti-takeover" provisions. The Board of Trustees of the Fund is divided into
three classes, each having a term of no more than three years (except, to
ensure that the term of a class of the Fund's trustees expires each year, one
class of the Fund's trustees will serve an initial one-year term and three-year
terms thereafter and another class of its trustees will serve an initial
two-year term and three-year terms thereafter). Each year the term of one class
of trustees will expire. Accordingly, only those trustees in one class may be
changed in any one year, and it


                                      43
<PAGE>

would require a minimum of two years to change a majority of the Board of
Trustees. Such system of electing trustees may have the effect of maintaining
the continuity of management and, thus, make it more difficult for the
shareholders of the Fund to change the majority of trustees. See "Trustees and
Officers." A trustee of the Fund may be removed with or without cause by 66
2/3% of the votes entitled to be cast for the election of such trustees.
Special voting requirements also apply to mergers into or a sale of all or
substantially all of the Fund's assets and conversion of the Fund into an
open-end fund (or other closed-end fund commonly known as an "interval fund").
These special voting requirements are 75% of the outstanding voting shares
(together with a separate vote by the holders of any preferred shares
outstanding). In addition, 80% of the holders of the outstanding voting
securities of the Fund voting as a class is generally required in order to
authorize any of the following transactions:

o    merger or consolidation of the Fund with or into any other corporation;

o    issuance of any securities of the Fund to any person or entity for cash;

o    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);

o    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); or

o    the purchase of the Fund's Common Shares 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 Fund. However, such vote would not be required when, under certain
conditions, the Board of Trustees approves the transaction. Reference is made
to the Governing Documents of the Fund, on file with the SEC, for the full text
of these provisions.

         The provisions of the Governing Documents described above could have
the effect of depriving the owners of shares in the 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 the 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.

                CUSTODIAN, TRANSFER AGENT, DIVIDEND-DISBURSING
                              AGENT AND REGISTRAR


         State Street Bank and Trust Company (the "Custodian"), located at One
Boston Place, Boston, Massachusetts 02019, serves as the Custodian of the
Fund's assets pursuant to a custody agreement. Under the custody agreement, the
Custodian holds the Fund's assets in compliance with the 1940 Act. For its
services, the Custodian will receive a monthly fee based upon the average
weekly value of the total assets of the Fund, plus certain charges for
securities transactions.


         Equiserve Trust Company, N.A. located at PO Box 43025, Providence,
R.I. 02940-3025, serves as the Fund's dividend disbursing agent, as agent under
the Fund's Plan and as transfer agent and registrar for shares of the Fund.

                                      44


<PAGE>

                                 LEGAL MATTERS

         Certain legal matters will be passed on by Skadden, Arps, Slate,
Meagher & Flom LLP, New York, New York, special counsel to the Fund in
connection with the Offering.

                                    EXPERTS

         The financial statements of the Fund as of December 31, 2002 have been
incorporated by reference into the SAI in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing. PricewaterhouseCoopers LLP is
located at 1177 Avenue of the Americas, New York, New York 10036.

                              FURTHER INFORMATION

         The Fund is subject to the informational requirements of the
Securities Exchange Act of 1934 and in accordance therewith files reports,
proxy statements and other information with the SEC. Such reports, proxy
statements and other information filed by the Fund can be inspected and copied
at public reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549; and 500 West Madison Street, Chicago, Illinois 60661.
The Fund's Common Shares are listed on the NYSE. Reports, proxy statements and
other information concerning the Fund can be inspected and copied at the
Library of the NYSE at 20 Broad Street, New York, New York 10005.

         This Prospectus constitutes a part of a registration statement on Form
N-2 (together with the SAI and all the exhibits and the appendix thereto, the
"Registration Statement") filed by the Fund with the SEC under the Securities
Act and the 1940 Act. This Prospectus and the SAI do not contain all of the
information set forth in the Registration Statement. Reference is hereby made
to the Registration Statement and related exhibits for further information with
respect to the Fund and the Common Shares offered hereby. Statements contained
herein concerning the provisions of documents are necessarily summaries of such
documents, and each statement is qualified in its entirety by reference to the
copy of the applicable document filed with the SEC.

               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         Certain statements in this Prospectus constitute forward-looking
statements, which involve known and unknown risks, uncertainties and other
factors that may cause the actual results, levels of activity, performance or
achievements of the Fund to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, those listed
under "Risk Factors" and elsewhere in this Prospectus. As a result of the
foregoing and other factors, no assurance can be given as to the future
results, levels of activity or achievements, and neither the Fund nor any other
person assumes responsibility for the accuracy and completeness of such
statements. To the extent required by law, the Fund undertakes to supplement
this Prospectus to reflect any material changes to the Fund after the date of
this Prospectus.


                                      45
<PAGE>

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS. IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUND OR THE FUND'S ADVISER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE OF COMMON SHARES OFFERED BY THIS PROSPECTUS, NOR DOES
IT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY COMMON
SHARES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD
BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE FACTS AS SET FORTH IN THE PROSPECTUS OR IN THE AFFAIRS OF
THE FUND SINCE THE DATE HEREOF.

                       ---------------------------------

                               TABLE OF CONTENTS

                                                                           PAGE
                                                                           ----


PROSPECTUS SUMMARY.............................................................1
TABLE OF FEES AND EXPENSES.....................................................9
FINANCIAL HIGHLIGHTS..........................................................10
THE OFFER.....................................................................12
USE OF PROCEEDS...............................................................23
INVESTMENT OBJECTIVES AND POLICIES............................................23
RISK FACTORS AND SPECIAL CONSIDERATIONS.......................................27
MANAGEMENT OF THE FUND........................................................34
DIVIDENDS AND DISTRIBUTIONS...................................................36
TAXATION .....................................................................37
CAPITALIZATION................................................................39
ANTI-TAKEOVER PROVISIONS OF THE DECLARATION OF TRUST AND BY-LAWS..............44
CUSTODIAN, TRANSFER AGENT, DIVIDEND-DISBURSING AGENT AND REGISTRAR............45
LEGAL MATTERS.................................................................45
EXPERTS  .....................................................................45
FURTHER INFORMATION...........................................................45
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.............................46
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION......................49



                                      46

<PAGE>

                               TABLE OF CONTENTS

                                      OF

                      STATEMENT OF ADDITIONAL INFORMATION

                                                                          PAGE
                                                                          ----


STATEMENT OF ADDITIONAL INFORMATION.........................................B-1
INVESTMENT OBJECTIVES AND POLICIES..........................................B-1
INVESTMENT RESTRICTIONS....................................................B-10
MANAGEMENT OF THE FUND.....................................................B-12
PORTFOLIO TRANSACTIONS.....................................................B-20
AUTOMATIC DIVIDEND REINVESTMENT
         AND VOLUNTARY CASH PURCHASE PLAN..................................B-22
TAXATION ..................................................................B-24
NET ASSET VALUE............................................................B-29
GENERAL INFORMATION........................................................B-30
COUNSEL AND INDEPENDENT ACCOUNTANTS........................................B-30
BENEFICIAL OWNERS..........................................................B-30
FINANCIAL STATEMENTS.......................................................B-30
FINANCIAL STATEMENTS.......................................................B-31
APPENDIX A..................................................................A-1




                                      47
<PAGE>



                       ---------------------------------
                       ---------------------------------

                           THE GABELLI UTILITY TRUST
                               __________ SHARES

                               OF COMMON SHARES
                       ISSUABLE UPON EXERCISE OF RIGHTS

                          TO SUBSCRIBE TO SUCH SHARES

                                  PROSPECTUS


                                August __, 2003


                       ---------------------------------
                       ---------------------------------




<PAGE>

                      STATEMENT OF ADDITIONAL INFORMATION


         The Gabelli Utility Trust (the "Fund") is a non-diversified,
closed-end management investment company that seeks long-term growth of capital
and income by investing primarily in a portfolio of equity securities selected
by Gabelli Funds, LLC, the investment adviser to the Fund (the "Adviser"). It
is the policy of the Fund, under normal market conditions, to invest at least
80% of its total assets in common stock and debt and equity securities of
foreign and domestic companies involved to a substantial extent (e.g., at least
50% of the assets, gross income or net profits of a company is committed to or
derived from) in providing products, services or equipment for (i) the
generation or distribution of electricity, gas and water and (ii)
telecommunications services or infrastructure operations, such as airports,
toll roads and municipal services.



         This Statement of Additional Information ("SAI") is not a prospectus,
but should be read in conjunction with the Prospectus for the Fund dated August
__, 2003 (the "Prospectus"). This SAI does not include any information that a
prospective investor should consider before purchasing shares of the Fund, and
investors should obtain and read the Prospectus prior to purchasing shares. A
copy of the Prospectus may be obtained without charge, by calling the Fund at
1-800-GABELLI (1-800-422-3554) or (914) 921-5070. This SAI incorporates by
reference the entire Prospectus.


         The Prospectus and this SAI omit certain of the information contained
in the registration statement filed with the Securities and Exchange
Commission, Washington, D.C. The registration statement may be obtained from
the Securities and Exchange Commission (the "Commission") upon payment of the
fee prescribed, or inspected at the Commission's office or via its website
(www.sec.gov) at no charge.


This Statement of Additional Information is dated August __, 2003.


                      INVESTMENT OBJECTIVES AND POLICIES


Investment Objectives



         The Fund's primary investment objectives are long-term growth of
capital and income. Under normal market conditions, the Fund will invest at
least 80% of its total assets in common stock and debt and equity securities of
foreign and domestic companies involved to a substantial extent (e.g., at least
50% of the assets, gross income or net profits of a company is committed to or
derived from) in providing products, services or equipment for (i) the
generation or distribution of electricity, gas and water and (ii)
telecommunications services or infrastructure operations, such as airports,
toll roads and municipal services. See "Investment Objectives and Policies" in
the Prospectus.



Investment Practices


         Securities Subject to Reorganization. The Fund may invest without
limit in securities of companies 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


                                      B-1
<PAGE>

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 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 offer and/or 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 Fund, thereby increasing its brokerage and
other transaction expenses. The 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 80% of the Fund's total 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 Adviser to be warranted
("temporary defensive periods"), the 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 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. During temporary defensive periods, the Fund may
also invest to the extent permitted by applicable law in shares of money market
mutual funds. Money market mutual funds are investment companies and the
investments in those companies in some cases by the Fund are subject to certain
fundamental investment restrictions and applicable law. See "Investment
Restrictions." As a shareholder in a mutual fund, the Fund will bear its
ratable share of its expenses, including management fees, and will remain
subject to payment of the fees to the Adviser, with respect to assets so
invested. See "Management of the Fund-Investment Advisory and Administration
Arrangements."


         Lower-Rated Securities. The 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. Debt securities that are rated lower than
"BBB" by S&P or "Baa" by Moody's 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 economic
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


                                      B-2
<PAGE>

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 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 operating history, financial resources and
its sensitivity to economic conditions and trends, the market support for the
facility financed by the issue, the perceived ability and integrity of the
issuer's management and regulatory matters.


         In addition, the market value of securities in lower-rated categories
is more volatile than that of higher-quality securities, and the markets in
which such lower-rated or unrated securities are traded are more limited than
those in which higher-rated securities are traded. The existence of limited
markets may make it more difficult for the 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 the Fund to purchase and may also have the
effect of limiting the ability of the 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 (often a feature
of fixed income securities), the 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 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. Interest rates have
recently been at the lowest levels in many years and, therefore, it is likely
that they will rise in the future.

         The Fund may invest up to 10% of its total assets in securities of
issuers in default. The Fund will make an investment in securities of issuers
in default only when the 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 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
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 Fund, the Adviser may also
consider general business conditions, anticipated changes in interest rates and
the outlook for specific industries.


         Subsequent to its purchase by the 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. Moreover, such ratings do
not assess the risk of decline in market value. None of these events will
require the sale of the securities by the Fund, although the Adviser will
consider these events in determining whether the 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


                                      B-3
<PAGE>

holders, such as the Fund. If an issuer exercises these rights during periods
of declining interest rates, the Fund may have to replace the security with a
lower-yielding security, thus resulting in a decreased return for the Fund.

         The market for certain lower-rated and comparable unrated securities
several years ago experienced a major economic recession. Past recessions have
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 or currency 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 or currency 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 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 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 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 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 the
Fund has been assigned an exercise notice, the Fund will be unable to effect a
closing purchase transaction. Similarly, if the 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 Fund so desires.


         The 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 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 Adviser to predict correctly the
effect of these factors. The use of options cannot serve as a complete hedge
since the


                                      B-4
<PAGE>

price movement of securities underlying the options will not necessarily follow
the price movements of the portfolio securities subject to the hedge.

         An option position may be closed out only on an exchange which
provides a secondary market for an option of the same series or in a private
transaction. Although the Fund 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 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 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 Fund may also
purchase and sell call and put options on securities indices. 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 Fund is obligated, in
return for the premium received, to make delivery of this amount. The Fund may
offset its position in stock index options prior to expiration by entering into
a closing transaction on an exchange or it may let the option expire
unexercised.

         The Fund 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 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 indices entails the risk that trading in
the options may be interrupted if trading in certain securities included in the
index is interrupted. The Fund will not purchase these options unless the
Adviser is satisfied with the development, depth and liquidity of the market
and the Adviser believes the options can be closed out.

         Price movements in the portfolio of the Fund are unlikely to correlate
precisely with movements in the level of an index and, therefore, the use of
options on indices cannot serve as a complete hedge and will depend, in part,
on the ability of the Adviser to predict correctly movements in the direction
of the stock market generally or of a particular industry. Because options on
securities indices require settlement in cash, the Adviser may be forced to
liquidate portfolio securities to meet settlement obligations. The staff of the
SEC considers over-the-counter options such as options on indices illiquid
securities.

         Although the Adviser will attempt to take appropriate measures to
minimize the risks relating to the Fund's writing of put and call options,
there can be no assurance that the Fund will succeed in any option- writing
program it undertakes.


                                      B-5
<PAGE>

         Futures Contracts and Options on Futures. The Fund will not enter into
futures contracts or options on futures contracts unless (i) the aggregate
initial margins and premiums do not exceed 5% of the fair market value of its
assets and (ii) the aggregate market value of its outstanding futures contracts
and the market value of the currencies and futures contracts subject to
outstanding options written by the Fund 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 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 Fund.
In this regard, the Fund 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 to 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 Fund upon the
purchase or sale of a futures contract. Initially, the 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 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 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 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.


                                      B-6
<PAGE>

         In the event the 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 liquid securities equal to the market value of the contract must be
deposited and maintained in a segregated account with the custodian of the Fund
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 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 Fund 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 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 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 Fund will segregate liquid assets consisting
of cash, U.S. Government Securities or other liquid securities with its
custodian, or a designated sub-custodian, in an amount at all times equal to or
exceeding its commitment with respect to the contracts.

         The dealings of the Fund in forward foreign exchange are limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of one forward foreign currency for
another currency with respect to specific receivables or payables of the 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 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 Fund may enter into a forward
contract with respect to either the currency in which the transaction is
denominated or another currency deemed appropriate by the Adviser. The amount
the Fund may invest in forward currency contracts is limited to the amount of
its aggregate investments in foreign currencies.


                                      B-7
<PAGE>

         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 Fund 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
Fund 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 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 Fund prior to the
settlement date. The Fund will segregate with its custodian cash or liquid
securities in an aggregate amount at least equal to the amount of its
outstanding forward commitments.

         Short Sales. The Fund may make short sales of securities. A short sale
is a transaction in which the 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 issuer will not exceed either 5%
of the Fund's total assets or 5% of such issuer's voting securities. The Fund
also will not make a short sale, if, after giving effect to such sale, the
market value of all securities sold short exceeds 25% of the value of its
assets or the Fund's aggregate short sales of a particular class of securities
exceeds 25% of the outstanding securities of that class. The 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 Fund owns, or has the immediate and
unconditional right to acquire at no additional cost, the identical security.


         The 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. Short sales
"against the box" may be subject to special tax rules, one of the effects of
which may be to accelerate income to the Fund.


         When the 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 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 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 Fund will also be
required to deposit similar collateral with its custodian, State Street Bank
and Trust Company ("State Street"), 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 or 100%
of the current market


                                      B-8
<PAGE>

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 Fund on such security, the 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 Fund replaces the borrowed security,
the Fund will incur a loss; conversely, if the price declines, the Fund will
realize a capital gain. Any gain will be decreased, any loss increased, by the
transaction costs described above. Although the 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
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 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 Fund, because the 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 Fund may engage in repurchase agreement
transactions involving money market instruments with banks, registered
broker-dealers and government securities dealers approved by the Adviser. The
Fund will not enter into repurchase agreements with the Adviser or any of its
affiliates. Under the terms of a typical repurchase agreement, the Fund 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 Fund 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 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 at all times to the total
amount of the repurchase obligation, including interest. The Fund bears a risk
of loss in the event that the other party to a repurchase agreement defaults on
its obligations and the 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 Adviser, acting under the
supervision of the Board of Trustees of the Fund, reviews the creditworthiness
of those banks and dealers with which the Fund 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.

                            INVESTMENT RESTRICTIONS


         The Fund operates under the following restrictions that constitute
fundamental policies that, except as otherwise noted, cannot be changed without
the affirmative vote of the holders of a majority of the outstanding voting
securities of the Fund along with the affirmative vote of a majority of the
votes entitled to be cast by holders of outstanding preferred shares (including
the Series A Preferred Shares and/or Series B Preferred Shares), voting
together as a single class. For purposes of the preferred share voting rights
described in the foregoing sentence, except as otherwise required under the
1940 Act, the majority of the outstanding preferred shares means, in accordance
with Section 2(a)(42) of the 1940 Act, the vote of (i) of 67% or more of the
preferred shares present at the shareholders meeting called for such vote, if
the holders of more than 50% of the outstanding preferred shares are present or
represented by proxy or (ii) more than 50% of the outstanding preferred shares,
whichever is less. Except as otherwise noted, all percentage limitations



                                      B-9
<PAGE>

set forth below apply immediately after a purchase or initial investment and
any subsequent change in any applicable percentage resulting from market
fluctuations does not require any action. The Fund may not:

(1)      invest 25% or more of its total assets, taken at market value at the
         time of each investment, in the securities of issuers in any
         particular industry other than the Utility Industry. This restriction
         does not apply to investments in U.S. Government Securities.

(2)      purchase or sell commodities or commodity contracts except that the
         Fund 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 Fund do not exceed 50% of the market value of its total
         assets. The Fund may not purchase or sell real estate, provided that
         the Fund may invest in securities secured by real estate or interests
         therein or issued by companies which invest in real estate or
         interests therein.

(3)      make loans of money, except by the purchase of a portion of private or
         publicly distributed debt obligations or the entering into of
         repurchase agreements. The Fund reserves the authority to make loans
         of its portfolio securities to financial intermediaries in an
         aggregate amount not exceeding 20% of its total assets. Any such loans
         will only be made upon approval of, and subject to any conditions
         imposed by, the Board of Trustees of the Fund. Because these loans are
         required to be fully collateralized at all times, the risk of loss in
         the event of default of the borrower should be slight.

(4)      borrow money except to the extent permitted by applicable law. The
         1940 Act currently requires that the 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.

(5)      issue senior securities, except to the extent permitted by applicable
         law.

(6)      underwrite securities of other issuers except insofar as the Fund may
         be deemed an underwriter under the Securities Act 1933, (the "1933
         Act") in selling portfolio securities; provided, however, this
         restriction shall not apply to securities of any investment company
         organized by the Fund that are to be distributed pro rata as a
         dividend to its shareholders.


                                     B-10
<PAGE>

                            MANAGEMENT OF THE FUND


Trustees and Officers



         Overall responsibility for management and supervision of the Fund
rests with its Board of Trustees. The Board of Trustees approves all
significant agreements between the Fund and the companies that furnish the Fund
with services, including agreements with the Adviser, the Fund's custodian and
the Fund's transfer agent. The day-to-day operations of the Fund are delegated
to the Adviser.


         The names and business addresses of the trustees and principal
officers of the 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 trustees, their positions with certain other organizations and
companies. Trustees who are "interested persons" of the Fund, as defined by the
1940 Act, are indicated by an asterisk.

Trustees

<TABLE>
<CAPTION>

                                                                                         Number of
                                                                                       Portfolios in
                                                                                          Fund               Other
    Name (And Age), Position      Term of Office            Principal                     Complex          Directorships
       with the Fund and          and Length of         Occupation During               Overseen by           Held by
       Business Address[1]         Time Served[2]        Past Five Years                  Trustee             Trustee
       ----------------           --------------        ------------------              -----------       ---------------

<S>                                     <C>           <C>                                      <C>        <C>
INTERESTED                        Since 1999*         Chairman of the Board,                   23         Director of
- -----------                                           Chief Executive Officer of                          Morgan Group
TRUSTEES:                                             Gabelli Asset Management                            Holdings, Inc.
- --------                                              Inc. and Chief Investment                           (transportation
*Mario J. Gabelli (61)+                               Officer of the Investment                           services); Vice
Trustee and Chief                                     Adviser and GAMCO                                   Chairman of
Investment Officer                                    Investors, Inc;                                     Lynch
                                                      Director/Trustee and Chief                          Corporation
                                                      Investment Officer of other                         (diversified
                                                      registered investment                               manufacturing
                                                      companies in the Gabelli                            company and
                                                      fund complex.                                       Lynch
                                                                                                          International
                                                                                                          Corporation
                                                                                                          (multimedia)).

*John D. Gabelli (58)+                                Since 1999*** Senior Vice President     10         ____
Trustee                                               of Gabelli & Company and
                                                      Director of Gabelli Advisers,
                                                      Inc.; Director/Trustee of
                                                      other registered investment
                                                      companies in the Gabelli
                                                      fund complex.


                                                          B-11
<PAGE>


                                                                                         Number of
                                                                                       Portfolios in
                                                                                          Fund               Other
    Name (And Age), Position      Term of Office               Principal                  Complex          Directorships
       with the Fund and          and Length of            Occupation During            Overseen by           Held by
       Business Address[1]        Time Served[2]            Past Five Years               Trustee             Trustee
       ----------------           --------------           ------------------           -----------       ---------------

*Karl Otto Pohl (73)              Since 1999***       Member of the Shareholder                32         Director of
Trustee                                               Committee of Sal. Oppenheim                         Gabelli Asset
                                                      Jr. & Cie, Zurich (private                          Management
                                                      investment bank); Former                            Inc.; Chairman,
                                                      President of the Deutsche                           Incentive Capital
                                                      Bundesbank and Chairman of                          and Incentive
                                                      its Central Bank Council from                       Asset
                                                      1980 through 1991;                                  Management
                                                      Director/Trustee of other                           (Zurich);
                                                      registered investment                               Director at Sal.
                                                      companies in the Gabelli fund                       Oppenheim Jr. &
                                                      complex.                                            Cie, Zurich
DISINTERESTED                                         Director, President and                  3                  ___
- -------------
TRUSTEES:
- ---------                                             Founder, The John Dewey
Dr. Thomas E. Bratter (63)        Since 1999*         Academy (residential college
Trustee                                               preparatory therapeutic high
                                                      school); Director/Trustee of
                                                      other registered investment
                                                      companies in the Gabelli fund
                                                      complex.

Anthony J. Colavita (67)          Since 1999**        President and Attorney at law            34                 ___
Trustee                                               in the law firm of Anthony J.
                                                      Colavita, P.C. since 1961;
                                                      Director/Trustee of other
                                                      registered investment
                                                      companies in the Gabelli fund
                                                      complex.

James P. Conn (65)                Since 1999***       Former Managing Director                 11         Director of
Trustee                                               and Chief Investment Officer                        LaQuinta Corp.
                                                      of Financial Security                               (hotels) and First
                                                      Assurance Holdings Ltd.,                            Republic Bank
                                                      1992-1998; Director/Trustee
                                                      of other registered investment
                                                      companies in the Gabelli fund
                                                      complex.



                                                          B-12
<PAGE>


                                                                                         Number of
                                                                                       Portfolios in
                                                                                          Fund               Other
    Name (And Age), Position      Term of Office               Principal                  Complex          Directorships
       with the Fund and          and Length of            Occupation During            Overseen by           Held by
       Business Address[1]        Time Served[2]            Past Five Years               Trustee             Trustee
       ----------------           --------------           ------------------           -----------       ---------------

Vincent D. Enright  (59)          Since 1999*         Former Senior Vice President             12                 ___
Trustee                                               and Chief Financial Officer
                                                      of KeySpan Energy
                                                      Corporation through 1998;
                                                      Director/Trustee of other
                                                      registered investment
                                                      companies in the Gabelli
                                                      fund complex.

Frank J. Fahrenkopf, Jr. (63)     Since 1999**        President and CEO of the                 3                  ___
Trustee                                               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; Director/Trustee
                                                      of other registered investment
                                                      companies in the Gabelli fund
                                                      complex.

Robert J. Morrissey (63)          Since 1999**        Partner in the law firm of               10                 ___
Trustee                                               Morrissey, Hawkins & Lynch;
                                                      Director/Trustee of other
                                                      registered investment
                                                      companies in the Gabelli
                                                      fund complex.

Anthony R. Pustorino (77)         Since 1999***       Certified Public Accountant;             17                 ___
Trustee                                               Professor Emeritus, Pace
                                                      University;
                                                      Director/Trustee of other
                                                      registered investment
                                                      companies in the Gabelli
                                                      fund complex.


                                                          B-13


<PAGE>


                                                                                         Number of
                                                                                       Portfolios in
                                                                                          Fund               Other
    Name (And Age), Position      Term of Office               Principal                  Complex          Directorships
       with the Fund and          and Length of            Occupation During            Overseen by           Held by
       Business Address[1]        Time Served[2]            Past Five Years               Trustee             Trustee
       ----------------           --------------           ------------------           -----------       ---------------

Salvatore J. Zizza (67)           Since 1999**        Chairman of Hallmark                     10         Director of
Trustee                                               Electrical Supply Corp.;                            Hollis Eden
                                                      Former Executive Vice                               Pharmaceuticals
                                                      President of FMG Group (a

                                                      healthcare provider);
                                                      Director/Trustee of other
                                                      registered investment
                                                      companies in the Gabelli
                                                      fund complex.
</TABLE>

<TABLE>
<CAPTION>

Officers


       Name (And Age), Position                  Term of Office                       Principal
           with the Fund and                      and Length of                   Occupation During
          Business Address1                       Time Served                      Past Five Years
          ----------------                        -----------                      ---------------

<S>                                                <C>                    <C>
Bruce N. Alpert (51)                               Since 2003             Executive Vice President and
President                                                                 Chief Operating Officer of the
                                                                          Adviser since June 1988;
                                                                          Director and President of
                                                                          Gabelli Advisers, Inc.; Officer
                                                                          of all other registered
                                                                          investment companies in the
                                                                          Gabelli fund complex.

Gus A. Coutsouros (40)                             Since 2003             Vice President and Chief
Vice President and Treasurer                                              Financial Officer of Gabelli
                                                                          Funds, LLC since 1998 and an
                                                                          officer of all mutual funds
                                                                          advised by Gabelli Funds, LLC
                                                                          and its affiliates.  Chief
                                                                          Financial Officer of Gabelli
                                                                          Advisers, Inc.  Prior to 1998,
                                                                          Treasurer of Lazard Funds.



                                                          B-14
<PAGE>


David Schachter (49)                               Since 1999             Vice President of the Fund since
Vice President                                                            1999; Financial Services
                                                                          Research Analyst of Gabelli &
                                                                          Company from October 1, 1998 to
                                                                          July 9, 1999; Prior to October,
                                                                          1998, Vice President of Thomas J.
                                                                          Herzfeld Advisers, Inc., a
                                                                          registered investment adviser and
                                                                          noted closed-end fund authority.

James E. McKee (40)                                Since 1999             Vice President, General Counsel
Secretary of the Fund                                                     and Secretary of the Adviser
                                                                          (since 1999) and Vice President
                                                                          of GAMCO Investors, Inc.
                                                                          (since 1993); Secretary of the
                                                                          registered investment companies
                                                                          in the Gabelli fund complex.

</TABLE>

_____________________



*     "Interested person" of the Fund, as defined in the 1940 Act. Mr. Mario
      Gabelli is an "interested person" of the Fund as a result of his
      employment as an officer of the Fund and the 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
      Adviser.
+     Mr. Mario Gabelli and Mr. John Gabelli are brothers.
[1]   Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise
      noted.
[2]   The Fund's Board of Trustees is divided into three classes, each class
      having a term of three years. Each year the term of office of one class
      expires and the successor or successors elected to such class serve for a
      three year term. The three year term for each class expires as follows:
      *-- Term expires at the Fund's 2004 Annual Meeting of Shareholders and
      until their successors are duly elected and qualified.
      **-- Term expires at the Fund's 2005 Annual Meeting of Shareholders and
      until their successors are duly elected and qualified.
      ***-- Term expires at the Fund's 2006 Annual Meeting of Shareholders and
      until their successors are duly elected and qualified.

         The Board of Trustees of the Fund is divided into three classes, with
each class having a term of three years. The terms of Messrs. Bratter, Enright
and Mario Gabelli as trustees of the Fund expire in 2004; the terms of Messrs.
Colavita, Fahrenkopf, Morrissey and Zizza as trustees of the Fund expire in
2005; the terms of Messrs. Conn, John Gabelli, Pohl and Pustorino as trustees
of the Fund expire in 2006.


<TABLE>
<CAPTION>


- -----------------------------------------------------------------------------------------------------------
Name of Director                   Dollar Range of Equity             Aggregate Dollar Range of Equity
                                   Securities in the Fund             Securities in all Registered
                                                                      Investment Companies Overseen
                                                                      by Directors in Family of
                                                                      Investment Companies
- -----------------------------------------------------------------------------------------------------------


                                                       B-15
<PAGE>


Interested Trustees

- -----------------------------------------------------------------------------------------------------------
<S>                                           <C>  <C>                                <C>
Mario J. Gabelli                              $1 - $10,000                       Over $100,000
- -----------------------------------------------------------------------------------------------------------
John D. Gabelli                                   None                           Over $100,000
- -----------------------------------------------------------------------------------------------------------
Karl Otto Pohl                                    None                               None
- -----------------------------------------------------------------------------------------------------------

Disinterested Trustees

- -----------------------------------------------------------------------------------------------------------
Dr. Thomas E. Bratter                             None                          Over $100,000
- -----------------------------------------------------------------------------------------------------------
James P. Conn                              $10,001 - $50,000                    Over $100,000
- -----------------------------------------------------------------------------------------------------------
Vincent D. Enright                                None                          Over $100,000
- -----------------------------------------------------------------------------------------------------------
Frank J. Fahrenkopf, Jr.                          None                           $1 - $10,000
- -----------------------------------------------------------------------------------------------------------
Robert J. Morrissey                               None                        $10,001 - $50,000
- -----------------------------------------------------------------------------------------------------------
Anthony J. Pustonino                       $10,001 - $50,000                    Over $100,000
- -----------------------------------------------------------------------------------------------------------
Salvatore J. Zizza                         $50,001 - $100,000                   Over $100,000
- -----------------------------------------------------------------------------------------------------------

</TABLE>

All shares were valued as of December 31, 2002.

         The Trustees serving on the Fund's Nominating Committee are Messrs.
Zizza (Chairman) and Colavita. 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 would consider recommendations by
shareholders if a vacancy were to exist. Such recommendations should be
forwarded to the Secretary of the Fund. The Nominating Committee did not meet
during the year ended December 31, 2002. The Fund does not have a standing
compensation committee.


         Messrs. Pustorino (Chairman), Colavita and Enright serve on the Fund's
Audit Committee and these Trustees are not "interested persons" of the Fund as
defined in the 1940 Act. The Audit Committee generally is responsible for
reviewing and evaluating issues related to the accounting and financial
reporting policies and, as appropriate, internal controls of the Fund and the
internal controls of certain service providers, overseeing the quality and
objectivity of the Fund's financial statements and the audit thereof and to act
as a liaison between the Board of Trustees and the Fund's independent
accountants. During the year ended December 31, 2002, the Audit Committee met
twice.



         As of July 30, 2003, the trustees and officers of the Fund as a group
beneficially owned approximately [1.55%] of the outstanding shares of the
Fund's Common Shares.

Remuneration of Trustees and Officers

         The Fund pays each trustee who is not affiliated with the Adviser or
its affiliates a fee of $3,000 per year plus $500 per meeting attended,
together with each trustee's actual out-of-pocket expenses relating to
attendance at such meetings.


                                      B-16

<PAGE>


          The following table shows certain compensation information for the
trustees and officers of the Fund for the fiscal year ended December 31, 2002.
Mr. Schachter is employed by the Fund and his compensation is evaluated and
approved by the trustees. Other officers who are employed by the Adviser
receive no compensation or expense reimbursement from the Fund.

<TABLE>

                                   COMPENSATION TABLE
                        FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
<CAPTION>


                                                                           TOTAL COMPENSATION
                                                                         FROM THE FUND AND FUND
                                                   AGGREGATE                  COMPLEX PAID
         NAME OF PERSON AND                    COMPENSATION FROM              TO TRUSTEES/
              POSITION                              THE FUND                    OFFICERS*

<S>                                                   <C>                        <C>
MARIO J. GABELLI Chairman of the Board                $0                         $0 (22)
DR. THOMAS E. BRATTER Trustee                         $5,000                     $31,000 (3)
ANTHONY J. COLAVITA Trustee                           $6,000                     $152,286 (33)
JAMES P. CONN Trustee                                 $5,000                     $53,500 (11)
VINCENT D. ENRIGHT Trustee                            $6,000                     $54,536 (11)
FRANK J. FAHRENKOPF, JR. Trustee                      $5,000                     $31,000 (3)
JOHN D. GABELLI Trustee                               $0                         $0 (9)
ROBERT J. MORRISSEY Trustee                           $6,000                     $45,000 (9)
KARL OTTO POHL Trustee                                $0                         $0 (31)
ANTHONY R. PUSTORINO Trustee                          $6,000                     $132,286 (17)
SALVATORE J. ZIZZA Trustee                            $5,000                     $73,750 (9)


</TABLE>

*        Represents the total compensation paid to such persons during the
         calendar year ended December 31, 2002 by investment companies
         (including the Fund) or portfolios thereof from which such person
         receives compensation that are considered part of the same fund
         complex as the Fund because they have common or affiliated investment
         advisers. The number in parenthesis represents the number of such
         investment companies.

For his services as Vice President of the Fund, Mr. Schachter received
compensation in 2002 of $130,000.


Limitation of Officers' and Trustees' Liability


         The Governing Documents of the Fund provide that the Fund will
indemnify its trustees and officers and may indemnify its employees or agents
against liabilities and expenses incurred in connection with litigation in
which they may be involved because of their positions with the Fund, to the
fullest extent permitted by law. However, nothing in the Governing Documents of
the Fund protects or indemnifies a trustee, officer, employee or agent of the
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.


Investment Advisory and Administrative Arrangements

         Gabelli Funds, LLC acts as the Fund's investment adviser pursuant to
an advisory agreement with the Fund (the "Advisory Agreement"). The Adviser is
a New York corporation with principal offices located at One Corporate Center,
Rye, New York 10580. The Adviser was organized in 1999 and is the successor to
Gabelli Funds, Inc., which was organized in 1980. As of March 31, 2003, the
Adviser acted as registered investment adviser to 19 management investment
companies with aggregate net assets of $8.4 billion. The Adviser, together with
other affiliated investment advisers set forth below, had assets under
management totaling approximately $19.5 billion, as of March 31, 2003. GAMCO
Investors, Inc., an affiliate of the


                                      B-17

<PAGE>

Adviser, acts as investment adviser for individuals, pension trusts, profit
sharing trusts and endowments and as a sub-adviser to management investment
companies, having aggregate assets of $9.2 billion under management as of March
31, 2003. Gabelli Fixed Income LLC, an affiliate of the Adviser, acts as
investment adviser for The Treasurer's Fund and separate accounts having
aggregate assets of $1.4 billion under management as of March 31, 2003. Gabelli
Advisers, Inc., an affiliate of the Adviser, acts as investment manager to the
Gabelli Westwood Funds, having aggregate assets of $441 million under
management as of March 31, 2003.



         The 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 Adviser on the basis of his ownership of a
majority of the stock of the Gabelli Group Capital Partners, Inc., which owns a
majority of the capital stock of Gabelli Asset Management Inc.

         Under the terms of the Advisory Agreement, the 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
Trustees. In addition, under the Advisory Agreement, the Adviser oversees the
administration of all aspects of the Fund's business and affairs and provides,
or arranges for others to provide, at the 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 Fund,
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 Advisory Agreement unless the Adviser voluntarily assumes
responsibility for such expense.

         The economic terms of the Advisory Agreement between the Fund and its
Adviser were unanimously approved by the Fund's Board of Trustees at its
February 19, 2003 meeting. The Board's approval included a majority of the
Trustees who are not parties to the Advisory Agreement or interested persons of
any such party (as such term is defined in the 1940 Act). In considering
whether to approve the Advisory Agreement, the Fund's non-interested trustees
considered, among other factors, (i) the services provided to the Fund by the
Adviser and the sub-administrator, (ii) the Fund's absolute and comparative
investment performance, (iii) the Fund's fee and expense data as compared to
various benchmarks and a peer group of closed-end funds in the same asset range
as the Fund, and (iv) the Adviser's profitability with respect to its
management of the Fund. The non-interested trustees indicated that the primary
factors in their determination to approve the Advisory Agreement were the high
quality of service provided by the Adviser, including the experience of the
Fund's portfolio manager, and the Fund's comparative investment performance.

         The Advisory Agreement combines investment advisory and administrative
responsibilities in one agreement. For services rendered by the Adviser on
behalf of the Fund under the Advisory Agreement, the Fund pays the 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 Adviser has voluntarily agreed to waive the
portion of its investment advisory fee attributable to an amount of assets of
the Fund equal to the aggregate stated value of the applicable series of its
preferred shares for any calendar year in which the net asset value total
return of the Fund allocable to the Common Shares, including distributions and
the advisory fee subject to potential waiver, is less than the stated annual
dividend rate of such series, prorated during the year such series is issued
and the final year such series is outstanding. This waiver will apply
separately to the portion of the Fund's assets


                                      B-18
<PAGE>

attributable to the Series A Preferred Shares and Series B Preferred Shares,
respectively, for so long as any shares of such series remain outstanding.

         For each of the years ended December 31, 2000, December 31, 2001 and
December 31, 2002, the Adviser was paid $861,678, $855,435 and $878,549,
respectively, for advisory and administrative services rendered to the Fund.

         The Advisory Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard for its
obligations and duties thereunder, the Adviser is not liable for any error or
judgment or mistake of law or for any loss suffered by the Fund. As part of the
Advisory Agreement, the Fund has agreed that the name "Gabelli" is the
Adviser's property, and that in the event the 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, the Advisory Agreement will remain in effect
with respect to the Fund 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 Trustees or by the holders of a majority of its outstanding
voting securities and (ii) by a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of any party to the Advisory
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. The Advisory Agreement terminates automatically on its
assignment and may be terminated without penalty on 60 days' written notice at
the option of either party thereto or by a vote of a majority (as defined in
the 1940 Act) of the Fund's outstanding shares.


Code of Ethics

         The Fund and the Adviser have adopted a code of ethics (the "Code of
Ethics") under Rule 17j-1 of the 1940 Act. The Code of Ethics permits
personnel, subject to the Code of Ethics and its restrictive provisions, to
invest in securities, including securities that may be purchased or held by the
Fund. The Code of Ethics can be reviewed and copied at the United States
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
Information on the operations of the Reference Room may be obtained by calling
the Securities and Exchange Commission at (202) 942-8090. The Code of Ethics is
also available on the EDGAR database on the Securities and Exchange
Commission's web site at http://www.sec.gov. Copies of the Code of Ethics may
also be obtained, after paying a duplicating fee, by electronic request at the
following e-mail address: publicinfo@sec.gov, or by writing the Securities and
Exchange Commission's Public Reference Room Section, Washington, D.C. 20549-
0102.


                             PORTFOLIO TRANSACTIONS


          Subject to policies established by the Board of Trustees of the Fund,
the Adviser is responsible for placing purchase and sale orders and the
allocation of brokerage on behalf of the Fund. 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 Fund.
However, Gabelli & Company may execute transactions in the over-the-counter
markets on an agency basis and receive a stated commission therefrom. To the
extent consistent with applicable provisions of the 1940 Act and the rules and
exemptions adopted by the SEC thereunder, as well as other regulatory
requirements, the Fund's Board of Trustees have determined that portfolio
transactions may be executed through Gabelli & Company and its broker-dealer


                                      B-19


<PAGE>

affiliates if, in the judgment of the 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 Fund a rate consistent with that charged to
comparable unaffiliated customers in similar transactions. The Fund has no
obligations to deal with any broker or group of brokers in executing
transactions in portfolio securities. In executing transactions, the Adviser
seeks to obtain the best price and execution for the Fund, 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 Adviser generally seeks reasonably competitive commission
rates, the Fund does not necessarily pay the lowest commission available.

         Subject to obtaining the best price and execution, brokers who provide
supplemental research, market and statistical information to the Adviser or its
affiliates may receive orders for transactions by the Fund. 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 Adviser under the Advisory Agreement
and the expenses of the Adviser will not necessarily be reduced as a result of
the receipt of such supplemental information. Such information may be useful to
the Adviser and its affiliates in providing services to clients other than the
Fund, and not all such information is used by the Adviser in connection with
the Fund. Conversely, such information provided to the Adviser and its
affiliates by brokers and dealers through whom other clients of the Adviser and
its affiliates effect securities transactions may be useful to the Adviser in
providing services to the Fund.

         Although investment decisions for the Fund are made independently from
those of the other accounts managed by the Adviser and its affiliates,
investments of the kind made by the Fund may also be made by those other
accounts. When the same securities are purchased for or sold by the Fund and
any of such other accounts, it is the policy of the Adviser and its affiliates
to allocate such purchases and sales in the manner deemed fair and equitable to
all of the accounts, including the Fund.

         For the fiscal years ended December 31, 2000, December 31, 2001 and
December 31, 2002, the Fund paid a total of $125,729, $81,313, and $140,917,
respectively, in brokerage commissions, of which Gabelli & Company, Inc. and
its affiliates received $116,973, $70,203, and $123,636, respectively. The
amount received by Gabelli & Company, Inc. and its affiliates from the Fund in
respect of brokerage commissions for the fiscal year ended December 31, 2002
represented approximately 87.74% of the aggregate dollar amount of brokerage
commissions paid by the Fund for such period and approximately 75.29% of the
aggregate dollar amount of transactions by the Fund for such period. The
brokerage commissions in 2002 reflect, in part, the Fund's investment of
proceeds from its rights offering, completed in June, 2002. The variance
between the percentage of brokerage commissions received by Gabelli & Company,
Inc. and the percentage of transactions executed by Gabelli & Company, Inc.
reflects the Fund's practice of generally directing bulk trades to unaffiliated
broker-dealers.


                                      B-20
<PAGE>


Repurchase of Shares


         The Fund is a closed-end, non-diversified, management investment
company and as such its shareholders do not, and will not, have the right to
redeem their shares. The Fund, 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 Fund's shares are trading at a discount of 10% or more (or such
other percentage as the Board of Trustees of the Fund may determine from time
to time) from the net asset value of the shares. Pursuant to the 1940 Act, the
Fund may repurchase its shares on a securities exchange (provided that the Fund
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, status 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 Fund. When the 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.


Portfolio Turnover

         The portfolio turnover rates of the Fund for the fiscal years ending
December 31, 2002 and 2001 were 29% and 41%, respectively. 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 Fund
and, indirectly, by its shareholders. A higher rate of portfolio turnover may
also result in taxable gains being passed to shareholders sooner than would
otherwise be the case.


                        AUTOMATIC DIVIDEND REINVESTMENT
                        AND VOLUNTARY CASH PURCHASE PLAN

         Under the Automatic Dividend Reinvestment and Voluntary Cash Purchase
Plan adopted by the Fund ( the "Plan"), a shareholder whose Common Shares are
registered in his own name, including all Shares issued pursuant to the Rights
Offering and all shares held by a shareholder participating in the Rights
Offering, will have all distributions reinvested automatically by Equiserve
Trust Company ("Equiserve"), 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
Shares 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 Equiserve as dividend disbursing agent.


         Under the Plan, whenever the market price of the Common Shares 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 Common Shares, valued
at the


                                      B-21
<PAGE>

greater of (i) the net asset value as most recently determined or (ii) 95% of
the then current market price of the Common 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 preceding trading day. If the net asset value of
the Common Shares at the time of valuation exceeds the market price of the
Common Shares, participants will receive shares from the Fund, or acquired by
the Plan agent in the open market, valued at market price. If the Fund should
declare a dividend or capital gains distribution payable only in cash,
Equiserve will buy the Fund's Common Shares for the Plan in the open market, on
the New York Stock Exchange or elsewhere, for the participants' accounts,
except that Equiserve will endeavor to terminate purchases in the open market
and cause the Fund to issue shares at the greater of (i) net asset value or
(ii) 95% of the market price of the Common Shares if, following the
commencement of such purchases, the market value of its Common Shares exceeds
net asset value.


         Participants in the Plan have the option of making additional cash
payments to Equiserve, twice per month for the Fund, for investment in the
shares. Such payments may be made in any amount from $250 to $10,000. Equiserve
will use all funds received from participants to purchase shares of the Fund in
the open market on the 1st and 15th of each month. It is suggested that
participants send voluntary cash payments to Equiserve in a manner that ensures
that Equiserve 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 Equiserve at least 48
hours before such payment is to be invested. Equiserve 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. Common Shares in the account of each Plan participant
will be held by Equiserve 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
Equiserve so that the shares represented by such certificates will be held by
Equiserve 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, Equiserve 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.

         Equiserve's fees for handling the reinvestment of such dividends and
capital gains distributions are paid by the Fund. There are no brokerage
charges with respect to shares issued directly by the Fund 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 Equiserve's open market purchases in connection with the
reinvestment of dividends or capital gains distributions.

         With respect to purchases from voluntary cash payments, Equiserve 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 Equiserve 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.


                                      B-22
<PAGE>

         Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate its 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.
The Plan also may be amended or terminated by Equiserve on at least 90 days'
written notice to the participants in such Plan. All correspondence concerning
the Plan should be directed to Equiserve at P.O. Box 43025, Providence, R.I.
02940-3025.

                                    TAXATION


         The following discussion is a brief summary of certain United States
federal income tax considerations affecting the Fund and its shareholders. No
attempt is made to present a detailed explanation of all federal, state, local
and foreign tax concerns affecting the Fund and its Shareholders (including
Shareholders who own large positions in the Fund), and the discussions set
forth here and in the Prospectus do not constitute tax advice. Investors are
urged to consult their own tax advisers with any specific questions relating to
federal, state, local and foreign taxes. The discussion reflects applicable tax
laws of the United States as of the date of this SAI, which tax laws may be
changed or subject to new interpretations by the courts or the Internal Revenue
Service (the "IRS") retroactively or prospectively.



Taxation of the Fund

         The Fund has qualified as and intends to continue to qualify as a
regulated investment company (a "RIC") under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). If it so qualifies, the Fund
will not be subject to U.S. federal income tax on the portion of its net
investment income (i.e., its investment company taxable income as defined in
the Code without regard to the deduction for dividends paid) and on its net
capital gain (i.e., the excess of its net realized long-term capital gain over
its net realized short-term capital loss), if any, which it distributes to its
shareholders in each taxable year, provided that an amount equal to at least
90% of the sum of its net investment income and any net tax-exempt income for
the taxable year is distributed to its shareholders.

         Qualification as a RIC requires, among other things, that the Fund:
(i) derive at least 90% of its gross income in each taxable year from
dividends, interest, payments with respect to securities loans, gains from the
sale or other disposition of stock, securities or foreign currencies or other
income (including gains from options, futures or forward contracts) derived
with respect to its business of investing in stock, securities or currencies
and (ii) diversify its holdings so that, at the end of each quarter of each
taxable year, subject to certain exceptions, (a) at least 50% of the market
value of the Fund's assets is represented by cash, cash items, U.S. government
securities, securities of other RICs and other securities with such other
securities limited, in respect of any one issuer, to an amount not greater than
5% of the value of the Fund's assets and 10% of the outstanding voting
securities of such issuer, and (b) not more than 25% of the value of its assets
is invested in the securities (other than U.S. government securities or the
securities of other RICs) of any one issuer or any two or more issuers that the
Fund controls and which are determined to be engaged in the same or related
trades or businesses. If the Fund were unable to satisfy the 90% distribution
requirement or otherwise were to fail to qualify as a RIC in any year, it would
be taxed in the same manner as an ordinary corporation with no deduction for
dividends paid. In addition, distributions would be taxed to its shareholders
as ordinary income.

         The IRS has taken the position that if a regulated investment company
has two classes of shares, it may designate distributions made to each class in
any year as consisting of no more than such class's proportionate share of
particular types of income, such as long-term capital gain. A class's
proportionate share


                                      B-23
<PAGE>

of a particular type of income is determined according to the percentage of
total dividends paid by the regulated investment company during such year that
was paid to such class. Consequently, the Fund will designate distributions
made to the common shareholders and preferred shareholders as consisting of
particular types of income in accordance with the classes' proportionate shares
of such income. Because of this rule, the Fund is required to allocate a
portion of its net capital gain, qualified dividend income and dividends
qualifying for the dividends received deduction to common shareholders and
preferred shareholders. The amount of net capital gain and qualified dividend
income and dividends qualifying for the dividends received deduction allocable
among common shareholders and the preferred shareholders will depend upon the
amount of such net capital gain and qualified dividend income and dividends
qualifying for the dividends received deduction realized by the Fund and the
total dividends paid by the Fund on the Common Shares and the Preferred Shares
during a taxable year.

         Under the Code, amounts not distributed by a RIC on a timely basis in
accordance with a calendar year distribution requirement are subject to a 4%
excise tax. To avoid the tax, the Fund must distribute during each calendar
year, an amount at least equal to the sum of (i) 98% of its ordinary income for
the calendar year, (ii) 98% of its capital gain net income (both long-term and
short-term) for the one year period ending on October 31 of such year, (unless
an election is made to use the Fund's fiscal year), and (iii) all ordinary
income and capital gain net income for previous years that were not previously
distributed or subject to tax under Subchapter M. A distribution will be
treated as paid during the calendar year if it is paid during the calendar year
or declared by the Fund in October, November or December of the year, payable
to shareholders of record on a date during such a month and paid by the Fund
during January of the following year. Any such distributions paid during
January of the following year will be deemed to be received on December 31 of
the year the distributions are declared, rather than when the distributions are
received. While the Fund intends to distribute its ordinary income and capital
gain net income in the manner necessary to minimize imposition of the 4% excise
tax, there can be no assurance that sufficient amounts of the Fund's ordinary
income and capital gain net income will be distributed to avoid entirely the
imposition of the tax. In such event, the Fund will be liable for the tax only
on the amount by which it does not meet the foregoing distribution
requirements.

         Gain or loss on the sales of securities by the Fund will be long-term
capital gain or loss if the securities have been held by the Fund for more than
one year. Gain or loss on the sale of securities held for one year or less will
be short-term capital gain or loss.

         Foreign currency gain or loss on non-U.S. dollar denominated bonds and
other similar debt instruments and on any non-U.S. dollar denominated futures
contracts, options and forward contracts that are not section 1256 contracts
(as defined below) generally will be treated as net investment income and loss.

         Investments by the Fund in certain "passive foreign investment
companies" ("PFICs") could subject the Fund to federal income tax (including
interest charges) on certain distributions or dispositions with respect to
those investments which cannot be eliminated by making distributions to
stockholders. An election may be available to the Fund to mitigate the effect
of this provision but the election generally accelerates the recognition of
income without the receipt of cash. Dividends paid by PFICs will not qualify
for the reduced tax rates discussed below under "Taxation of Shareholders."

         The Fund may invest in debt obligations purchased at a discount with
the result that the Fund may be required to accrue income for federal income
tax purposes before amounts due under the obligations are paid. The Fund may
also invest in securities rated in the medium to lower rating categories of
nationally recognized


                                      B-24
<PAGE>

rating organizations, and in unrated securities ("high yield securities"). A
portion of the interest payments on such high yield securities may be treated
as dividends for federal income tax purposes.

         As a result of investing in stock of PFICs or securities purchased at
a discount or any other investment that produces income that is not matched by
a corresponding cash distribution to the Fund, the Fund could be required to
include in current income, income it has not yet received. Any such income
would be treated as income earned by the Fund and therefore would be subject to
the distribution requirements of the Code. This might prevent the Fund from
distributing 90% of its net investment income as is required in order to avoid
Fund-level federal income taxation on all of its income, or might prevent the
Fund from distributing enough ordinary income and capital gain net income to
avoid completely the imposition of the excise tax. To avoid this result, the
Fund may be required to borrow money or dispose of other securities to be able
to make distributions to its shareholders.

         If the Fund does not meet the asset coverage requirements of the 1940
Act and the Statements of Preferences, the Fund will be required to suspend
distributions to the holders of the Common Shares until the asset coverage is
restored. Such a suspension of distributions might prevent the Fund from
distributing 90% of its net investment income as is required in order to avoid
Fund-level federal income taxation on all of its income, or might prevent the
Fund from distributing enough income and capital gain net income to avoid
completely imposition of the excise tax. Upon any failure to meet the asset
coverage requirements of the 1940 Act or the Statements of Preferences, the
Fund may, and in certain circumstances will, be required to partially redeem
Preferred Shares in order to restore the requisite asset coverage and avoid the
adverse consequences to the Fund and its shareholders of failing to qualify as
a RIC. If asset coverage were restored, the Fund would again be able to pay
dividends and would generally be able to avoid Fund-level federal income
taxation on the income that it distributes.

Hedging Transactions

         Certain options, futures contracts and options on futures contracts
are "section 1256 contracts." Any gains or losses on section 1256 contracts are
generally considered 60% long-term and 40% short-term capital gains or losses
("60/40"). Also, section 1256 contracts held by the Fund at the end of each
taxable year are "marked-to-market" with the result that unrealized gains or
losses are treated as though they were realized and the resulting gain or loss
is treated as 60/40 gain or loss.

         Hedging transactions undertaken by the Fund may result in "straddles"
for federal income tax purposes. The straddle rules may affect the character of
gains (or losses) realized by the Fund. In addition, losses realized by the
Fund on positions that are part of a straddle may be deferred under the
straddle rules, rather than being taken into account in calculating the taxable
income for the taxable year in which such losses are realized. Further, the
Fund may be required to capitalize, rather than deduct currently, any interest
expense on indebtedness incurred or continued to purchase or carry any
positions that are part of a straddle.

         The Fund may make one or more of the elections available under the
Code which are applicable to straddles. If the Fund makes any of the elections,
the amount, character and timing of the recognition of gains or losses from the
affected straddle positions may be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections
accelerate the recognition of gain or loss from the affected straddle
positions.


                                      B-25
<PAGE>

         Because application of the straddle rules may affect the character and
timing of the Fund's gains, losses and deductions, the amount which must be
distributed to shareholders, and which will be taxed to shareholders as
ordinary income or long-term capital gain, may be increased or decreased
substantially as compared to a fund that did not engage in such hedging
transactions.

Foreign Taxes

         Since the Fund may invest in foreign securities, its income from such
securities may be subject to non-U.S. taxes. The Fund historically has invested
less than 50% of its total assets in foreign securities. As long as the Fund
continues to invest less than 50% of its assets in foreign securities it will
not be eligible to elect to "pass-through" to shareholders of the Fund the
ability to use the foreign tax deduction or foreign tax credit for foreign
taxes paid with respect to qualifying taxes.

Taxation of Shareholders

         The Fund will determine either to distribute or to retain for
reinvestment all or part of its net capital gain. If any such gains are
retained, the Fund will be subject to a tax of 35% of such amount. In that
event, the Fund expects to designate the retained amount as undistributed
capital gains in a notice to its shareholders, each of whom (i) will be
required to include in income for tax purposes as long-term capital gains its
share of such undistributed amounts, (ii) will be entitled to credit its
proportionate share of the tax paid by the Fund against its federal income tax
liability and to claim refunds to the extent that the credit exceeds such
liability and (iii) will increase its basis in its shares of the Fund by an
amount equal to 65% of the amount of undistributed capital gains included in
such shareholder's gross income.

          Distributions of ordinary income are taxable to a U.S. shareholder as
ordinary income, whether paid in cash or shares. Such dividends (if designated
by the Fund) may qualify (provided holding periods and other requirements are
met) (i) for the dividends received deduction available to corporations, but
only to the extent that the Fund's income consists of qualified dividends
received from U.S. corporations and (ii) under the recently enacted Jobs and
Growth Tax Relief Reconciliation Act of 2003 (effective for taxable years after
December 31, 2002 through December 31, 2008) ("2003 Tax Act"), as qualified
dividend income eligible for the reduced maximum rate to individuals of
generally 15% (5% for individuals in lower tax brackets) to the extent that the
Fund receives qualified dividend income. Qualified dividend income is, in
general, dividend income from taxable domestic corporations and certain foreign
corporations (e.g., generally, foreign corporations incorporated in a
possession of the United States or in certain countries with a comprehensive
tax treaty with the United States, or the stock of which is readily tradable on
an established securities market in the United States). Distributions of net
capital gain designated as capital gain dividends, if any, are taxable to
shareholders at rates applicable to long-term capital gains, whether paid in
cash or in shares, regardless of how long the shareholder has held the Fund's
shares, and are not eligible fo the dividends received deduction. Under the
2003 Tax Act, the maximum tax rate on net long-term capital gain of individuals
is reduced generally from 20% to 15% (5% for individuals in lower brackets) for
such gain realized after May 6, 2003 and before January 1, 2009. Distributions
in excess of the Fund's earnings and profits will first reduce the adjusted tax
basis of a holder's shares and, after such adjusted tax basis is reduced to
zero, will constitute capital gain to such holder (assuming the shares are held
as a capital asset). For non-corporate taxpayers, under the 2003 Tax Act, net
investment income (other than qualified dividend income) will currently be
taxed at a maximum rate of 35%, while net capital gain generally will be taxed
at a maximum rate of 15%. For corporate taxpayers, both net investment income
and net capital gain are taxed at a maximum rate of 35%.


                                      B-26
<PAGE>

         Shareholders may be entitled to offset their capital gain dividends
with capital losses. There are a number of statutory provisions affecting when
capital losses may be offset against capital gains, and limiting the use of
losses from certain investments and activities. Accordingly, shareholders with
capital losses are urged to consult their tax advisers.

         The price of shares purchased at any time may reflect the amount of a
forthcoming distribution. Those purchasing shares just prior to a distribution
will receive a distribution which will be taxable to them even though it
represents in part a return of invested capital.

         Upon a sale or exchange of shares, a shareholder will realize a
taxable gain or loss depending upon his or her basis in the shares. Such gain
or loss will be treated as long-term capital gain or loss if the shares have
been held for more than one year. Any loss realized on a sale or exchange will
be disallowed to the extent the shares disposed of are replaced within a 61-day
period beginning 30 days before and ending 30 days after the date that the
shares are disposed of. In such a case, the basis of the shares acquired will
be adjusted to reflect the disallowed loss.

         Any loss realized by a shareholder on the sale of Fund shares held by
the shareholder for six months or less will be treated for tax purposes as a
long-term capital loss to the extent of any capital gain dividends received by
the shareholder (or amounts credited to the shareholder as an undistributed
capital gain) with respect to such shares.

         Ordinary income dividends and capital gain dividends also may be
subject to state and local taxes. Shareholders are urged to consult their own
tax advisers regarding specific questions about the U.S. federal (including the
application of the alternative minimum tax rules), state, local or foreign tax
consequences to them of investing in the Fund.

         Ordinary income dividends (but not capital gain dividends) paid to
shareholders who are non-resident aliens or foreign entities will be subject to
a 30% United States withholding tax under existing provisions of the Code
applicable to foreign individuals and entities unless a reduced rate of
withholding or a withholding exemption is provided under applicable treaty law.
Non-resident shareholders are urged to consult their own tax advisers
concerning the applicability of the United States withholding tax.

Backup Withholding

         The Fund may be required to withhold federal income tax on all taxable
distributions and redemption proceeds payable to non-corporate shareholders who
fail to provide the Fund with their correct taxpayer identification number or
to make required certifications, or who have been notified by the IRS that they
are subject to backup withholding. Backup withholding is not an additional tax.
Any amounts withheld may be refunded or credited against such shareholder's
federal income tax liability, if any, provided that the required information is
furnished to the IRS.

         The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative, judicial or administrative
action, either prospectively or retroactively. Persons considering an
investment in Common Shares of the Fund


                                      B-27

<PAGE>

should consult their own tax advisers regarding the purchase, ownership and
disposition of Common Shares of the Fund.


                                NET ASSET VALUE

         The net asset value of the 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.

         Portfolio instruments of the Fund which are traded in a market subject
to government regulation on which trades are reported contemporaneously
generally will be valued at the last sale price on the principal market for
such instruments as of the close of regular trading on the day the instruments
are being valued, or lacking any sales, at the average of the bid and asked
price on the principal market for such instruments on the most recent date on
which bid and asked prices are available. Other readily marketable assets will
be valued at the average of quotations provided by dealers maintaining an
active market in such instruments. Securities and other assets for which market
quotations are not readily available will be valued at fair value as determined
in good faith by or under the direction of the Board of Trustees. Short-term
investments that mature in more than 60 days are valued at the highest bid
price obtained from a dealer maintaining an active market in that security or
on the basis of prices obtained from a pricing service approved as reliable by
the Board of Trustees. Short-term investments that mature in 60 days or fewer
are valued at amortized cost, unless the Board of Trustees determines that such
valuation does not constitute fair value. The Fund may employ recognized
pricing services from time to time for the purpose of pricing portfolio
instruments.

         Trading takes place in various foreign markets on days which are not
Business Days and therefore the Fund's respective net asset value per share is
not calculated. The calculation of the Fund's net asset value may not take
place contemporaneously with the determination of the prices of portfolio
securities held by the Fund. Events affecting the values of portfolio
securities that occur between the time their prices are determined and the
close of the NYSE will not be reflected in the Fund's calculation of net asset
value unless the Board of Trustees deems that the particular event would
materially affect the net asset value, in which case the fair value of those
securities will be determined by consideration of other factors by or under the
direction of the Board of Trustees.

         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.

                              GENERAL INFORMATION

                      COUNSEL AND INDEPENDENT ACCOUNTANTS

         Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York,
New York 10036 is special counsel to the Fund in connection with the rights
offering.

          PricewaterhouseCoopers LLP, independent accountants, 1177 Avenue of
the Americas, New York, New York 10036, serve as auditors of the Fund and will
annually render an opinion on the financial statements of the Fund.


                                      B-28
<PAGE>


                               BENEFICIAL OWNERS


         As of July 31, 2003, there are no persons known to the Fund who may be
deemed beneficial owners of 5% or more of shares of the Fund's Common Shares
because they possessed or shared voting or investment power with respect to the
Fund's Common Shares.


                              FINANCIAL STATEMENTS


         The audited financial statements included in the Annual Report to the
Fund's Shareholders for the fiscal year ended December 31, 2002, together with
the report of PricewaterhouseCoopers LLP thereon, are also incorporated herein
by reference from the Fund's Annual Report to Shareholders. All other portions
of the Annual Report to Shareholders and Semi-Annual Report to Shareholders are
not incorporated herein by reference and are not part of the Registration
Statement. A copy of the Annual Report to Shareholders may be obtained without
charge by writing to the Fund at its address at One Corporate Center, Rye, New
York 10580- 1422 or by calling the Fund toll-free at 800-GABELLI (422-3554).
The unaudited financial statements for the six months ended June 30, 2003,
follow.



                                      B-29
<PAGE>

                              FINANCIAL STATEMENTS

                            PORTFOLIO OF INVESTMENTS

                           June 30, 2003 (Unaudited)

<TABLE>
<CAPTION>



                                                    Market                                                            Market
Shares                               Cost           Value         Shares                                 Cost           Value
- ------                              -------        -------        ------                                -------        -------
<S>         <C>                     <C>             <C>           <C>       <C>                           <C>        <C>
            COMMON STOCKS - 87.9%                                 45,000    NiSource Inc. (Sails)+      $ 90,000       $ 99,900
            Agriculture - 0.0%                                    64,000    NSTAR.................     2,729,958      2,915,200
  20,000    Cadiz Inc.+.............  $ 3,000       $ 2,700        6,000    Otter Tail Corp.......       167,121        161,880
                                    ----------    ----------      50,000    PG&E Corp.+...........       625,746      1,057,500
                                                                  10,000    PNM Resources Inc.....       185,900        267,500
            Communications Equipment - 0.2%                       45,000    Progress Energy Inc.       1,959,850      1,975,500
  60,000    Furukawa Electric Co.                                 40,000    Progress Energy Inc.,         20,800          4,200
            Ltd...................    419,016       195,877                   CVO+................
                                    ---------     ---------       12,000    Puget Energy Inc......       266,242        286,440
                                                                  30,000    Sierra Pacific               227,798        178,200
            Energy and Utilities:  Electric  - 21.0%                          Resources+..........
 220,000    AES Corp.+............  1,072,514      1,397,000      30,000    TXU Corp..............       483,015        673,500
  20,000    Calpine Corp.+........     52,600        132,000      10,000    Unitil Corp...........       271,147        241,000
  55,000    Cinergy Corp..........  1,727,502      2,023,450      10,000    Vectren Corp..........       245,531        250,500
  20,000    Cleco Corp............    364,947        346,400     215,000    Westar Energy Inc.....     3,192,547      3,489,450
 80,0000    DPL Inc...............  1,547,470      1,275,200      10,000    Wisconsin Energy Corp.       257,794        290,000
  19,000    DTE Energy Co...          807,570        734,160       7,000    WPS Resources Corp....       204,319        281,400
  90,000    Edison International+.  1,037,120      1,478,700     175,000    Xcel Energy Inc.......     3,004,875      2,632,000
 160,000    El Paso Electric Co.+.. 1,462,191      1,972,800                                           ----------   ------------
  22,000    FPL Group Inc.......... 1,192,215      1,470,700                                           34,973,950    36,081,637
  44,000    Great Plains                                                                               ----------   ------------
              Energy Inc...........   919,607      1,270,720
  55,000    Maine Public                                                    Energy and Utilities:  Natural Gas -  14.9%
              Service Co........... 1,750,455      1,788,050      33,000    AGL Resources Inc.....       805,954        839,520
 170,000    Northeast Utilites..... 3,354,147      2,845,800       3,000    Atmos Energy Corp.....        66,880         74,400
  55,000    SCANA Corp......        1,694,645      1,885,400      13,800    Cascade Natural Gas          295,987        263,580
 118,000    TECO Energy Inc.        1,863,891      1,414,820                Corp..................
  22,000    UIL Holdings Corp......   966,711        892,100       3,000    Chesapeake Utilities          55,515         67,800
  20,000    Unisource Energy Corp..   236,625        376,00                 Corp..................
                                   -----------    ----------      29,800    Delta Natural Gas Co.        496,324        700,002
                                   20,050,210     21,303,300                 Inc..................
                                   -----------    ----------      40,000    Dynegy Inc., Cl. A +..       250,000        168,000
                                                                   1,000    EnergySouth Inc.......        26,780         32,800
        Energy and Utilities: Integrated - 35.6%                  38,000    National Fuel Gas Co..       890,728        989,900
                                                                  90,000    Nicor Inc.............     1,982,877      3,339,900
 162,000    Allegheny Energy Inc... 1,462,197      1,368,900      15,000    NUI Corp..............       174,468        232,800
  13,000    ALLETE Inc......          222,463        345,150      65,000    ONEOK Inc.............     1,121,404      1,275,950
  75,000    Alliant Energy Corp.... 1,256,310      1,427,250      19,000    Peoples Energy Corp...       665,481        814,910
 150,000    Aquila Inc.............   423,832        387,000      20,000    Piedmont Natural Gas         588,123        776,200
     500    Avista Corp............     5,575          7,075                Co. Inc...............
  18,000    Central Vermont                                        3,000    RGC Resources, Inc....        59,164         70,020
              Public Service Corp..   327,361        351,900     115,000    SEMCO Energy Inc......     1,528,444        669,300
  48,000    CH Energy Group Inc.... 2,186,400      2,160,000     102,566    Southern Union Co.+...     1,458,095      1,737,468
 165,000    CMS Energy Corp........ 1,334,352      1,336,500     145,000    Southwest Gas Corp....     3,596,118      3,071,100
  75,000    Constellation Energy                                                                       ----------   ------------
              Group Inc...........  2,109,100      2,572,500                                           14,062,342    15,123,650
   2,000    Dominion Resources Inc.    80,310        128,540                                           ----------   ------------
 180,000    DQE Inc...............  3,128,555      2,712,600
 150,000    Duke Energy Corp......  2,884,145      2,992,500                Energy and Utilites:  Water - 5.3%
 100,000    El Paso Corp..........  1,049,809        808,000      12,000    American States Water        266,173        327,600
  13,000    Empire District           259,961        282,750                Co....................
              Electric Co.........                                11,000    Artesian Resources           257,250        395,989
  32,000    Energy East Corp......    595,433        664,320                 Corp., Cl. A .........
   5,000    Entergy Corp..........    140,415        263,900      20,500    BIW Ltd...............       385,069        372,075
   8,979    FirstEntergy Corp.....    287,099        345,243      20,520    California Water             566,928        577,022
  83,666    Florida Public          1,051,557      1,367,939                Service Group.........
              Utilities Co........                                 7,500    Connecticut Water            146,455        191,625
   20,000   Green Mountain            416,731        400,000                 Service Inc...........
             Power Corp...........                                38,500    Middlesex Water Co....       801,886        948,640
  30,000    MGE Energy Inc........    816,100        941,400      20,066    Pennichuck Corp.......       489,727        495,630
 110,000    Mirant Corp.+.........    900,482        319,000      12,000    Philadelphia Suburban        183,101        292,560
   5,000    NiSource Inc..........    103,120         95,000                Corp..................
  18,300    SJW Corp..............     1,768,527      1,560,075

</TABLE>


                                See accompanying notes to financial statements.


                                                          B-30

<PAGE>

                                          PORTFOLIO OF INVESTMENTS (Continued)

                                               June 30, 2003 (Unaudited)
<TABLE>
<CAPTION>

                                                           Market                                                             Market
 Shares                                      Cost          Value          Shares                                   Cost       Value
 ------                                      ----          -----          ------                                   ----       -----
         COMMON STOCKS (Continued)                                                  PREFERRED STOCKS - 1.2%
         Energy and Utilities:  Water (Continued)                                     Telecommunications - 1.2%

<S>      <C>                                   <C>             <C>           <S>    <c>                        <C>         <C>
 5,512   Southwest Water Co..............   $  52,058       $ 77,003      23,000    Citizens Communications
 6,000   York Water Co...................     108,629         98,520                  Co., 5.00% Cv. Pfd..... $1,094,616  $1,219,000
                                            ---------    ------------                                         ----------   ---------
                                            5,025,983      5,336,739      Principal
                                            ---------    ------------      Amount
                                                                           ------
         Environmental Services - 0.1%                                              CORPORATE BONDS - 0.8%
18,000   Catalytica Energy Systems Inc.+.     179,986         48,600                Energy and Utilities: Integrated - 0.8%
                                              --------    ------------
                                                                         $1,100,000  Mirant Corp., Sub. Deb.
         Equipment and Supplies - 0.0%                                               Cv.,  2.500%, 06/15/21+...  833,029     825,000
10,000   Capstone Turbine Corp.+.........      13,980         10,900                                          -----------   --------
                                            ---------    ------------
                                                                                   REPURCHASE AGREEMENT - 10.0%
         Exchange Traded Funds - 2.1%
28,000   Utilities HOLDRs Trust..........   2,015,370      2,088,800     10,089,000  Agreement with  State Street
                                            ---------    ------------                  Bank and Trust Co.,
         Metals and Mining - 0.5%                                                      1.080%, dated 06/30/03,
 6,168   Fording Canadian Coal Trust                                                   due 07/01/03, proceeds
         (New York)......................     132,561        111,764                   at maturity,
19,532   Fording Canadian Coal Trust                                                   $10,089,303(a).....   10,089,000  10,089,000
          (Toronto).......................    389,730        350,750                                         ----------   ---------
                                            ---------    ------------       TOTAL INVESTMENTS - 99.9%...... $97,969,318 $101,102,043
                                              522,291        462,514                                        =========== ------------
                                            ---------    ------------
         Satellite - 0.6%                                                   Other Assets in Excess of                       150,362
50,000   General Motors Corp., Cl. H+         870,553        640,500            Liabilities - 0.1%...                   ------------
                                            ---------    ------------
                                                                            NET ASSETS - 100.0%
         Telecommunications - 6.6%                                           (15,282,735 shares outstanding)..........  $101,252,405
45,000   BellSouth Corp..................   1,411,141      1,198,350                                                    ===========
30,000   BT Group plc, ADR...............   1,094,015      1,009,800
24,000   CenturyTel Inc..................     910,440        836,400        NET ASSET VALUE
40,000   Cincinnati Bell Inc.+                953,620        938,000        ($101,252,405/15,282,735
18,000   Citizens Communications  Co.+...     132,130        232,020             shares outstanding).......                  $6.63
 2,000   Commonwealth Telephone                                             _________                                   ==========
         Enterprises Inc.+...............      65,002         87,940                  For Federal tax purposes:
19,788   D&E Communications Inc.              231,091        226,573                  Aggregate cost................   $ 97,227,406
 9,000   Deutsche Telekom AG, ADR +           162,149        136,800                                                    ==========
 2,000   France Telecom SA, ADR..........      22,799         49,300
40,000   Touch America Holdings Inc.+          38,488          2,680                  Gross unrealized appreciation... $ 10,072,345
49,000   Verizon Communications Inc.        1,876,164      1,933,050                  Gross unrealized depreciation...   (6,197,708)
 2,045   WilTel Communications Inc.+           53,526         30,143                                                    ------------
                                            ---------    ------------
                                            6,950,295      6,681,056                  Net unrealized appreciation......$  3,874,637
                                            ---------    ------------                                                   ============

         Wireless Communications - 1.0%                                     _______________
39,000   mm02 plc, ADR+..................     405,354        359,970        (a)    Collateralized by U.S. Treasury Note,
35,000   Nextel Communications Inc.,                                               3.375%, due 04/30/04, market value
         Cl.A+..........................      460,343        632,800               $10,293,821.
                                            ---------    ------------       +      Non-income producing security.
                                              865,697        992,770        ADR -  American Depository Receipt.
                                            ---------    ------------       CVO -  Contingent Value Obligation.
         TOTAL COMMON STOCKS.............  85,952,673     88,969,043
                                            ---------    ------------


                                     See accompanying notes to financial statements.
</TABLE>

                                                          B-31

<PAGE>

<TABLE>
<CAPTION>
                                                THE GABELLI UTILITY TRUST


        STATEMENT OF ASSETS AND LIABILITIES                                          STATEMENT OF OPERATIONS
            June 30, 2003 (Unaudited)                                     For the Six Months Ended June 30, 2003 (Unaudited)

Assets:                                                              Investment Income:
<S>                            <C>            <C>                                                        <C>          <C>
   Investments, at value (Cost $97,969,318)   $101,102,043               Dividends (net of foreign taxes $4,647)...   $1,582,099
   Cash.................................               757               Interest..................................      106,091
   Dividends and interest receivable....           308,141                                                           -----------
   Receivable for investments sold......           489,920
   Other assets.........................             3,465               Total Investment Income.................      1,688,190
                                             -------------                                                           -----------
   Total Assets.........................       101,904,326           Expenses:
                                             -------------
                                                                         Investment advisory fees................        462,568
iabilities:
   Payable for investments purchased....           182,918               Shareholder communications expenses.....        146,113
   Payable for investment advisory fees.            83,812               Shareholder services fees...............        123,155
   Payable for audit and legal fees.....            19,118               Payroll.................................         66,335
   Other accrued expenses...............           366,073               Trustees' fees..........................         22,582
   Total Liabilities....................           651,921               Legal and audit fees....................         17,718
   Net Assets applicable to 15,282,735                                   Custodian fees..........................          7,448
   shares outstanding...................      $101,252,405               Miscellaneous expenses..................         48,770
                                             =============                                                           -----------

et Assets consist of:                                                    Total Expenses..........................        894,689
                                                                                                                     -----------
   Shares of beneficial interest, at par value     $15,283
   Additional paid-in capital...........       103,846,628               Less:  Custodian fee credit.............           (147)
   Accumulated net investment loss......        (4,686,805)                                                          -----------
   Accumulated net realized loss on investment  (1,055,344)
   Net unrealized appreciation on investments    3,132,643               Net Expenses............................        94,542
                                                                                                                     -----------
   Total Net Assets.....................       $101,252,405
                                              =============              Net Investment Income...................        793,648
   Net Asset Value                                                                                                   -----------
        ($101,252,405 / 15,282,735 shares
        outstanding; unlimited number of shares                      Net Realized and Unrealized Gain (Loss) on
        authorized of $0.001 par value).....       $6.63                 Investments
                                              =============
                                                                         Net realized loss in investments........     (1,635,388)
   Net change in unrealized appreciation on
     investments...........................     11,593,255
                                               -----------

   Net Realized and Unrealized Gain (Loss) on
     Investments...........................      9,957,867
                                               -----------

   Net Increase in Net Assets Resulting
      from Operations......................    $10,751,515
                                               ===========



                                           STATEMENT OF CHANGES IN NET ASSETS

                                                                         Six Months Ended
                                                                          June 30, 2003              Year Ended
                                                                           (Unaudited)            December 31, 2002
                                                                        ------------------       -------------------
Operations:

   Net investment income...............................................    $       793,648              $  1,448,624
   Net realized loss on investments....................................         (1,635,388)                3,644,126
   Net change in unrealized appreciations/depreciation on investments..         11,593,255               (11,989,550)
                                                                            --------------             -------------

   Net Increase (Decrease) in Net Assets resulting from operations.....         10,751,515                (6,896,800)
                                                                            --------------            --------------
Distributions to Common Stock Shareholders:

   Net investment income...............................................           (793,648)               (1,475,143)
   Net realized gain on investments....................................                 --                (4,760,629)
   Return of capital...................................................         (4,686,805)               (3,261,058)
                                                                           ---------------            --------------
   Total Distributions to Common Stock Shareholders....................         (5,480,453)               (9,496,830)
                                                                           ---------------            --------------
Trust Share Transactions:

   Net increase in net assets from common shares issued in rights offering              --                27,737,238
   Net increase in net assets from common shares issued upon
      reinvestment of dividends and distributions......................            870,263                 1,570,082
                                                                          ----------------            --------------

   Net Increase in Net Assets from Trust Share Transactions............            870,263                29,307,320
                                                                          ----------------             -------------

   Net Increase in Net Assets..........................................          6,141,325                12,913,690
                                                                           ---------------             -------------
Net Assets:

   Beginning of period.................................................         95,111,080                82,197,390
                                                                            --------------             -------------
   End of period.......................................................       $101,252,405              $ 95,111,080
                                                                            ==============              ============

                                  See accompanying notes to financial statements.
</TABLE>



                                                          B-32
<PAGE>

             NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)

                   NOTES TO FINANCIAL STATEMENTS (Unaudited)

1. Organization. The Gabelli Utility Trust (the "Utility Trust") is a
closed-end, non-diversified management investment company organized as a
Delaware business trust on February 25, 1999 and registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), whose primary
objective is long-term growth of capital and income. The Utility Trust had no
operations prior to July 9, 1999, other than the sale of 10,000 shares of
beneficial interest for $100,000 to The Gabelli Equity Trust Inc. (the "Equity
Trust") at $10.00 per share. On July 9, 1999, the Utility Trust had a 4 for 3
stock split making the balance of Utility Trust shares held by the Equity Trust
as 13,333. On July 9, 1999, the Equity Trust contributed $79,487,260 in cash
and securities in exchange for shares of the Utility Trust, and on the same
date distributed such shares to Equity Trust shareholders of record on July 1,
1999 at the rate of one share of the Utility Trust for every ten shares of the
Equity Trust. Investment operations commenced on July 9, 1999.

Effective August 1, 2002, the Fund modified its non-fundamental investment
policy (the "80% Policy") to increase, from 65% to 80%, the portion of its
assets that it will invest, under normal market conditions, in common stocks
and other securities of foreign and domestic companies involved in providing
products, services or equipment for (i) the generation or distribution of
electricity, gas and water and (ii) telecommunications services or
infrastructure operations (the "Utility Industry").

The 80% Policy may be changed without shareholder approval. However, the Fund
has adopted a policy to provide shareholders with at least 60 days' notice of
the implementation of any change in the 80% Policy.

2. Significant Accounting Policies. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Utility Trust in the preparation of its financial statements.

   Security Valuation. Portfolio securities listed or traded on a nationally
recognized securities exchange, quoted by the National Association of
Securities Dealers Automated Quotations, Inc. ("Nasdaq") or traded in the U.S.
over-the-counter market for which market quotations are readily available are
valued at the last quoted sale price on that exchange or market as of the close
of business on the day the securities are being valued. If there were no sales
that day, the security is valued at the average of the closing bid and asked
prices or, if there were no asked prices quoted on that day, then the security
is valued at the closing bid price on that day. If no bid or asked prices are
quoted on such day, the security is valued at the most recently available price
or, if the Board of Trustees so determines, by such other method as the Board
of Trustees shall determine in good faith, to reflect its fair market value.
Portfolio securities traded on more than one national securities exchange or
market are valued according to the broadest and most representative market, as
determined by Gabelli Funds, LLC (the "Adviser"). Portfolio securities
primarily traded in foreign markets are generally valued at the preceding
closing values of such securities on their respective exchanges or markets.
Securities and assets for which market quotations are not readily available are
valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Board of Trustees.
Short term debt securities with remaining maturities of 60 days or less are
valued at amortized cost, unless the Board of Trustees determines such does not
reflect the securities fair value, in which case these securities will be
valued at their fair value as determined by the Board of Trustees. Debt
instruments having a maturity greater than 60 days for which market quotations
are readily available are valued at the latest average of the bid and asked
prices. If there were no asked prices quoted on such day, the security is
valued using the closing bid price on that day. Options are valued at the last
sale price on the exchange on which they are listed. If no sales of such
options have taken place that day, they will be valued at the mean between
their closing bid and asked prices.

   Repurchase Agreements. The Utility Trust may enter into repurchase
agreements with primary government securities dealers recognized by the Federal
Reserve Bank of New York, with member banks of the Federal Reserve System or
with other brokers or dealers that meet credit guidelines established by the
Adviser and reviewed by the Board of Trustees. Under the terms of a typical
repurchase agreement, the Utility Trust takes possession of an underlying debt
obligation subject to an obligation of the seller to repurchase, and the
Utility Trust to resell, the obligation at an agreed-upon price and time,
thereby determining the yield during the Utility Trust's holding period. The
Utility Trust will always receive and maintain securities as collateral whose
market value, including accrued interest, will be at least equal to 102% of the
dollar amount invested by the Utility Trust in each agreement. The Utility
Trust will make payment for such securities only upon physical delivery or upon
evidence of book entry transfer of the collateral to the account of the
custodian. To the extent that any repurchase transaction exceeds one business
day, the value of the collateral is marked-to-market on a daily basis to
maintain the adequacy of the collateral. If the seller defaults and the value
of the collateral declines or if bankruptcy proceedings are commenced with
respect to the seller of the security, realization of the collateral by the
Utility Trust may be delayed or limited.

   Securities Sold Short. A short sale involves selling a security which the
Utility Trust does not own. The proceeds received for short sales are recorded
as liabilities and the Utility Trust records an unrealized gain or loss to the
extent of the difference between the proceeds received and the value of the
open short position on the day of determination. The Utility Trust records a
realized gain or loss when the short position is closed out. By entering into a
short sale, the Utility Trust bears the market risk of an unfavorable change in
the price of the


                                      B-33
<PAGE>

             NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)

security sold short. Dividends on short sales are recorded as an expense by the
Utility Trust on the ex-dividend date and interest expense is recorded on the
accrual basis.

   Foreign Currency Translation. The books and records of the Utility Trust are
maintained in United States (U.S.) dollars. Foreign currencies, investments and
other assets and liabilities are translated into U.S. dollars at the exchange
rates prevailing at the end of the period, and purchases and sales of
investment securities, income and expenses are translated at the exchange rate
prevailing on the respective dates of such transactions. Unrealized gains and
losses, which result from changes in foreign exchange rates and/or changes in
market prices of securities, have been included in unrealized
appreciation/depreciation on investments and foreign currency transactions. Net
realized foreign currency gains and losses resulting from changes in exchange
rates include foreign currency gains and losses between trade date and
settlement date on investment securities transactions, foreign currency
transactions and the difference between the amounts of interest and dividends
recorded on the books of the Utility Trust and the amounts actually received.
The portion of foreign currency gains and losses related to fluctuation in
exchange rates between the initial trade date and subsequent sale trade date is
included in realized gain/(loss) on investments.

   Securities Transactions and Investment Income. Securities transactions are
accounted for as of the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded as earned.
Dividend income is recorded on the ex-dividend date.

   Dividends and Distributions to Shareholders. Distributions to shareholders
are recorded on the ex-dividend date. Income distributions and capital gain
distributions are determined in accordance with Federal income tax regulations,
which may differ from accounting principles generally accepted in the United
States.

   Provision for Income Taxes. The Utility Trust intends to continue to qualify
as a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended. As a result, a Federal income tax provision is not
required.

   Dividends and interest from non-U.S. sources received by the Utility Trust
are generally subject to non-U.S. withholding taxes at rates ranging up to 30%.
Such withholding taxes may be reduced or eliminated under the terms of
applicable U.S. income tax treaties, and the Utility Trust intends to undertake
any procedural steps required to claim the benefits of such treaties.

3. Agreements and Transactions with Affiliates. The Utility Trust has entered
into an investment advisory agreement (the "Advisory Agreement") with the
Adviser which provides that the Utility Trust will pay the Adviser on the first
business day of each month a fee for the previous month equal on an annual
basis to 1.00% of the value of the Utility Trust's average daily net assets. In
accordance with the Advisory Agreement, the Adviser provides a continuous
investment program for the Utility Trust's portfolio and oversees the
administration of all aspects of the Utility Trust's business and affairs.

   During the six months ended June 30, 2003, Gabelli & Company, Inc. and its
affiliates received $26,975 in brokerage commissions as a result of executing
agency transactions in portfolio securities on behalf of the Utility Trust.

   The cost of calculating the Trust's net asset value per share is a Trust
expense pursuant to the Investment Advisory Agreement between the Trust and the
Adviser. During the six months ended June 30, 2003, the Gabelli Utility Trust
reimbursed the Adviser $17,400 in connection with the cost of computing the
Trust's net asset value.

4. Portfolio Securities. Cost of purchases and proceeds from sales of
securities, other than short-term securities, for the six months ended June 30,
2003 aggregated $13,736,614 and $2,710,040, respectively.

5. Capital. The Board of Trustees of the Utility Trust has authorized the
repurchase of its shares on the open market when the shares are trading at a
discount of 10% or more (or such other percentage as the Board of Trustees may
determine from time to time) from the net asset value of the shares. During the
six months ended June 30, 2003, the Utility Trust did not repurchase any shares
of beneficial interest in the open market.

   On May 22, 2002, the Utility Trust distributed one transferable right for
each of the 11,294,893 common shares outstanding to shareholders of record on
that date. Three rights were required to purchase one additional common share
at the subscription price of $7.50 per share. The subscription period expired
on June 27, 2002. The rights offering was fully subscribed resulting in the
issuance of 3,764,965 common shares and proceeds of $28,237,239 to the Utility
Trust, prior to the deduction of estimated expenses of $500,000. The net asset
value per share of the Utility Trust common shareholders was enhanced by
approximately $0.15 per share as a result of the issuance of shares above net
asset value.


                                      B-34
<PAGE>

             NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)

         Transactions in shares of beneficial interest were as follows:

<TABLE>
<CAPTION>
                                                  Six Months Ended
                                                    June 30, 2003                    Year Ended
                                                     (Unaudited)                  December 31, 2002

                                             ---------------------------     ---------------------------
                                                Shares         Amount           Shares         Amount
                                             -------------  ------------     ------------   ------------
<S>                                                <C>          <C>               <C>          <C>
Shares issued in rights offering...........             --            --        3,764,965    $27,737,239
Shares issued upon reinvestment
   of dividends and distributions..........        102,243      $870,263          185,730      1,570,081
                                             -------------  ------------     ------------   ------------
Net increase...............................        102,243      $870,263        3,950,695    $29,307,320
                                             =============  ============     ============   ============
</TABLE>

6. Industry Concentration. Because the Utility Trust primarily invests in
common stocks and other securities of foreign and domestic companies in the
Utility Industry, its portfolio may be subject to greater risk and market
fluctuations than a portfolio of securities representing a broad range of
investments.


                                      B-35
<PAGE>

                                                                     APPENDIX A

                             CORPORATE BOND RATINGS

MOODY'S INVESTORS SERVICE, INC.

Aaa        Bonds that 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 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 that 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 make
           the long-term risk appear somewhat larger than in Aaa Securities.

A          Bonds that 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 some time in the future.

Baa        Bonds that 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 that 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 that 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. Moody's applies numerical modifiers (1,
           2, and 3) with respect to the bonds rated "Aa" through "B." The
           modifier 1 indicates that the company 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 company ranks in the
           lower end of its generic rating category.

Caa        Bonds that are rated Caa are of poor standing. These issues may be
           in default or there may be present elements of danger with respect
           to principal or interest.

Ca         Bonds that 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 that 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.


                                      A-1


<PAGE>

STANDARD & POOR'S RATINGS SERVICES

AAA         This is the highest rating assigned by S&P to a debt obligation and
            indicates an extremely strong capacity to pay interest and repay
            principal.

AA          Debt rated AA has a very strong capacity to pay interest and repay
            principal and differs from AAA issues only in small degree.
            Principal and interest payments on bonds in this category are
            regarded as safe.

A           Debt rated A has a strong capacity to pay interest and repay
            principal although they are somewhat more susceptible to the
            adverse effects of changes in circumstances and economic conditions
            than debt in higher rated categories.

BBB         This is the lowest investment grade. Debt rated BBB has an adequate
            capacity to pay interest and repay principal. Whereas it normally
            exhibits adequate 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 in higher rated categories.

Speculative Grade

   Debt rated BB, CCC, CC and C are 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
speculation, 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 exposures to adverse conditions. Debt rated C1
is reserved for income bonds on which no interest is being paid and debt rated
D is in payment default.

   In July 1994, S&P initiated 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.

   "AA" to "CCC" may be modified by the addition of a plus or minus sign to
show relative standing within the major categories.

   "NR" indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.

                       ---------------------------------


                                      A-2


<PAGE>

                                     PART C

                               OTHER INFORMATION

ITEM 24.          FINANCIAL STATEMENTS AND EXHIBITS

(1)  Financial Statements

         Part A


         Financial highlights for a share outstanding throughout the periods
         ended June 30, 2003 (unaudited) and December 31, 2002, 2001, 2000 and
         1999 (audited).

         Part B

Financial Statements (unaudited) for the fiscal period ended June 30, 2003(1)
        (i)     Portfolio of Investments as of June 30, 2003
        (ii)    Statement of Assets and Liabilities as of June 30, 2003
        (iii)   Statement of Operations for the period ended June 30, 2003
        (iv)    Statement of Changes in Net Assets for the period ended
                June 30, 2003
        (v)     Financial highlights for a share outstanding throughout the
                periods ended June 30, 2003 and December 31, 2002, 2001, 2000
                and 1999.
        (vi)    Notes to Financial Statements

        Financial Statements (audited) for the fiscal year 2002(1)
        (i)     Portfolio of Investments as of December 31, 2002
        (ii)    Statement of Assets and Liabilities as of December 31, 2002
        (iii)   Statement of Operations for the year ended December 31, 2002
        (iv)    Statement of Changes in Net Assets for the year ended December
                31, 2002
        (v)     Financial highlights for a share outstanding throughout the
                periods 2002, 2001, 2000 and 1999. (vi) Notes to Financial
                Statements
        (vii)   Report of Independent Accountants

(2) Exhibits

         (a)    (i)    Amended and Restated Agreement and Declaration of Trust
                       of Registrant(2)
                (ii)   Statement of Preferences with respect to the
                       5.625% Series A Cumulative Preferred Shares(3)
                (iii)  Statement of Preferences with respect to the
                       Series B Auction Market Preferred Shares(3)

         (b)   Amended and Restated By-Laws of Registrant(2)
         (c)   Not applicable
         (d)   (i)    Form of Registrant's Common Share Certificate(2)
               (ii)   Form of Registrants' 5.625% Series A Cumulative
                      Preferred Share Certificate(2)
               (iii)  Form of Registrant's Series B Auction Market Preferred
                      Share Certificate(2)
               (iv)   Form of Subscription Certificate(3)
               (v)    Form of Notice of Guaranteed Delivery of Payment(3)
               (vi)   Form of Nominee Holder Oversubscription Certification(3)


                                       1
<PAGE>

               (vii)  Form of Subscription, Distribution and Escrow Agency
                      Agreement(3)
         (e)    Automatic Dividend Reinvestment and Voluntary Cash
                Purchase Plan of Registrant(2)
         (f)    Not applicable
         (g)    Form of Investment Advisory Agreement between Registrant and
                Gabelli Funds, LLC(2)
         (h)    Not applicable
         (i)    Not applicable
         (j)(1) Form of Custodian Contract between Registrant and Boston Safe
                Deposit and Trust Company (later assigned to State Street
                Bank & Trust Company)(2)
            (2) Form of Custodian Fee Schedule between Registrant and Boston
                Safe Deposit and Trust Company(2)
         (k)    Form of Registrar, Transfer Agency and Service Agreement
                between Registrant and Equiserve Trust Company(2)

         (l)    Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom LLP
                with respect to legality(3)
         (m)    Not applicable
         (n)    (i)   Consent of PricewaterhouseCoopers LLP(3)
                (ii)  Powers of Attorney(2)
         (o)    Not applicable
         (p)    Not applicable
         (q)    Codes of Ethics of the Trust and the Advisor(2)

________________

(1)   Incorporated by reference to the Fund's annual report filed on
      March 10, 2003.
(2)   Filed previously.
(3)   Filed herewith.


Item 25.  Marketing Arrangements

          Not Applicable


Item 26.  Other Expenses of Issuance and Distribution

         The following table sets forth the estimated expenses to be incurred
in connection with the offering described in this Registration Statement:


SEC registration fees.............................................. $  6,182
New York Stock Exchange listing fee................................   68,625
Printing and engraving expenses ...................................   75,000
Auditing fees and expenses ........................................   10,000
Legal fees and expenses............................................  100,000
Blue Sky fees and expenses.........................................    5,000
Miscellaneous......................................................  221,479
         Total..................................................... $486,286




                                       2
<PAGE>


Item 27.  Persons Controlled by or Under Common Control with Registrant

         NONE

Item 28.  Number of Holders of Securities as of June 30, 2003


                                                                Number of Record
Title of Class                                                     Holders

Common Shares of Beneficial Interest, par value                    48,259
$.001 per share


Item 29.  Indemnification

         The response of this Item is incorporated by reference to the caption
"Limitation of Officers' and Trustees Liability" in the Part B of this
Registration Statement.

         Insofar as indemnification for liability arising under the 1933 Act
may be permitted to trustees, officers and controlling persons of Registrant
pursuant to the foregoing provisions, or otherwise, Registrant has been advised
that, in the opinion of the Commission, such indemnification is against public
policy as expressed in the 1933 Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a director, officer or
controlling person of Registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered. Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.



Item 30.  Business and Other Connections of Investment Adviser

         The Adviser, a limited liability company organized under the laws of
the State of New York, acts as investment adviser to the Registrant. The
Registrant is fulfilling the requirement of this Item 30 to provide a list of
the officers and directors of the Investment Adviser, together with information
as to any other business, profession, vocation or employment of a substantial
nature engaged in by the Investment Adviser or those officers and directors
during the past two years, by incorporating by reference the information
contained in the Form ADV of the Investment Adviser filed with the Commission
pursuant to the Investment Advisers Act of 1940 (Commission File No.
801-26202).

Item 31.  Location of Accounts and Records


         The accounts and records of the Registrant are maintained in part at
the office of the Adviser at One Corporate Center, Rye, New York 10580-1434, in
part at the offices of the Custodian, State Street Bank & Trust Company, One
Boston Place, Boston, Massachusetts 02108, at the offices of the Fund's
Administrator, PFPC, Inc, 3200 Horizon Drive, King of Prussia, Pennsylvania
19406, and in part at the offices of EquiServe Trust Company, N.A., 150 Royall
Street, Mail Stop 45-02-62, Canton, MA 02021.



                                       3
<PAGE>

Item 32.  Management Services

         Not applicable.

Item 33.  Undertakings

         o        Registrant undertakes to suspend the offering of shares until
                  the prospectus is amended, if subsequent to the effective
                  date of this registration statement, its net asset value
                  declines more than ten percent from its net asset value, as
                  of the effective date of the registration statement or its
                  net asset value increases to an amount greater than its net
                  proceeds as stated in the prospectus.

        o         Not applicable.

        o         Not applicable.

        o         Not applicable.

         o        Registrant undertakes that, for the purpose of determining
                  any liability under the 1933 Act the information omitted from
                  the form of prospectus filed as part of the Registration
                  Statement in reliance upon Rule 430A and contained in the
                  form of prospectus filed by the Registrant pursuant to Rule
                  497(h) will be deemed to be a part of the Registration
                  Statement as of the time it was declared effective.

                  Registrant undertakes that, for the purpose of determining
                  any liability under the 1933 Act, each post-effective
                  amendment that contains a form of prospectus will be deemed
                  to be a new Registration Statement relating to the securities
                  offered therein, and the offering of such securities at that
                  time will be deemed to be the initial bona fide offering
                  thereof.

         o        Registrant undertakes to send by first class mail or other
                  means designed to ensure equally prompt delivery, within two
                  Business Days of receipt of a written or oral request, any
                  Statement of Additional Information constituting Part B of
                  this Registration Statement.


                                       4
<PAGE>

                                   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 13th day of August, 2003.


                              THE GABELLI UTILITY TRUST

                              By:  /s/ BRUCE N. ALPERT
                                   --------------------------------
                                   Bruce N. Alpert
                                   President

         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.

<TABLE>
<CAPTION>



         Signature                            Title                             Date

<S>                                   <C>                                       <C>

          *                          Chief Investment Officer and              August 13, 2003
- -------------------------            Trustee
Mario J. Gabelli


 /s/ BRUCE N. ALPERT                 President                                 August 13, 2003
- ------------------------
Bruce N. Alpert

           *                         Trustee                                   August 13, 2003
- ------------------------
Thomas E. Bratter

           *                         Trustee                                   August 13, 2003
- ------------------------
Anthony J. Colavita

           *                         Trustee                                   August 13, 2003
- ------------------------
James P. Conn

           *                         Trustee                                   August 13, 2003
- ------------------------
Vincent D. Enright

           *                         Trustee                                   August 13, 2003
- ------------------------
Frank J. Fahrenkopf, Jr.

           *                         Trustee                                   August 13, 2003
- ------------------------
John D. Gabelli

           *                         Trustee                                   August 13, 2003
- ------------------------
Robert J. Morrissey

           *                         Trustee                                   August 13, 2003
- ------------------------
Karl Otto Pohl

           *                         Trustee                                   August 13, 2003
- ------------------------
Anthony R. Pustorino



                                       5

<PAGE>

         Signature                            Title                             Date


          *                          Trustee                                   August 13, 2003
- ------------------------
Salvatore J. Zizza


  /S/GUS A. COUTSOUROS               Vice President and Treasurer              August 13, 2003
- ----------------------
Gus A. Coutsouros


*By:  Bruce N. Alpert,
- ------------------------
    Attorney-in-Fact


</TABLE>


                                          6


<PAGE>


                                 EXHIBIT INDEX


EXHIBIT NUMBER                     DESCRIPTION


EX-99(a)(ii)      Statement of Preferences for 5.62% Series A Cumulative
                  Preferred Shares

EX-99(a)(iii)     Statement of Preferences for Series B Auction Market
                  Preferred Shares

EX-99(d)(2)       Form of Subscription Certificate

EX-99(d)(3)       Form of Notice of Guaranteed Delivery of Payment

EX-99(d)(4)       Form of Nominee Holder Oversubscription Certificate

EX-99(d)(5)       Form of Subscription, Distribution and Escrow Agency Agreement

EX-99(l)          Opinion of Skadden, Arps, Slate, Meagher & Flom LLP

EX-99(n)(1)       Consent of PricewaterhouseCoopers LLP


                                       7




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>3
<FILENAME>s462455a.txt
<DESCRIPTION>EXHIBIT (A)(II)
<TEXT>


                           THE GABELLI UTILITY TRUST

                           STATEMENT OF PREFERENCES

                                      OF

                  5.625% SERIES A CUMULATIVE PREFERRED SHARES

         The Gabelli Utility Trust, a Delaware statutory trust (hereinafter
called the "Trust"), hereby certifies that:

         FIRST: The Board of Trustees of the Trust, at a meeting duly convened
and held on February 19, 2003, pursuant to authority expressly vested in it by
Article III of the Agreement and Declaration of Trust, adopted resolutions
classifying and designating 2,000,000 authorized but unissued capital shares
of the Trust, par value $.001 per share, as "5.625% Series A Cumulative
Preferred Shares" and authorizing the issuance of up to 2,000,000 shares of
5.625% Series A Cumulative Preferred Shares at such times as the Pricing
Committee should determine.

         SECOND: The Pricing Committee, at a meeting duly convened and held on
July 22, 2003, pursuant to authority granted it by the Board of Trustees of
the Trust at its February 19, 2003 meeting, approved the issuance by the Trust
of up to 1,200,000 5.625% Series A Cumulative Preferred Shares.

         THIRD: The preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption of the 5.625% Series A Cumulative Preferred Shares, par value $.001
per share, as set by the Board of Trustees are as follows:

                                    PART I

                                  DEFINITIONS

         Unless the context or use indicates another or different meaning or
intent, each of the following terms when used in this Statement of Preferences
shall have the meaning ascribed to it below, whether such term is used in the
singular or plural and regardless of tense:

         "Accountant's Confirmation" means a letter from an Independent
Accountant delivered to Moody's with respect to certain Basic Maintenance
Reports substantially to the effect that:

         (a)   the Independent Accountant has read the Basic Maintenance
               Report or Reports prepared by the Administrator during the
               referenced calendar year that are referred to in such letter;

         (b)   with respect to the issue size compliance, issuer
               diversification and industry diversification calculations, such
               calculations and the resulting Market Value of the Moody's
               Eligible Assets included in the Reports and the Adjusted Value
               of the Moody's Eligible Assets included in the Reports are
               numerically correct;

         (c)   with respect to the excess or deficiency of the Adjusted Value
               of the Moody's Eligible Assets included in the Reports when
               compared to the Basic Maintenance Amount calculated for
               Moody's, the results of the calculation set forth in the
               Reports have been recalculated and are numerically correct;

         (d)   with respect to the Moody's and S&P ratings on corporate
               evidences of indebtedness, convertible corporate evidences of
               indebtedness and preferred stock listed in the Reports, that
               information has been traced and agrees with the information
               provided directly or indirectly by the respective rating
               agencies (in the event such information does not agree or such
               information is not listed in the accounting records of the
               Trust, the Independent Accountants will inquire of the rating
               agencies what such information is and provide a listing in
               their letter of such differences, if any);

         (e)   with respect to issuer name and coupon or dividend rate listed
               in the Reports, that information has been traced and agrees
               with information listed in the accounting records of the Trust;

         (f)   with respect to issue size listed in the Reports, that
               information has been traced and agrees with information
               provided by a Pricing Service or such other services as Moody's
               may authorize from time to time;

         (g)   with respect to the prices (or alternative permissible factors
               used in calculating the Market Value as provided by this
               Statement of Preferences) provided by the Administrator of the
               Trust's assets for purposes of valuing securities in the
               portfolio, the Independent Accountant has traced the price used
               in the Reports to the price provided by such Administrator (in
               accordance with the procedures provided in this Statement of
               Preferences) and verified that such information agrees (in the
               event such information does not agree, the Independent
               Accountants will provide a listing in their letter of such
               differences); and

         (h)   with respect to the description of each security included in
               the Reports, the description of Moody's Eligible Assets has
               been compared to the definition of Moody's Eligible Assets
               contained in this Statement of Preferences, and the description
               as appearing in the Reports agrees with the definition of
               Moody's Eligible Assets as described in this Statement of
               Preferences.

         Each such letter may state that: (i) such Independent Accountant has
made no independent verification of the accuracy of the description of the
investment securities listed in the Reports or the Market Value of those
securities nor has it performed any procedures other than those specifically
outlined above for the purposes of issuing such letter; (ii) unless otherwise
stated in the letter, the procedures specified therein were limited to a
comparison of numbers or a verification of specified computations applicable
to numbers appearing in the Reports and the schedule(s) thereto; (iii) the
foregoing procedures do not constitute an examination in accordance with
generally accepted auditing standards and the Reports contained in the letter
do not extend to any of the Trust's financial statements taken as a whole;
(iv) such Independent Accountant does not express an opinion as to whether
such procedures would enable such Independent Accountant to determine that the
methods followed in the preparation of the Reports would correctly determine
the Market Value or Discounted Value of the investment portfolio; and (v)
accordingly, such Independent Accountant expresses no opinion as to the
information set forth in the Reports or in the schedule(s) thereto and makes
no representation as to the sufficiency of the procedures performed for the
purposes of this Statement of Preferences.

         Such letter shall also state that the Independent Accountant is an
"independent accountant" with respect to the Trust within the meaning of the
Securities Act of 1933, as amended, and the related published rules and
regulations thereunder.

         "Adjusted Value" of each Moody's Eligible Asset shall be computed as
follows:

         (a)   cash shall be valued at 100% of the face value thereof; and

         (b)   all other Moody's Eligible Assets shall be valued at the
               Discounted Value thereof; and

         (c)   each asset that is not a Moody's Eligible Asset shall be valued
               at zero.

         "Administrator" means the other party to the Administration Agreement
with the Trust which shall initially be Gabelli Funds, LLC, a New York limited
liability company, and will include, as appropriate, any sub-administrator
appointed by the Administrator.

         "ADRs" means U.S. dollar-denominated American Depository Receipts.

         "Adviser" means Gabelli Funds, LLC, a New York limited liability
company, or such other person as shall be serving as the investment adviser of
the Trust.

         "Annual Valuation Date" means the Valuation Date each calendar year
so designated by the Trust, commencing in the calendar year 2003.

         "Asset Coverage" means asset coverage, as determined in accordance
with Section 18(h) of the 1940 Act, of at least 200% with respect to all
outstanding senior securities of the Trust which are stock, including all
Outstanding Series A Preferred Shares (or such other asset coverage as may in
the future be specified in or under the 1940 Act as the minimum asset coverage
for senior securities which are stock of a closed-end investment company as a
condition of declaring dividends on its common stock), determined on the basis
of values calculated as of a time within 48 hours (not including Saturdays,
Sundays or holidays) next preceding the time of such determination.

         "Basic Maintenance Amount" means, as of any Valuation Date, the
dollar amount equal to (a) the sum of (i) the product of the number of shares
of each class or series of Preferred Shares Outstanding on such Valuation Date
multiplied by the Liquidation Preference per share; (ii) to the extent not
included in (i) the aggregate amount of cash dividends (whether or not earned
or declared) that will have accumulated for each Outstanding Preferred Share
from the most recent Dividend Payment Date to which dividends have been paid
or duly provided for (or, in the event the Basic Maintenance Amount is
calculated on a date prior to the initial Dividend Payment Date with respect
to a class or series of the Preferred Shares, then from the Date of Original
Issue) through the Valuation Date plus all dividends to accumulate on the
Preferred Shares then Outstanding during the 70 days following such Valuation
Date or, if less, during the number of days following such Valuation Date that
Preferred Shares called for redemption are scheduled to remain Outstanding;
(iii) the Trust's other liabilities due and payable as of such Valuation Date
(except that dividends and other distributions payable by the Trust on Common
Shares shall not be included as a liability) and such liabilities projected to
become due and payable by the Trust during the 90 days following such
Valuation Date (excluding liabilities for investments to be purchased and for
dividends and other distributions not declared as of such Valuation Date); and
(iv) any current liabilities of the Trust as of such Valuation Date to the
extent not reflected in (or specifically excluded by) any of (a)(i) through
(a)(iii) (including, without limitation, and immediately upon determination,
any amounts due and payable by the Trust pursuant to reverse repurchase
agreements and any payables for assets purchased as of such Valuation Date)
less (b)(i) the Adjusted Value of any of the Trust's assets or (ii) the face
value of any of the Trust's assets if, in the case of both (b)(i) and (b)(ii),
such assets are either cash or evidences of indebtedness which mature prior to
or on the date of redemption or repurchase of Preferred Shares or payment of
another liability and are either U.S. Government Obligations or evidences of
indebtedness which have a rating assigned by Moody's of at least Aaa, P-1,
VMIG-1 or MIG-1 or by S&P of at least AAA, SP-1+ or A-1+, and are irrevocably
held by the Trust's custodian bank in a segregated account or deposited by the
Trust with the Dividend-Disbursing Agent for the payment of the amounts needed
to redeem or repurchase Preferred Shares subject to redemption or repurchase
or any of (a)(ii) through (a)(iv); and provided that in the event the Trust
has repurchased Preferred Shares and irrevocably segregated or deposited
assets as described above with its custodian bank or the Dividend-Disbursing
Agent for the payment of the repurchase price the Trust may deduct 100% of the
Liquidation Preference of such Preferred Shares to be repurchased from (a)
above. Basic Maintenance Amount shall, for purposes of this Statement of
Preferences, have a correlative meaning with respect to any other class or
series of Preferred Shares.

         "Basic Maintenance Amount Cure Date" means, with respect to the
Series A Preferred Shares, 10 Business Days following a Valuation Date, such
date being the last day upon which the Trust's failure to comply with
paragraph 5(a)(ii)(A) of Part II hereof could be cured, and for the purposes
of this Statement of Preferences shall have a correlative meaning with respect
to any other class or series of Preferred Shares.

         "Basic Maintenance Report" or "Report" means, with respect to the
Series A Preferred Shares, a report prepared by the Administrator which sets
forth, as of the related Valuation Date, Moody's Eligible Assets sufficient to
meet or exceed the Basic Maintenance Amount, the Market Value and Discounted
Value thereof (seriatim and in the aggregate), and the Basic Maintenance
Amount, and for the purposes of this Statement of Preferences shall have a
correlative meaning with respect to any other class or series of Preferred
Shares.

         "Board of Trustees" means the Board of Trustees of the Trust or any
duly authorized committee thereof as permitted by applicable law.

         "Business Day" means a day on which the New York Stock Exchange is
open for trading and that is neither a Saturday, Sunday nor any other day on
which banks in The City of New York, New York are authorized or obligated by
law to close.

         "By-Laws" means the By-Laws of the Trust as amended from time to
time.

         "Common Shares" means the common shares, par value $.001 per share,
of the Trust.

         "Cure Date" shall have the meaning set forth in paragraph 3(a) of
Part II hereof.

         "Date of Original Issue" means July 31, 2003, and for the purposes of
this Statement of Preferences shall have a correlative meaning with respect to
any other class or series of Preferred Shares.

         "Declaration" means the Agreement and Declaration of Trust of the
Trust, dated as of February 25, 1999, as amended, supplemented or restated
from time to time (including by this Statement of Preferences or by way of any
other supplement or Statement of Preferences authorizing or creating a class
of shares of beneficial interest in the Trust).

         "Deposit Assets" means cash, Short-Term Money Market Instruments and
U.S. Government Obligations. Except for determining whether the Trust has
Moody's Eligible Assets with an Adjusted Value equal to or greater than the
Basic Maintenance Amount, each Deposit Asset shall be deemed to have a value
equal to its principal or face amount payable at maturity plus any interest
payable thereon after delivery of such Deposit Asset but only if payable on or
prior to the applicable payment date in advance of which the relevant deposit
is made.

         "Discounted Value" means, as applicable, (a) the quotient of the
Market Value of an Eligible Asset divided by the applicable Discount Factor or
(b) such other formula for determining the discounted value of an Eligible
Asset as may be established by an applicable Rating Agency, provided, in
either case that with respect to an Eligible Asset that is currently callable,
Discounted Value will be equal to the applicable quotient or product as
calculated above or the call price, whichever is lower, and that with respect
to an Eligible Asset that is prepayable, Discounted Value will be equal to the
applicable quotient or product as calculated above or the par value, whichever
is lower.

         "Dividend-Disbursing Agent" means, with respect to the Series A
Preferred Shares, EquiServe Trust Company, N.A. and its successors or any
other dividend-disbursing agent appointed by the Trust and, with respect to
any other class or series of Preferred Shares, the Person appointed by the
Trust as dividend-disbursing or paying agent with respect to such class or
series.

         "Dividend Payment Date" means with respect to the Series A Preferred
Shares, any date on which dividends declared by the Board of Trustees thereon
are payable pursuant to the provisions of paragraph 1(a) of Part II of this
Statement of Preferences and shall for the purposes of this Statement of
Preferences have a correlative meaning with respect to any other class or
series of Preferred Shares.

         "Dividend Period" shall have the meaning set forth in paragraph 1(a)
of Part II hereof, and for the purposes of this Statement of Preferences shall
have a correlative meaning with respect to any other class or series of
Preferred Shares.

        "Governing Documents" means the Declaration and the By-Laws.

         "Independent Accountant" means a nationally recognized accountant, or
firm of accountants, that is with respect to the Trust an independent public
accountant or firm of independent public accountants under the Securities Act
of 1933, as amended.

         "Liquidation Preference" shall, with respect to the Series A
Preferred Shares, have the meaning set forth in paragraph 2(a) of Part II
hereof, and for the purposes of this Statement of Preferences shall have a
correlative meaning with respect to any other class or series of Preferred
Shares.

         "Market Value" means the amount determined by the Trust with respect
to Moody's Eligible Assets in accordance with valuation policies adopted from
time to time by the Board of Trustees as being in compliance with the
requirements of the 1940 Act.

         Notwithstanding the foregoing, "Market Value" may, at the option of
the Trust with respect to any of its assets, mean the amount determined with
respect to specific Moody's Eligible Assets of the Trust in the manner set
forth below:

         (a)   as to any common or preferred stock which is a Moody's Eligible
               Asset, (i) if the stock is traded on a national securities
               exchange or quoted on the Nasdaq System, the last sales price
               reported on the Valuation Date or (ii) if there was no reported
               sales price on the Valuation Date, the lower of two bid prices
               for such stock provided to the Administrator by two recognized
               securities dealers with minimum capitalizations of $25,000,000
               (or otherwise approved for such purpose by Moody's) or by one
               such securities dealer and any other source (provided that the
               utilization of such source would not adversely affect Moody's
               then-current rating of the Series A Preferred Shares), at least
               one of which shall be provided in writing or by telecopy,
               telex, other electronic transcription, computer obtained
               quotation reducible to written form or similar means, and in
               turn provided to the Trust by any such means by such
               Administrator, or, if two bid prices cannot be obtained, such
               Moody's Eligible Asset shall have a Market Value of zero;

         (b)   as to any U.S. Government Obligation, Short Term Money Market
               Instrument (other than demand deposits, federal funds, bankers'
               acceptances and next Business Day repurchase agreements) and
               commercial paper with a maturity of greater than 60 days, the
               product of (i) the principal amount (accreted principal to the
               extent such instrument accretes interest) of such instrument,
               and (ii) the lower of the bid prices for the same kind of
               instruments having, as nearly as practicable, comparable
               interest rates and maturities provided by two recognized
               securities dealers having a minimum capitalization of
               $25,000,000 (or otherwise approved for such purpose by Moody's)
               or by one such dealer and any other source (provided that the
               utilization of such source would not adversely affect Moody's
               then-current rating of the Series A Preferred Shares) to the
               Administrator, at least one of which shall be provided in
               writing or by telecopy, telex, other electronic transcription,
               computer obtained quotation reducible to written form or
               similar means, and in turn provided to the Trust by any such
               means by such Administrator, or, if two bid prices cannot be
               obtained, such Moody's Eligible Asset will have a Market Value
               of zero;

         (c)   as to cash, demand deposits, federal funds, bankers'
               acceptances and next Business Day repurchase agreements
               included in Short-Term Money Market Instruments, the face value
               thereof;

         (d)   as to any U.S. Government Obligation, Short-Term Money Market
               Instrument or commercial paper with a maturity of 60 days or
               fewer, amortized cost unless the Board of Trustees determines
               that such value does not constitute fair value;

         (e)   as to any other evidence of indebtedness which is a Moody's
               Eligible Asset, (i) the product of (A) the unpaid principal
               balance of such indebtedness as of the Valuation Date and
               (B)(1) if such indebtedness is traded on a national securities
               exchange or quoted on the Nasdaq System, the last sales price
               reported on the Valuation Date or (2) if there was no reported
               sales price on the Valuation Date or if such indebtedness is
               not traded on a national securities exchange or quoted on the
               Nasdaq System, the lower of two bid prices for such
               indebtedness provided by two recognized dealers with a minimum
               capitalization of $25,000,000 (or otherwise approved for such
               purpose by Moody's) or by one such dealer and any other source
               (provided that the utilization of such source would not
               adversely affect Moody's then-current rating of the Series A
               Preferred Shares) to the Administrator, at least one of which
               shall be provided in writing or by telecopy, telex, other
               electronic transcription, computer obtained quotation reducible
               to written form or similar means, and in turn provided to the
               Trust by any such means by such Administrator, plus (ii)
               accrued interest on such indebtedness.

         "Moody's" means Moody's Investors Service, Inc., or its successors at
law. In the event that Moody's is no longer rating the Series A Preferred
Shares at the request of the Trust, "Moody's" shall be deemed to refer to any
other nationally recognized securities rating agency designated by the Trust.

         "Moody's Discount Factor" means, with respect to a Moody's Eligible
Asset specified below, the following applicable number:

                                                                   Moody's
Type of Moody's Eligible Asset:                               Discount Factor:
- ------------------------------                                ---------------

Short Term Money Market Instruments (other than U.S.
Government Obligations set forth below) and other
commercial paper:

    U.S. Treasury Securities with final maturities that
    are less than or equal to 60 days.................              1.00

    Demand or time deposits, certificates of deposit
    and bankers' acceptances includible in Short Term               1.00
    Money Market Instruments..........................

    Commercial paper rated P-1 by Moody's maturing in
    30 days or less...................................              1.00

    Commercial paper rated P-1 by Moody's maturing in
    more than 30 days but in 270 days or less.........              1.15

    Commercial paper rated A-1+ by S&P maturing in 270
    days or less......................................              1.25

    Repurchase obligations includible in Short Term

    Money Market Instruments if term is less than 30                1.00
    days and counterparty is rated at least A2........

    Other repurchase obligations......................         Discount Factor
                                                                applicable to
                                                              underlying assets

U.S. Common Stocks and Common Stocks of foreign issuers
for which ADR's are traded:

        Utility ......................................              1.70

        Industrial ...................................              2.64

        Financial ....................................              2.41

Common Stocks of foreign issuers (in existence for at
least five years) for which no ADR's are traded.......              4.00

Convertible Preferred Stocks..........................              3.00

Preferred stocks:

    Auction rate preferred stocks.....................              3.50

    Other preferred stocks issued by issuers in the
    financial and industrial industries...............              2.09

    Other preferred stocks issued by issuers in the
    utilities industry................................              1.55

U.S. Government Obligations (other than U.S. Treasury
Securities Strips set forth below) with remaining terms
to maturity of:

    1 year or less....................................              1.04

    2 years or less...................................              1.09

    3 years or less...................................              1.12

    4 years or less...................................              1.15

    5 years or less...................................              1.18

    7 years of less...................................              1.21

    10 years or less..................................              1.24

    15 years or less..................................              1.25

    20 years or less..................................              1.26

    30 years or less..................................              1.26

U.S. Treasury Securities Strips with remaining terms to
maturity of:

    1 year or less....................................              1.04

    2 years or less...................................              1.10

    3 years or less...................................              1.14

    4 years or less...................................              1.18

    5 years or less...................................              1.21

    7 years or less...................................              1.27

    10 years or less..................................              1.34

    15 years or less..................................              1.45

    20 years or less..................................              1.54

    30 years or less..................................              1.66

Corporate Debt:

    Non-convertible corporate debt rated Aaa with
    remaining terms to maturity of:

        1 year or less................................             1.09

        2 years or less...............................              1.15

        3 years or less...............................              1.20

        4 years or less...............................              1.26

        5 years or less...............................              1.32

        7 years or less...............................              1.39

        10 years or less..............................              1.45

        15 years or less..............................              1.50

        20 years or less..............................              1.50

        30 years or less..............................              1.50

    Non-convertible corporate debt rated at least Aa3
    with remaining terms to maturity of:

        1 year or less................................              1.12

        2 years of less...............................              1.18

        3 years or less...............................              1.23

        4 years or less...............................              1.29

        5 years or less...............................              1.35

        7 years or less...............................              1.43

        10 years or less..............................              1.50

        15 years or less..............................              1.55

        20 years or less..............................              1.55

        30 years or less..............................              1.55

    Non-convertible corporate debt rated at least A3
    with remaining terms to maturity of:

        1 year or less................................              1.15

        2 years or less...............................              1.22

        3 years or less...............................              1.27

        4 years or less...............................              1.33

        5 years or less...............................              1.39

        7 years or less...............................              1.47

        10 years or less..............................              1.55

        15 years or less..............................              1.60

        20 years or less..............................              1.60

        30 years or less..............................              1.60

    Non-convertible corporate debt rated at least Baa3
    with remaining terms of maturity of:

        1 year or less................................              1.18

        2 years or less...............................              1.25

        3 years or less...............................              1.31

        4 years or less...............................              1.38

        5 years or less...............................              1.44

        7 years or less...............................              1.52

        10 years or less..............................              1.60

        15 years or less..............................              1.65

        20 years or less..............................              1.65

        30 years or less..............................              1.65

    Non-convertible corporate debt rated at least Ba3
    with remaining terms of maturity of:

        1 year or less................................              1.37

        2 years or less...............................              1.46

        3 years or less...............................              1.56

        4 years or less...............................              1.61

        5 years or less...............................              1.68

        7 years or less...............................              1.79

        10 years or less..............................              1.89

        15 years or less..............................              1.96

        20 years or less..............................              1.96

        30 years or less..............................              1.96

    Non-convertible corporate debt rated at least B1
    and B2 with remaining terms of maturity of:

        1 year or less................................              1.50

        2 years or less...............................              1.60

        3 years or less...............................              1.68

        4 years or less...............................              1.76

        5 years or less...............................              1.86

        7 years or less...............................              1.97

        10 years or less..............................              2.08

        15 years or less..............................              2.16

        20 years or less..............................              2.28

        30 years or less..............................              2.29

         Non-convertible unrated corporate debt of any              2.50
maturity .............................................

Convertible corporate debt securities rated at least
Aa3 issued by the following type of issuers:

    Utility...........................................            1.62-1.67

    Industrial........................................            2.56-2.61

    Financial.........................................            2.33-2.38

    Transportation....................................            2.50-2.65

Convertible corporate debt securities rated at least A3
issued by the following type of issuers:

    Utility...........................................              1.72

    Industrial........................................              2.66

    Financial.........................................              2.43

    Transportation....................................              2.75

Convertible corporate debt securities rated at least
Baa3 issued by the following type of issuers:

    Utility...........................................              1.88

    Industrial........................................              2.82

    Financial.........................................              2.59

    Transportation....................................              2.85

Convertible corporate debt securities rated at least
Ba3 issued by the following type of issuers:

    Utility...........................................              1.95

    Industrial........................................              2.90

    Financial.........................................              2.65

    Transportation....................................              2.90

Convertible corporate debt securities rated at least B2
issued by the following type of issuers:

    Utility...........................................              1.99

    Industrial........................................              2.93

    Financial.........................................              2.70

    Transportation....................................              2.95


        "Moody's Eligible Assets" means:

         (a)   cash (including, for this purpose, receivables for investments
               sold to a counterparty whose senior debt securities are rated
               at least Baa3 by Moody's or a counterparty approved by Moody's
               and payable within five Business Days following such Valuation
               Date and dividends and interest receivable within 49 days on
               investments);

         (b)   Short-Term Money Market Instruments;

         (c)   commercial paper that is not includible as a Short-Term Money
               Market Instrument having on the Valuation Date a rating from
               Moody's of at least P-1 and maturing within 270 days;

         (d)   preferred stocks (i) which either (A) are issued by issuers
               whose senior debt securities are rated at least Baa1 by Moody's
               or (B) are rated at least Baa3 by Moody's or (C) in the event
               an issuer's senior debt securities or preferred stock is not
               rated by Moody's, which either (1) are issued by an issuer
               whose senior debt securities are rated at least A- by S&P or
               (2) are rated at least A- by S&P and for this purpose have been
               assigned a Moody's equivalent rating of at least Baa3, (ii) of
               issuers which have (or, in the case of issuers which are
               special purpose corporations, whose parent companies have)
               common stock listed on the New York Stock Exchange, the
               American Stock Exchange or the Nasdaq National Market System,
               (iii) which have a minimum issue size (when taken together with
               other of the issuer's issues of similar tenor) of $50,000,000,
               (iv) which have paid cash dividends consistently during the
               preceding three-year period (or, in the case of new issues
               without a dividend history, are rated at least A1 by Moody's
               or, if not rated by Moody's, are rated at least AA- by S&P),
               (v) which pay cumulative cash dividends in U.S. dollars, (vi)
               which are not convertible into any other class of stock and do
               not have warrants attached, (vii) which are not issued by
               issuers in the transportation industry and (viii) in the case
               of auction rate preferred stocks, which are rated at least Aa3
               by Moody's, or if not rated by Moody's, AAA by S&P, AAA by
               Fitch or are otherwise approved in writing by Moody's and have
               never had a failed auction; provided, however, that for this
               purpose the aggregate Market Value of the Trust's holdings of
               any single issue of auction rate preferred stock shall not be
               more than 1% of the Trust's total assets.

         (e)   common stocks (i) (A) which are traded on a nationally
               recognized stock exchange or in the over-the-counter market,
               (B) if cash dividend paying, pay cash dividends in U.S. dollars
               and (C) which may be sold without restriction by the Trust;
               provided, however, that (y) common stock which, while a Moody's
               Eligible Asset owned by the Trust, ceases paying any regular
               cash dividend will no longer be considered a Moody's Eligible
               Asset until 71 days after the date of the announcement of such
               cessation, unless the issuer of the common stock has senior
               debt securities rated at least A3 by Moody's and (z) the
               aggregate Market Value of the Trust's holdings of the common
               stock of any issuer in excess of 4% in the case of utility
               common stock and 6% in the case of non-utility common stock of
               the aggregate Market Value of the Trust's holdings shall not be
               Moody's Eligible Assets, (ii) which are securities denominated
               in any currency other than the U.S. dollar or securities of
               issuers formed under the laws of jurisdictions other than the
               United States, its states and the District of Columbia for
               which there are dollar-denominated ADRs or their equivalents
               which are traded in the United States on exchanges or
               over-the-counter and are issued by banks formed under the laws
               of the United States, its states or the District of Columbia or
               (iii) which are securities of issuers formed under the laws of
               jurisdictions other than the United States (and in existence
               for at least five years) for which no ADRs are traded;
               provided, however, that the aggregate Market Value of the
               Trust's holdings of securities denominated in currencies other
               than the U.S. dollar and ADRs in excess of (A) 6% of the
               aggregate Market Value of the outstanding shares of common
               stock of such issuer thereof or (B) 10% of the Market Value of
               the Trust's Moody's Eligible Assets with respect to issuers
               formed under the laws of any single such non-U.S. jurisdiction
               other than Australia, Belgium, Canada, Denmark, Finland,
               France, Germany, Ireland, Italy, Japan, the Netherlands, New
               Zealand, Norway, Spain, Sweden, Switzerland and the United
               Kingdom, shall not be a Moody's Eligible Asset;

         (f)   ADR securities, based on the following guidelines: (i)
               Sponsored ADR program or (ii) Level II or Level III ADRs.
               Private placement Rule 144A ADRs are not eligible for
               collateral consideration. Global GDR programs will be evaluated
               on a case by case basis;

         (g)   U.S. Government Obligations;

         (h)   corporate evidences of indebtedness (i) which may be sold
               without restriction by the Trust which are rated at least B3
               (Caa subordinate) by Moody's (or, in the event the security is
               not rated by Moody's, the security is rated at least BB- by S&P
               and which for this purpose is assigned a Moody's equivalent
               rating of one full rating category lower), with such rating
               confirmed on each Valuation Date, (ii) which have a minimum
               issue size of at least (A) $100,000,000 if rated at least Baa3
               or (B) $50,000,000 if rated B or Ba3, (iii) which are not
               convertible or exchangeable into equity of the issuing
               corporation and have a maturity of not more than 30 years, and
               (iv) for which, if rated below Baa3 or not rated, the aggregate
               Market Value of the Trust's holdings do not exceed 10% of the
               aggregate Market Value of any individual issue of corporate
               evidences of indebtedness calculated at the time of original
               issuance; and

         (i)   convertible corporate evidences of indebtedness (i) which are
               issued by issuers whose senior debt securities are rated at
               least B2 by Moody's (or, in the event an issuer's senior debt
               securities are not rated by Moody's, which are issued by
               issuers whose senior debt securities are rated at least BB by
               S&P and which for this purpose is assigned a Moody's equivalent
               rating of one full rating category lower), (ii) which are
               convertible into common stocks which are traded on the New York
               Stock Exchange or the American Stock Exchange or are quoted on
               the Nasdaq National Market System, and (iii) which, if cash
               dividend paying, pay cash dividends in U.S. dollars; provided,
               however, that once convertible corporate evidences of
               indebtedness have been converted into common stock, the common
               stock issued upon conversion must satisfy the criteria set
               forth in clause (e) above and other relevant criteria set forth
               in this definition in order to be a Moody's Eligible Asset;

         provided, however, that the Trust's investments in auction rate
         preferred stocks described in clause (d) above shall be included in
         Moody's Eligible Assets only to the extent that the aggregate Market
         Value of such stocks does not exceed 10% of the aggregate Market
         Value of all of the Trust's investments meeting the criteria set
         forth in clauses (a) through (g) above less the aggregate Market
         Value of those investments excluded from Moody's Eligible Assets
         pursuant to the paragraph appearing after clause (j) below; and

         (j)   no assets which are subject to any lien or irrevocably
               deposited by the Trust for the payment of amounts needed to
               meet the obligations described in clauses (a)(i) through
               (a)(iv) of the definition of "Basic Maintenance Amount" may be
               includible in Moody's Eligible Assets.

         Notwithstanding anything to the contrary in the preceding clauses
               (a)-(j), the Trust's investment in preferred stock, common
               stock, corporate evidences of indebtedness and convertible
               corporate evidences of indebtedness shall not be treated as
               Moody's Eligible Assets except to the extent they satisfy the
               following diversification requirements (utilizing Moody's
               Industry and Sub-industry Categories) with respect to the
               Market Value of the Trust's holdings:

Issuer:

                                          Non-Utility              Utility
                                         Maximum Single         Maximum Single
Moody's Rating(1)(2)                      Issuer(3)(4)           Issuer(3)(4)
- --------------------                     --------------         --------------

Aaa                                               100%                   100%

Aa                                                 20%                    20%

A                                                  10%                    10%

CS/CB, Baa(5)                                      6%                     4%

Ba                                                 4%                     4%

B1/B2                                              3%                     3%

B3 or below                                        2%                     2%


Industry and State:

                                                   Utility
                                Non-Utility        Maximum           Utility
                              Maximum Single     Single Sub-      Maximum Single
Moody's Rating(1)               Industry(3)     Industry(3)(6)       State(3)
- -----------------             --------------    --------------    --------------

Aaa                                100%              100%            100%

Aa                                  60%               60%             20%

A                                   40%               50%             10%(7)

CS/CB, Baa(5)                       20%               50%              7%(7)

Ba                                  12%               12%              0%

B1/B2                                8%                8%              0%

B3 or below                          5%                5%              0%


- --------------

         (1)   Unless conclusions regarding liquidity risk as well as
               estimates of both the probability and severity of default for
               the Trust's assets can be derived from other sources,
               securities rated below B by Moody's and unrated securities,
               which are securities rated by neither Moody's, S&P nor Fitch,
               are limited to 10% of Moody's Eligible Assets. If a corporate,
               municipal or other debt security is unrated by Moody's, S&P or
               Fitch, the Trust will use the percentage set forth under "Below
               B and Unrated" in this table. Ratings assigned by S&P or Fitch
               are generally accepted by Moody's at face value. However,
               adjustments to face value may be made to particular categories
               of credits for which the S&P and/or Fitch rating does not seem
               to approximate a Moody's rating equivalent.

         (2)   Corporate evidences of indebtedness from issues ranging from
               $50,000,000 to $100,000,000 are limited to 20% of Moody's
               Eligible Assets.

         (3)   The referenced percentages represent maximum cumulative totals
               only for the related Moody's rating category and each lower
               Moody's rating category.

         (4)   Issuers subject to common ownership of 25% or more are
               considered as one name.

         (5)   CS/CB refers to common stock and convertible corporate
               evidences of indebtedness, which are diversified independently
               from the rating level.

         (6)   In the case of utility common stock, utility preferred stock,
               utility evidences of indebtedness and utility convertible
               evidences of indebtedness, the definition of industry refers to
               sub-industries (electric, water, hydro power, gas,
               diversified). Investments in other sub-industries are eligible
               only to the extent that the combined sum represents a
               percentage position of the Moody's Eligible Assets less than or
               equal to the percentage limits in the diversification tables
               above.

         (7)   Such percentage shall be 15% in the case of utilities regulated
               by California, New York and Texas.


         "Moody's Industry Classifications" means for the purposes of
determining Moody's Eligible Assets, each of the following industry
classifications (or such other classifications as Moody's may from time to
time approve for application to the Series A Preferred Shares).

               1.     Aerospace and Defense: Major Contractor, Subsystems,
                      Research, Aircraft Manufacturing, Arms, Ammunition.

               2.     Automobile: Automobile Equipment, Auto-Manufacturing,
                      Auto Parts Manufacturing, Personal Use Trailers, Motor
                      Homes, Dealers.

               3.     Banking: Bank Holding, Savings and Loans, Consumer
                      Credit, Small Loan, Agency, Factoring, Receivables.

               4.     Beverage, Food and Tobacco: Beer and Ale, Distillers,
                      Wines and Liquors, Distributors, Soft Drink Syrup,
                      Bottlers, Bakery, Mill Sugar, Canned Foods, Corn
                      Refiners, Dairy Products, Meat Products, Poultry
                      Products, Snacks, Packaged Foods, Distributors, Candy,
                      Gum, Seafood, Frozen Food, Cigarettes, Cigars,
                      Leaf/Snuff, Vegetable Oil.

               5.     Buildings and Real Estate: Brick, Cement, Climate
                      Controls, Contracting, Engineering, Construction,
                      Hardware, Forest Products (building-related only),
                      Plumbing, Roofing, Wallboard, Real Estate, Real Estate
                      Development, REITs, Land Development.

               6.     Chemicals, Plastics and Rubber: Chemicals
                      (non-agricultural), Industrial Gases, Sulphur, Plastics,
                      Plastic Products, Abrasives, Coatings, Paints, Varnish,
                      Fabricating Containers.

               7.     Packaging and Glass: Glass, Fiberglass, Containers made
                      of: Glass, Metal, Paper, Plastic, Wood or Fiberglass.

               8.     Personal and Non-Durable Consumer Products
                      (Manufacturing Only): Soaps, Perfumes, Cosmetics,
                      Toiletries, Cleaning Supplies, School Supplies.

               9.     Diversified/Conglomerate Manufacturing.

               10.    Diversified/Conglomerate Service.

               11.    Diversified Natural Resources, Precious Metals and
                      Minerals: Fabricating, Distribution.

               12.    Ecological: Pollution Control, Waste Removal, Waste
                      Treatment and Waste Disposal.

               13.    Electronics: Computer Hardware, Electric Equipment,
                      Components, Controllers, Motors, Household Appliances,
                      Information Service Communication Systems, Radios, TVs,
                      Tape Machines, Speakers, Printers, Drivers, Technology.

               14.    Finance: Investment Brokerage, Leasing, Syndication,
                      Securities.

               15.    Farming and Agriculture: Livestock, Grains, Produce,
                      Agriculture Chemicals, Agricultural Equipment,
                      Fertilizers.

               16.    Grocery: Grocery Stores, Convenience Food Stores.

               17.    Healthcare, Education and Childcare: Ethical Drugs,
                      Proprietary Drugs, Research, Health Care Centers,
                      Nursing Homes, HMOs, Hospitals, Hospital Supplies,
                      Medical Equipment.

               18.    Home and Office Furnishings, Housewares, and Durable
                      Consumer Products: Carpets, Floor Coverings, Furniture,
                      Cooking, Ranges.

               19.    Hotels, Motels, Inns and Gaming.

               20.    Insurance: Life, Property and Casualty, Broker, Agent,
                      Surety.

               21.    Leisure, Amusement, Motion Pictures, Entertainment:
                      Boating, Bowling, Billiards, Musical Instruments,
                      Fishing, Photo Equipment, Records, Tapes, Sports,
                      Outdoor Equipment (Camping), Tourism, Resorts, Games,
                      Toy Manufacturing, Motion Picture Production Theaters,
                      Motion Picture Distribution.

               22.    Machinery (Non-Agricultural, Non-Construction,
                      Non-Electronic): Industrial, Machine Tools, Steam
                      Generators.

               23.    Mining, Steel, Iron and Non-Precious Metals: Coal,
                      Copper, Lead, Uranium, Zinc, Aluminum, Stainless Steel,
                      Integrated Steel, Ore Production, Refractories, Steel
                      Mill Machinery, Mini-Mills, Fabricating, Distribution
                      and Sales of the foregoing.

               24.    Oil and Gas: Crude Producer, Retailer, Well Supply,
                      Service and Drilling.

               25.    Printing, Publishing, and Broadcasting: Graphic Arts,
                      Paper, Paper Products, Business Forms, Magazines, Books,
                      Periodicals, Newspapers, Textbooks, Radio, T.V., Cable
                      Broadcasting Equipment.

               26.    Cargo Transport: Rail, Shipping, Railroads, Rail-car
                      Builders, Ship Builders, Containers, Container Builders,
                      Parts, Overnight Mail, Trucking, Truck Manufacturing,
                      Trailer Manufacturing, Air Cargo, Transport.

               27.    Retail Stores: Apparel, Toy, Variety, Drugs, Department,
                      Mail Order Catalog, Showroom.

               28.    Telecommunications: Local, Long Distance, Independent,
                      Telephone, Telegraph, Satellite, Equipment, Research,
                      Cellular.

               29.    Textiles and Leather: Producer, Synthetic Fiber, Apparel
                      Manufacturer, Leather Shoes.

               30.    Personal Transportation: Air, Bus, Rail, Car Rental.

               31.    Utilities: Electric, Water, Hydro Power, Gas.

               32.    Diversified Sovereigns: Semi-sovereigns, Canadian
                      Provinces, Supra-national Agencies.

         The Trust will use SIC codes in determining which industry
classification is applicable to a particular investment in consultation with
the Independent Accountant and Moody's, to the extent the Trust considers
necessary.

         "1933 Act" means the Securities Act of 1933, as amended, or any
successor statute.

         "1940 Act" means the Investment Company Act of 1940, as amended, or
any successor statute.

         "Notice of Redemption" shall have the meaning set forth in paragraph
3(c)(i) of Part II hereof.

         "Outstanding" means, as of any date, Preferred Shares theretofore
issued by the Trust except:

         (a)   any such Preferred Share theretofore cancelled by the Trust or
               delivered to the Trust for cancellation;

         (b)   any such Preferred Share, other than an auction rate Preferred
               Share, as to which a notice of redemption shall have been given
               and for whose payment at the redemption thereof Deposit Assets
               in the necessary amount are held by the Trust in trust for, or
               have been irrevocably deposited with the relevant disbursing
               agent for payment to, the holder of such share pursuant to the
               Statement of Preferences with respect thereto;

         (c)   in the case of an auction rate Preferred Share, any such share
               theretofore delivered to the auction agent for cancellation or
               with respect to which the Trust has given notice of redemption
               and irrevocably deposited with the paying agent sufficient
               funds to redeem such share; and

         (d)   any such Preferred Share in exchange for or in lieu of which
               other shares have been issued and delivered.

Notwithstanding the foregoing, (i) for purposes of voting rights (including
the determination of the number of shares required to constitute a quorum),
any Preferred Shares as to which any subsidiary of the Trust is the holder
will be disregarded and deemed not Outstanding, (ii) in connection with any
auction of Auction Market Preferred Shares as to which the Trust or any Person
known to the auction agent to be a subsidiary of the Trust is the holder will
be disregarded and not deemed Outstanding.

         "Person" means and includes an individual, a partnership, the Trust,
a trust, a corporation, a limited liability company, an unincorporated
association, a joint venture or other entity or a government or any agency or
political subdivision thereof.

         "Preferred Shares" means the preferred shares, par value $.001 per
share, of the Trust, and includes the Series A Preferred Shares.

         "Pricing Service" means any of the following: Bloomberg Financial
Service, Bridge Information Services, Data Resources Inc., FT Interactive,
International Securities Market Association, Merrill Lynch Securities Pricing
Service, Muller Data Corp., Reuters, S&P/J.J. Kenny, Telerate, Trepp Pricing
and Wood Gundy.

         "Redemption Price" has the meaning set forth in paragraph 3(a) of
Part II hereof, and for the purposes of this Statement of Preferences shall
have a correlative meaning with respect to any other class or series of
Preferred Shares.

         "S&P" means Standard & Poor's Ratings Services, or its successors at
law.

         "Series A Preferred Shares" means the 5.625% Series A Cumulative
Preferred Shares, par value $.001 per share, of the Trust.

         "Series A Asset Coverage Cure Date" means, with respect to the
failure by the Trust to maintain Asset Coverage (as required by paragraph
5(a)(i) of Part II hereof) as of the last Business Day of each March, June,
September and December of each year, 49 days following such Business Day.

         "Short-Term Money Market Instruments" means the following types of
instruments if, on the date of purchase or other acquisition thereof by the
Trust, the remaining term to maturity thereof is not in excess of 180 days:

         (i)   commercial paper rated A-1 if such commercial paper matures in
               30 days or A-1+ if such commercial paper matures in over 30
               days;

         (ii)  demand or time deposits in, and banker's acceptances and
               certificates of deposit of (A) a depository institution or
               trust company incorporated under the laws of the United States
               of America or any state thereof or the District of Columbia or
               (B) a United States branch office or agency of a foreign
               depository institution (provided that such branch office or
               agency is subject to banking regulation under the laws of the
               United States, any state thereof or the District of Columbia);

         (iii) overnight funds; and

         (iv)  U.S. Government Obligations.

         "Trust" means The Gabelli Utility Trust, a Delaware statutory trust.

         "U.S. Government Obligations" means direct obligations of the United
States or by its agencies or instrumentalities that are entitled to the full
faith and credit of the United States and that, other than United States
Treasury Bills, provide for the periodic payment of interest and the full
payment of principal at maturity or call for redemption.

         "Valuation Date" means the last Business Day of each month, or such
other date as the Trust and Moody's may agree to for purposes of determining
the Basic Maintenance Amount.

         "Voting Period" shall have the meaning set forth in paragraph 4(b) of
Part II hereof.

                                   PART II

                           SERIES A PREFERRED SHARES

         1.    Dividends.

         (a) Holders of Series A Preferred Shares shall be entitled to
receive, when, as and if declared by the Board of Trustees, out of funds
legally available therefor, cumulative cash dividends at the rate of 5.625%
per annum (computed on the basis of a 360-day year consisting of twelve 30-day
months) of the Liquidation Preference on the Series A Preferred Shares and no
more, payable quarterly on March 26, June 26, September 26 and December 26 in
each year (each, a Dividend Payment Date) commencing on September 26, 2003
(or, if any such day is not a Business Day, then on the next succeeding
Business Day) to holders of record of Series A Preferred Shares as they appear
on the stock register of the Trust at the close of business on the fifth
preceding Business Day in preference to dividends on Common Shares and any
other capital shares of the Trust ranking junior to the Series A Preferred
Shares in payment of dividends. Dividends on Series A Preferred Shares shall
accumulate from the date on which such shares are originally issued. Each
period beginning on and including a Dividend Payment Date (or the Date of
Original Issue, in the case of the first dividend period after issuance of
such shares) and ending on but excluding the next succeeding Dividend Payment
Date is referred to herein as a "Dividend Period." Dividends on account of
arrears for any past Dividend Period or in connection with the redemption of
Series A Preferred Shares may be declared and paid at any time, without
reference to any Dividend Payment Date, to holders of record on such date not
exceeding 30 days preceding the payment date thereof as shall be fixed by the
Board of Trustees.

         (b) (i) No full dividends shall be declared or paid on Series A
Preferred Shares for any Dividend Period or part thereof unless full
cumulative dividends due through the most recent Dividend Payment Dates
therefor for all series of Preferred Shares of the Trust ranking on a parity
with the Series A Preferred Shares as to the payment of dividends have been or
contemporaneously are declared and paid through the most recent Dividend
Payment Dates therefor. If full cumulative dividends due have not been paid on
all such Outstanding Preferred Shares, any dividends being paid on such
Preferred Shares (including the Series A Preferred Shares) will be paid as
nearly pro rata as possible in proportion to the respective amounts of
dividends accumulated but unpaid on each such series of Preferred Shares on
the relevant Dividend Payment Date. No holders of Series A Preferred Shares
shall be entitled to any dividends, whether payable in cash, property or
shares, in excess of full cumulative dividends as provided in this paragraph
1(b)(i) on Series A Preferred Shares. No interest or sum of money in lieu of
interest shall be payable in respect of any dividend payments on any Series A
Preferred Shares that may be in arrears.

               (ii) For so long as Series A Preferred Shares are Outstanding,
the Trust shall not pay any dividend or other distribution (other than a
dividend or distribution paid in Common Shares, or options, warrants or rights
to subscribe for or purchase Common Shares or other shares, if any, ranking
junior to the Series A Preferred Shares as to dividends and upon liquidation)
in respect of the Common Shares or any other shares of the Trust ranking
junior to the Series A Preferred Shares as to the payment of dividends and the
distribution of assets upon liquidation, or call for redemption, redeem,
purchase or otherwise acquire for consideration any Common Shares or any other
shares of the Trust ranking junior to the Series A Preferred Shares as to the
payment of dividends and the distribution of assets upon liquidation (except
by conversion into or exchange for shares of the Trust ranking junior to the
Series A Preferred Shares as to dividends and upon liquidation), unless, in
each case, (A) immediately thereafter, the aggregate Adjusted Value of the
Trust's Moody's Eligible Assets shall equal or exceed the Basic Maintenance
Amount and the Trust shall have Asset Coverage, (B) all cumulative dividends
on all Series A Preferred Shares due on or prior to the date of the
transaction have been declared and paid (or shall have been declared and
sufficient funds for the payment thereof deposited with the applicable
Dividend-Disbursing Agent) and (C) the Trust has redeemed the full number of
Series A Preferred Shares to be redeemed mandatorily pursuant to any provision
contained herein for mandatory redemption.

               (iii) Any dividend payment made on the Series A Preferred
Shares shall first be credited against the dividends accumulated with respect
to the earliest Dividend Period for which dividends have not been paid.

         (c) Not later than the Business Day immediately preceding each
Dividend Payment Date, the Trust shall deposit with the Dividend-Disbursing
Agent Deposit Assets having an initial combined value sufficient to pay the
dividends that are payable on such Dividend Payment Date, which Deposit Assets
shall mature on or prior to such Dividend Payment Date. The Trust may direct
the Dividend-Disbursing Agent with respect to the investment of any such
Deposit Assets, provided that such investment consists exclusively of Deposit
Assets and provided further that the proceeds of any such investment will be
available at the opening of business on such Dividend Payment Date.

         2.   Liquidation Rights.

         (a)   In the event of any liquidation, dissolution or winding up of the
affairs of the Trust, whether voluntary or involuntary, the holders of Series
A Preferred Shares shall be entitled to receive out of the assets of the Trust
available for distribution to shareholders, after satisfying claims of
creditors but before any distribution or payment shall be made in respect of
the Common Shares or any other shares of the Trust ranking junior to the
Series A Preferred Shares as to liquidation payments, a liquidation
distribution in the amount of $25.00 per share (the "Liquidation Preference"),
plus an amount equal to all unpaid dividends accumulated to and including the
date fixed for such distribution or payment (whether or not earned or declared
by the Trust, but excluding interest thereon), and such holders shall be
entitled to no further participation in any distribution or payment in
connection with any such liquidation, dissolution or winding up.

         (b)   If, upon any liquidation, dissolution or winding up of the
affairs of the Trust, whether voluntary or involuntary, the assets of the
Trust available for distribution among the holders of all Outstanding Series A
Preferred Shares, and any other Outstanding class or series of Preferred
Shares of the Trust ranking on a parity with the Series A Preferred Shares as
to payment upon liquidation, shall be insufficient to permit the payment in
full to such holders of Series A Preferred Shares of the Liquidation
Preference plus accumulated and unpaid dividends and the amounts due upon
liquidation with respect to such other Preferred Shares, then such available
assets shall be distributed among the holders of Series A Preferred Shares and
such other Preferred Shares ratably in proportion to the respective
preferential liquidation amounts to which they are entitled. Unless and until
the Liquidation Preference plus accumulated and unpaid dividends has been paid
in full to the holders of Series A Preferred Shares, no dividends or
distributions will be made to holders of the Common Shares or any other shares
of the Trust ranking junior to the Series A Preferred Shares as to
liquidation.

         3.  Redemption.

         The Series A Preferred Shares shall be redeemed by the Trust as
provided below:

         (a) Mandatory Redemptions.

         If the Trust is required to redeem any Preferred Shares (which may
include Series A Preferred Shares) pursuant to paragraphs 5(b) or 5(c) of Part
II hereof, then the Trust shall, to the extent permitted by the 1940 Act and
Delaware law, by the close of business on such Series A Asset Coverage Cure
Date or Basic Maintenance Amount Cure Date (herein collectively referred to as
a "Cure Date"), as the case may be, fix a redemption date and proceed to
redeem shares as set forth in paragraph 3(c) hereof. On such redemption date,
the Trust shall redeem, out of funds legally available therefor, the number of
Preferred Shares, which, to the extent permitted by the 1940 Act and Delaware
law, at the option of the Trust may include any proportion of Series A
Preferred Shares or any other series of Preferred Shares, equal to the minimum
number of shares the redemption of which, if such redemption had occurred
immediately prior to the opening of business on such Cure Date, would have
resulted in the Trust having Asset Coverage or an Adjusted Value of its
Moody's Eligible Assets equal to or greater than the Basic Maintenance Amount,
as the case may be, immediately prior to the opening of business on such Cure
Date or, if Asset Coverage or an Adjusted Value of its Eligible Assets equal
to or greater than the Basic Maintenance Amount, as the case may be, cannot be
so restored, all of the Outstanding Series A Preferred Shares, at a price
equal to $25.00 per share plus accumulated but unpaid dividends (whether or
not earned or declared by the Trust) through the date of redemption (the
"Redemption Price"). In the event that Preferred Shares are redeemed pursuant
to paragraphs 5(b) or 5(c) of Part II hereof, the Trust may, but is not
required to, redeem a sufficient number of Series A Preferred Shares pursuant
to this paragraph 3(a) which, when aggregated with other Preferred Shares
redeemed by the Trust, permits the Trust to have with respect to the Preferred
Shares (including the Series A Preferred Shares) remaining Outstanding after
such redemption (i) Asset Coverage of as much as 220% and (ii) Moody's
Eligible Assets with Adjusted Value of as great as 110% of the Basic
Maintenance Amount. In the event that all of the Series A Preferred Shares
then Outstanding are required to be redeemed pursuant to paragraph 5 of Part
II hereof, the Trust shall redeem such shares at the Redemption Price and
proceed to do so as set forth in paragraph 3(c) hereof.

         (b)   Optional Redemptions.

         Prior to July 31, 2008, the Series A Preferred Shares are not subject
to optional redemption by the Trust unless such redemption is necessary, in
the judgment of the Board of Trustees, to maintain the Trust's status as a
regulated investment company under Subchapter M of the Internal Revenue Code
of 1986, as amended. Commencing July 31, 2008 and thereafter, and prior
thereto to the extent necessary to maintain the Trust's status as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended, to the extent permitted by the 1940 Act and Delaware law, the Trust
may at any time upon Notice of Redemption redeem the Series A Preferred Shares
in whole or in part at the Redemption Price per share, which notice shall
specify a redemption date of not fewer than 15 days nor more than 40 days
after the date of such notice.

         (c)   Procedures for Redemption.

               (i) If the Trust shall determine or be required to redeem
Series A Preferred Shares pursuant to this paragraph 3, it shall mail a
written notice of redemption ("Notice of Redemption") with respect to such
redemption by first class mail, postage prepaid, to each holder of the shares
to be redeemed at such holder's address as the same appears on the stock books
of the Trust on the close of business on such date as the Board of Trustees
may determine, which date shall not be earlier than the second Business Day
prior to the date upon which such Notice of Redemption is mailed to the
holders of Series A Preferred Shares. Each such Notice of Redemption shall
state: (A) the redemption date as established by the Board of Trustees; (B)
the number of Series A Preferred Shares to be redeemed; (C) the CUSIP
number(s) of such shares; (D) the Redemption Price; (E) the place or places
where the certificate(s) for such shares (properly endorsed or assigned for
transfer, if the Board of Trustees shall so require and the Notice of
Redemption shall so state) are to be surrendered for payment in respect of
such redemption; (F) that dividends on the shares to be redeemed will cease to
accrue on such redemption date; (G) the provisions of this paragraph 3 under
which such redemption is made; and (H) in the case of a redemption pursuant to
paragraph 3(b), any conditions precedent to such redemption. If fewer than all
Series A Preferred Shares held by any holder are to be redeemed, the Notice of
Redemption mailed to such holder also shall specify the number or percentage
of shares to be redeemed from such holder. No defect in the Notice of
Redemption or the mailing thereof shall affect the validity of the redemption
proceedings, except as required by applicable law.

               (ii) If the Trust shall give a Notice of Redemption, then by
the close of business on the Business Day preceding the redemption date
specified in the Notice of Redemption (so long as any conditions precedent to
such redemption have been met) or, if the Dividend-Disbursing Agent so agrees,
another date not later than the redemption date, the Trust shall (A) deposit
with the Dividend-Disbursing Agent Deposit Assets that shall mature on or
prior to such redemption date having an initial combined value sufficient to
effect the redemption of the Series A Preferred Shares to be redeemed and (B)
give the Dividend-Disbursing Agent irrevocable instructions and authority to
pay the Redemption Price to the holders of the Series A Preferred Shares
called for redemption on the redemption date. The Trust may direct the
Dividend-Disbursing Agent with respect to the investment of any Deposit Assets
so deposited provided that the proceeds of any such investment will be
available at the opening of business on such redemption date. Upon the date of
such deposit (unless the Trust shall default in making payment of the
Redemption Price), all rights of the holders of the Series A Preferred Shares
so called for redemption shall cease and terminate except the right of the
holders thereof to receive the Redemption Price thereof and such shares shall
no longer be deemed Outstanding for any purpose. The Trust shall be entitled
to receive, promptly after the date fixed for redemption any cash in excess of
the aggregate Redemption Price of the Series A Preferred Shares called for
redemption on such date and any remaining Deposit Assets. Any assets so
deposited that are unclaimed at the end of two years from such redemption date
shall, to the extent permitted by law, be repaid to the Trust, after which the
holders of the Series A Preferred Shares so called for redemption shall look
only to the Trust for payment of the Redemption Price thereof. The Trust shall
be entitled to receive, from time to time after the date fixed for redemption,
any interest on the Deposit Assets so deposited.

               (iii) On or after the redemption date, each holder of Series A
Preferred Shares that are subject to redemption shall surrender the
certificate evidencing such shares to the Trust at the place designated in the
Notice of Redemption and shall then be entitled to receive the cash Redemption
Price, without interest.

               (iv) In the case of any redemption of less than all of the
Series A Preferred Shares pursuant to this Statement of Preferences, such
redemption shall be made pro rata from each holder of Series A Preferred
Shares in accordance with the respective number of shares held by each such
holder on the record date for such redemption.

               (v) Notwithstanding the other provisions of this paragraph 3,
the Trust shall not redeem Series A Preferred Shares unless all accumulated
and unpaid dividends on all Outstanding Series A Preferred Shares and other
Preferred Shares ranking on a parity with the Series A Preferred Shares with
respect to dividends for all applicable past Dividend Periods (whether or not
earned or declared by the Trust) shall have been or are contemporaneously paid
or declared and Deposit Assets for the payment of such dividends shall have
been deposited with the Dividend-Disbursing Agent as set forth in paragraph
1(c) of Part II hereof, provided, however, that the foregoing shall not
prevent the purchase or acquisition of outstanding Preferred Shares pursuant
to the successful completion of an otherwise lawful purchase or exchange offer
made on the same terms to holders of all Outstanding Series A Preferred
Shares.

               If the Trust shall not have funds legally available for the
redemption of, or is otherwise unable to redeem, all the Series A Preferred
Shares or other Preferred Shares designated to be redeemed on any redemption
date, the Trust shall redeem on such redemption date the number of Series A
Preferred Shares and other Preferred Shares so designated as it shall have
legally available funds, or is otherwise able, to redeem ratably on the basis
of the Redemption Price from each holder whose shares are to be redeemed, and
the remainder of the Series A Preferred Shares and other Preferred Shares
designated to be redeemed shall be redeemed on the earliest practicable date
on which the Trust shall have funds legally available for the redemption of,
or is otherwise able to redeem, such shares upon Notice of Redemption.

         4.  Voting Rights.

         (a) General.

         Except as otherwise provided in the Governing Documents or a
resolution of the Board of Trustees, or as required by applicable law, holders
of Series A Preferred Shares shall have no power to vote on any matter except
matters submitted to a vote of the Common Shares. In any matter submitted to a
vote of the holders of the Common Shares, each holder of Series A Preferred
Shares shall be entitled to one vote for each Series A Preferred Share held
and the holders of the Outstanding Preferred Shares, including Series A
Preferred Shares, and the Common Shares shall vote together as a single class;
provided, however, that at any meeting of the shareholders of the Trust held
for the election of trustees, the holders of the Outstanding Preferred Shares,
including Series A Preferred Shares, shall be entitled, as a class, to the
exclusion of the holders of all other securities and classes of capital shares
of the Trust, to elect a number of Trust's trustees, such that following the
election of trustees at the meeting of the shareholders, the Trust's Board of
Trustees shall contain two trustees elected by the holders of the Outstanding
Preferred Shares, including the Series A Preferred Shares. Subject to
paragraph 4(b) of Part II hereof, the holders of the outstanding capital
shares of the Trust, including the holders of Outstanding Preferred Shares,
including the Series A Preferred Shares, voting as a single class, shall elect
the balance of the trustees.

         (b) Right to Elect Majority of Board of Trustees.

         During any period in which any one or more of the conditions
described below shall exist (such period being referred to herein as a "Voting
Period"), the number and/or composition of trustees constituting the Board of
Trustees shall be adjusted as necessary to permit the holders of Outstanding
Preferred Shares, including the Series A Preferred Shares, voting separately
as one class (to the exclusion of the holders of all other securities and
classes of capital shares of the Trust) to elect the number of trustees that,
when added to the two trustees elected exclusively by the holders of Preferred
Shares pursuant to paragraph 4(a) above, would constitute a simple majority of
the Board of Trustees as so adjusted. The Trust and the Board of Trustees
shall take all necessary actions, including effecting the removal of trustees
or amendment of the Trust's Declaration, to effect an adjustment of the number
and/or composition of trustees as described in the preceding sentence. A
Voting Period shall commence:

               (i) if at any time accumulated dividends (whether or not earned
or declared, and whether or not funds are then legally available in an amount
sufficient therefor) on the Outstanding Series A Preferred Shares equal to at
least two full years' dividends shall be due and unpaid and sufficient cash or
specified securities shall not have been deposited with the
Dividend-Disbursing Agent for the payment of such accumulated dividends; or

               (ii) if at any time Holders of any other Preferred Shares are
entitled to elect a majority of the trustees of the Trust under the 1940 Act
or Statement of Preferences creating such shares.

               Upon the termination of a Voting Period, the voting rights
described in this paragraph 4(b) shall cease, subject always, however, to the
reverting of such voting rights in the holders of Preferred Shares upon the
further occurrence of any of the events described in this paragraph 4(b).

         (c)   Right to Vote with Respect to Certain Other Matters.

         Subject to paragraph 1 of Part III of this Statement of Preferences,
so long as any Series A Preferred Shares are Outstanding, the Trust shall not,
without the affirmative vote of the holders of a majority (as defined in the
1940 Act) of the Preferred Shares Outstanding at the time and present and
voting on such matter, voting separately as one class, amend, alter or repeal
the provisions of this Statement of Preferences so as to in the aggregate
adversely affect the rights and preferences set forth in any Statement of
Preferences, including the Series A Preferred Shares. To the extent permitted
under the 1940 Act, in the event that more than one series of Preferred Shares
are Outstanding, the Trust shall not effect any of the actions set forth in
the preceding sentence which in the aggregate adversely affects the rights and
preferences set forth in the Statement of Preferences for a series of
Preferred Shares differently than such rights and preferences for any other
series of Preferred Shares without the affirmative vote of the holders of at
least a majority of the Preferred Shares Outstanding and present and voting on
such matter of each series adversely affected (each such adversely affected
series voting separately as a class to the extent its rights are affected
differently). The holders of the Series A Preferred Shares shall not be
entitled to vote on any matter that affects the rights or interests of only
one or more other series of Preferred Shares. The Trust shall notify Moody's
ten Business Days prior to any such vote described above. Unless a higher
percentage is required under the Governing Documents or applicable provisions
of the Delaware Statutory Trust Act or the 1940 Act, the affirmative vote of
the holders of a majority of the Outstanding Preferred Shares, including
Series A Preferred Shares, voting together as a single class, will be required
to approve any plan of reorganization adversely affecting the Preferred Shares
or any action requiring a vote of security holders under Section 13(a) of the
1940 Act. For purposes of this paragraph 4(c), the phrase "vote of the holders
of a majority of the Outstanding Preferred Shares" (or any like phrase) shall
mean, in accordance with Section 2(a)(42) of the 1940 Act, the vote, at the
annual or a special meeting of the shareholders of the Trust duly called (i)
of 67 percent or more of the Preferred Shares present at such meeting, if the
holders of more than 50 percent of the Outstanding Preferred Shares are
present or represented by proxy; or (ii) of more than 50 percent of the
Outstanding Preferred Shares, whichever is less. The class vote of holders of
Preferred Shares described above will in each case be in addition to a
separate vote of the requisite percentage of Common Shares and Preferred
Shares, including Series A Preferred Shares, voting together as a single
class, necessary to authorize the action in question. An increase in the
number of authorized Preferred Shares pursuant to the Governing Documents or
the issuance of additional shares of any series of Preferred Shares (including
Series A Preferred Shares) pursuant to the Governing Documents shall not in
and of itself be considered to adversely affect the rights and preferences of
the Preferred Shares.

         (d)   Voting Procedures.

               (i)  As soon as practicable after the accrual of any right of
the holders of Preferred Shares to elect additional trustees as described in
paragraph 4(b) above, the Trust shall call a special meeting of such holders
and instruct the Dividend-Disbursing Agent to mail a notice of such special
meeting to such holders, such meeting to be held not less than 10 nor more
than 20 days after the date of mailing of such notice. If the Trust fails to
send such notice to the Dividend-Disbursing Agent or if the Trust does not
call such a special meeting, it may be called by any such holder on like
notice. The record date for determining the holders entitled to notice of and
to vote at such special meeting shall be the close of business on the day on
which such notice is mailed or such other date as the Board of Trustees shall
determine. At any such special meeting and at each meeting held during a
Voting Period, such holders of Preferred Shares, voting together as a class
(to the exclusion of the holders of all other securities and classes of
capital shares of the Trust), shall be entitled to elect the number of
trustees prescribed in paragraph 4(b) above on a one-vote-per-share basis. At
any such meeting, or adjournment thereof in the absence of a quorum, a
majority of such holders present in person or by proxy shall have the power to
adjourn the meeting without notice, other than by an announcement at the
meeting, to a date not more than 120 days after the original record date.

               (ii) For purposes of determining any rights of the holders of
Series A Preferred Shares to vote on any matter or the number of shares
required to constitute a quorum, whether such right is created by this
Statement of Preferences, by the other provisions of the Governing Documents,
by statute or otherwise, any Series A Preferred Share which is not Outstanding
shall not be counted.

               (iii) The terms of office of all persons who are trustees of
the Trust at the time of a special meeting of holders of Preferred Shares to
elect trustees and who remain trustees following such meeting shall continue,
notwithstanding the election at such meeting by such holders of the number of
trustees that they are entitled to elect, and the persons so elected by such
holders, together with the two incumbent trustees elected by the holders of
Preferred Shares, and the remaining incumbent trustees elected by the holders
of the Common Shares and Preferred Shares, shall constitute the duly elected
trustees of the Trust.

               (iv) Upon the expiration of a Voting Period, the terms of
office of the additional trustees elected by the holders of Preferred Shares
pursuant to paragraph 4(b) above shall expire at the earliest time permitted
by law, and the remaining trustees shall constitute the trustees of the Trust
and the voting rights of such holders of Preferred Shares, including Series A
Preferred Shares, to elect additional trustees pursuant to paragraph 4(b)
above shall cease, subject to the provisions of the last sentence of paragraph
4(b). Upon the expiration of the terms of the trustees elected by the holders
of Preferred Shares pursuant to paragraph 4(b) above, the number of trustees
shall be automatically reduced to the number of trustees on the Board
immediately preceding such Voting Period.

         (e)   Exclusive Remedy.

         Unless otherwise required by law, the holders of Series A Preferred
Shares shall not have any rights or preferences other than those specifically
set forth herein. The holders of Series A Preferred Shares shall have no
preemptive rights or rights to cumulative voting. In the event that the Trust
fails to pay any dividends on the Series A Preferred Shares, the exclusive
remedy of the holders shall be the right to vote for trustees pursuant to the
provisions of this paragraph 4.

         (f)  Notification to Moody's.

         In the event a vote of holders of Series A Preferred Shares is
required pursuant to the provisions of Section 13(a) of the 1940 Act, as long
as the Series A Preferred Shares are rated by Moody's at the Trust's request,
the Trust shall, not later than ten Business Days prior to the date on which
such vote is to be taken, notify Moody's that such vote is to be taken and the
nature of the action with respect to which such vote is to be taken and, not
later than ten Business Days after the date on which such vote is taken,
notify Moody's of the result of such vote.

         5.  Coverage Tests.

         (a) Determination of Compliance.

         For so long as any Series A Preferred Shares are Outstanding, the
Trust shall make the following determinations:

               (i) Asset Coverage. The Trust shall have Asset Coverage as of
the last Business Day of each March, June, September and December of each year
in which any Series A Preferred Shares are Outstanding.

               (ii) Basic Maintenance Amount Requirement.

                     (A) For so long as any Series A Preferred Shares are
Outstanding and are rated by Moody's at the Trust's request, the Trust shall
maintain, on each Valuation Date, Moody's Eligible Assets having an Adjusted
Value at least equal to the Basic Maintenance Amount, each as of such
Valuation Date. Upon any failure to maintain Moody's Eligible Assets having an
Adjusted Value at least equal to the Basic Maintenance Amount, the Trust shall
use all commercially reasonable efforts to retain Moody's Eligible Assets
having an Adjusted Value at least equal to the Basic Maintenance Amount on or
prior to the Basic Maintenance Amount Cure Date, by altering the composition
of its portfolio or otherwise.

                     (B) The Administrator shall prepare a Basic Maintenance
Report relating to each Valuation Date. On or before 5:00 P.M., New York City
time, on the fifth Business Day after the first Valuation Date following the
Date of Original Issue of the Series A Preferred Shares and after each (1)
Annual Valuation Date, (2) Valuation Date on which the Trust fails to satisfy
the requirements of paragraph 5(a)(ii)(A) above, (3) Basic Maintenance Amount
Cure Date following a Valuation Date on which the Trust fails to satisfy the
requirements of paragraph 5(a)(ii)(A) above and (4) Valuation Date and any
immediately succeeding Business Day on which the Adjusted Value of the Trust's
Moody's Eligible Assets exceeds the Basic Maintenance Amount by 5% or less,
the Trust shall complete and deliver to Moody's a Basic Maintenance Report,
which will be deemed to have been delivered to Moody's if Moody's receives a
copy or telecopy, telex or other electronic transcription or transmission of
the Basic Maintenance Report and on the same day the Trust mails to Moody's
for delivery on the next Business Day the Basic Maintenance Report. A failure
by the Trust to deliver a Basic Maintenance Report under this paragraph
5(a)(ii)(B) shall be deemed to be delivery of a Basic Maintenance Report
indicating an Adjusted Value of the Trust's Moody's Eligible Assets less than
the Basic Maintenance Amount, as of the relevant Valuation Date.

                     (C) Within ten Business Days after the date of delivery
to Moody's of a Basic Maintenance Report in accordance with paragraph
5(a)(ii)(B) above relating to an Annual Valuation Date, the Trust shall
deliver to Moody's an Accountant's Confirmation relating to such Basic
Maintenance Report that was prepared by the Trust during the quarter ending on
such Annual Valuation Date. Also, within ten Business Days after the date of
delivery to Moody's of a Basic Maintenance Report in accordance with paragraph
5(a)(ii)(B) above relating to a Valuation Date on which the Trust fails to
satisfy the requirements of paragraph 5(a)(ii)(A) and any Basic Maintenance
Amount Cure Date, the Trust shall deliver to Moody's an Accountant's
Confirmation relating to such Basic Maintenance Report.

                     (D) In the event the Adjusted Value of the Trust's
Moody's Eligible Assets shown in any Basic Maintenance Report prepared
pursuant to paragraph 5(a)(ii)(B) above is less than the applicable Basic
Maintenance Amount, the Trust shall have until the Basic Maintenance Amount
Cure Date to achieve an Adjusted Value of the Trust's Moody's Eligible Assets
at least equal to the Basic Maintenance Amount, and upon such achievement (and
not later than such Basic Maintenance Amount Cure Date) the Trust shall inform
Moody's of such achievement in writing by delivery of a revised Basic
Maintenance Report showing an Adjusted Value of the Trust's Moody's Eligible
Assets at least equal to the Basic Maintenance Amount as of the date of such
revised Basic Maintenance Report.

                     (E) On or before 5:00 P.M., New York City time, on no
later than the fifth Business Day after the next Valuation Date following each
date on which the Trust has repurchased more than 1% of its Common Shares
since the most recent date of delivery of a Basic Maintenance Report, the
Trust shall complete and deliver to Moody's a Basic Maintenance Report. A
Basic Maintenance Report delivered as provided in paragraph 5(a)(ii)(B) above
also shall be deemed to have been delivered pursuant to this paragraph
5(a)(ii)(E).

         (b)  Failure to Meet Asset Coverage.

         If the Trust fails to have Asset Coverage as provided in paragraph
5(a)(i) hereof and such failure is not cured as of the related Series A Asset
Coverage Cure Date, (i) the Trust shall give a Notice of Redemption as
described in paragraph 3 of Part II hereof with respect to the redemption of a
sufficient number of Preferred Shares, which at the Trust's determination (to
the extent permitted by the 1940 Act and Delaware law) may include any
proportion of Series A Preferred Shares, to enable it to meet the requirements
of paragraph 5(a)(i) above, and, at the Trust's discretion, such additional
number of Series A Preferred Shares or other Preferred Shares in order that
the Trust have Asset Coverage with respect to the Series A Preferred Shares
and any other Preferred Shares remaining Outstanding after such redemption as
great as 220%, and (ii) deposit with the Dividend-Disbursing Agent Deposit
Securities having an initial combined value sufficient to effect the
redemption of the Series A Preferred Shares or other Preferred Shares to be
redeemed, as contemplated by paragraph 3 of Part II hereof.

         (c)  Failure to Maintain Moody's Eligible Assets having an Adjusted
Value at Least Equal to the Basic Maintenance Amount.

         If the Trust fails to have Moody's Eligible Assets having an Adjusted
Value at least equal to the Basic Maintenance Amount as provided in paragraph
5(a)(ii)(A) above and such failure is not cured, the Trust shall, on or prior
to the Basic Maintenance Amount Cure Date, (i) give a Notice of Redemption as
described in paragraph 3 of Part II hereof with respect to the redemption of a
sufficient number of Series A Preferred Shares or other Preferred Shares to
enable it to meet the requirements of paragraph 5(a)(ii)(A) above, and, at the
Trust's discretion, such additional number of Series A Preferred Shares or
other Preferred Shares in order that the Trust have Adjusted Assets with
respect to the remaining Series A Preferred Shares and any other Preferred
Shares remaining Outstanding after such redemption as great as 110% of the
Basic Maintenance Amount, and (ii) deposit with the Dividend-Disbursing Agent
Deposit Assets having an initial combined value sufficient to effect the
redemption of the Series A Preferred Shares or other Preferred Shares to be
redeemed, as contemplated by paragraph 3 of Part II hereof.

         (d)  Status of Shares Called for Redemption.

         For purposes of determining whether the requirements of paragraphs
5(a)(i) and 5(a)(ii)(A) hereof are satisfied, (i) no Series A Preferred Share
shall be deemed to be Outstanding for purposes of any computation if, prior to
or concurrently with such determination, sufficient Deposit Assets to pay the
full Redemption Price for such share shall have been deposited in trust with
the Dividend-Disbursing Agent (or applicable paying agent) and the requisite
Notice of Redemption shall have been given, and (ii) such Deposit Assets
deposited with the Dividend-Disbursing Agent (or paying agent) shall not be
included.

         6.  Certain Other Restrictions.

         (a) For so long as the Series A Preferred Shares are rated by Moody's
at the request of the Trust, the Trust will not, and will cause the Adviser
not to, (i) knowingly and willfully purchase or sell any asset for the
specific purpose of causing, and with the actual knowledge that the effect of
such purchase or sale will be to cause, the Trust to have Moody's Eligible
Assets having an Adjusted Value as of the date of such purchase or sale to be
less than the Basic Maintenance Amount as of such date, (ii) in the event
that, as of the immediately preceding Valuation Date, the Adjusted Value of
the Trust's Moody's Eligible Assets exceeded the Basic Maintenance Amount by
5% or less, alter the composition of the Trust's assets in a manner reasonably
expected to reduce the Adjusted Value of the Trust's Moody's Eligible Assets,
unless the Trust shall have confirmed that, after giving effect to such
alteration, the Adjusted Value of the Trust's Moody's Eligible Assets exceeded
the Basic Maintenance Amount or (iii) declare or pay any dividend or other
distribution on any Common Shares or repurchase any Common Shares, unless the
Trust shall have confirmed that, after giving effect to such declaration,
other distribution or repurchase, the Trust continued to satisfy the
requirements of paragraph 5(a)(ii)(A) of Part II hereof.

         (b) For so long as the Series A Preferred Shares are rated by Moody's
at the request of the Trust, unless the Trust shall have received written
confirmation from Moody's, the Trust may engage in the lending of its
portfolio securities only in an amount of up to 5% of the Trust's total
assets, provided that the Trust receives cash collateral for such loaned
securities which is maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities and, if invested, is
invested only in Short-Term Money Market Investments or in money market mutual
funds meeting the requirements of Rule 2a-7 under the 1940 Act that maintain a
constant $1.00 per share net asset value and treat the loaned securities
rather than the collateral as the assets of the Trust for purposes of
determining compliance with paragraph 5 of Part II hereof.

         (c) For so long as the Series A Preferred Shares are rated by Moody's
at the request of the Trust, the Trust shall not consolidate the Trust with,
merge the Trust into, sell or otherwise transfer all or substantially all of
the Trust's assets to another Person or adopt a plan of liquidation of the
Trust, in each case without providing prior written notification to Moody's.

         7.  Limitation on Incurrence of Additional Indebtedness and Issuance
of Additional Preferred Shares

         (a) So long as any Series A Preferred Shares are Outstanding the
Trust may issue and sell one or more series of a class of senior securities of
the Trust representing indebtedness under Section 18 of the 1940 Act and/or
otherwise create or incur indebtedness, provided that immediately after giving
effect to the incurrence of such indebtedness and to its receipt and
application of the proceeds thereof, the Trust shall have an "asset coverage"
for all senior securities representing indebtedness, as defined in Section
18(h) of the 1940 Act, of at least 300% of the amount of all indebtedness of
the Trust then outstanding and no such additional indebtedness shall have any
preference or priority over any other indebtedness of the Trust upon the
distribution of the assets of the Trust or in respect of the payment of
interest. Any possible liability resulting from lending and/or borrowing
portfolio securities, entering into reverse repurchase agreements, entering
into futures contracts and writing options, to the extent such transactions
are made in accordance with the investment restrictions of the Trust then in
effect, shall not be considered to be indebtedness limited by this paragraph
7(a).

         (b) So long as any Series A Preferred Shares are Outstanding, the
Trust may issue and sell shares of one or more other series of Preferred
Shares constituting a series of a class of senior securities of the Trust
representing stock under Section 18 of the 1940 Act in addition to the Series
A Preferred Shares, provided that (i) the Trust shall, immediately after
giving effect to the issuance of such additional Preferred Shares and to its
receipt and application of the proceeds thereof, including, without
limitation, to the redemption of Preferred Shares for which a Redemption
Notice has been mailed prior to such issuance, have an "asset coverage" for
all senior securities which are stock, as defined in Section 18(h) of the 1940
Act, of at least 200% of the sum of the liquidation preference of the Series A
Preferred Shares and all other Preferred Shares of the Trust then Outstanding,
and (ii) no such additional Preferred Shares shall have any preference or
priority over any other Preferred Shares of the Trust upon the distribution of
the assets of the Trust or in respect of the payment of dividends.

         8. Status of Redeemed or Repurchased Series A Preferred

         Series A Preferred Shares which at any time have been redeemed or
purchased by the Trust shall, after such redemption or purchase, have the
status of authorized but unissued Preferred Shares.


                                   PART III

      ABILITY OF BOARD OF TRUSTEES TO MODIFY THE STATEMENT OF PREFERENCES

         1. Modification to Prevent Ratings Reduction or Withdrawal.

         The Board of Trustees, without further action by the shareholders,
may amend, alter, add to or repeal any provision of this Statement of
Preferences including provisions that have been adopted by the Trust pursuant
to the Rating Agency guidelines, if the Board of Trustees determines that such
amendments or modifications are necessary to prevent a reduction in, or the
withdrawal of, a rating of the Preferred Shares and are in the aggregate in
the best interests of the holders of the Preferred Shares.

         2. Other Modification.

         The Board of Trustees, without further action by the shareholders,
may amend, alter, add to or repeal any provision of this Statement of
Preferences including provisions that have been adopted by the Trust pursuant
to the rating agency guidelines, if the Board of Trustees determines that such
amendments or modifications will not in the aggregate adversely affect the
rights and preferences of the holders of any series of the Preferred Shares,
provided, that the Trust has received advice from each applicable Rating
Agency that such amendment or modification is not expected to adversely affect
such Rating Agency's then-current rating of such series of the Trust's
Preferred Shares.

         Notwithstanding the provisions of the preceding paragraph, to the
extent permitted by law, the Board of Trustees, without the vote of the
holders of the Series A Preferred Shares or any other capital shares of the
Trust, may amend the provisions of this Statement of Preferences to resolve
any inconsistency or ambiguity or to remedy any formal defect so long as the
amendment does not in the aggregate adversely affect the rights and
preferences of the Series A Preferred Shares.

         IN WITNESS WHEREOF, The Gabelli Utility Trust has caused these
presents to be signed in its name and on its behalf by a duly authorized
officer, and its corporate seal to be hereunto affixed and attested by its
Secretary, and the said officers of the Trust further acknowledge said
instrument to be the corporate act of the Trust, and state that to the best of
their knowledge, information and belief under penalty of perjury the matters
and facts herein set forth with respect to approval are true in all material
respects, all on July 30, 2003.



                                            By     /s/ Bruce Alpert
                                               ------------------------------
                                               Name:  Bruce Alpert
                                               Title: President

Attest:

___/s/ James E. McKee
Name:  James E. McKee
Title: Secretary

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>4
<FILENAME>s462456a.txt
<DESCRIPTION>EXHIBIT (A)(III)
<TEXT>


                           THE GABELLI UTILITY TRUST

                           STATEMENT OF PREFERENCES

                                      OF

                   SERIES B AUCTION MARKET PREFERRED SHARES

         The Gabelli Utility Trust, a Delaware statutory trust, (the "Trust"),
hereby certifies that:

         FIRST: The Board of Trustees of the Trust, at a meeting duly convened
and held on February 19, 2003, pursuant to authority expressly vested in it by
Article III of the Agreement and Declaration of Trust, adopted resolutions
classifying and designating 5,000 authorized but unissued capital shares of
the Trust, par value $.001 per share, as "Series B Auction Market Preferred
Shares" and authorizing the issuance of up to 5,000 Series B Auction Market
Preferred Shares at such times as the Pricing Committee should determine.

         SECOND: The Pricing Committee, at a meeting duly convened and held on
July 22, 2003, pursuant to authority granted it by the Board of Trustees of
the Trust at its February 19, 2003 meeting, approved the issuance by the Trust
of up to 1000 Series B Auction Market Preferred Shares.

         THIRD: The preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption of the Series B Auction Market Preferred Shares, par value $.001
per share, as set by the Board of Trustees are as follows:

                                  DESIGNATION

         Series B Preferred Shares: A series of 5,000 preferred shares, par
value $0.001 per share, liquidation preference $25,000 per share, is hereby
designated "Series B Auction Market Preferred Shares" (the "Series B Preferred
Shares"). Each share of Series B Preferred Shares may be issued on a date to
be determined by the Board of Trustees of the Trust; have an initial dividend
rate stated as a rate per annum, an initial Dividend Period and an initial
Dividend Payment Date as shall be determined in advance of the issuance
thereof by the Board of Trustees of the Trust; and have such other
preferences, rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption, in addition to those
required by applicable law or set forth in the Governing Documents applicable
to Preferred Shares of the Trust, as are set forth in this Statement of
Preferences. The Series B Preferred Shares shall constitute a separate series
of Preferred Shares.

         As used in this Statement of Preferences, unless the context requires
otherwise, each capitalized term shall have the meaning ascribed to it in
paragraph 13 of Part I and paragraph 1 of Part II of this Statement of
Preferences.

                    Part I: Series B Preferred Shares Terms

1.    Number of Shares; Ranking.

      (a) The initial number of authorized and classified shares constituting
the Series B Preferred Shares to be issued is 1,000. Additional authorized and
classified Series B Preferred Shares may be issued at any time upon resolution
by the Board of Trustees. No fractional Series B Preferred Shares shall be
issued.

      (b) Series B Preferred Shares which at any time have been redeemed or
purchased by the Trust shall, after such redemption or purchase, have the
status of authorized but unissued Preferred Shares.

      (c) The Series B Preferred Shares shall rank on a parity with any other
series of Preferred Shares as to the payment of dividends to which such share
is entitled.

      (d) No Holder of Series B Preferred Shares shall have, solely by reason
of being such a holder, any preemptive or other right to acquire, purchase or
subscribe for any Preferred Shares or Common Shares or other securities of the
Trust which it may hereafter issue or sell.

2.    Dividends.

      (a) The Holders of Series B Preferred Shares shall be entitled to
receive, when, as and if declared by the Board of Trustees, out of funds
legally available therefor, cumulative cash dividends on their Series B
Preferred Shares at the dividend rate determined by the Board of Trustees in
the manner described under "Designation" above during the period from and
after the date on which the initial Series B Preferred Shares are originally
issued up to and including the last day of the initial Dividend Period and,
thereafter, at the rate, determined as set forth in paragraph 2(c), and no
more, payable on the respective dates determined as set forth in paragraph
2(b). Dividends on the Outstanding Series B Preferred Shares shall accumulate
from the date on which such shares are originally issued.

          (i) Dividends shall be payable on the Series B Preferred Shares
when, as and if declared by the Board of Trustees following the initial
Dividend Payment Date, subject to paragraph 2(b)(ii), with respect to any
Dividend Period of 91 days or less, on the first Business Day following the
last day of such Dividend Period; provided, however, if the Dividend Period is
more than 91 days then monthly on the first Business Day of each calendar
month and on the first Business Day following the last day of such Dividend
Period.

          (ii) If a day for payment of dividends resulting from the
application of paragraph 2(b)(i) above is not a Business Day, then the
Dividend Payment Date shall be the first Business Day following such day for
payment of dividends.

          (iii) The Trust shall pay to the Paying Agent not later than 12:00
noon, New York City time, on the Business Day immediately preceding each
Dividend Payment Date for Series B Preferred Shares, an aggregate amount of
immediately available funds equal to the dividends to be paid to all Holders
of such Series B Preferred Shares on such Dividend Payment Date. The Trust
shall not be required to establish any reserves for the payment of dividends.

          (iv) All moneys paid to the Paying Agent for the payment of
dividends shall be held in trust for the payment of such dividends by the
Paying Agent for the benefit of the Holders specified in paragraph 2(b)(v).
Unless instructed by the Trust in writing the Paying Agent will hold such
moneys uninvested. Any moneys paid to the Paying Agent in accordance with the
foregoing but not applied by the Paying Agent to the payment of dividends,
including interest earned, if any, on such moneys, will, to the extent
permitted by law, be repaid to the Trust at the end of 90 days from the date
on which such moneys were to have been so applied.

          (v) Each dividend on Series B Preferred Shares shall be paid on the
Dividend Payment Date therefor to the Holders of Series B Preferred Shares as
their names appear on the stock ledger or ownership records of the Trust on
the Business Day immediately preceding such Dividend Payment Date; provided,
however, that if dividends are in arrears, they may be declared and paid at
any time to Holders as their names appear on the stock ledger or ownership
records of the Trust on such date not exceeding 15 days preceding the payment
date thereof, as may be fixed by the Board of Trustees. No interest will be
payable in respect of any dividend payment or payments which may be in
arrears.

     (c) (i) For each Dividend Period after the initial Dividend Period for
the Outstanding Series B Preferred Shares, the dividend rate shall be equal to
the rate (stated as a rate per annum) that results from an Auction (but the
rate set at the Auction will not exceed the Maximum Rate); provided, however,
that if an Auction for any subsequent Dividend Period is not held for any
reason (other than as provided in the immediately following sentence) or if
Sufficient Clearing Bids have not been made in an Auction (other than as a
result of all Series B Preferred Shares being the subject of Submitted Hold
Orders), then the dividend rate on each Outstanding share of Series B
Preferred Shares for any such Dividend Period shall be the Maximum Rate,
except as provided in 2(c)(ii) below. If an Auction is not held because an
unforeseen event or unforeseen events cause a day that otherwise would have
been an Auction Date not to be a Business Day, then the length of the then
current Dividend Period shall be extended by seven days (or a multiple thereof
if necessary because of such unforeseen event or events), the Applicable Rate
for such period shall be the Applicable Rate for the Dividend Period so
extended and the Dividend Payment Date for such Dividend Period shall be the
first Business Day immediately succeeding the end of such period.

          (ii) Subject to the cure provisions in paragraph 2(c)(iii) below, a
Default Period with respect to the Outstanding Series B Preferred Shares will
commence if the Trust fails to deposit irrevocably in trust in same-day funds,
with the Paying Agent by 12:00 noon, New York City time on the Business Day
immediately preceding the relevant Dividend Payment Date, the full amount of
any declared dividend on the Outstanding Series B Preferred Shares then
payable on that Dividend Payment Date (a "Dividend Default").

     Subject to the cure provisions of paragraph 2(c)(iii) below, a
Default Period with respect to a Dividend Default or a Redemption Default
shall end on the Business Day on which, by 12:00 noon, New York City time, all
unpaid dividends and any unpaid Redemption Price in respect of such Series B
Preferred Shares shall have been deposited irrevocably in trust in same-day
funds with the Paying Agent. In the case of a Default Period, the following
shall apply:

          A.    Each Dividend Period that commences during a Default Period
                will be a Standard Dividend Period.

          B.    The dividend rate for each Dividend Period that commences and
                concludes during a Default Period will be equal to the Default
                Rate.

          C.    In the event a Holder sells Series B Preferred Shares at an
                Auction that takes place on the day a Dividend Default occurs
                and the Default is not cured in accordance with paragraph
                2(c)(iii) below, such former Holder shall be entitled to
                receive the Default Rate with respect to the Series B
                Preferred Shares such Holder sold at the Auction for the
                Dividend Period with respect to which the Default occurred.

          D.    In the event a Dividend Period commences during a Default
                Period and such Dividend Period continues after such Default
                Period has ended, (a) the dividend rate for the portion of
                such Dividend Period that occurs during the Default Period
                will be the Default Rate and (b) the dividend rate for the
                portion of such Dividend Period that falls outside the Default
                Period will be (i) the Applicable Rate, in the case of the
                first Dividend Period following a Default, or (ii) the Maximum
                Rate, in the case of any other Dividend Period commencing
                during a Default Period.

          E.    The commencement of a Default Period will not by itself cause
                the commencement of a new Dividend Period.

          F.    No Auction will be held during an applicable Default Period;
                provided, however, that if a Default Period shall end prior to
                the end of a Standard Dividend Period that had commenced
                during such Default Period, an Auction will be held on the
                last day of such Standard Dividend Period.

          (iii) No Default Period with respect to a Dividend Default or
Redemption Default shall be deemed to have commenced, unless such default is
due solely to the willful failure of the Trust, if the amount of any dividend
or any Redemption Price due is deposited irrevocably in trust in same-day
funds with the Paying Agent by 12:00 noon, New York City time within three
Business Days after the applicable Dividend Payment Date or Redemption Date,
together with an amount in respect of such Series B Preferred Shares equal to
the Default Rate applied to the amount of such non-payment based on the actual
number of days that would otherwise have comprised the Default Period divided
by 360. The "Default Rate" shall be equal to the Reference Rate multiplied by
three (3).

          (iv) The amount of dividends per Series B Preferred Share payable
(if declared) on each Dividend Payment Date of each Dividend Period of less
than one year (or in respect of dividends on another date in connection with a
redemption during such Dividend Period) shall be computed by multiplying the
relevant Applicable Rate, Default Rate or Maximum Rate, as the case may be,
for such Dividend Period (or a portion thereof) by a fraction, the numerator
of which will be the number of days in such Dividend Period (or portion
thereof) that such Series B Preferred Share was Outstanding and for which the
Applicable Rate, Maximum Rate or the Default Rate was applicable (but in no
event shall the numerator exceed 360) and the denominator of which will be
360, multiplying the amount so obtained by $25,000, and rounding the amount so
obtained to the nearest cent. During any Dividend Period of one year or more,
the amount of dividends per Series B Preferred Share payable on any Dividend
Payment Date (or in respect of dividends on another date in connection with a
redemption during such Dividend Period) will be computed as described in the
preceding sentence except that the numerator, with respect to any full twelve
month period, will be 360.

      (d) Any dividend payment made on Series B Preferred Shares shall first
be credited against the earliest accumulated but unpaid dividends due with
respect to such shares.

      (e) For so long as the Series B Preferred Shares are Outstanding, except
as otherwise contemplated by Part I of this Statement of Preferences, the
Trust shall not pay any dividend or other distribution (other than a dividend
or distribution paid in shares of, or options, warrants or rights to subscribe
for or purchase, Common Shares or other shares, if any, ranking junior to the
Series B Preferred Shares as to dividends and upon liquidation) with respect
to Common Shares or any other capital shares of the Trust ranking junior to
the Series B Preferred Shares as to dividends or upon liquidation, or call for
redemption, redeem, purchase or otherwise acquire for consideration any Common
Shares or other capital shares ranking junior to the Series B Preferred Shares
(except by conversion into or exchange for shares of the Trust ranking junior
to the Series B Preferred Shares as to dividends and upon liquidation),
unless, in each case, (i) immediately after such transaction, the Trust would
have Eligible Assets with an aggregate Discounted Value at least equal to the
Basic Maintenance Amount and Asset Coverage would be achieved, (ii) all
cumulative and unpaid dividends due on or prior to the date of the transaction
have been declared and paid in full with respect to the Trust's Preferred
Shares, including the Series B Preferred Shares (or shall have been declared
and sufficient funds for the payment thereof deposited with the applicable
Paying Agent) and (iii) the Trust has redeemed the full number of Preferred
Shares to be redeemed mandatorily pursuant to any provision for mandatory
redemption contained herein, including, without limitation, any such provision
contained in paragraph 3(a)(ii).

      (f) No full dividends shall be declared or paid on the Series B
Preferred Shares for any Dividend Period or part thereof, unless full
cumulative dividends due through the most recent Dividend Payment Dates
therefor for all Outstanding series of Preferred Shares of the Trust ranking
on a parity with the Series B Preferred Shares as to the payment of dividends
have been or contemporaneously are declared and paid through the most recent
Dividend Payment Dates therefor. If full cumulative dividends due have not
been paid on all Outstanding Preferred Shares, any dividends being paid on
such Preferred Shares (including the Series B Preferred Shares) will be paid
as nearly pro rata as possible in proportion to the respective amounts of
dividends accumulated but unpaid on each such series of Preferred Shares then
Outstanding on the relevant Dividend Payment Date.

3.    Redemption.

      (i) Optional Redemption. After the initial Dividend Period, subject to
any Non-Call Period and the provisions of this paragraph 3, and to the extent
permitted under the 1940 Act and Delaware law, the Trust may, at its option,
redeem in whole or in part out of funds legally available therefor, Series B
Preferred Shares by delivering a notice of redemption not less than 7 calendar
days and not more than 40 calendar days prior to the Redemption Date at the
applicable Redemption Price. Notwithstanding the foregoing, the Trust shall
not give a notice of any redemption pursuant to this paragraph 3(a)(i) unless,
on the date on which the Trust gives such notice (x) the Trust reasonably
believes that, assuming the fulfillment of any conditions precedent specified
in such notice, it will be able to deposit with the Paying Agent when due
Deposit Assets with maturity or tender dates not later than the day preceding
the applicable Redemption Date and having a value not less than the Redemption
Price due to Holders of the Series B Preferred Shares to be redeemed on the
Redemption Date and (y) the Trust would have Eligible Assets with an aggregate
Discounted Value at least equal to the Basic Maintenance Amount and Asset
Coverage immediately subsequent to such redemption, if such redemption were to
occur on such date, it being understood that the provisions of paragraph 3(d)
shall be applicable in such circumstances in the event the Trust makes the
deposit and takes the other action required thereby.

      (ii) Mandatory Redemption. So long as Series B Preferred Shares are
Outstanding, if the Trust fails (A) as of any Valuation Date to meet the Basic
Maintenance Test and such failure is not cured by the Basic Maintenance Amount
Cure Date or (B) as of any Quarterly Valuation Date to meet Asset Coverage and
such failure is not cured by the Series B Asset Coverage Cure Date or (C) as
of any valuation or measuring date applicable to any other series of Preferred
Shares to meet any applicable maintenance amount test and such failure is not
cured by the relevant cure date (any such cure date, together with any Basic
Maintenance Amount Cure Date or Series B Asset Coverage Cure Date, a "Cure
Date"), Preferred Shares, which at the Trust's determination may include
Series B Preferred Shares, will be subject to mandatory redemption out of
funds legally available therefor. The series and number of Preferred Shares to
be redeemed in such circumstances will be determined by the Trust, subject to
the limitations of the 1940 Act and Delaware law, from among all series of
Preferred Shares then Outstanding and may include any proportion of Series B
Preferred Shares (or any other series of Preferred Shares). The amount of
Preferred Shares to be mandatorily redeemed under such circumstances shall, in
the aggregate, equal the lesser of (1) the minimum amount of Preferred Shares
(including the Series B Preferred Shares if so determined by the Trust) the
redemption of which, if deemed to have occurred immediately prior to the
opening of business on the relevant Cure Date, would result in the Trust
meeting, as the case may be, the Basic Maintenance Test, Asset Coverage and
any other then applicable maintenance amount test, in each case as of the
relevant Cure Date (provided that, if there is no such minimum amount of
Preferred Shares the redemption of which would have such result, all Series B
Preferred Shares then Outstanding will be redeemed), and (2) the maximum
amount of Preferred Shares that can be redeemed out of funds expected to be
available therefor on the Mandatory Redemption Date at the applicable
Redemption Price; provided, that in the event that Preferred Shares are
redeemed mandatorily pursuant to this paragraph 3, the Trust may, but is not
required to, redeem a sufficient amount of additional Series B Preferred
Shares, which when aggregated with other Preferred Shares redeemed by the
Trust, permits the Trust to have (x) Eligible Assets with Adjusted Value with
respect to the Preferred Shares remaining Outstanding of as great as 110% of
the Basic Maintenance Amount and (y) Asset Coverage with respect to the
Preferred Shares remaining Outstanding of as much as 220%.

      (iii) Subject to the Statement of Preferences establishing each series
of Preferred Shares and the 1940 Act, the Trust may determine the shares and
series of Preferred Shares to be redeemed in accordance with the paragraph
3(a)(ii) above, subject to the further provisions of this paragraph 3(a)(iii).
The Trust shall effect any mandatory redemption of Series B Preferred Shares
relating to: (A) a failure to meet the Basic Maintenance Test or a failure to
meet Asset Coverage, no later than 8 days following such Cure Date, provided,
that if such 8th day is not a Business Day, such redemption will occur not
later than the close of business on the next Business Day or (B) a failure to
meet any other then applicable maintenance amount test in accordance with the
requirements of such test (in each case the date specified for such redemption
being, the "Mandatory Redemption Date"), except that if the Trust does not
have funds legally available for the redemption of, or is not otherwise
legally permitted to redeem, the amount of Preferred Shares which would be
mandatorily redeemed by the Trust under subparagraph 3(a)(ii) if sufficient
funds were available, or the Trust otherwise is unable to effect such
redemption on or prior to the applicable Mandatory Redemption Date, the Trust
shall redeem on such redemption date the number of Series B Preferred Shares
and other Preferred Shares with respect to which it has given notice of
redemption as it shall have legally available funds, or is otherwise able, to
redeem ratably on the basis of Redemption Price from each holder whose shares
are to be redeemed, and the remainder of the Series B Preferred Shares and
other Preferred Shares which it was unable to redeem on the earliest
practicable date on which the Trust will have such funds available upon
notice, in the case of Series B Preferred Shares, pursuant to paragraph 3(b)
to Holders of the Series B Preferred Shares to be redeemed. The Trust will
deposit with the Paying Agent funds sufficient to redeem the specified number
of Series B Preferred Shares subject to a redemption under this paragraph 3(a)
by 12:00 noon, New York City time, of the Business Day immediately preceding
the redemption date. If fewer than all of the Outstanding Series B Preferred
Shares are to be redeemed, the number of Series B Preferred Shares to be
redeemed shall be redeemed pro rata from the Holders of such shares in
proportion to the number of Series B Preferred Shares held by such Holders, by
lot or by such other method as the Trust shall deem fair and equitable,
subject, however, to the terms of any applicable Specific Redemption
Provisions.

      (b) In the event of a redemption of Series B Preferred Shares pursuant
to paragraph 3(a) above, the Trust will have filed or will file a notice of
its intention to redeem with the Commission, in either case so as to provide
at least the minimum notice required under Rule 23c-2 under the 1940 Act or
any successor provision. In addition, the Trust shall deliver a notice of
redemption to the Auction Agent (the "Notice of Redemption") containing the
information set forth below (i) in the case of an optional redemption pursuant
to paragraph 3(a)(i) above, one Business Day prior to the giving of notice to
the Holders and (ii) in the case of a mandatory redemption pursuant to
paragraph 3(a)(ii) above, on or prior to the 7th day preceding the Mandatory
Redemption Date. The Auction Agent will use its reasonable efforts to provide
telephonic, electronic or written notice to each Holder of any Series B
Preferred Shares called for redemption not later than the close of business on
the Business Day immediately following the day on which the Trust determines
the shares to be redeemed (or, during a Default Period with respect to such
shares, not later than the close of business on the Business Day immediately
following the day on which the Auction Agent receives Notice of Redemption
from the Trust). The Auction Agent shall confirm a telephonic notice in
writing not later than the close of business on the third Business Day
preceding the date fixed for redemption by providing the Notice of Redemption
to each Holder of shares called for redemption, the Paying Agent (if different
from the Auction Agent) and the Securities Depository. The Notice of
Redemption will be addressed to the Holders of Series B Preferred Shares at
their addresses appearing on the share records of the Trust. Such Notice of
Redemption will set forth (s) the date fixed for redemption, (t) the number or
percentage of Series B Preferred Shares to be redeemed, (u) the CUSIP
number(s) of such shares, (v) the Redemption Price (specifying the amount of
accumulated dividends and any applicable redemption premium to be included
therein), (w) the place or places where such shares are to be redeemed, (x)
that dividends on the shares to be redeemed will cease to accumulate on such
date fixed for redemption, (y) the provision of this Statement of Preferences
under which redemption shall be made, and (z) in the case of a redemption
pursuant to paragraph 3(a)(i), any conditions precedent to such redemption. If
fewer than all the Outstanding Series B Preferred Shares held by any Holder
are to be redeemed, the Notice of Redemption mailed to such Holder shall also
specify the number or percentage of Series B Preferred Shares to be redeemed
from such Holder. No defect in the Notice of Redemption or in the transmittal
or mailing thereof will affect the validity of the redemption proceedings,
except as required by applicable law.

      (c) Notwithstanding the provisions of paragraph 3(a), the Trust shall
not redeem Preferred Shares unless all accumulated and unpaid dividends on all
Outstanding Series B Preferred Shares and other Preferred Shares ranking on a
parity with the Series B Preferred Shares with respect to dividends for all
applicable past Dividend Periods (whether or not earned or declared by the
Trust) have been or are contemporaneously paid or declared and Deposit Assets
for the payment of such dividends have been deposited with the Paying Agent;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of outstanding Preferred Shares pursuant to the successful
completion of an otherwise lawful purchase or exchange offer made on the same
terms to holders of all Outstanding Series B Preferred Shares.

      (d) Upon the deposit of funds sufficient to redeem Series B Preferred
Shares with the Paying Agent and the giving of the Notice of Redemption to the
Auction Agent under paragraph 3(b) above, such shares shall no longer be
deemed to be Outstanding for any purpose (including, without limitation, for
purposes of calculating whether the Trust has met the Basic Maintenance Test
or Asset Coverage), and all rights of the Holders of the Series B Preferred
Shares so called for redemption shall cease and terminate, except the right of
such Holder to receive the applicable Redemption Price, but without any
interest or other additional amount. Such Redemption Price shall be paid by
the Paying Agent to the nominee of the Securities Depository. The Trust shall
be entitled to receive from the Paying Agent, promptly after the date fixed
for redemption, any cash deposited with the Paying Agent in excess of (i) the
aggregate Redemption Price of the Series B Preferred Shares called for
redemption on such date and (ii) such other amounts, if any, to which Holders
of the Series B Preferred Shares called for redemption may be entitled. Any
funds so deposited that are unclaimed at the end of two years from such
redemption date shall, to the extent permitted by law, be paid to the Trust,
after which time the Holders of Series B Preferred Shares so called for
redemption may look only to the Trust for payment of the Redemption Price and
all other amounts, if any, to which they may be entitled; provided, however,
that the Paying Agent shall notify all Holders whose funds are unclaimed by
placing a notice in The Wall Street Journal concerning the availability of
such funds for three consecutive weeks. The Trust shall be entitled to
receive, from time to time after the date fixed for redemption, any interest
earned on the funds so deposited.

      (e) A Default Period with respect to the Outstanding Series B Preferred
Shares will commence if the Trust fails to deposit irrevocably in trust in
same-day funds, with the Paying Agent by 12:00 noon, New York City time on the
Business Day preceding the redemption date specified in the Notice of
Redemption (the "Redemption Date") or on such later date as the Paying Agent
shall authorize, the full amount of any Redemption Price payable on such
Redemption Date (a "Redemption Default"); provided, that no Redemption Default
shall be deemed to have occurred in respect of Series B Preferred Shares when
the related redemption notice provides that the redemption of such Series B
Preferred Shares is subject to one or more conditions precedent and each such
condition precedent shall not have been satisfied at the time or times or in
the manner specified in such Notice of Redemption. To the extent a Redemption
Default occurs with respect to Series B Preferred Shares or that any
redemption for which Notice of Redemption has been given is otherwise
prohibited, such redemption shall be made as soon as practicable to the extent
such funds become legally available or such redemption is no longer otherwise
prohibited. Notwithstanding the fact that a Redemption Default has occurred
and is continuing or that the Trust has otherwise failed to redeem Series B
Preferred Shares for which a Notice of Redemption has been given, dividends
may be declared and if so declared will be paid on Series B Preferred Shares,
which shall include those Series B Preferred Shares for which Notice of
Redemption has been given but for which deposit of funds has not been made.

      (f) All moneys paid to the Paying Agent for payment of the Redemption
Price of Series B Preferred Shares called for redemption shall be held in
trust by the Paying Agent for the benefit of Holders of the Series B Preferred
Shares so to be redeemed. A Redemption Default will occur on account of the
Trust's failure to timely deposit any required Redemption Price with the
Paying Agent and any resulting Default Period will end in accordance with
paragraph 2(c)(ii).

      (g) So long as the Series B Preferred Shares are held of record by the
nominee of the Securities Depository, the Redemption Price for such shares
will be paid on the date fixed for redemption to the nominee of the Securities
Depository for distribution to agent members for distribution to the Persons
for whom they are acting as agent.

      (h) Except for the provisions described above, nothing contained in this
Statement of Preferences limits any right of the Trust to purchase or
otherwise acquire Series B Preferred Shares outside of an Auction at any
price, whether higher or lower than the price that would be paid in connection
with an optional or mandatory redemption, so long as, at the time of any such
purchase, there is no arrearage in the payment of dividends on, or the
Redemption Price with respect to, any Series B Preferred Shares for which
Notice of Redemption has been given, and the Trust meets Asset Coverage and
the Basic Maintenance Test after giving effect to such purchase or acquisition
on the date thereof. Any Series B Preferred Shares which are purchased,
redeemed or otherwise acquired by the Trust shall have no voting rights. If
fewer than all the Outstanding Series B Preferred Shares are redeemed or
otherwise acquired by the Trust, the Trust shall give notice of such
transaction to the Auction Agent.

      (i) In the case of any redemption pursuant to this paragraph 3, only
whole Series B Preferred Shares shall be redeemed, and in the event that any
provision of the Governing Documents would require redemption of a fractional
share, the Auction Agent shall be authorized to round up so that only whole
shares are redeemed.

      (j) Notwithstanding anything herein to the contrary, the Board of
Trustees may authorize, create or issue other series of Preferred Shares
ranking on a parity with the Series B Preferred Shares with respect to the
payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Trust, to the extent permitted
by the 1940 Act, if upon issuance of any such series, either (i) the net
proceeds from the sale of such shares (or such portion thereof needed to
redeem or repurchase the Outstanding Series B Preferred Shares) are deposited
with the Auction Agent, Notice of Redemption as contemplated by paragraph 3(b)
has been delivered prior thereto or is sent promptly thereafter, and such
proceeds are used to redeem all Outstanding Series B Preferred Shares or (ii)
the Trust would meet Asset Coverage, the Basic Maintenance Test and the
requirements of paragraph 9 immediately following such issuance and any
redemption of Preferred Shares (which may include a portion of the Series B
Preferred Shares) to be effected with the proceeds of such issuance.

4.    Designation of Dividend Period.

      (a) The initial Dividend Period for the Series B Preferred Shares shall
be as determined in the manner under "Designation" above. The Trust shall
designate the duration of subsequent Dividend Periods of the Series B
Preferred Shares; provided, however, that no such designation shall be
necessary for a Standard Dividend Period and, provided further, that any
designation of a Special Dividend Period for the Series B Preferred shall be
effective only if (i) notice thereof shall have been given as provided herein,
(ii) any failure to pay in a timely manner to the Auction Agent the full
amount of any dividend on, or the Redemption Price of, the Series B Preferred
Shares shall have been cured as provided for herein, (iii) Sufficient Clearing
Orders shall have existed in an Auction held for the Series B Preferred Shares
on the Auction Date immediately preceding the first day of such proposed
Special Dividend Period, (iv) if the Trust shall have mailed a Notice of
Redemption with respect to any Series B Preferred Shares, the Redemption Price
with respect to such shares shall have been deposited with the Paying Agent,
and (v) the Trust has confirmed that as of the Auction Date next preceding the
first day of such Special Dividend Period, it has Eligible Assets with an
aggregate Discounted Value at least equal to the Basic Maintenance Amount, and
the Trust has consulted with the Broker-Dealers and has provided notice of
such designation and a Basic Maintenance Report for the most recent Valuation
Date to each Rating Agency.

      (b) If the Trust proposes to designate any Special Dividend Period, not
fewer than seven Business Days (or two Business Days in the event the duration
of the Dividend Period prior to such Special Dividend Period is fewer than ten
Business Days) nor more than 30 Business Days prior to the first day of such
Special Dividend Period, notice shall be (i) made by press release and (ii)
communicated by the Trust by telephonic or other means to the Auction Agent
and confirmed in writing promptly thereafter. Each such notice shall state (x)
that the Trust proposes to exercise its option to designate a succeeding
Special Dividend Period, specifying the first and last days thereof and (y)
that the Trust will by 3:00 P.M., New York City time, on the second Business
Day next preceding the first day of such Special Dividend Period, notify the
Auction Agent, who will promptly notify the Broker-Dealers, of either (A) its
determination, subject to certain conditions, to proceed with such Special
Dividend Period, subject to the terms of any Specific Redemption Provisions,
or (B) its determination not to proceed with such Special Dividend Period, in
which latter event the succeeding Dividend Period shall be a Standard Dividend
Period. No later than 3:00 P.M., New York City time, on the second Business
Day next preceding the first day of any proposed Special Dividend Period, the
Trust shall deliver to the Auction Agent, who will promptly deliver to the
Broker-Dealers and Existing Holders, either:

                   (1) a notice stating (a) that the Trust has determined to
designate the next succeeding Dividend Period as a Special Dividend Period,
(b) the first and last days thereof and (c) the terms of any Specific
Redemption Provisions; or

                   (2) a notice stating that the Trust has determined not to
exercise its option to designate a Special Dividend Period.

      If the Trust fails to deliver either such notice with respect to the
designation of any proposed Special Dividend Period to the Auction Agent or is
unable to make the confirmation provided in paragraph 4(a)(v) by 3:00 P.M.,
New York City time, on the second Business Day next preceding the first day of
such proposed Special Dividend Period, the Trust shall be deemed to have
delivered a notice to the Auction Agent with respect to such Dividend Period
to the effect set forth in clause (2) above, thereby resulting in a Standard
Dividend Period.

5.      Restrictions on Transfer.

      Series B Preferred Shares may be transferred only (a) pursuant to an
Order placed in an Auction, (b) to or through a Broker-Dealer or (c) to the
Trust or any Affiliate. Notwithstanding the foregoing, a transfer other than
pursuant to an Auction will not be effective unless the selling Existing
Holder or the Agent Member of such Existing Holder (in the case of an Existing
Holder whose shares are listed in its own name on the books of the Auction
Agent), or the Broker-Dealer or Agent Member of such Broker-Dealer (in the
case of a transfer between persons holding any Series B Preferred Shares
through different Broker-Dealers), advises the Auction Agent of such transfer.
Any certificates representing Series B Preferred Shares issued to the
Securities Depository will bear legends with respect to the restrictions
described above and stop-transfer instructions will be issued to the Transfer
Agent and/or Registrar.

6.   Voting Rights.

      (a) General.

      Except as otherwise provided in the Governing Documents or a resolution
of the Board of Trustees, or as required by applicable law, Holders of Series
B Preferred Shares shall have no power to vote on any matter except matters
submitted to a vote of the Common Shares. In any matter submitted to a vote of
the holders of the Common Shares, each Holder of Series B Preferred Shares
shall be entitled to one vote for each Series B Preferred Share held and the
Holders of Outstanding Preferred Shares and Common Shares shall vote together
as a single class; provided, however, that at any meeting of the shareholders
of the Trust held for the election of trustees, the Holders of Outstanding
Preferred Shares, including the Series B Preferred Shares, shall be entitled,
as a class, to the exclusion of the holders of all other securities and
classes of capital shares of the Trust, to elect a number of the Trust's
trustees, such that following the election of trustees at the meeting of the
shareholders, the Trust's Board of Trustees shall contain two trustees elected
by the Holders of the Outstanding Preferred Shares as a class. Subject to
paragraph 6(b), the holders of outstanding capital shares of the Trust,
including the Holders of Outstanding Preferred Shares, including the Series B
Preferred Shares, voting as a single class, shall elect the balance of the
trustees.

      (b) Right to Elect Majority of Board of Trustees.

      During any period in which any one or more of the conditions described
below shall exist (such period being referred to herein as a "Voting Period"),
the number and/or composition of trustees constituting the Board of Trustees
shall be adjusted as necessary to permit the Holders of the Outstanding
Preferred Shares, including the Series B Preferred Shares, voting separately
as one class (to the exclusion of the holders of all other securities and
classes of capital shares of the Trust) to elect the number of trustees that,
when added to the two trustees elected exclusively by the Holders of Preferred
Shares pursuant to paragraph 6(a) above, would constitute a simple majority of
the Board of Trustees as so adjusted. The Trust and the Board of Trustees
shall take all necessary actions, including effecting the removal of trustees
or the amendment of the Trust's Declaration, to effect an adjustment of the
number and/or composition of trustees as described in the preceding sentence.
A Voting Period shall commence:

          (i) if at any time accumulated dividends (whether or not earned or
declared, and whether or not funds are then legally available in an amount
sufficient therefor) on the Outstanding Series B Preferred Shares equal to at
least two full years' dividends shall have become due and unpaid and
sufficient cash or specified securities shall not have been deposited with the
Paying Agent for the payment in full of such accumulated dividends; or

          (ii) if at any time Holders of any other Preferred Shares are
entitled to elect a majority of the trustees of the Trust under the 1940 Act
or the Statement of Preferences creating such shares.

          Upon the termination of a Voting Period, the voting rights described
in this paragraph 6(b) shall cease, subject always, however, to the reverting
of such voting rights in the holders of Preferred Shares upon the further
occurrence of any of the events described in this paragraph 6(b).

      (c) Right to Vote with Respect to Certain Other Matters.

      Subject to paragraph 1 of Part III of this Statement of Preferences, so
long as the Series B Preferred Shares are Outstanding, the Trust shall not,
without the affirmative vote of the Holders of a majority (as defined in the
1940 Act) of the Preferred Shares Outstanding at the time and present and
voting on such matter, voting separately as one class, amend, alter or repeal
the provisions of the Governing Documents so as to in the aggregate adversely
affect the rights and preferences set forth in any Statement of Preferences,
including the Series B Preferred Shares. To the extent permitted under the
1940 Act, in the event more than one series of Preferred Shares are
Outstanding, the Trust shall not effect any of the actions set forth in the
preceding sentence which in the aggregate adversely affects the rights and
preferences set forth in the Statement of Preferences for a series of
Preferred Shares differently than such rights and preferences for any other
series of Preferred Shares without the affirmative vote of the Holders of at
least a majority of the Preferred Shares Outstanding and present and voting on
such matter of each series adversely affected (each such adversely affected
series voting separately as a class to the extent its rights are affected
differently). The Holders of the Series B Preferred Shares shall not be
entitled to vote on any matter that affects the rights or interests of only
one or more other series of Preferred Shares. The Trust shall notify each
Rating Agency ten Business Days prior to any such vote described above. Unless
a higher percentage is required under the Governing Documents or applicable
provisions of the Delaware Statutory Trust Act or the 1940 Act, the
affirmative vote of the Holders of a majority of the Outstanding Preferred
Shares, including the Series B Preferred Shares, voting together as a single
class, will be required to approve any plan of reorganization adversely
affecting the Preferred Shares or any action requiring a vote of security
holders under Section 13(a) of the 1940 Act. For purposes of this paragraph
6(c), the phrase "vote of the Holders of a majority of the Outstanding
Preferred Shares" (or any like phrase) shall mean, in accordance with Section
2(a)(42) of the 1940 Act, the vote, at the annual or a special meeting of the
shareholders of the Trust duly called (i) of 67 percent or more of the
Preferred Shares present at such meeting, if the Holders of more than 50
percent of the Outstanding Preferred Shares are present or represented by
proxy; or (ii) of more than 50 percent of the Outstanding Preferred Shares,
whichever is less. The class vote of Holders of Preferred Shares described
above will in each case be in addition to a separate vote of the requisite
percentage of Common Shares and Preferred Shares, including the Series B
Preferred Shares, voting together as a single class, necessary to authorize
the action in question. An increase in the number of authorized Preferred
Shares pursuant to the Governing Documents or the issuance of additional
shares of any series of Preferred Shares (including the Series B Preferred
Shares) pursuant to the Governing Documents shall not in and of itself be
considered to adversely affect the rights and preferences of the Holders of
Preferred Shares.

      (d)  Voting Procedures.

          (i) As soon as practicable after the accrual of any right of the
Holders of Preferred Shares, including the Series B Preferred Shares, to elect
additional trustees as described in paragraph 6(b), the Trust shall call a
special meeting of such Holders and instruct the Auction Agent to mail a
notice of such special meeting to the Holders of Series B Preferred Shares,
such meeting to be held not less than 10 nor more than 20 days after the date
of mailing of such notice. If the Trust fails to send such notice to the
Auction Agent or if the Trust does not call such a special meeting, it may be
called by any such Holder on like notice. The record date for determining the
Holders entitled to notice of and to vote at such special meeting shall be the
close of business on the day on which such notice is mailed or such other day
as the Board of Trustees shall determine. At any such special meeting and at
each meeting held during a Voting Period, such Holders of Preferred Shares,
voting together as a class (to the exclusion of the holders of all other
securities and classes of capital shares of the Trust), shall be entitled to
elect the number of trustees prescribed in paragraph 6(b) on a
one-vote-per-share basis. At any such meeting, or adjournment thereof in the
absence of a quorum, a majority of the Holders of Preferred Shares, including
the Series B Preferred Shares, present in person or by proxy shall have the
power to adjourn the meeting without notice, other than an announcement at the
meeting, until a date not more than 120 days after the original record date.

          (ii) For purposes of determining any rights of the Holders of the
Preferred Shares, including the Series B Preferred Shares, to vote on any
matter, whether such right is created by this Statement of Preferences, by the
other provisions of the Governing Documents, by statute or otherwise, a share
of Series B Preferred Shares which is not Outstanding shall not be counted.

          (iii) The terms of office of all persons who are trustees of the
Trust at the time of a special meeting of Holders of Preferred Shares to elect
trustees and who remain trustees following such meeting shall continue,
notwithstanding the election at such meeting by such Holders of the number of
trustees that they are entitled to elect, and the persons so elected by such
Holders, together with the two incumbent trustees elected by the Holders of
Preferred Shares and the remaining incumbent trustees elected by the holders
of the Common Shares and Preferred Shares, shall constitute the duly elected
trustees of the Trust.

          (iv) Upon the expiration of a Voting Period, the terms of office of
the additional trustees elected by the Holders of Preferred Shares pursuant to
paragraph 6(b) above shall expire, and the remaining trustees shall constitute
the trustees of the Trust and the voting rights of such Holders of Preferred
Shares, including Series B Preferred Shares, to elect additional trustees
pursuant to paragraph 6(b) above shall cease, subject to the provisions of the
last sentence of paragraph 6(b). Upon the expiration of the terms of the
trustees elected by the holders of Preferred Shares pursuant to paragraph 6(b)
above, the number of trustees shall be automatically reduced to the number of
trustees on the Board immediately preceding such Voting Period.

      (e)  Exclusive Remedy.

           Unless otherwise required by law, the Holders of Series B
Preferred Shares shall not have any rights or preferences other than those
specifically set forth herein.  The Holders of Series B Preferred Shares shall
have no preemptive rights or rights to cumulative voting.  In the event that the
Trust fails to pay any dividends on the Series B Preferred Shares, the exclusive
remedy of the Holders shall be the right to vote for trustees pursuant to the
provisions of this paragraph 6.

      (f)  Notification to Rating Agency.

           In the event a vote of Holders of Preferred Shares is required
pursuant to the provisions of Section 13(a) of the 1940 Act, as long as the
Series B Preferred Shares are rated by a Rating Agency at the request of the
Trust, the Trust shall, not later than ten Business Days prior to the date on
which such vote is to be taken, notify each Rating Agency that such vote is to
be taken and the nature of the action with respect to which such vote is to be
taken and, not later than ten Business Days after the date on which such vote
is taken, notify each Rating Agency of the result of such vote.

7.    Liquidation Rights.

      (a) In the event of any liquidation, dissolution or winding up of the
affairs of the Trust, whether voluntary or involuntary, the Holders of Series
B Preferred Shares shall be entitled to receive out of the assets of the Trust
available for distribution to shareholders, after claims of creditors but
before any distribution or payment shall be made in respect of the Common
Shares or any other shares of the Trust ranking junior to the Series B
Preferred Shares as to liquidation payments, a liquidation distribution in the
amount of $25,000.00 per share (the "Liquidation Preference"), plus an amount
equal to all unpaid dividends accumulated to and including the date fixed for
such distribution or payment (whether or not earned or declared by the Trust,
but excluding interest thereon), and such Holders shall be entitled to no
further participation in any distribution or payment in connection with any
such liquidation, dissolution or winding up.

      (b) If, upon any liquidation, dissolution or winding up of the affairs
of the Trust, whether voluntary or involuntary, the assets of the Trust
available for distribution among the Holders of all Outstanding Series B
Preferred Shares, and any other Outstanding class or series of Preferred
Shares ranking on a parity with the Series B Preferred Shares as to payment
upon liquidation, shall be insufficient to permit the payment in full to such
Holders of Series B Preferred Shares of the Liquidation Preference plus
accumulated and unpaid dividends and the amounts due upon liquidation with
respect to such other Preferred Shares, then such available assets shall be
distributed among the Holders of Series B Preferred Shares and such other
Preferred Shares ratably in proportion to the respective preferential
liquidation amounts to which they are entitled. Unless and until the
Liquidation Preference plus accumulated and unpaid dividends has been paid in
full to the Holders of Series B Preferred Shares, no dividends or
distributions will be made to holders of Common Shares or any other shares of
the Trust ranking junior to the Series B Preferred Shares as to liquidation.

8.    Auction Agent.

      For so long as the Series B Preferred Shares are Outstanding, the
Auction Agent, duly appointed by the Trust to so act, shall be in each case a
commercial bank, trust company or other financial institution independent of
the Trust and its Affiliates (which, however, may engage or have engaged in
business transactions with the Trust or its Affiliates) and at no time shall
the Trust or any of its Affiliates act as the Auction Agent in connection with
the Auction Procedures. If the Auction Agent resigns or for any reason its
appointment is terminated during any period that any Series B Preferred Shares
are Outstanding, the Trust shall use its best efforts promptly thereafter to
appoint another qualified commercial bank, trust company or financial
institution to act as the Auction Agent.

9.    Coverage Tests.

      (a)   Determination of Compliance.

      For so long as the Series B Preferred Shares are Outstanding, the Trust
shall make the following determinations:

            (i)   Asset Coverage as follows:

                  (A) As of each Quarterly Valuation Date, the Trust shall
determine whether Asset Coverage is met as of that date. In the event the
Trust determines that it has failed to meet Asset Coverage as of such
Quarterly Valuation date, the Trust will notify each Rating Agency of such
failure in writing (which notification may be by facsimile or other electronic
means) on or before 5:00 P.M., New York City time, on the fifth Business Day
following the date of such determination.

                  (B) The Trust shall deliver to each Rating Agency an "Asset
Coverage Certificate" which sets forth the determination of paragraph
9(a)(i)(A) above (1) as of the Date of Original Issue and, thereafter, (2) as
of (x) each Quarterly Valuation Date and (y) a Business Day on or before any
Series B Asset Coverage Cure Date following a failure to meet Asset Coverage.
Such Asset Coverage Certificate shall be delivered in the case of clause (1)
on the Date of Original Issue and in the case of clause (2) on or before the
seventh Business Day following such Quarterly Valuation Date or the relevant
Cure Date, as the case may be.

          (ii)  Basic Maintenance Amount as follows:

                  (A) For so long as the Series B Preferred Shares are rated
by Moody's and/or S&P at the Trust's request, the Trust shall maintain, on
each Valuation Date, Eligible Assets having an Adjusted Value at least equal
to the Basic Maintenance Amount, as of such Valuation Date. Upon any failure
to maintain Eligible Assets having an Adjusted Value at least equal to the
Basic Maintenance Amount, the Trust shall use all commercially reasonable
efforts to re-attain Eligible Assets having an Adjusted Value at least equal
to the Basic Maintenance Amount on or prior to the Basic Maintenance Amount
Cure Date, by altering the composition of its portfolio or otherwise.

                  (B) On or before 5:00 P.M., New York City time, on the fifth
Business Day after a Valuation Date on which the Trust fails to satisfy the
Basic Maintenance Amount, and on the fifth Business Day after the Basic
Maintenance Amount Cure Date with respect to such Valuation Date, the Trust
shall complete and deliver to each Rating Agency a Basic Maintenance Report as
of the date of such failure or such Basic Maintenance Amount Cure Date, as the
case may be, which will be deemed to have been delivered to such Rating Agency
if such Rating Agency receives a copy or facsimile or other electronic
transcription or transmission thereof and on the same day the Trust mails or
sends to such Rating Agency for delivery on the next Business Day the full
Basic Maintenance Report. The Trust shall also deliver a Basic Maintenance
Report to each Rating Agency as of each Monthly Valuation Date, in each case
on or before the fifth Business Day after such day. A failure by the Trust to
deliver a Basic Maintenance Report pursuant to the preceding sentence shall be
deemed to be delivery of a Basic Maintenance Report indicating the Discounted
Value for all assets of the Trust is less than the Basic Maintenance Amount,
as of the relevant Valuation Date.

          (C) Within ten Business Days after the date of delivery of a Basic
Maintenance Report in accordance with paragraph 9(a)(ii)(B) relating to any
Annual Valuation Date, the Trust shall cause the Independent Accountant to
send an Accountant's Confirmation to each Rating Agency with respect to such
Basic Maintenance Report.

          (D) Within ten Business Days after the date of delivery of a Basic
Maintenance Report in accordance with paragraph 9(a)(ii)(B) relating to each,
if any, Valuation Date on which the Trust failed to satisfy the Basic
Maintenance Amount and the Basic Maintenance Amount Cure Date with respect to
such failure to satisfy the Basic Maintenance Amount, the Trust shall cause
the Independent Accountant to provide to each Rating Agency an Accountant's
Confirmation as to such Basic Maintenance Report.

          (E) If any Accountant's Confirmation delivered pursuant to paragraph
(C) or (D) of this paragraph 9(a)(ii) does not agree with the Trust's
calculation of the Basic Maintenance Report for a particular Valuation Date
for which such Accountant's Confirmation was required to be delivered, or
shows that a lower aggregate Discounted Value for the aggregate Eligible
Assets in respect of any Rating Agency than was determined by the Trust, the
calculation or determination made by such Independent Accountant shall be
final and conclusive and shall be binding on the Trust, and the Trust shall
accordingly amend and deliver the Basic Maintenance Report to the relevant
Rating Agency promptly following receipt by the Trust of such Accountant's
Confirmation.

          (F) On or before 5:00 p.m., New York City time, on the fifth
Business Day after the Date of Original Issue of Series B Preferred Shares,
the Trust shall complete and deliver to each Rating Agency a Basic Maintenance
Report as of the close of business on such Date of Original Issue.

          (G) On or before 5:00 p.m., New York City time, on the fifth
Business Day after either (1) the Trust shall have redeemed Series B Preferred
Shares or (2) the ratio of the Discounted Value of Eligible Assets in respect
of any Rating Agency to the Basic Maintenance Amount is less than or equal to
110%, the Trust shall complete and deliver to each Rating Agency, a Basic
Maintenance Report as of the date of either such event.

          (H) As for any Valuation Date for which the Trust's ratio of the
Discounted Value of Eligible Assets in respect of any Rating Agency to the
Basic Maintenance Amount is less than or equal to 110%, the Trust shall
deliver, by fax or email before 5:00 p.m. New York City time on the first
Business Day following such Valuation Date, notice of such ratio to each
Rating Agency.

      (b)  Failure to Meet Asset Coverage Requirements.

            If the Trust fails to have Asset Coverage as provided in paragraph
9(a)(i)(A) or to have Eligible Assets having an Adjusted Value at least equal
to the Basic Maintenance Amount as provided in paragraph 9(a)(ii)(A) and such
failure is not cured by the applicable Cure Date, Preferred Shares, which at
the Trust's determination (to the extent permitted by the 1940 Act and
Delaware law) may include any proportion of Series B Preferred Shares, will be
subject to mandatory redemption as set forth in paragraph 3.

      (c)   Status of Series B Preferred Shares Called for Redemption.

            For purposes of determining whether the requirements of paragraphs
9(a)(i)(A) and 9(a)(ii)(A) hereof are satisfied, (i) no Series B Preferred
Share or other Preferred Share shall be deemed to be Outstanding for purposes
of any computation if, prior to or concurrently with such determination,
sufficient Deposit Assets to pay the full Redemption Price for such share
shall have been deposited in trust with the Paying Agent (or applicable
dividend-disbursing agent) and the requisite Notice of Redemption shall have
been given, and (ii) such Deposit Assets deposited with the Paying Agent (or
dividend-disbursing agent) shall not be included.

      (d)   Certain Notifications Relating to Market Value.

            In the event the Market Value of an Eligible Asset is determined
pursuant to clause (a)(iii) of the definition of Market Value set forth in
paragraph 13, the Trust shall promptly inform each Rating Agency in writing
(which notice may be by facsimile or other electronic means) of the basis upon
which the Market Value of such Eligible Asset was determined.

10.   Certain Other Restrictions.

      (a) For so long as the Series B Preferred are rated by a Rating Agency
at the Trust's request, the Trust will not, and will cause the Adviser not to,
(i) knowingly and willfully purchase or sell any asset for the specific
purpose of causing, and with the actual knowledge that the effect of such
purchase or sale will be to cause, the Trust to have Eligible Assets having an
Adjusted Value as of the date of such purchase or sale to be less than the
Basic Maintenance Amount as of such date, (ii) in the event that, as of the
immediately preceding Valuation Date, the Adjusted Value of the Trust's
Eligible Assets exceeded the Basic Maintenance Amount by 5% or less, alter the
composition of the Trust's assets in a manner reasonably expected to reduce
the Adjusted Value of the Trust's Eligible Assets, unless the Trust shall have
confirmed that, after giving effect to such alteration, the Adjusted Value of
the Trust's Eligible Assets exceeded the Basic Maintenance Amount or (iii)
declare or pay any dividend or other distribution on any Common Shares or
repurchase any Common Shares, unless the Trust shall have confirmed that,
after giving effect to such declaration, other distribution or repurchase, the
Trust continued to satisfy the requirements of paragraph 9(a)(ii).

      (b) For so long as the Series B Preferred Shares are rated by any Rating
Agency at the Trust's request, unless the Trust shall have received written
confirmation from each such Rating Agency, the Trust may engage in the lending
of its portfolio securities only in an amount of up to 20% of the Trust's
total assets, provided that the Trust receives cash collateral for such loaned
securities that is maintained at all times in an amount equal to at least 100%
of the then current market value of the loaned securities and, if invested, is
invested only in Short-Term Money Market Instruments or in money market mutual
funds meeting the requirements of Rule 2a-7 under the 1940 Act that maintain a
constant $1.00 per share net asset value and treat the loaned securities
rather than the collateral as the assets of the Trust for purposes of
determining compliance with paragraph 9.

      (c) For so long as the Series B Preferred Shares are rated by any Rating
Agency at the Trust's request, the Trust shall not consolidate with, merge
into, sell or otherwise transfer all or substantially all of its assets to
another Person or adopt a plan of liquidation of the Trust, in each case
without providing prior written notification to each Rating Agency.

11.   Limitation on Incurrence of Additional Indebtedness, Certain
      Transactions and Issuance of Additional Preferred Shares

      (a) So long as the Series B Preferred Shares are Outstanding, the Trust
may issue and sell one or more series of a class of senior securities of the
Trust representing indebtedness under Section 18 of the 1940 Act and/or
otherwise create or incur indebtedness, provided that immediately after giving
effect to the incurrence of such indebtedness and to its receipt and
application of the proceeds thereof, the Trust shall have an "asset coverage"
for all senior securities representing indebtedness, as defined in Section
18(h) of the1940 Act, of at least 300% of the amount of all indebtedness of
the Trust then Outstanding and no such additional indebtedness shall have any
preference or priority over any other indebtedness of the Trust upon the
distribution of the assets of the Trust upon the distribution of the assets of
the Trust or in respect of the payment of interest. Any possible liability
resulting from lending and/or borrowing portfolio securities, entering into
reverse repurchase agreements, entering into futures contracts and writing
options, to the extent such transactions are made in accordance with the
investment restrictions of the Trust then in effect, shall not be considered
to be indebtedness limited by this paragraph 11(a).

      (b)  So long as any Series B Preferred Shares are Outstanding and S&P is
rating such Series B Preferred Shares at the Trust's request, the Trust will
not, unless it has received written confirmation that any such transaction
would not impair the rating then assigned by S&P to such Series B Preferred
Shares, engage in any one or more of the following transactions:

            (i) purchase or sell futures contracts; write, purchase or sell
options on futures contracts; or write put options (except covered put
options) or call options (except covered call options) on securities owned by
the Trust (collectively, "S&P Hedging Transactions"), except subject to the
following limitations:

                  (A) for each net long or short position in S&P Hedging
Transactions, the Trust will maintain in a segregated account with the Trust's
custodian or with the counterparty to such S&P Hedging Transaction an amount
of cash or readily marketable securities having a value, when added to any
amounts on deposit with the Trust's futures commission merchants or brokers as
margin or premium for such position, at least equal to the market value of the
Trust's potential obligations on such position, marked-to-market on a daily
basis, in each case as and to the extent required by the applicable rules or
orders of the Commission or by interpretations of the Commission's staff;

                  (B) the Trust will not engage in any S&P Hedging Transaction
which would cause the Trust at the time of such transaction to own or have
sold the lesser of (1) outstanding futures contracts, in aggregate, based on
the Standard & Poor's 500 Index, the Dow Jones Industrial Average, the Russell
2000 Index, the Wilshire 5000 Index, the Nasdaq Composite Index and the New
York Stock Exchange Composite Index (or any component of any of the forgoing)
exceeding in number 50% of the market value of the Trust's total assets or (2)
outstanding futures contracts based on any of the aforementioned indices
exceeding in number 10% of the average number of daily traded futures
contracts based on such index in the 30 days preceding the time of effecting
such transaction as reported by The Wall Street Journal;

                  (C) the Trust will engage in closing transactions to close
out any outstanding futures contract which the Trust owns or has sold or any
outstanding option thereon owned by the Trust in the event (1) the Trust does
not have S&P Eligible Assets with an aggregate Discounted Value equal to or
greater than the Series B Preferred Basic Maintenance Amount on two
consecutive Valuation Dates and (2) the Trust is required to pay variation
margin on the second such Valuation Date;

                  (D) the Trust will engage in a closing transaction to close
out any outstanding futures contract or option thereon at least one week prior
to the delivery date under the terms of the futures contract or option thereon
unless the Trust holds the securities deliverable under such terms; and

                  (E) when the Trust writes a futures contract or option
thereon, either the amount of margin posted by the Trust (in the case of a
futures contract) or the marked-to-market value of the Trust's obligation (in
the case of a put option written by the Trust) shall be treated as a liability
of the Trust for purposes of calculating the Series B Preferred Basic
Maintenance Amount, or, in the event the Trust writes a futures contract or
option thereon which requires delivery of an underlying security and the Trust
does not wish to treat its obligations with respect thereto as a liability for
purposes of calculating the Series B Preferred Basic Maintenance Amount, it
shall hold such underlying security in its portfolio and shall not include
such security to the extent of such contract or option as an S&P Eligible
Asset.

            (ii) borrow money, except for the purpose of clearing securities
transactions if (A) the Series B Preferred Basic Maintenance Amount would
continue to be satisfied after giving effect to such borrowing and (B) such
borrowing (1) is privately arranged with a bank or other person and is not
intended to be publicly distributed or (2) is for "temporary purposes," and is
in an amount not exceeding 5 percent of the market value of the total assets
of the Trust at the time of the borrowing; for purposes of the foregoing,
"temporary purposes" means that the borrowing is to be repaid within sixty
days and is not to be extended or renewed;

            (iii) engage in any short sales of equity securities (other than
short sales against the box) unless the Trust maintains in a segregated
account with the Trust's custodian an amount of cash or other readily
marketable securities having a market value, when added to any amounts on
deposit with the Trust's broker as collateral for its obligation to replace
the securities borrowed and sold short, at least equal to the current market
value of securities sold short, marked-to-market on a daily basis;

            (iv) utilize any pricing service other than a Pricing Service or
such other pricing service then permitted by S&P; or

            (v)  enter into any reverse repurchase agreement, other than with a
counterparty that is rated at least A-1+ by S&P.

      (c) So long as any Series B Preferred Shares are Outstanding, the Trust
may issue and sell shares of one or more other series of Preferred Stock
constituting a series of a class of senior securities of the Trust
representing stock under Section 18 of the 1940 Act in addition to the Series
B Preferred Shares and other Preferred Stock then Outstanding, provided that
(i) the Trust shall, immediately after giving effect to the issuance of such
additional Preferred Stock and to its receipt and application of the proceeds
thereof, have an "asset coverage" for all senior securities which are stock,
as defined in Section 18(h) of the 1940 Act, of at least 200% of the Series B
Preferred Shares and all other Preferred Stock of the Trust then Outstanding,
and (ii) no such additional Preferred Stock (including any additional Series B
Preferred Shares) shall have any preference or priority over any other
Preferred Stock of the Trust upon the distribution of the assets of the Trust
or in respect of the payment of dividends.

12.   Termination.

      In the event that no Series B Preferred Shares are Outstanding, all
rights and preferences of such shares established and designated hereunder shall
cease and terminate, and all obligations of the Trust under this Statement of
Preferences shall terminate.

13.   Definitions.

      Unless the context or use indicates another or different meaning or
intent, each of the following terms when used in this Statement of Preferences
shall have the meaning ascribed to it below, whether such term is used in the
singular or plural and regardless of tense:

      "ACCOUNTANT'S CONFIRMATION" means a letter from an Independent
Accountant delivered to each Rating Agency with respect to certain Basic
Maintenance Reports substantially to the effect that:

      (a) the Independent Accountant has read the Basic Maintenance Report or
Reports prepared by the Administrator during the referenced calendar year that
are referred to in such letter;

      (b) with respect to the issue size compliance, issuer diversification
and industry diversification calculations, such calculations and the resulting
Market Value of the relevant Eligible Assets included in the Reports and the
Adjusted Value of the such Eligible Assets included in the Reports are
numerically correct;

      (c) with respect to the excess or deficiency of the Adjusted Value of
the relevant Eligible Assets included in the Reports when compared to the
Basic Maintenance Amount calculated for such Rating Agency the results of the
calculation set forth in the Reports have been recalculated and are
numerically correct;

      (d) with respect to the Rating Agency ratings on corporate evidences of
indebtedness, convertible corporate evidences of indebtedness and preferred
stock listed in the Reports, that information has been traced and agrees with
the information provided directly or indirectly by the respective Rating
Agencies (in the event such information does not agree or such information is
not listed in the accounting records of the Trust, the Independent Accountants
will inquire of the Rating Agencies what such information is and provide a
listing in their letter of such differences, if any);

      (e) with respect to issuer name and coupon or dividend rate listed in
the Reports, that information has been traced and agrees with information
listed in the accounting records of the Trust;

      (f) with respect to issue size listed in the Reports, that information
has been traced and agrees with information provided by a Pricing Service or
such other services as the relevant Rating Agency may authorize from time to
time;

      (g) with respect to the prices (or alternative permissible factors used
in calculating the Market Value as provided by this Statement of Preferences)
provided by the Administrator of the Trust's assets for purposes of valuing
securities in the portfolio, the Independent Accountant has traced the price
used in the Reports to the price provided by such Administrator (in accordance
with the procedures provided in this Statement of Preferences) and verified
that such information agrees (in the event such information does not agree,
the Independent Accountants will provide a listing in their letter of such
differences); and

      (h) with respect to the description of each security included in the
Reports, the description of the relevant Eligible Assets has been compared to
the definition of such Rating Agency's Eligible Assets contained in this
Statement of Preferences, and the description as appearing in the Reports
agrees with the definition of such Rating Agency's Eligible Assets as
described in this Statement of Preferences.

      Each such letter may state that: (i) such Independent Accountant has
made no independent verification of the accuracy of the description of the
investment securities listed in the Reports or the Market Value of those
securities nor has it performed any procedures other than those specifically
outlined above for the purposes of issuing such letter; (ii) unless otherwise
stated in the letter, the procedures specified therein were limited to a
comparison of numbers or a verification of specified computations applicable
to numbers appearing in the Reports and the schedule(s) thereto; (iii) the
foregoing procedures do not constitute an examination in accordance with
generally accepted auditing standards and the Reports contained in the letter
do not extend to any of the Trust's financial statements taken as a whole;
(iv) such Independent Accountant does not express an opinion as to whether
such procedures would enable such Independent Accountant to determine that the
methods followed in the preparation of the Reports would correctly determine
the Market Value or Discounted Value of the investment portfolio; and (v)
accordingly, such Independent Accountant expresses no opinion as to the
information set forth in the Reports or in the schedule(s) thereto and makes
no representation as to the sufficiency of the procedures performed for the
purposes of this Statement of Preferences; and such other statements as are
acceptable to the Rating Agencies.

      Such letter shall also state that the Independent Accountant is an
"independent accountant" with respect to the Trust within the meaning of the
1933 Act and the related published rules and regulations thereunder.

      "ADJUSTED VALUE" of each Eligible Asset shall be computed as follows:

            (a) cash shall be valued at 100% of the face value thereof; and

            (b) all other Eligible Assets shall be valued at the applicable
Discounted Value thereof; and

            (c) each asset that is not an Eligible Asset shall be valued at
zero.

      "ADMINISTRATOR" means the other party to the Administration Agreement
with the Trust which shall initially be Gabelli Funds, LLC, a New York limited
liability company, and will include, as appropriate, any sub-administrator
appointed by the Administrator.

      "ADRS" means U.S. dollar-denominated American Depository Receipts.

      "ADVISER" means Gabelli Funds, LLC, a New York limited liability
company, or such other Person that is then serving as the investment adviser
of the Trust.

      "AFFILIATE" means, with respect to the Auction Agent, any person known
to the Auction Agent to be controlled by, in control of or under common
control with the Trust; provided, however, that no Broker-Dealer controlled
by, in control of or under common control with the Trust shall be deemed to be
an Affiliate nor shall any corporation or any Person controlled by, in control
of or under common control with such corporation, one of the directors or
executive officers of which is a trustee of the Trust be deemed to be an
Affiliate solely because such trustee or executive officer is also a trustee
of the Trust.

      "ALL HOLD RATE" means 90% of the Reference Rate.

      "ANNUAL VALUATION DATE" means the Valuation Date each calendar year so
designated by the Trust, commencing in the calendar year 2003.

      "APPLICABLE RATE" means, with respect to the Series B Preferred Shares,
for each Dividend Period (i) if Sufficient Clearing Bids exist for the Auction
in respect thereof, the Winning Bid Rate, (ii) if Sufficient Clearing Orders
do not exist for the Auction in respect thereof, or an Auction does not take
place with respect to such Dividend Period because of the commencement of a
Default Period, the Maximum Rate and (iii) if all Series B Preferred Shares
are the subject of Submitted Hold Orders for the Auction in respect thereof,
the All Hold Rate.

      "ASSET COVERAGE" means asset coverage, as determined in accordance with
Section 18(h) of the 1940 Act, of at least 200% with respect to all
outstanding senior securities of the Trust which are stock, including all
Outstanding Series B Preferred Shares (or such other asset coverage as may in
the future be specified in or under the 1940 Act as the minimum asset coverage
for senior securities which are stock of a closed-end investment company as a
condition of declaring dividends on its common stock), determined on the basis
of values calculated as of a time within 48 hours (not including Saturdays,
Sundays or holidays) next preceding the time of such determination.

      "ASSET COVERAGE CERTIFICATE" means the certificate required to be
delivered by the Trust pursuant to paragraph 9(a)(i)(B) of Part I of this
Statement of Preferences.

      "AUCTION" means each periodic operation of the Auction Procedures.

      "AUCTION AGENT" means The Bank of New York unless and until another
commercial bank, trust company, or other financial institution appointed by a
resolution of the Board of Trustees enters into an agreement with the Trust to
follow the Auction Procedures for the purpose of determining the Applicable
Rate.

      "AUCTION DATE" means the last day of the initial Dividend Period and
each seventh day after the immediately preceding Auction Date; provided,
however, that if any such seventh day is not a Business Day, such Auction Date
shall be the first preceding day that is a Business Day and the next Auction
Date, if for a Standard Dividend Period, shall (subject to the same
advancement procedure) be the seventh day after the date that the preceding
Auction Date would have been if not for the advancement procedure; provided
further, however, that the Auction Date for the Auction at the conclusion of
any Special Dividend Period shall be the last Business Day in such Special
Dividend Period and that no more than one Auction shall be held during any
Dividend Period; provided further, however, that the Auction Date following a
Default Period shall be the last Business Day in the Standard Dividend Period
that commenced during such Default Period. Notwithstanding the foregoing, in
the event an auction is not held because an unforeseen event or unforeseen
events cause a day that otherwise would have been an Auction Date not to be a
Business Day, then the length of the then current dividend period will be
extended by seven days (or a multiple thereof if necessary because of such
unforeseen event or events).

      "AUCTION PROCEDURES" means the procedures for conducting Auctions as set
forth in Part II of this Statement of Preferences.

      "BASIC MAINTENANCE AMOUNT" means, with respect to the Series B Preferred
Shares, as of any Valuation Date, the dollar amount equal to (a) the sum of
(i) the product of the number of shares of each class or series of Preferred
Shares Outstanding on such Valuation Date multiplied, in the case of each such
series or class, by the per share Liquidation Preference applicable to each
such series or class; (ii) to the extent not included in (i) the aggregate
amount of cash dividends (whether or not earned or declared) that will have
accumulated for each Outstanding Preferred Share from the most recent
applicable dividend payment date to which dividends have been paid or duly
provided for (or, in the event the Basic Maintenance Amount is calculated on a
date prior to the initial Dividend Payment Date with respect to a class or
series of the Preferred Shares, then from the Date of Original Issue of such
shares) through the Valuation Date plus all dividends to accumulate on the
Preferred Shares then Outstanding during the 31 days following such Valuation
Date or, if less, during the number of days following such Valuation Date that
the Preferred Shares called for redemption are scheduled to remain Outstanding
at the applicable rate or default rate then in effect with respect to such
shares; (iii) the Trust's other liabilities due and payable as of such
Valuation Date (except that dividends and other distributions payable by the
Trust on Common Shares shall not be included as a liability) and such
liabilities projected to become due and payable by the Trust during the 90
days following such Valuation Date (excluding liabilities for investments to
be purchased and for dividends and other distributions not declared as of such
Valuation Date); and (iv) any current liabilities of the Trust as of such
Valuation Date to the extent not reflected in (or specifically excluded by)
any of (a)(i) through (a)(iii) (including, without limitation, and immediately
upon determination, any amounts due and payable by the Trust pursuant to
reverse repurchase agreements and any payables for assets purchased as of such
Valuation Date) less (b) (i) the Adjusted Value of any of the Trust's assets
or (ii) the face value of any of the Trust's assets if, in the case of both
(b)(i) and (b)(ii), such assets are either cash or evidences of indebtedness
which mature prior to or on the date of redemption or repurchase of Preferred
Shares or payment of another liability and are either U.S. Government
Obligations or evidences of indebtedness which have a rating assigned by
Moody's of at least Aaa, P-1, VMIG-1 or MIG-1 or by S&P of at least AAA, SP-1+
or A-1+, and are irrevocably held by the Trust's custodian bank in a
segregated account or deposited by the Trust with the dividend-disbursing
agent or Paying Agent, as the case may be, for the payment of the amounts
needed to redeem or repurchase Preferred Shares subject to redemption or
repurchase or any of (a)(ii) through (a)(iv); and provided that in the event
the Trust has repurchased Preferred Shares and irrevocably segregated or
deposited assets as described above with its custodian bank, the
dividend-disbursing agent or Paying Agent for the payment of the repurchase
price the Trust may deduct 100% of the Liquidation Preference of such
Preferred Shares to be repurchased from (a) above. Basic Maintenance Amount
shall, for the purposes of this Statement of Preferences, have a correlative
meaning with respect to any other class or series of Preferred Shares.

      "BASIC MAINTENANCE AMOUNT CURE DATE" means, with respect to the Series B
Preferred Shares, 10 Business Days following a Valuation Date, such date being
the last day upon which the Trust's failure to comply with paragraph
9(a)(ii)(A) of Part I of this Statement of Preferences could be cured, and
shall, for the purposes of this Statement of Preferences, have a correlative
meaning with respect to any other class or series of Preferred Shares.

      "BASIC MAINTENANCE TEST" means, with respect to the Series B Preferred
Shares, a test which is met if the lower of the aggregate Discounted Values of
the Moody's Eligible Assets or the S&P Eligible Assets if both Moody's and S&P
are then rating the Series B Preferred Shares at the request of the Trust, or
the Eligible Assets of whichever of Moody's or S&P is then doing so if only
one of Moody's or S&P is then rating the Series B Preferred Shares at the
request of the Trust, meets or exceeds the Basic Maintenance Amount.

      "BASIC MAINTENANCE REPORT" or "REPORT" means, with respect to the Series
B Preferred Shares, a report prepared by the Administrator which sets forth,
as of the related Monthly Valuation Date, (i) Moody's Eligible Assets and S&P
Eligible Assets sufficient to meet or exceed the Basic Maintenance Amount,
(ii) the Market Value and Discounted Value thereof (seriatim and in the
aggregate), (iii) the Basic Maintenance Amount, and (iv) the net asset value
of the Trust. Such report will also include (A) the month-end closing price
for the Common Shares of the Trust (B) the monthly total-return per Common
Shares, which will be determined based upon month-end closing share prices,
assuming reinvestment of all dividends paid during such month and (C) the
total leverage position of the Trust. For the purposes of this Statement of
Preferences, "Basic Maintenance Report" or "Report" shall have a correlative
meaning with respect to any other class or series of Preferred Shares.

      "BENEFICIAL OWNER," with respect to the Series B Preferred Shares, means
a customer of a Broker-Dealer who is listed on the records of that
Broker-Dealer (or, if applicable, the Auction Agent) as a holder of Series B
Preferred Shares.

      "BID" has the meaning set forth in paragraph 2(a) of Part II of this
Statement of Preferences.

      "BIDDER" has the meaning set forth in paragraph 2(a) of Part II of this
Statement of Preferences, provided however that neither the Trust nor any
Affiliate shall be permitted to be Bidder in an Auction.

      "BOARD OF TRUSTEES" or "BOARD" means the Board of Trustees of the Trust
or any duly authorized committee thereof as permitted by applicable law.

      "BROKER-DEALER" means any broker-dealer or broker-dealers, or other
entity permitted by law to perform the functions required of a Broker-Dealer
by the Auction Procedures, that has been selected by the Trust and has entered
into a Broker-Dealer Agreement that remains effective.

      "BROKER-DEALER AGREEMENT" means an agreement between the Auction Agent
and a Broker-Dealer, pursuant to which such Broker-Dealer agrees to follow the
Auction Procedures.

      "BUSINESS DAY" means a day on which the New York Stock Exchange is open
for trading and which is not a Saturday, Sunday or other day on which banks in
The City of New York, New York are authorized or obligated by law to close.

      "BY-LAWS" means the By-Laws of the Trust, as amended from time to time.

      "COMMISSION" means the Securities and Exchange Commission.

      "COMMON SHARES" means the Trust's common shares, par value $.001 per
share.

      "CURE DATE" has the meaning set forth in paragraph 3(a)(ii) of Part I of
this Statement of Preferences.

      "DATE OF ORIGINAL ISSUE" means July 31, 2003, and, for the purposes of
this Statement of Preferences, shall have a correlative meaning with respect
to any other class or series of Preferred Shares.

      "DECLARATION" means the Agreement and Declaration of Trust of the Trust,
dated February 25, 1999, as amended and restated from time to time (including
by this Statement of Preferences or by way of any other supplement or
Statement of Preferences authorizing or creating a class of shares of
beneficial interest in the Trust).

      "DEFAULT" means a Dividend Default or a Redemption Default.

      "DEFAULT PERIOD" means a Dividend Default or a Redemption Default.

      "DEFAULT RATE" has the meaning set forth in paragraph 2(c)(iii) of Part
I of this Statement of Preferences.

      "DEPOSIT ASSETS" means cash, Short-Term Money Market Instruments and
U.S. Government Obligations. Except for determining whether the Trust has
Eligible Assets with an Adjusted Value equal to or greater than the Basic
Maintenance Amount, each Deposit Asset shall be deemed to have a value equal
to its principal or face amount payable at maturity plus any interest payable
thereon after delivery of such Deposit Asset but only if payable on or prior
to the applicable payment date in advance of which the relevant deposit is
made.

      "DISCOUNT FACTOR" means (a) so long as Moody's is rating the Series B
Preferred Shares at the Trust's request, the Moody's Discount Factor, (b) so
long as S&P is rating the Series B Preferred Shares at the Trust's request,
the S&P Discount Factor, and/or (c) any applicable discount factor established
by any Other Rating Agency, whichever is applicable.

      "DISCOUNTED VALUE" means, as applicable, (a) the quotient of the Market
Value of an Eligible Asset divided by the applicable Discount Factor or (b)
such other formula for determining the discounted value of an Eligible Asset
as may be established by an applicable Rating Agency, provided, in either case
that with respect to an Eligible Asset that is currently callable, Discounted
Value will be equal to the applicable quotient or product as calculated above
or the call price, whichever is lower, and that with respect to an Eligible
Asset that is prepayable, Discounted Value will be equal to the applicable
quotient or product as calculated above or the par value, whichever is lower.

      "DIVIDEND DEFAULT" has the meaning set forth in paragraph 2(c)(ii) of
Part I of this Statement of Preferences.

      "DIVIDEND PAYMENT DATE" means with respect to the Series B Preferred
Shares, any date on which dividends declared by the Board of Trustees thereon
are payable pursuant to the provisions of paragraph 2(b) of Part I of this
Statement of Preferences and shall for the purposes of this Statement of
Preferences have a correlative meaning with respect to any other class or
series of Preferred Shares.

      "DIVIDEND PERIOD" means, with respect to Series B Preferred Shares, the
initial period determined in the manner set forth under "Designation" above,
and thereafter, the period commencing on the Business Day following each
Auction Date and ending on the next Auction Date or, if such next Auction Date
is not immediately followed by a Business Day, on the latest day prior to the
next succeeding Business Day, and shall, for the purposes of this Statement of
Preferences, have a correlative meaning with respect to any other class or
series of Preferred Shares.

      "ELIGIBLE ASSETS" means Moody's Eligible Assets (if Moody's is then
rating the Series B Preferred Shares at the request of the Trust), S&P
Eligible Assets (if S&P is then rating the Series B Preferred Shares at the
request of the Trust), and/or Other Rating Agency Eligible Assets if any Other
Rating Agency is then rating the Series A Preferred or Series B AMPS,
whichever is applicable.

      "GOVERNING DOCUMENTS" means the Declaration and the By-Laws.

      "HOLDER" means, with respect to the Preferred Shares, including the
Series B Preferred Shares, the registered holder of such shares as the same
appears on the stock ledger or ownership records of the Trust or records of
the Auction Agent, as the case may be.

      "INDEPENDENT ACCOUNTANT" means a nationally recognized accountant, or
firm of accountants, that is with respect to the Trust an independent public
accountant or firm of independent public accountants under the 1933 Act.

      "INDUSTRY CLASSIFICATION" means a six-digit industry classification in
the Standard Industry Classification system published by the United States.

      "LIBOR DEALERS" means Merrill Lynch, Pierce, Fenner & Smith Incorporated
and such other dealer or dealers as the Trust may from time to time appoint,
or, in lieu of any thereof, their respective affiliates or successors.

      "LIBOR RATE," on any Auction Date, means (i) the rate for deposits in
U.S. dollars for the designated Dividend Period, which appears on display page
3750 of Moneyline's Telerate Service ("Telerate Page 3750") (or such other
page as may replace that page on that service, or such other service as may be
selected by the LIBOR Dealer or its successors that are LIBOR Dealers) as of
11:00 a.m., London time, on the day that is the London Business Day preceding
the Auction Date (the "LIBOR Determination Date"), or (ii) if such rate does
not appear on Telerate Page 3750 or such other page as may replace such
Telerate Page 3750, (A) the LIBOR Dealer shall determine the arithmetic mean
of the offered quotations of the Reference Banks to leading banks in the
London interbank market for deposits in U.S. dollars for the designated
Dividend Period in an amount determined by such LIBOR Dealer by reference to
requests for quotations as of approximately 11:00 a.m. (London time) on such
date made by such LIBOR Dealer to the Reference Banks, (B) if at least two of
the Reference Banks provide such quotations, LIBOR Rate shall equal such
arithmetic mean of such quotations, (C) if only one or none of the Reference
Banks provide such quotations, LIBOR Rate shall be deemed to be the arithmetic
mean of the offered quotations that leading banks in The City of New York
selected by the LIBOR Dealer (after obtaining the Trust's approval) are
quoting on the relevant LIBOR Determination Date for deposits in U.S. dollars
for the designated Dividend Period in an amount determined by the LIBOR Dealer
(after obtaining the Trust's approval) that is representative of a single
transaction in such market at such time by reference to the principal London
offices of leading banks in the London interbank market; provided, however,
that if one of the LIBOR Dealers does not quote a rate required to determine
the LIBOR Rate, the LIBOR Rate will be determined on the basis of the
quotation or quotations furnished by any Substitute LIBOR Dealer or Substitute
LIBOR Dealers selected by the Trust to provide such rate or rates not being
supplied by the LIBOR Dealer; provided further, that if the LIBOR Dealer and
Substitute LIBOR Dealers are required but unable to determine a rate in
accordance with at least one of the procedures provided above, LIBOR Rate
shall be LIBOR Rate as determined on the previous Auction Date. If the number
of Dividend Period days shall be (1) 7 or more but fewer than 21 days, such
rate shall be the seven-day LIBOR rate; (2) more than 21 but fewer than 49
days, such rate shall be one-month LIBOR rate; (3) 49 or more but fewer than
77 days, such rate shall be the two-month LIBOR rate; (4) 77 or more but fewer
than 112 days, such rate shall be the three-month LIBOR rate; (5) 112 or more
but fewer than 140 days, such rate shall be the four-month LIBOR rate; (6) 140
or more but fewer than 168 days, such rate shall be the five-month LIBOR rate;
(7) 168 or more but fewer than 189 days, such rate shall be the six-month
LIBOR rate; (8) 189 or more but fewer than 217 days, such rate shall be the
seven-month LIBOR rate; (9) 217 or more but fewer than 252 days, such rate
shall be the eight-month LIBOR rate; (10) 252 or more but fewer than 287 days,
such rate shall be the nine-month LIBOR rate; (11) 287 or more but fewer than
315 days, such rate shall be the ten-month LIBOR rate; (12) 315 or more but
fewer than 343 days, such rate shall be the eleven-month LIBOR rate; and (13)
343 or more but fewer than 365 days, such rate shall be the twelve-month LIBOR
rate.

      "LIQUIDATION PREFERENCE" shall, with respect to each share of Series B
Preferred Shares, have the meaning set forth in paragraph 7(a) of Part I of
this Statement of Preferences and shall, for the purposes of this Statement of
Preferences, have a correlative meaning with respect to any other class or
series of Preferred Shares.

      "LONDON BUSINESS DAY" means any day on which commercial banks are
generally open for business in London.

      "MANDATORY REDEMPTION DATE" has the meaning set forth in paragraph
3(a)(iii) of Part I of this Statement of Preferences.

      "MARKET VALUE" means the amount determined by the Trust with respect to
specific Eligible Assets in accordance with valuation policies adopted from
time to time by the Board of Trustees as being in compliance with the
requirements of the 1940 Act.

            Notwithstanding the foregoing, "Market Value" may, at the option
of the Trust with respect to any of its assets, mean the amount determined
with respect to specific Eligible Assets of the Trust in the manner set forth
below:

            (a) as to any common or preferred stock which is an Eligible
Asset, (i) if the stock is traded on a national securities exchange or quoted
on the Nasdaq System, the last sales price reported on the Valuation Date,
(ii) if there was no such reported sales price, the price reported by a
recognized pricing service or (iii) if there was no such pricing service
report, the lower of two bid prices for such stock provided to the
Administrator by two recognized securities dealers with minimum
capitalizations of $25,000,000 (or otherwise approved for such purpose by
Moody's and S&P), at least one of which shall be provided in writing or by
telecopy, telex, other electronic transcription, computer obtained quotation
reducible to written form or similar means, and in turn provided to the Trust
by any such means by such Administrator, or, if two bid prices cannot be
obtained, such Eligible Asset shall have a Market Value of zero;

            (b) as to any U.S. Government Obligation, Short-Term Money Market
Instrument (other than demand deposits, federal funds, bankers' acceptances
and next Business Day repurchase agreements) and commercial paper, with a
maturity of greater than 60 days, the product of (i) the principal amount
(accreted principal to the extent such instrument accretes interest) of such
instrument and (ii) the lower of the bid prices for the same kind of
instruments having, as nearly as practicable, comparable interest rates and
maturities provided by two recognized securities dealers having minimum
capitalization of $25,000,000 (or otherwise approved for such purpose by
Moody's and S&P) to the Administrator, at least one of which shall be provided
in writing or by telecopy, telex, other electronic transcription, computer
obtained quotation reducible to written form or similar means, and in turn
provided to the Trust by any such means by such Administrator, or, if two bid
prices cannot be obtained, such Eligible Asset will have a Market Value of
zero;

            (c) as to cash, demand or time deposits, federal funds, bankers'
acceptances and next Business Day repurchase agreements included in Short-Term
Money Market Instruments, the face value thereof;

            (d) as to any U.S. Government Obligation, Short-Term Money Market
Instrument or commercial paper with a maturity of 60 days or fewer, amortized
cost unless the Board of Trustees determines that such value does not
constitute fair value;

            (e) as to any other evidence of indebtedness which is an Eligible
Asset, (i) the product of (A) the unpaid principal balance of such
indebtedness as of the Valuation Date and (B)(1) if such indebtedness is
traded on a national securities exchange or quoted on the Nasdaq System, the
last sales price reported on the Valuation Date or (2) if there was no
reported sales price on the Valuation Date or if such indebtedness is not
traded on a national securities exchange or quoted on the Nasdaq System, the
lower of two bid prices for such indebtedness provided by two recognized
dealers with a minimum capitalization of $25,000,000 (or otherwise approved
for such purpose by Moody's and S&P) to the Administrator, at least one of
which shall be provided in writing or by telecopy, telex, other electronic
transcription, computer obtained quotation reducible to written form or
similar means, and in turn provided to the Trust by any such means by such
Administrator, plus (ii) accrued interest on such indebtedness.

            "MAXIMUM RATE" means, on any day on which the Applicable Rate is
determined, the greater of (as set forth in the table below) (i) the
applicable percentage of the Reference Rate or (ii) the applicable spread plus
the Reference Rate. The reference rate is the applicable LIBOR Rate (for a
dividend period or a special dividend period of fewer than 364 days), or the
applicable Treasury Index Rate (for a special dividend period of 364 days or
more). The applicable percentage and applicable spread will be determined
based on the lower of the credit ratings assigned to the Series B AMPS by
Moody's and S&P. If Moody's and S&P or both do not make such ratings
available, the rate will be determined by reference to equivalent ratings
issued by a substitute rating agency.


                                                Applicable   Applicable
   Moody's Credit Rating     S&P Credit Rating  Percentage     Spread
   ---------------------     -----------------  ----------   ----------
            Aaa                     AAA            125%       125 bps

        Aa3 to Aa1              AA- to AA+         150%       150 bps

         A3 to A1                A- to A+          200%       200 bps

       Baa3 to Baa1            BBB- to BBB+        250%       250 bps

        Below Baa3              Below BBB-         300%       300 bps


            "MONTHLY VALUATION DATE" means the last Valuation Date of each
calendar month.

            "MOODY'S" means Moody's Investors Service, Inc. and its successors
at law.

            "MOODY'S DISCOUNT FACTOR" means, with respect to a Moody's
Eligible Asset specified below, the following applicable number:

                                                                  Moody's
Type of Moody's Eligible Asset:                              Discount Factor:
- ------------------------------                               ----------------

Short Term Money Market Instruments (other than U.S.
Government Obligations set forth below) and other
commercial paper:

     U.S. Treasury Securities with final maturities            1.00
     that are less than or equal to 60 days............
     Demand or time deposits, certificates of deposit          1.00
     and bankers' acceptances includible in Moody's
     Short Term Money Market Instruments...............
     Commercial paper rated P-1 by Moody's maturing in         1.00
     30 days or less...................................
     Commercial paper rated P-1 by Moody's maturing in         1.15
     more than 30 days but in 270 days or less.........
     Commercial paper rated A-1+ by S&P maturing in 270        1.25
     days or less......................................
     Repurchase obligations includible in Moody's Short        1.00
     Term Money Market Instruments if term is less than
     30 days and counterparty is rated at least A2.....
     Other repurchase obligations......................    Discount Factor
                                                           applicable to the
                                                           underlying assets
     U.S. Common Stocks and Common Stocks of foreign
     issuers for which ADRs are traded.................
            Utility....................................        1.70
            Industrial.................................        2.64
            Financial  ................................        2.41
     Common Stocks of foreign issuers (in existence for
     at least five years) for which no ADRs are traded.        4.00
     Convertible Preferred Stocks......................        3.00
     Preferred stocks:
     Auction Market preferred stocks...................        3.50
     Other preferred stocks issued by issuers in the           2.09
     financial and industrial industries...............
     Other preferred stocks issued by issuers in the           1.55
     utilities industry................................
     U.S. Government Obligations (other than U.S.
     Treasury Securities Strips set forth below) with
     remaining terms to maturity of:
            1 year or less.............................        1.04
            2 years or less............................        1.09
            3 years or less............................        1.12
            4 years or less............................        1.15
            5 years or less............................        1.18
            7 years of less............................        1.21
            10 years or less...........................        1.24
            15 years or less ..........................        1.25
            20 years or less ..........................        1.26
            30 years or less...........................        1.26
     U.S. Treasury Securities Strips with remaining
     terms to maturity of:
            1 year or less.............................        1.04
            2 years or less............................        1.10
            3 years or less............................        1.14
            4 years or less............................        1.18
            5 years or less............................        1.21
            7 years or less............................        1.27
            10 years or less...........................        1.34
            15 years or less...........................        1.45
            20 years or less...........................        1.54
            30 years or less...........................        1.66
Corporate Debt:
Non-convertible corporate debt rated Aaa with remaining
     terms to maturity of:
            1 year or less.............................        1.09
            2 years or less............................        1.15
            3 years or less............................        1.20
            4 years or less............................        1.26
            5 years or less............................        1.32
            7 years or less............................        1.39
            10 years or less...........................        1.45
            15 years or less...........................        1.50
            20 years or less...........................        1.50
            30 years or less...........................        1.50
Non-convertible corporate debt rated at least Aa3 with
     remaining terms to maturity of:
            1 year or less.............................        1.12
            2 years of less............................        1.18
            3 years or less............................        1.23
            4 years or less............................        1.29
            5 years or less............................        1.35
            7 years or less............................        1.43
            10 years or less...........................        1.50
            15 years or less...........................        1.55
            20 years or less...........................        1.55
            30 years or less...........................        1.55
Non-convertible corporate debt rated at least A3 with
     remaining terms to maturity of:
            1 year or less.............................        1.15
            2 years or less............................        1.22
            3 years or less............................        1.27
            4 years or less............................        1.33
            5 years or less............................        1.39
            7 years or less............................        1.47
            10 years or less...........................        1.55
            15 years or less...........................        1.60
            20 years or less...........................        1.60
            30 years or less...........................        1.60
Non-convertible corporate debt rated at least Baa3 with
     remaining terms of maturity of:
            1 year or less.............................        1.18
            2 years or less............................        1.25
            3 years or less............................        1.31
            4 years or less............................        1.38
            5 years or less............................        1.44
            7 years or less............................        1.52
            10 years or less...........................        1.60
            15 years or less...........................        1.65
            20 years or less...........................        1.65
            30 years or less...........................        1.65
     Non-convertible corporate debt rated at least Ba3
     with remaining terms of maturity of:
         1 year or less................................        1.37
         2 years or less...............................        1.46
         3 years or less...............................        1.56
         4 years or less...............................        1.61
         5 years or less...............................        1.68
         7 years or less...............................        1.79
         10 years or less..............................        1.89
         15 years or less..............................        1.96
         20 years or less..............................        1.96
         30 years or less..............................        1.96
     Non-convertible corporate debt rated at least B1
     and B2 with remaining terms of maturity of:
         1 year or less................................        1.50
         2 years or less...............................        1.60
         3 years or less...............................        1.68
         4 years or less...............................        1.76
         5 years or less...............................        1.86
         7 years or less...............................        1.97
         10 years or less..............................        2.08
         15 years or less..............................        2.16
         20 years or less..............................        2.28
         30 years or less..............................        2.29
      Non-convertible unrated corporate debt of any
      maturity Convertible corporate debt securities
      rated at least Aa3 issued by the following
      type of issuers:                                             2.50
         Utility.......................................        1.62-1.67
         Industrial....................................        2.56-2.61
         Financial.....................................        2.33-2.38
         Transportation................................        2.50-2.65
     Convertible corporate debt securities rated at
     least A3 issued by the following type of issuers:
         Utility.......................................           1.72
         Industrial....................................           2.66
         Financial.....................................           2.43
         Transportation................................           2.75
     Convertible corporate debt securities rated at
     least Baa3 issued by the following type of issuers:
         Utility.......................................           1.88
         Industrial....................................           2.82
         Financial.....................................           2.59
         Transportation................................           2.85
     Convertible corporate debt securities rated at
     least Ba3 issued by the following type of issuers:
         Utility.......................................           1.95
         Industrial....................................           2.90
         Financial.....................................           2.65
         Transportation................................           2.90
     Convertible corporate debt securities rated at
     least B2 issued by the following type of issuers:
         Utility.......................................           1.99
         Industrial....................................           2.93
         Financial.....................................           2.70
         Transportation................................           2.95


         "MOODY'S ELIGIBLE ASSETS" means:

            (a) cash (including, for this purpose, receivables for investments
                sold to a counterparty whose senior debt securities are rated
                at least Baa3 by Moody's or a counterparty approved by Moody's
                and payable within five Business Days following such Valuation
                Date and dividends and interest receivable within 49 days on
                investments);

            (b) Short-Term Money Market Instruments;

            (c) commercial paper that is not includible as a Short-Term Money
                Market Instrument having on the Valuation Date a rating from
                Moody's of at least P-1 and maturing within 270 days;

            (d) preferred stocks (i) which either (A) are issued by issuers
                whose senior debt securities are rated at least Baa1 by
                Moody's or (B) are rated at least Baa3 by Moody's or (C) in
                the event an issuer's senior debt securities or preferred
                stock is not rated by Moody's, which either (1) are issued by
                an issuer whose senior debt securities are rated at least A-
                by S&P or (2) are rated at least A- by S&P and for this
                purpose have been assigned a Moody's equivalent rating of at
                least Baa3, (ii) of issuers which have (or, in the case of
                issuers which are special purpose corporations, whose parent
                companies have) common stock listed on the New York Stock
                Exchange, the American Stock Exchange or the Nasdaq National
                Market System, (iii) which have a minimum issue size (when
                taken together with other of the issuer's issues of similar
                tenor) of $50,000,000, (iv) which have paid cash dividends
                consistently during the preceding three-year period (or, in
                the case of new issues without a dividend history, are rated
                at least A1 by Moody's or, if not rated by Moody's, are rated
                at least AA- by S&P), (v) which pay cumulative cash dividends
                in U.S. dollars, (vi) which are not convertible into any other
                class of stock and do not have warrants attached, (vii) which
                are not issued by issuers in the transportation industry and
                (viii) in the case of auction rate preferred stocks, which are
                rated at least Aa3 by Moody's, or if not rated by Moody's, AAA
                by S&P, AAA by Fitch or are otherwise approved in writing by
                Moody's and have never had a failed auction; provided,
                however, that for this purpose the aggregate Market Value of
                the Trust's holdings of any single issue of auction rate
                preferred stock shall not be more than 1% of the Trust's total
                assets.

            (e) common stocks (i) (A) which are traded on a nationally
                recognized stock exchange or in the over-the-counter market,
                (B) if cash dividend paying, pay cash dividends in U.S.
                dollars and (C) which may be sold without restriction by the
                Trust; provided, however, that (y) common stock which, while a
                Moody's Eligible Asset owned by the Trust, ceases paying any
                regular cash dividend will no longer be considered a Moody's
                Eligible Asset until 71 days after the date of the
                announcement of such cessation, unless the issuer of the
                common stock has senior debt securities rated at least A3 by
                Moody's and (z) the aggregate Market Value of the Trust's
                holdings of the common stock of any issuer in excess of 4% in
                the case of utility common stock and 6% in the case of
                non-utility common stock of the aggregate Market Value of the
                Trust's holdings shall not be Moody's Eligible Assets, (ii)
                which are securities denominated in any currency other than
                the U.S. dollar or securities of issuers formed under the laws
                of jurisdictions other than the United States, its states and
                the District of Columbia for which there are ADRs or their
                equivalents which are traded in the United States on exchanges
                or over-the-counter and are issued by banks formed under the
                laws of the United States, its states or the District of
                Columbia or (iii) which are securities of issuers formed under
                the laws of jurisdictions other than the United States (and in
                existence for at least five years) for which no ADRs are
                traded; provided, however, that the aggregate Market Value of
                the Trust's holdings of securities denominated in currencies
                other than the U.S. dollar and ADRs in excess of (A) 6% of the
                aggregate Market Value of the Outstanding shares of common
                stock of such issuer thereof or (B) in excess of 10% of the
                Market Value of the Trust's Moody's Eligible Assets with
                respect to issuers formed under the laws of any single such
                non-U.S. jurisdiction other than Australia, Belgium, Canada,
                Denmark, Finland, France, Germany, Ireland, Italy, Japan, the
                Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland
                and the United Kingdom, shall not be a Moody's Eligible Asset;

            (f) ADR securities, based on the following guidelines: (i)
                Sponsored ADR program or (ii) Level II or Level III ADRs.
                Private placement Rule 144A ADRs are not eligible for
                collateral consideration. Global GDR programs will be
                evaluated on a case by case basis;

            (g) U.S. Government Obligations;

            (h) corporate evidences of indebtedness (i) which may be sold
                without restriction by the Trust which are rated at least B3
                (Caa subordinate) by Moody's (or, in the event the security is
                not rated by Moody's, the security is rated at least BB- by
                S&P and which for this purpose is assigned a Moody's
                equivalent rating of one full rating category lower), with
                such rating confirmed on each Valuation Date, (ii) which have
                a minimum issue size of at least (A) $100,000,000 if rated at
                least Baa3 or (B) $50,000,000 if rated B or Ba3, (iii) which
                are not convertible or exchangeable into equity of the issuing
                corporation and have a maturity of not more than 30 years and
                (iv) for which, if rated below Baa3 or not rated, the
                aggregate Market Value of the Trust's holdings do not exceed
                10% of the aggregate Market Value of any individual issue of
                corporate evidences of indebtedness calculated at the time of
                original issuance; and

            (i) convertible corporate evidences of indebtedness (i) which are
                issued by issuers whose senior debt securities are rated at
                least B2 by Moody's (or, in the event an issuer's senior debt
                securities are not rated by Moody's, which are issued by
                issuers whose senior debt securities are rated at least BB by
                S&P and which for this purpose is assigned a Moody's
                equivalent rating of one full rating category lower), (ii)
                which are convertible into common stocks which are traded on
                the New York Stock Exchange or the American Stock Exchange or
                are quoted on the Nasdaq National Market System and (iii)
                which, if cash dividend paying, pay cash dividends in U.S.
                dollars; provided, however, that once convertible corporate
                evidences of indebtedness have been converted into common
                stock, the common stock issued upon conversion must satisfy
                the criteria set forth in clause (e) above and other relevant
                criteria set forth in this definition in order to be a Moody's
                Eligible Asset; provided, however, that the Trust's
                investments in auction rate preferred stocks described in
                clause (d) above shall be included in Moody's Eligible Assets
                only to the extent that the aggregate Market Value of such
                stocks does not exceed 10% of the aggregate Market Value of
                all of the Trust's investments meeting the criteria set forth
                in clauses (a) through (g) above less the aggregate Market
                Value of those investments excluded from Moody's Eligible
                Assets pursuant to the paragraph appearing after clause (i)
                below; and

            (j) no assets which are subject to any lien or irrevocably
                deposited by the Trust for the payment of amounts needed to
                meet the obligations described in clauses (a)(i) through
                (a)(iv) of the definition of "Basic Maintenance Amount" may be
                includible in Moody's Eligible Assets.

         Notwithstanding anything to the contrary in the preceding clauses
     (a)-(j), the Trust's investment in preferred stock, common stock, corporate
     evidences of indebtedness and convertible corporate evidences of
     indebtedness shall not be treated as Moody's Eligible Assets except to the
     extent they satisfy the following diversification requirements (utilizing
     Moody's Industry and Sub-industry Categories) with respect to the Market
     Value of the Trust's holdings:

     Issuer:

                                         Non-Utility             Utility
                                       Maximum Single         Maximum Single
      Moody's Rating(1)(2)              Issuer(3)(4)           Issuer(3)(4)
      --------------------             --------------         --------------
      Aaa                                   100%                   100%
      Aa                                    20%                    20%
      A                                     10%                    10%
      CS/CB, Baa(5)                         6%                     4%
      Ba                                    4%                     4%
      B1/B2                                 3%                     3%
      B3 or below                           2%                     2%



     Industry and State:

                               Non-Utility        Utility         Utility
                                 Maximum          Maximum        Maximum
                                  Single        Single Sub-       Single
     Moody's Rating(1)         Industry(3)     Industry(3)(6)    State(3)
     ----------------          -----------     --------------    --------

     Aaa                          100%            100%            100%
     Aa                           60%             60%             20%
     A                            40%             50%             10%(7)
     CS/CB, Baa(5)                20%             50%             7%(7)
     Ba                           12%             12%             0%
     B1/B2                        8%              8%              0%
     B3 or below                  5%              5%              0%


- -------------------

(1) Unless conclusions regarding liquidity risk as well as estimates of both
    the probability and severity of default for the Trust's assets can be
    derived from other sources, securities rated below B by Moody's and unrated
    securities, which are securities rated by neither Moody's, S&P nor Fitch,
    are limited to 10% of Moody's Eligible Assets. If a corporate, municipal or
    other debt security is unrated by Moody's, S&P or Fitch, the Trust will use
    the percentage set forth under "Below B and Unrated" in this table. Ratings
    assigned by S&P or Fitch are generally accepted by Moody's at face value.
    However, adjustments to face value may be made to particular categories of
    credits for which the S&P and/or Fitch rating does not seem to approximate
    a Moody's rating equivalent

(2) Corporate evidences of indebtedness from issues ranging $50,000,000 to
    $100,000,000 are limited to 20% of Moody's Eligible Assets.

(3) The referenced percentages represent maximum cumulative totals only for the
    related Moody's rating category and each lower Moody's rating category.

(4) Issuers subject to common ownership of 25% or more are considered as one
    name.

(5) CS/CB refers to common stock and convertible corporate evidences of
    indebtedness, which are diversified independently from the rating level.

(6) In the case of utility common stock, utility preferred stock, utility
    evidences of indebtedness and utility convertible evidences of indebtedness,
    the definition of industry refers to sub-industries (electric, water, hydro
    power, gas, diversified).  Investments in other sub-industries are eligible
    only to the extent that the combined sum represents a percentage position of
    the Moody's Eligible Assets less than or equal to the percentage limits in
    the diversification tables above.

(7) Such percentage shall be 15% in the case of utilities regulated by
    California, New York and Texas.


         "MOODY'S HEDGING TRANSACTIONS" means purchases or sales of
     exchange-traded financial futures contracts based on any index approved by
     Moody's or Treasury Bonds, and purchases, writings or sales of
     exchange-traded put options on such financial futures contracts, any index
     approved by Moody's or Treasury Bonds, and purchases, writings or sales of
     exchange-traded call options on such financial futures contracts, any index
     approved by Moody's or Treasury Bonds, subject to the following
     limitations:

            (a)   the Trust will not engage in any Moody's Hedging Transaction
                  based on any index approved by Moody's (other than Closing
                  Transactions) that would cause the Trust at the time of such
                  transaction to own or have sold:

                  (i)   outstanding financial futures contracts based on such
                        index exceeding in number 10% of the average number of
                        daily traded financial futures contracts based on such
                        index in the 30 days preceding the time of effecting
                        such transaction as reported by The Wall Street
                        Journal; or

                  (ii)  outstanding financial futures contracts based on any
                        index approved by Moody's having a Market Value
                        exceeding 50% of the Market Value of all portfolio
                        securities of the Trust constituting Moody's Eligible
                        Assets owned by the Trust;

            (b)   The Trust will not engage in any Moody's Hedging Transaction
                  based on Treasury Bonds (other than Closing Transactions)
                  that would cause the Trust at the time of such transaction
                  to own or have sold:

                  (i)   outstanding financial futures contracts based on
                        Treasury Bonds with such contracts having an aggregate
                        Market Value exceeding 20% of the aggregate Market
                        Value of Moody's Eligible Assets owned by the Trust
                        and rated Aa by Moody's (or, if not rated by Moody's
                        but rated by S&P, rated AAA by S&P); or

                  (ii)  outstanding financial futures contracts based on
                        Treasury Bonds with such contracts having an aggregate
                        Market Value exceeding 50% of the aggregate Market
                        Value of all portfolio securities of the Trust
                        constituting Moody's Eligible Assets owned by the
                        Trust (other than Moody's Eligible Assets already
                        subject to a Moody's Hedging Transaction) and rated
                        Baa or A by Moody's (or, if not rated by Moody's but
                        rated by S&P, rated A or AA by S&P);

            (c)   The Trust will engage in Closing Transactions to close out
                  any outstanding financial futures contract based on any
                  index approved by Moody's if the amount of open interest in
                  such index as reported by The Wall Street Journal is less
                  than an amount to be mutually determined by Moody's and the
                  Trust;

            (d)   The Trust will engage in a Closing Transaction to close out
                  any outstanding financial futures contract by no later than
                  the fifth Business Day of the month in which such contract
                  expires and will engage in a Closing Transaction to close
                  out any outstanding option on a financial futures contract
                  by no later than the first Business Day of the month in
                  which such option expires;

            (e)   The Trust will engage in Moody's Hedging Transactions only
                  with respect to financial futures contracts or options
                  thereon having the next settlement date or the settlement
                  date immediately thereafter;

            (f)   The Trust (i) will not engage in options and futures
                  transactions for leveraging or speculative purposes, except
                  that an option or futures transaction shall not for these
                  purposes be considered a leveraged position or speculative
                  and (ii) will not write any call options or sell any
                  financial futures contracts for the purpose of hedging the
                  anticipated purchase of an asset prior to completion of such
                  purchase; and

            (g)   The Trust will not enter into an option or futures
                  transaction unless, after giving effect thereto, the Trust
                  would continue to have Moody's Eligible Assets with an
                  aggregate Discounted Value equal to or greater than the
                  Basic Maintenance Amount.

         "MOODY'S INDUSTRY CLASSIFICATIONS" means, for the purposes of
     determining Moody's Eligible Assets, each of the following industry
     classifications (or such other classifications as Moody's may from time to
     time approve for application to the Series B Preferred Shares).

         1.     Aerospace and Defense: Major Contractor, Subsystems, Research,
                Aircraft Manufacturing, Arms, Ammunition.

         2.     Automobile: Automobile Equipment, Auto-Manufacturing, Auto
                Parts Manufacturing, Personal Use Trailers, Motor Homes,
                Dealers.

         3.     Banking: Bank Holding, Savings and Loans, Consumer Credit,
                Small Loan, Agency, Factoring, Receivables.

         4.     Beverage, Food and Tobacco: Beer and Ale, Distillers, Wines
                and Liquors, Distributors, Soft Drink Syrup, Bottlers, Bakery,
                Mill Sugar, Canned Foods, Corn Refiners, Dairy Products, Meat
                Products, Poultry Products, Snacks, Packaged Foods,
                Distributors, Candy, Gum, Seafood, Frozen Food, Cigarettes,
                Cigars, Leaf/Snuff, Vegetable Oil.

         5.     Buildings and Real Estate: Brick, Cement, Climate Controls,
                Contracting, Engineering, Construction, Hardware, Forest
                Products (building-related only), Plumbing, Roofing,
                Wallboard, Real Estate, Real Estate Development, REITs, Land
                Development.

         6.     Chemicals, Plastics and Rubber: Chemicals (non-agricultural),
                Industrial Gases, Sulphur, Plastics, Plastic Products,
                Abrasives, Coatings, Paints, Varnish, Fabricating Containers.

         7.     Packaging and Glass: Glass, Fiberglass, Containers made of:
                Glass, Metal, Paper, Plastic, Wood or Fiberglass.

         8.     Personal and Non-Durable Consumer Products (Manufacturing
                Only): Soaps, Perfumes, Cosmetics, Toiletries, Cleaning
                Supplies, School Supplies.

         9.     Diversified/Conglomerate Manufacturing.

         10.    Diversified/Conglomerate Service.

         11.    Diversified Natural Resources, Precious Metals and Minerals:
                Fabricating, Distribution.

         12.    Ecological: Pollution Control, Waste Removal, Waste Treatment
                and Waste Disposal.

         13.    Electronics: Computer Hardware, Electric Equipment,
                Components, Controllers, Motors, Household Appliances,
                Information Service Communication Systems, Radios, TVs, Tape
                Machines, Speakers, Printers, Drivers, Technology.

         14.    Finance: Investment Brokerage, Leasing, Syndication,
                Securities.

         15.    Farming and Agriculture: Livestock, Grains, Produce,
                Agriculture Chemicals, Agricultural Equipment, Fertilizers.

         16.    Grocery: Grocery Stores, Convenience Food Stores.

         17.    Healthcare, Education and Childcare: Ethical Drugs,
                Proprietary Drugs, Research, Health Care Centers, Nursing
                Homes, HMOs, Hospitals, Hospital Supplies, Medical Equipment.

         18.    Home and Office Furnishings, Housewares, and Durable Consumer
                Products: Carpets, Floor Coverings, Furniture, Cooking,
                Ranges.

         19.    Hotels, Motels, Inns and Gaming.

         20.    Insurance: Life, Property and Casualty, Broker, Agent, Surety.

         21.    Leisure, Amusement, Motion Pictures, Entertainment: Boating,
                Bowling, Billiards, Musical Instruments, Fishing, Photo
                Equipment, Records, Tapes, Sports, Outdoor Equipment
                (Camping), Tourism, Resorts, Games, Toy Manufacturing, Motion
                Picture Production Theaters, Motion Picture Distribution.

         22.    Machinery (Non-Agricultural, Non-Construction,
                Non-Electronic): Industrial, Machine Tools, Steam Generators.

         23.    Mining, Steel, Iron and Non-Precious Metals: Coal, Copper,
                Lead, Uranium, Zinc, Aluminum, Stainless Steel, Integrated
                Steel, Ore Production, Refractories, Steel Mill Machinery,
                Mini-Mills, Fabricating, Distribution and Sales of the
                foregoing.

         24.    Oil and Gas: Crude Producer, Retailer, Well Supply, Service
                and Drilling.

         25.    Printing, Publishing, and Broadcasting: Graphic Arts, Paper,
                Paper Products, Business Forms, Magazines, Books, Periodicals,
                Newspapers, Textbooks, Radio, T.V., Cable Broadcasting
                Equipment.

         26.    Cargo Transport: Rail, Shipping, Railroads, Rail-car Builders,
                Ship Builders, Containers, Container Builders, Parts,
                Overnight Mail, Trucking, Truck Manufacturing, Trailer
                Manufacturing, Air Cargo, Transport.

         27.    Retail Stores: Apparel, Toy, Variety, Drugs, Department, Mail
                Order Catalog, Showroom.

         28.    Telecommunications: Local, Long Distance, Independent,
                Telephone, Telegraph, Satellite, Equipment, Research,
                Cellular.

         29.    Textiles and Leather: Producer, Synthetic Fiber, Apparel
                Manufacturer, Leather Shoes.

         30.    Personal Transportation: Air, Bus, Rail, Car Rental.

         31.    Utilities: Electric, Water, Hydro Power, Gas.

         32.    Diversified Sovereigns: Semi-sovereigns, Canadian Provinces,
                Supra-national Agencies.

          The Trust will use SIC codes in determining which industry
classification is applicable to a particular investment in consultation with
the Independent Accountant and Moody's, to the extent the Trust considers
necessary.

         "1933 ACT" means the Securities Act of 1933, as amended, or any
     successor statute.

         "1940 ACT" means the Investment Company Act of 1940, as amended, or any
     successor statute.

         "NON-CALL PERIOD" means a period determined by the Board of Trustees
     after consultation with the Broker-Dealers, during which the Series B
     Preferred Shares subject to such Special Dividend Period is not subject to
     redemption at the option of the Trust but only to mandatory redemption.

         "NOTICE OF REDEMPTION" means any notice with respect to the redemption
     of Series B Preferred Shares pursuant to paragraph 3 of Part I of this
     Statement of Preferences.

         "OTHER RATING AGENCY" means any rating agency other than Moody's or S&P
     then providing a rating for the Series B Preferred Shares at the request of
     the Trust.

         "OTHER RATING AGENCY ELIGIBLE ASSETS" means assets of the Trust
     designated by any Other Rating Agency as eligible for inclusion in
     calculating the discounted value of the Trust's assets in connection with
     such Other Rating Agency's rating of the Series B Preferred Shares.

         "OUTSTANDING" means, as of any date, Preferred Shares theretofore
     issued by the Trust except:

            (a)   any such Preferred Share theretofore cancelled by the Trust
                  or delivered to the Trust for cancellation;

            (b)   any such Preferred Share other than an auction market
                  Preferred Share as to which a notice of redemption shall
                  have been given and for whose payment at the redemption
                  thereof Deposit Assets in the necessary amount are held by
                  the Trust in trust for, or have been irrevocably deposited
                  with the relevant disbursing agent for payment to, the
                  holder of such share pursuant to the Statement of
                  Preferences with respect thereto;

            (c)   in the case of an auction market Preferred Share, including
                  the Series B Preferred Shares, any such shares theretofore
                  delivered to the applicable auction agent for cancellation
                  or with respect to which the Trust has given notice of
                  redemption and irrevocably deposited with the applicable
                  paying agent sufficient funds to redeem such shares; and

            (d)   any such Preferred Share in exchange for or in lieu of which
                  other shares have been issued and delivered.

            Notwithstanding the foregoing, (i) for purposes of voting rights
     (including the determination of the number of shares required to
     constitute a quorum), any Preferred Shares as to which any subsidiary of
     the Trust is the holder or Existing Holder, as applicable, will be
     disregarded and deemed not Outstanding and (ii) in connection with any
     auction, any auction market Preferred Shares as to which any Person known
     to the auction agent to be a subsidiary of the Trust is the holder or
     Existing Holder, as applicable, will be disregarded and not deemed
     Outstanding.

            "PAYING AGENT" means The Bank of New York unless and until another
     entity appointed by a resolution of the Board of Trustees enters into an
     agreement with the Trust to serve as paying agent, which paying agent may
     be the same as the Auction Agent and, with respect to any other class or
     series of Preferred Shares, the Person appointed by the Trust as
     dividend-disbursing or paying agent with respect to such class or series.

            "PERSON" means and includes an individual, a partnership, the
     Trust, a trust, a corporation, a limited liability company, an
     unincorporated association, a joint venture or other entity or a
     government or any agency or political subdivision thereof.

            "PREFERRED SHARES" means the preferred shares, par value $.001 per
     share, of the Trust, and includes the Series B Preferred Shares.

            "PREMIUM CALL PERIOD" means a period consisting of a number of
     whole years as determined by the Board of Trustees after consultation
     with the Broker-Dealers, during each year of which the shares subject to
     such Special Dividend Period will be redeemable at the Trust's option at
     a price per share equal to the Liquidation Preference plus accumulated
     but unpaid dividends (whether or not earned or declared) plus a premium
     expressed as a percentage or percentages of the Liquidation Preference or
     expressed as a formula using specified variables as determined by the
     Board of Trustees after consultation with the Broker-Dealers.

            "PRICING SERVICE" means any of the following: Bloomberg Financial
     Service, Bridge Information Services, Data Resources Inc., FT
     Interactive, International Securities Market Association, Merrill Lynch
     Securities Pricing Service, Muller Data Corp., Reuters, S&P/J.J. Kenny,
     Telerate, Trepp Pricing and Wood Gundy.

            "QUARTERLY VALUATION DATE" means the last Business Day of each
     March, June, September and December of each year.

            "RATING AGENCY" means Moody's and S&P as long as such rating
     agency is then rating the Series B Preferred Shares at the Trust's
     request or any other rating agency then rating the Series B Preferred
     Shares at the Trust's request.

            "REDEMPTION DATE" has the meaning set forth in paragraph 3(e) of
     Part I of this Statement of Preferences.

            "REDEMPTION DEFAULT" has the meaning set forth in paragraph 3(e)
     of Part I of this Statement of Preferences.

            "REDEMPTION PRICE" shall mean, (a) with respect to a Dividend
     Period that is not a Premium Call Period, the Liquidation Preference plus
     an amount equal to accumulated but unpaid dividends thereon (whether or
     not earned or declared) to the Redemption Date, or, (b) with respect to a
     Dividend Period that is a Premium Call Period, the Liquidation Preference
     plus an amount equal to accumulated but unpaid dividends thereon (whether
     or not earned or declared) to the Redemption Date plus a redemption
     premium, if any, determined by the Board of Trustees after consultation
     with the Broker-Dealers and set forth in the notice describing any
     applicable Specific Redemption Provisions. For the purposes of this
     Statement of Preferences, "Redemption Price" shall have a correlative
     meaning with respect to any other class or series of Preferred Shares.

            "REFERENCE BANKS" means four major banks in the London interbank
     market selected by Merrill Lynch, Pierce, Fenner & Smith Incorporated or
     its affiliates or successors or such other party as the Trust may from
     time to time appoint.

            "REFERENCE RATE" means, with respect to the determination of the
     Default Rate, the applicable LIBOR Rate for a Dividend Period of 364 days
     or fewer or the applicable Treasury Index Rate for a Dividend Period of
     longer than 364 days and, with respect to the determination of the
     Maximum Rate, the LIBOR Rate or the Treasury Index Rate, as appropriate.

            "REGISTRAR" means The Bank of New York, unless and until another
     entity appointed by a resolution of the Board of Trustees enters into an
     agreement with the Trust to serve as registrar.

            "S&P" means Standard & Poor's Ratings Services, or its successors
     at law.

            "S&P DISCOUNT FACTOR" means, with respect to a S&P Eligible Asset
     specified below, the following applicable number:

     ASSET CLASS OBLIGOR        DISCOUNT FACTORS (1)
     (COLLATERAL)               --------------------
     -------------------

     Common Stock                      230.4%

     30-yr treasury notes              126.7%

     10-yr treasury notes              121.6%

     5-yr treasury notes               115.1%

     2-yr treasury notes               109.4%

     52 week treasury                  105.8%
     bills

     STMMI with                        112.7%
     maturities from
     181 to 360 days

     STMMI with                         104%
     maturities from 1
     to 180

     Non-rated 2a-7                     111%
     eligible money
     market funds used
     as sweep accounts

     Cash, receivables                  100%
     due within 5
     business days of a
     Valuation Date,
     demand deposits
     and STMMI with
     next day maturities
     held in
     'A-1+' rated
     institutions,
     'AAAm' rated money
     market funds &
     'A-1+' commercial
     paper with
     maturities of 30
     days or less

- --------------
     (1)     For an S&P rating of AAA.

     "S&P ELIGIBLE ASSETS" means:

            (a)     Deposit Assets;

            (b)     common stocks that satisfy all of the following conditions:

                    (i)    such common stock (including the common stock of
                           any predecessor or constituent issuer) has been
                           traded on a recognized national securities exchange
                           or quoted on the National Market System (or any
                           equivalent or successor thereto) of Nasdaq for at
                           least 450 days,

                    (ii)   the Market Capitalization of such issuer of common
                           stock exceeds $100 million,

                    (iii)  the issuer of such common stock is not an entity
                           that is treated as a partnership for federal income
                           tax purposes,

                    (iv)   if such issuer is organized under the laws of any
                           jurisdiction other than the United States, any
                           state thereof, any possession or territory thereof
                           or the District of Columbia, the common stock of
                           such issuer held by the Corporation is traded on a
                           recognized national securities exchange or quoted
                           on the National Market System of Nasdaq either
                           directly or in the form of depository receipts, and

                    (v)    if such issuer is registered as an investment
                           company under the 1940 Act, such issuer does not
                           invest more than 25% of the value of its gross
                           assets in securities that are not S&P Eligible
                           Assets by reason of clause (iv) above;

        provided, however, that the Trust's holdings of the common stock of any
        single issuer that satisfies the conditions set forth in clauses (i)
        through (v) above shall be included in S&P Eligible Assets only to the
        extent that

                    (1)    restricted stocks (144a securities) or any pink
                           sheet stocks (generally, stock that are not carried
                           in daily over-the-counter newspaper listings) are
                           ineligible; and

                    (2)    the aggregate Market Value of the Trust's holdings
                           of any single issuer is not in excess of 4% of the
                           aggregate Market Value of the Trust's S&P Eligible
                           Assets.

            (c)     preferred stocks, on such basis as S&P may determine in
                    response to a request from the Trust.

Notwithstanding the foregoing, an asset will not be considered an S&P Eligible
Asset if it is held in a margin account, is subject to any material lien,
mortgage, pledge, security interest or security agreement of any kind or has
been deposited irrevocably for the payment of dividends, redemption payments
or any other payment or obligation under the Trust's Statement of Preferences.

      "S&P HEDGING TRANSACTIONS" has the meaning set forth in paragraph
11(b)(i) of Part I of this Statement of Preferences.

      "SECURITIES DEPOSITORY" means The Depository Trust Company and its
successors and assigns or any successor securities depository selected by the
Trust that agrees to follow the procedures required to be followed by such
securities depository in connection with the Series B Preferred Shares.

      "SERIES B ASSET COVERAGE CURE DATE" means, with respect to the failure
by the Trust to maintain Asset Coverage (as required by paragraph 9(a)(i)(A)
of Part I of this Statement of Preferences) as of an applicable Quarterly
Valuation Date, 10 Business Days following such Quarterly Valuation Date, and
shall, for the purposes of this Statement of Preferences, have a correlative
meaning with respect to any other class or series of Preferred Shares.

      "SERIES B PREFERRED SHARES" means the Trust's Series B Auction Market
Preferred Shares, par value $.001 per share, liquidation preference $25,000
per share.

      "SHORT-TERM MONEY MARKET INSTRUMENTS" means the following types of
instruments if, on the date of purchase or other acquisition thereof by the
Trust, the remaining term to maturity thereof is not in excess of 180 days:

                (i)     commercial paper rated A-1 if such commercial paper
                        matures in 30 days, or A-1+ if such commercial paper
                        matures in over 30 days;

                (ii)    AAAm rated money market funds;

                (iii)   demand or time deposits in, and banker's acceptances
                        and certificates of deposit of (A) a depository
                        institution or trust company incorporated under the
                        laws of the United States of America or any state
                        thereof or the District of Columbia (B) a United
                        States branch office or agency of a foreign depository
                        institution (provided that such branch office or
                        agency is subject to banking regulation under the laws
                        of the United States, any state thereof or the
                        District of Columbia), or (C) A-1+ rated institutions;

                (iv)    overnight funds; and

                (v)     U.S. Government Obligations.

      "SPECIAL DIVIDEND PERIOD" means a Dividend Period that is not a Standard
Dividend Period.

      "SPECIFIC REDEMPTION PROVISIONS" means, with respect to any Special
Dividend Period of more than one year, either, or any combination of (i) a
Non-Call Period and (ii) a Premium Call Period.

      "STANDARD DIVIDEND PERIOD" means a Dividend Period of seven days,
subject to increase or decrease to the extent necessary for the next Auction
Date and Dividend Payment Date to each be Business Days.

      "SUBMISSION DEADLINE" means 1:30 p.m., New York City time, on any
Auction Date or such other time on any Auction Date by which Broker-Dealers
are required to submit Orders to the Auction Agent as specified by the Auction
Agent from time to time.

      "TRANSFER AGENT" means The Bank of New York, unless and until another
entity appointed by a resolution of the Board of Trustees enters into an
agreement with the Trust to serve as transfer agent.

      "TREASURY INDEX RATE" means the average yield to maturity for actively
traded marketable U.S. Treasury fixed interest rate securities having the same
number of 30-day periods to maturity as the length of the applicable Dividend
Period, determined, to the extent necessary, by linear interpolation based
upon the yield for such securities having the next shorter and next longer
number of 30-day periods to maturity treating all Dividend Periods with a
length greater than the longest maturity for such securities as having a
length equal to such longest maturity, in all cases based upon data set forth
in the most recent weekly statistical release published by the Board of
Governors of the Federal Reserve System (currently in H.15 (519)); provided,
however, if the most recent such statistical release shall not have been
published during the 15 days preceding the date of computation, the foregoing
computations shall be based upon the average of comparable data as quoted to
the Trust by at least three recognized dealers in U.S. Government Obligations
selected by the Trust.

      "TRUST" means The Gabelli Utility Trust, a Delaware statutory trust.

      "U.S. GOVERNMENT OBLIGATIONS" means direct obligations of the United
States or by its agencies or instrumentalities that are entitled to the full
faith and credit of the United States and that, other than United States
Treasury Bills, provide for the periodic payment of interest and the full
payment of principal at maturity or call for redemption.

      "VALUATION DATE" means the last Business Day of each week, or such other
date as the Trust and Rating Agencies may agree to for purposes of determining
the Basic Maintenance Amount.

      "VOTING PERIOD" has the meaning set forth in paragraph 6(b) of Part I of
this Statement of Preferences.

               14.    Interpretation.  References to sections, subsections,
clauses, sub-clauses, paragraphs and subparagraphs that do not reference a
specific Part of this Statement of Preferences or another document shall refer
to the Part of this Statement of Preferences in which the reference occurs,
unless the context otherwise requires.


                          Part II: Auction Procedures

         1. Certain Definitions. Unless the context or use indicates another
or different meaning or intent, each of the following terms when used in this
Statement of Preferences shall have the meaning ascribed to it below, whether
such term is used in the singular or plural and regardless of tense:

      "AGENT MEMBER" means a member of or participant in the Securities
Depository that will act on behalf of a Bidder.

      "AVAILABLE PREFERRED SHARES" has the meaning set forth in paragraph
4(a)(i) of Part II of this Statement of Preferences.

      "EXISTING HOLDER" means (a) a Person who beneficially owns those
Preferred Shares, including Series B Preferred Shares, listed in that Person's
name in the records of the Trust or Auction Agent, as the case may be, or (b)
the beneficial owner of those Series B Preferred Shares which are listed under
such person's Broker-Dealer's name in the records of the Auction Agent, which
Broker-Dealer shall have signed a Master Purchaser's Letter.

      "HOLD ORDER" has the meaning set forth in paragraph 2(a) of Part II of
this Statement of Preferences.

      "MASTER PURCHASER'S LETTER" means the letter which is required to be
executed by each prospective purchaser of Series B Preferred Shares or by the
Broker-Dealer through whom the shares will be held.

      "ORDER" has the meaning set forth in paragraph 2(a) of Part II of this
Statement of Preferences.

      "POTENTIAL HOLDER" means (a) any Existing Holder who may be interested
in acquiring additional Series B Preferred Shares or (b) any other Person who
may be interested in acquiring Series B Preferred Shares and who has signed a
Master Purchaser's Letter or whose shares will be listed under such person's
Broker-Dealer's name on the records of the Auction Agent which Broker-Dealer
shall have executed a Master Purchaser's Letter.

      "SELL ORDER" has the meaning set forth in paragraph 2(a) of Part II of
this Statement of Preferences.

      "SUBMITTED BID" has the meaning set forth in paragraph 4(a) of Part II
of this Statement of Preferences.

      "SUBMITTED HOLD ORDER" has the meaning set forth in paragraph 4(a) of
Part II of this Statement of Preferences.

      "SUBMITTED ORDER" has the meaning set forth in paragraph 4(a) of Part II
of this Statement of Preferences.

      "SUBMITTED SELL ORDER" has the meaning set forth in paragraph 4(a) of
Part II of this Statement of Preferences.

      "SUFFICIENT CLEARING BIDS" has the meaning set forth in paragraph
4(a)(ii) of Part II of this Statement of Preferences.

      "SUFFICIENT CLEARING ORDERS" means that all Series B Preferred Shares
are the subject of Submitted Hold Orders or that the number of Series B
Preferred Shares that are the subject of Submitted Bids by Potential Holders
specifying one or more rates equal to or less than the Maximum Rate exceeds or
equals the sum of (a) the number of Series B Preferred Shares that are subject
of Submitted Bids by Existing Holders specifying one or more rates higher than
the Maximum Rate and (b) the number of Series B Preferred Shares that are
subject to Submitted Sell Orders.

      "WINNING BID RATE" means the lowest rate specified in the Submitted Bids
which if:

               (a)  (i)  each such Submitted Bid of Existing Holders
                         specifying such lowest rate and

                    (ii) all other such Submitted Bids of Existing Holders
                         specifying lower rates were rejected, thus entitling
                         such Existing Holders to continue to hold the shares
                         of such series that are subject to such Submitted
                         Bids; and

               (b)  (i)  each such Submitted Bid of Potential Holders
                         specifying such lowest rate and

                    (ii) all other such Submitted Bids of Potential Holders
                         specifying lower rates were accepted;

would result in such Existing Holders described in subclause (a) above
continuing to hold an aggregate number of Outstanding Series B Preferred
Shares which, when added to the number of Outstanding Series B Preferred
Shares to be purchased by such Potential Holders described in subclause (b)
above, would equal not less than the Available Preferred Shares.

2.    Orders.

      (a)   On or prior to the Submission Deadline on each Auction Date for
Series B Preferred Shares:

            (i)   each Beneficial Owner of Series B Preferred Shares may submit
      to its Broker-Dealer by telephone or otherwise information as to:

                  (A) the number of Outstanding Series B Preferred Shares, if
            any, held by such Beneficial Owner which such Beneficial Owner
            desires to continue to hold without regard to the Applicable Rate
            for the next succeeding Dividend Period;

                  (B) the number of Outstanding Series B Preferred Shares, if
            any, held by such Beneficial Owner which such Beneficial Owner
            offers to sell if the Applicable Rate for the next succeeding
            Dividend Period shall be less than the rate per annum specified by
            such Beneficial Owner; and/or

                  (C) the number of Outstanding Series B Preferred Shares, if
            any, held by such Beneficial Owner which such Beneficial Owner
            offers to sell without regard to the Applicable Rate for the next
            succeeding Dividend Period; and

            (ii) each Broker-Dealer, using lists of potential Beneficial
      Owners, shall in good faith for the purpose of conducting a competitive
      Auction in a commercially reasonable manner, contact potential
      Beneficial Owners (by telephone or otherwise), including Persons that
      are not Beneficial Owners, on such lists to determine the number of
      Series B Preferred Shares, if any, that each such potential Beneficial
      Owner offers to purchase if the Applicable Rate for the next succeeding
      Dividend Period shall not be less than the rate per annum specified by
      such potential Beneficial Owner.

For the purposes hereof, the communication by a Beneficial Owner or potential
Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to the Auction
Agent, of information referred to in clauses (a)(i) or (a)(ii) of this
paragraph (2) is hereinafter referred to as an "Order" and collectively as
"Orders" and each Beneficial Owner and each potential Beneficial Owner placing
an Order with a Broker-Dealer, and such Broker-Dealer placing an Order with
the Auction Agent, is hereinafter referred to as a "Bidder" and collectively
as "Bidders;" an Order containing the information referred to in clause
(a)(i)(A) of this paragraph (2) is hereinafter referred to as a d Order" and
collectively as "Hold Orders;" an Order containing the information referred to
in clauses (a)(i)(B) or (a)(ii) of this paragraph (2) is hereinafter referred
to as a "Bid" and collectively as "Bids;" and an Order containing the
information referred to in clause (a)(i)(C) of this paragraph (2) is
hereinafter referred to as a "Sell Order" and collectively as "Sell Orders."

            (i)   A Bid by a Beneficial Owner or an Existing Holder of Series B
      Preferred Shares subject to an Auction on any Auction Date shall
      constitute an irrevocable offer to sell:

                  (A) the number of Outstanding Series B Preferred Shares
            specified in such Bid if the Applicable Rate determined on such
            Auction Date shall be less than the rate specified therein;

                  (B) such number or a lesser number of Outstanding Series B
            Preferred Shares to be determined as set forth in paragraph
            5(a)(iv) if the Applicable Rate for Series B Preferred Shares
            determined on such Auction Date shall be equal to the rate
            specified therein; or

                  (C) the number of Outstanding Series B Preferred Shares
            specified in such Bid if the rate specified therein shall be
            higher than the Maximum Rate, or such number or a lesser number of
            Outstanding Series B Preferred Shares to be determined as set
            forth in paragraph 5(b)(iii) if the rate specified therein shall
            be higher than the Maximum Rate and Sufficient Clearing Bids do
            not exist.

            (ii) A Sell Order by a Beneficial Owner or an Existing Holder of
      Series B Preferred Shares subject to an Auction on any Auction Date
      shall constitute an irrevocable offer to sell:

                  (A) the number of Outstanding Series B Preferred Shares
            specified in such Sell Order; or

                  (B) such number or a lesser number of Outstanding Series B
            Preferred Shares as set forth in paragraph 5(b)(iii) if Sufficient
            Clearing Bids do not exist; provided, however, that a
            Broker-Dealer that is an Existing Holder with respect to Series B
            Preferred Shares shall not be liable to any Person for failing to
            sell such shares pursuant to a Sell Order described in the proviso
            to paragraph 3(c) if (1) such shares were transferred by the
            Beneficial Owner thereof without compliance by such Beneficial
            Owner or its transferee Broker-Dealer (or other transferee Person,
            if permitted by the Trust) with the provisions of paragraph 6 or
            (2) such Broker-Dealer has informed the Auction Agent pursuant to
            the terms of its Broker-Dealer Agreement that, according to such
            Broker-Dealer's records, such Broker-Dealer believes it is not the
            Existing Holder of such shares.

            (iii) A Bid by a Potential Holder of Series B Preferred Shares
      subject to an Auction on any Auction Date shall constitute an
      irrevocable offer to purchase:

                  (A) the number of Outstanding Series B Preferred Shares
            specified in such Bid if the Applicable Rate determined on such
            Auction Date shall be higher than the rate specified therein; or

                  (B) such number or a lesser number of Outstanding Series B
            Preferred Shares as set forth in paragraph 5(a)(v) if the
            Applicable Rate determined on such Auction Date shall be equal to
            the rate specified therein.

      (c) No Order for any number of Series B Preferred Shares other than
whole shares shall be valid.

3.   Submission of Orders by Broker-Dealers to Auction Agent.

      (a) Each Broker-Dealer shall submit in writing to the Auction Agent
prior to the Submission Deadline on each Auction Date all Orders for Series B
Preferred Shares subject to an Auction on such Auction Date obtained by such
Broker-Dealer, designating itself (unless otherwise permitted by the Trust) as
an Existing Holder in respect of shares subject to Orders submitted or deemed
submitted to it by Beneficial Owners and as a Potential Holder in respect of
shares subject to Orders submitted to it by potential Beneficial Owners, and
shall specify with respect to each Order for such shares:

            (i) the name of the Bidder placing such Order (which shall be the
      Broker-Dealer unless otherwise permitted by the Trust);

            (ii) the aggregate number of Series B Preferred Shares that are
      the subject of such Order;

            (iii) to the extent that such Bidder is an Existing Holder of
      Series B Preferred Shares:

                  (A) the number of Series B Preferred Shares, if any, subject
            to any Hold Order of such Existing Holder;

                  (B) the number of Series B Preferred Shares, if any, subject
            to any Bid of such Existing Holder and the rate specified in such
            Bid; and

                  (C) the number of Series B Preferred Shares, if any, subject
            to any Sell Order of such Existing Holder; and

            (iv) to the extent such Bidder is a Potential Holder of Series B
      Preferred Shares, the rate and number of Series B Preferred Shares
      specified in such Potential Holder's Bid.

      (b) If any rate specified in any Bid contains more than three figures to
the right of the decimal point, the Auction Agent shall round such rate up to
the next highest one thousandth (.001) of 1%.

      (c) If an Order or Orders covering all of the Outstanding Series B
Preferred Shares held by any Existing Holder is not submitted to the Auction
Agent prior to the Submission Deadline, the Auction Agent shall deem a Hold
Order to have been submitted by or on behalf of such Existing Holder covering
the number of Outstanding Series B Preferred Shares held by such Existing
Holder and not subject to Orders submitted to the Auction Agent; provided,
however, that if an Order or Orders covering all of the Outstanding Series B
Preferred Shares held by any Existing Holder is not submitted to the Auction
Agent prior to the Submission Deadline for an Auction relating to a Special
Dividend Period consisting of more than 28 calendar days, the Auction Agent
shall deem a Sell Order to have been submitted by or on behalf of such
Existing Holder covering the number of Outstanding Series B Preferred Shares
held by such Existing Holder and not subject to Orders submitted to the
Auction Agent.

      (d) If one or more Orders of an Existing Holder is submitted to the
Auction Agent covering in the aggregate more than the number of Outstanding
Series B Preferred Shares subject to an Auction held by such Existing Holder,
such Orders shall be considered valid in the following order of priority:

            (i) all Hold Orders shall be considered valid, but only up to and
      including in the aggregate the number of Outstanding Series B Preferred
      Shares held by such Existing Holder, and if the number of shares subject
      to such Hold Orders exceeds the number of Outstanding Series B Preferred
      Shares held by such Existing Holder, the number of shares subject to
      each such Hold Order shall be reduced pro rata to cover the number of
      Outstanding Series B Preferred Shares held by such Existing Holder;

                  (A) any Bid for Series B Preferred Shares shall be
            considered valid up to and including the excess of the number of
            Outstanding Series B Preferred Shares held by such Existing Holder
            over the number of Series B Preferred Shares subject to any Hold
            Orders referred to in clause (d)(i) above;

                  (B) subject to subclause (d)(ii)(A), if more than one Bid of
            an Existing Holder for Series B Preferred Shares is submitted to
            the Auction Agent with the same rate and the number of Outstanding
            Series B Preferred Shares subject to such Bids is greater than
            such excess, such Bids shall be considered valid up to and
            including the amount of such excess, and the number of Series B
            Preferred Stock subject to each Bid with the same rate shall be
            reduced pro rata to cover the number of shares equal to such
            excess;

                  (C) subject to subclauses (d)(ii)(A) and (B), if more than
            one Bid of an Existing Holder for Series B Preferred Shares is
            submitted to the Auction Agent with different rates, such Bids
            shall be considered valid in the ascending order of their
            respective rates up to and including the amount of such excess;
            and

                  (D) in any such event, the number, if any, of such
            Outstanding Series B Preferred Shares subject to any portion of
            Bids considered not valid in whole or in part under this paragraph
            3(d)(ii) shall be treated as the subject of a Bid by or on behalf
            of a Potential Holder at the rate specified therein; and

            (iii) all Sell Orders for Series B Preferred Shares shall be
      considered valid up to and including the excess of the number of
      Outstanding Series B Preferred Shares held by such Existing Holder over
      the sum of Outstanding Series B Preferred Shares subject to valid Hold
      Orders referred to in paragraph 3(d)(i) above and valid Bids referred to
      in paragraph 3(d)(ii) above.

      (e) If more than one Bid for Series B Preferred Shares is submitted to
the Auction Agent by or on behalf of any Potential Holder, each such Bid
submitted shall be a separate Bid with the rate and number of shares therein
specified.

      (f) Any Order submitted by a Beneficial Owner or a potential Beneficial
Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior
to the Submission Deadline on any Auction Date, shall be irrevocable.

4.    Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate.

      (a) Not earlier than the Submission Deadline on each Auction Date for
Series B Preferred Shares, the Auction Agent shall assemble all valid Orders
submitted or deemed submitted to it by the Broker-Dealers (each such Order as
submitted or deemed submitted by a Broker-Dealer being hereinafter referred to
individually as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted
Sell Order," as the case may be, or as a "Submitted Order" and collectively as
"Submitted Hold Orders," "Submitted Bids" or "Submitted Sell Orders," as the
case may be, or as "Submitted Orders") and shall determine:

            (i) the excess of the number of Outstanding Series B Preferred
      Shares over the number of Outstanding Series B Preferred Shares subject
      to Submitted Hold Orders (such excess being hereinafter referred to as
      the "Available Preferred Shares");

            (ii) from the Submitted Orders for Series B Preferred Shares
      whether:

                  (A) the number of Outstanding Series B Preferred Shares
            subject to Submitted Bids of Potential Holders specifying one or
            more rates equal to or lower than the Maximum Rate exceeds or is
            equal to the sum of

                  (B) the number of Outstanding Series B Preferred Shares
            subject to Submitted Bids of Existing Holders specifying one or
            more rates higher than the Maximum Rate; and

                  (C) the number of Outstanding Series B Preferred Shares
            subject to Submitted Sell Orders (in the event such excess or such
            equality exists (other than because the number of Series B
            Preferred Shares in clauses (a)(ii)(A) and (B) above is zero
            because all of the Outstanding Series B Preferred Shares are
            subject to Submitted Hold Orders), such Submitted Bids in clause
            (a)(ii)(A) above being hereinafter referred to collectively as
            "Sufficient Clearing Bids"); and

            (iii) if Sufficient Clearing Bids exist, the Winning Bid Rate.

      (b) Not later than 9:30 A.M., New York City time, on each Auction Date,
the Auction Agent shall advise the Trust of the Maximum Rate for the Series B
Preferred Shares for which an Auction is being held on the Auction Date and,
based on such determination, promptly after the Auction Agent has made the
determinations pursuant to paragraph 4(a), the Auction Agent shall advise the
Trust of the Applicable Rate for the next succeeding Dividend Period thereof
as follows:

            (i) if Sufficient Clearing Bids exist, that the Applicable Rate
      for the next succeeding Dividend Period thereof shall be equal to the
      Winning Bid Rate so determined;

            (ii) if Sufficient Clearing Bids do not exist (other than because
      all of the Outstanding shares of such series are subject to Submitted
      Hold Orders), that the Applicable Rate for the next succeeding Dividend
      Period thereof shall be equal to the Maximum Rate; or

            (iii) if all of the Outstanding Series B Preferred Shares are
      subject to Submitted Hold Orders, that the Applicable Rate for the next
      succeeding Dividend Period thereof shall be the All Hold Rate.

5.    Acceptance and Rejection of Submitted Bids and Submitted Sell
Orders and Allocation.

      Existing Holders shall continue to hold the Series B Preferred Shares
that are subject to Submitted Hold Orders, and, based on the determinations
made pursuant to paragraph 4(a), the Submitted Bids and Submitted Sell Orders
shall be accepted or rejected by the Auction Agent and the Auction Agent shall
take such other action as set forth below:

      (a) If Sufficient Clearing Bids for Series B Preferred Shares have been
made, all Submitted Sell Orders shall be accepted and, subject to the
provisions of paragraphs 5(d) and 5(e), Submitted Bids shall be accepted or
rejected as follows in the following order of priority and all other Submitted
Bids shall be rejected:

            (i) Existing Holders' Submitted Bids for Series B Preferred Shares
      specifying any rate that is higher than the Winning Bid Rate shall be
      accepted, thus requiring each such Existing Holder to sell the Series B
      Preferred Shares subject to such Submitted Bids;

            (ii) Existing Holders' Submitted Bids for shares Series B
      Preferred Shares specifying any rate that is lower than the Winning Bid
      Rate shall be rejected, thus entitling each such Existing Holder to
      continue to hold the Series B Preferred Shares subject to such Submitted
      Bids;

            (iii) Potential Holders' Submitted Bids for Series B Preferred
      Shares specifying any rate that is lower than the Winning Bid Rate shall
      be accepted;

            (iv) each Existing Holder's Submitted Bid for Series B Preferred
      Shares specifying a rate that is equal to the Winning Bid Rate shall be
      rejected, thus entitling such Existing Holder to continue to hold the
      Series B Preferred Shares subject to such Submitted Bid, unless the
      number of Outstanding Series B Preferred Shares subject to all such
      Submitted Bids shall be greater than the number of Series B Preferred
      Shares ("remaining shares") in the excess of the Available Preferred
      Shares over the number of Series B Preferred Shares subject to Submitted
      Bids described in paragraphs 5(a)(ii) and 5(a)(iii), in which event such
      Submitted Bid of such Existing Holder shall be rejected in part, and
      such Existing Holder shall be entitled to continue to hold Series B
      Preferred Shares subject to such Submitted Bid, but only in an amount
      equal to the Series B Preferred Shares obtained by multiplying the
      number of remaining shares by a fraction, the numerator of which shall
      be the number of Outstanding Series B Preferred Shares held by such
      Existing Holder subject to such Submitted Bid and the denominator of
      which shall be the aggregate number of Outstanding Series B Preferred
      Shares subject to such Submitted Bids made by all such Existing Holders
      that specified a rate equal to the Winning Bid Rate; and

            (v) each Potential Holder's Submitted Bid for Series B Preferred
      Shares specifying a rate that is equal to the Winning Bid Rate shall be
      accepted but only in an amount equal to the number of shares obtained by
      multiplying the number of Series B Preferred Shares in the excess of the
      Available Preferred Shares over the number of Series B Preferred Shares
      subject to Submitted Bids described in paragraph 5(a)(ii) through (iv)
      by a fraction, the numerator of which shall be the number of Outstanding
      Series B Preferred Shares subject to such Submitted Bid and the
      denominator of which shall be the aggregate number of Outstanding Series
      B Preferred Shares subject to such Submitted Bids made by all such
      Potential Holders that specified a rate equal to the Winning Bid Rate.

      (b) If Sufficient Clearing Bids for Series B Preferred Shares have not
been made (other than because all of the Outstanding shares are subject to
Submitted Hold Orders), subject to the provisions of paragraph 5(d), Submitted
Orders shall be accepted or rejected as follows in the following order of
priority and all other Submitted Bids for Series B Preferred Shares shall be
rejected:

            (i) Existing Holders' Submitted Bids for Series B Preferred Shares
      specifying any rate that is equal to or lower than the Maximum Rate
      shall be rejected, thus entitling such Existing Holders to continue to
      hold the Series B Preferred Shares subject to such Submitted Bids;

            (ii) Potential Holders' Submitted Bids for Series B Preferred
      Shares specifying any rate that is equal to or lower than the Maximum
      Rate shall be accepted; and

            (iii) Each Existing Holder's Submitted Bid for Series B Preferred
      Shares specifying any rate that is higher than the Maximum Rate and the
      Submitted Sell Orders of each Existing Holder shall be accepted, thus
      entitling each Existing Holder that submitted or on whose behalf was
      submitted any such Submitted Bid or Submitted Sell Order to sell Series
      B Preferred Shares subject to such Submitted Bid or Submitted Sell
      Order, but in both cases only in an amount equal to the number of Series
      B Preferred Shares obtained by multiplying the number of Series B
      Preferred Shares subject to Submitted Bids described in paragraph
      5(b)(ii) by a fraction, the numerator of which shall be the number of
      Outstanding Series B Preferred Shares held by such Existing Holder
      subject to such Submitted Bid or Submitted Sell Order and the
      denominator of which shall be the aggregate number of Outstanding Series
      B Preferred Shares subject to all such Submitted Bids and Submitted Sell
      Orders.

      (c) If all of the Outstanding Series B Preferred Shares are subject to
Submitted Hold Orders, all Submitted Bids for such shares shall be rejected.

      (d) If, as a result of the procedures described in paragraph 5(a)(iv) or
(v) or paragraph 5(b)(iii), any Existing Holder would be entitled or required
to sell, or any Potential Holder would be entitled or required to purchase, a
fraction of a share of Series B Preferred Shares on any Auction Date, the
Auction Agent shall, in such manner as it shall determine in its sole
discretion, round up or down the number of Series B Preferred Shares to be
purchased or sold by any Existing Holder or Potential Holder on such Auction
Date as a result of such procedures so that the number of shares so purchased
or sold by each Existing Holder or Potential Holder on such Auction Date shall
be whole shares.

      (e) If, as a result of the procedures described in paragraph 5(a)(v) any
Potential Holder would be entitled or required to purchase less than a whole
share of Series B Preferred Shares on any Auction Date, the Auction Agent
shall, in such manner as it shall determine in its sole discretion, allocate
Series B Preferred Shares for purchase among Potential Holders so that only
whole shares are purchased on such Auction Date as a result of such procedures
by any Potential Holder, even if such allocation results in one or more
Potential Holders not purchasing Series B Preferred Shares on such Auction
Date.

      (f) Based on the results of each Auction for Series B Preferred Shares,
the Auction Agent shall determine the aggregate number of such shares to be
purchased and the aggregate number of such shares to be sold by Potential
Holders and Existing Holders and, with respect to each Potential Holder and
Existing Holder, to the extent that such aggregate number of shares to be
purchased and such aggregate number of shares to be sold differ, determine to
which other Potential Holder(s) or Existing Holder(s) they shall deliver, or
from which other Potential Holder(s) or Existing Holder(s) they shall receive,
as the case may be, Series B Preferred Shares. Notwithstanding any provision
of the Auction Procedures to the contrary, in the event an Existing Holder or
Beneficial Owner of Series B Preferred Shares with respect to whom a
Broker-Dealer submitted a Bid to the Auction Agent for such shares that was
accepted in whole or in part, or submitted or is deemed to have submitted a
Sell Order for such shares that was accepted in whole or in part, fails to
instruct its Agent Member to deliver such shares against payment therefor,
partial deliveries of Series B Preferred Shares that have been made in respect
of Potential Holders' or Potential Beneficial Owners' Submitted Bids for
Series B Preferred Shares that have been accepted in whole or in part shall
constitute good delivery to such Potential Holders and Potential Beneficial
Owners.

      (g) Neither the Trust nor the Auction Agent nor any affiliate of either
shall have any responsibility or liability with respect to the failure of an
Existing Holder, a Potential Holder, a Beneficial Owner, a Potential
Beneficial Owner or its respective Agent Member to deliver Series B Preferred
Shares or to pay for Series B Preferred Shares sold or purchased pursuant to
the Auction Procedures or otherwise.

6.    Transfer of Series B Preferred Shares.

      Unless otherwise permitted by the Trust, a Beneficial Owner or an
Existing Holder may sell, transfer or otherwise dispose of Series B Preferred
Shares only in whole shares and only pursuant to a Bid or Sell Order placed
with the Auction Agent in accordance with the procedures described in this
Part II or to a Broker-Dealer; provided, however, that (a) a sale, transfer or
other disposition of Series B Preferred Shares from a customer of a
Broker-Dealer who is listed on the records of that Broker-Dealer as the Holder
of such shares to that Broker-Dealer or another customer of that Broker-Dealer
shall not be deemed to be a sale, transfer or other disposition for purposes
of this paragraph 6 if such Broker-Dealer remains the Existing Holder of the
shares so sold, transferred or disposed of immediately after such sale,
transfer or disposition and (b) in the case of all transfers other than
pursuant to Auctions, the Broker-Dealer (or other Person, if permitted by the
Trust) to whom such transfer is made shall advise the Auction Agent of such
transfer.


                                   PART III

      ABILITY OF BOARD OF TRUSTEES TO MODIFY THE STATEMENT OF PREFERENCES

         1. Modification to Prevent Ratings Reduction or Withdrawal.

         The Board of Trustees, without further action by the shareholders,
may amend, alter, add to or repeal any provision of this Statement of
Preferences including provisions that have been adopted by the Trust pursuant
to Rating Agency guidelines, if the Board of Trustees determines that such
amendments or modifications are necessary to prevent a reduction in, or the
withdrawal of, a rating of the Preferred Shares and are in the aggregate in
the best interests of the Holders of the Preferred Shares.

         2. Other Modification.

         The Board of Trustees, without further action by the shareholders,
may amend, alter, add to or repeal any provision of this Statement of
Preferences including, without limitation, provisions that have been adopted
by the Trust pursuant to any rating agency guidelines, if the Board of
Trustees determines that such amendments or modifications will not in the
aggregate adversely affect the rights and preferences of any series of the
Preferred Shares, provided, that the Trust has received advice from each
applicable Rating Agency that such amendment or modification is not expected
to adversely affect such Rating Agency's then-current rating of such series of
the Trust's Preferred Shares.

         Notwithstanding the provisions of the preceding paragraph, to the
extent permitted by law, the Board of Trustees, without the vote of the
Holders of the Series B Preferred Shares or any other capital shares of the
Trust, may amend the provisions of this Statement of Preferences to resolve
any inconsistency or ambiguity or to remedy any formal defect so long as the
amendment does not in the aggregate adversely affect the rights and
preferences of the Series B Preferred Shares.

         IN WITNESS WHEREOF, The Gabelli Utility Trust has caused these
presents to be signed in its name and on its behalf by a duly authorized
officer, and its corporate seal to be hereunto affixed and attested by its
Secretary, and the said officers of the Trust further acknowledge said
instrument to be the corporate act of the Trust, and state that to the best of
their knowledge, information and belief under penalty of perjury the matters
and facts herein set forth with respect to approval are true in all material
respects, all on July 30, 2003.



                                            By  /s/ Bruce Alpert
                                              -------------------------------
                                              Name:  Bruce Alpert
                                              Title: President

Attest:

    /s/ James E. McKee
____________________________
Name:  James E. McKee
Title: Secretary

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>5
<FILENAME>ny422942.txt
<DESCRIPTION>EXHIBIT 99 (D)(IV)
<TEXT>
                                                                 EX 99(d)(iv)

 VOID IF NOT RECEIVED BY THE SUBSCRIPTION AGENT BEFORE 5:00 P.M. NEW YORK TIME
                             ON THE EXPIRATION DATE

CONTROL NO. _____ MAXIMUM PRIMARY SUBSCRIPTION SHARES AVAILABLE

                            THE GABELLI UTILITY TRUST

                      SUBSCRIPTION RIGHTS FOR COMMON STOCK

Dear Shareholder:

                      IN ORDER TO EXERCISE YOUR RIGHTS, YOU

                 MUST COMPLETE BOTH SIDES OF THE TEAR OFF CARD.

As the registered owner of the Subscription Certificate below, you are entitled
to subscribe for the number of shares of Common Stock, $.001 par value per
share, of The Gabelli Utility Trust (the "Fund"), shown above pursuant to the
Primary Subscription Right and upon the terms and conditions and at the
Subscription Price for each share of Common Stock specified in the Prospectus
relating thereto. The Rights represented hereby include the Over-Subscription
Privilege for Rights holders, as described in the Prospectus. Under the
Privilege, any number of additional shares may be purchased by a Rights holder
if such shares are available and the holder's Primary Subscription Rights have
been fully exercised to the extent possible.

Registered owners who are participants in The Gabelli Utility Trust Automatic
Dividend Reinvestment and Voluntary Cash Purchase Plan will receive their
primary and oversubscription shares via an uncertificated share credit to their
existing accounts. To request a stock certificate, participants in the plan
must check Box D on the reverse side of the Subscription Certificate below.
Registered owners who are not participants in the plan will be automatically
issued stock certificates. Stock certificates for primary share subscriptions
will be delivered as soon as practicable after receipt of the required
completed Subscription Certificate and after full payment has been received and
cleared. Stock certificates for oversubscriptions and confirmation statements
reflecting uncertificated share credits for dividend reinvestment accounts will
be delivered as soon as practicable after the Expiration Date and after all
allocations have been effected.

                     THE SUBSCRIPTION RIGHT IS TRANSFERABLE

PAYMENT MUST BE IN UNITED STATES DOLLARS. ONLY MONEY ORDERS OR CHECKS DRAWN ON
A BANK LOCATED IN THE CONTINENTAL UNITED STATES (OR FOR CANADIAN RESIDENTS
ONLY, ON A BANK LOCATED IN CANADA) AND MADE PAYABLE TO THE GABELLI UTILITY
TRUST WILL BE ACCEPTED. PLEASE REFERENCE YOUR RIGHTS CARD CONTROL NUMBER ON
YOUR CHECK, MONEY ORDER OR NOTICE OF GUARANTEED DELIVERY.

        VOID IF NOT RECEIVED BY THE SUBSCRIPTION AGENT BEFORE 5:00 P.M.
                      NEW YORK TIME ON THE EXPIRATION DATE

CONTROL NO. CUSIP NO.

__________ RIGHTS REPRESENTED BY THIS
SUBSCRIPTION CERTIFICATE

                                  ACCOUNT NO.

                           THE GABELLI UTILITY TRUST

                      SUBSCRIPTION RIGHTS FOR COMMON STOCK

          (COMPLETE APPROPRIATE SECTION ON REVERSE SIDE OF THIS FORM)

The registered owner of this Subscription Certificate named below, or assigns,
is entitled to the number of Rights to subscribe for the Common Stock, $.001
par value, of The Gabelli Utility Trust (the "Fund") shown above, in the ratio
of one share of Common Stock for each three Rights, pursuant to the Primary
Subscription Right and upon the terms and conditions and at the price for each
share of Common Stock specified in the Prospectus relating thereto. The Rights
represented hereby include the Over-Subscription Privilege for Record Date
Stockholders only, as described in the Prospectus. Under this Privilege, any
number of additional shares may be purchased by a Record Date Stockholder if
such shares are available and the owner's Primary Subscription Rights have been
fully exercised to the extent possible and the pro rata allocation requirements
have been satisfied. Stock certificates for the shares subscribed for pursuant
to the Primary Subscription Right will be delivered as soon as practicable
after receipt of the required completed Subscription Certificate and after full
payment has been received and cleared. Stock certificates for the shares
subscribed for pursuant to the Over-Subscription Privilege will be delivered as
soon as practicable after the Expiration Date and after all allocations have
been effected. Registered owners who are participants in The Gabelli Utility
Trust Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan will
receive their primary and oversubscription shares via an uncertificated share
credit to their existing accounts. To request a stock certificate, participants
in the plan should check Box D on the reverse side of this form. Any refund in
connection with an over-subscription will be delivered as soon as practicable
after the Expiration Date and after all allocations have been effected. The
Subscription Certificate may be transferred in the same manner and with the
same effect as in the case of a negotiable instrument payable to specific
persons, by duly completing and signing the assignment on the reverse side
hereof. To subscribe pursuant to the Primary Subscription Right or the
Over-Subscription Privilege, six Rights and the Subscription Price are required
for each share of Common Stock. Payment of the $__ per share must accompany the
Subscription Certificate. See reverse side of forms.

To subscribe for your primary shares please complete line "A" on the card
below.

EXAMPLE:

100 shares = 100 rights (100 rights will be AUTOMATICALLY rounded up to 102
rights, the nearest number of rights divisible by three)

102 rights divided by 3 = 34 primary shares

The maximum number of primary subscription shares would be 34.

A. 34 x $____ = $_____
                                (No. of shares)

If you are not subscribing for your full Primary Subscription, check box "E"
below and we will attempt to sell any remaining unexercised Rights.

To subscribe for any over-subscription shares please complete line "B" below.

PLEASE NOTE: Only Record Date Stockholders who have exercised their Primary
Subscription in full may apply for shares pursuant to the Over-Subscription
Privilege.

PAYMENT OF SHARES: Full payment for both the primary and over-subscription
shares or a notice of guaranteed delivery must accompany this subscription.
Please reference your rights card control number on your check, money order or
notice of guaranteed delivery.

If the aggregate Subscription Price paid by a Record Date Stockholder is
insufficient to purchase the number of shares of Common Stock that the holder
indicates are being subscribed for, or if a Record Date Stockholder does not
specify the number of shares of Common Stock to be purchased, then the Record
Date Stockholder will be deemed to have exercised first, the Primary
Subscription Right (if not already fully exercised) and second, the
Over-Subscription Privilege to purchase shares of Common Stock to the full
extent of the payment rendered. If the aggregate Subscription Price paid by a
Record Date Stockholder exceeds the amount necessary to purchase the number of
shares of Common Stock for which the Record Date Stockholder has indicated an
intention to subscribe, then the Record Date Stockholder will be deemed to have
exercised first, the Primary Subscription Right (if not already fully
exercised) and second, the Over-Subscription Privilege to the full extent of
the excess payment tendered.

Expiration Date September   , 2003 (unless extended) To: EQUISERVE

Attention: Corporate Actions

                   PLEASE FILL IN ALL APPLICABLE INFORMATION

                                    By Mail:
                                 P.O. Box 9573
                             Boston, MA 02205-9573

                             By Overnight Courier:
                              40 Campanelli Drive
                              Braintree, MA 02184

                                 By Facsimile:

                                 (781) 575-4826

With the original Subscription Certificate to be sent by mail, hand or
overnight courier. Confirm facsimile by telephone to (781) 575-4816

                                    By Hand:
                Securities Transfer and Reporting Services, Inc.

                                 c/o EquiServe
                           100 Williams St. Galleria

                               New York, NY 10038

A. Primary Subscription _____________ x $ = $____________ (3 Rights = 1 share)
(No. of Shares) (Purchase Price)

B. Over-Subscription

Privilege _____________ x $ = $___________(1) (Shares) (Purchase Price)

C. Amount of Check Enclosed

= $--------

(or amount in notice of guaranteed delivery)

D. IF YOU CURRENTLY PARTICIPATE IN THE FUND'S AUTOMATIC DIVIDEND

REINVESTMENT AND CASH PURCHASE PLAN AND WISH TO RECEIVE A CERTIFICATE, CHECK
HERE [ ]

E. Sell any Remaining Rights [ ]

F. Sell all of my Rights [ ]

(1) The Over-Subscription Privilege can be exercised only by a Record Date
Stockholder, as described in the Prospectus, and only if the Rights initially
issued to him are exercised to the fullest extent possible.

SECTION 1. TO SUBSCRIBE: I hereby irrevocably subscribe for the face amount of
Common Stock indicated as the total of A and B hereon upon the terms and
conditions specified in the Prospectus relating thereto, receipt of which is
acknowledged. I hereby agree that if I fail to pay for the shares of Common
Stock for which I have subscribed, the Fund may exercise any of the remedies
set forth in the Prospectus.

TO SELL: If I have checked either the box on line E or on line F, I authorize
the sale of Rights by the Subscription Agent according to the procedures
described in the Prospectus.

SIGNATURE(S) OF SUBSCRIBER(S)

Address for delivery of Shares if other than shown on front

If permanent change of address, check here [ ]

Please give your telephone number: ( ) _______________

Please give your e-mail address: ___________________ SECTION 2. TO TRANSFER
RIGHTS (except pursuant to E or F above):

For value received, ________ of the Rights represented by the Subscription
Certificate are assigned to:

                         (Print Full Name of Assignee)

                              (Print Full Address)

                          SIGNATURE(S) OF ASSIGNEE(S)

IMPORTANT: The Signature(s) must correspond in every particular, without
alteration, with the name(s) as printed on your Subscription Certificate.

Your signature must be guaranteed by:

(a) a commercial bank or trust company or (b) a member firm of a domestic stock
exchange or (c) a savings bank or credit union.

                                   SIGNATURE

                             (Name of Bank or Firm)

                                 GUARANTEED BY:

                        (Signature of Officer and Title)

<PAGE>

                                                                    EX 99(d)(v)

                         NOTICE OF GUARANTEED DELIVERY

                         FOR SHARES OF COMMON STOCK OF

                           THE GABELLI UTILITY TRUST

                   SUBSCRIBED FOR UNDER PRIMARY SUBSCRIPTION

                      AND THE OVER-SUBSCRIPTION PRIVILEGE

As set forth in the Prospectus, this form or one substantially equivalent
hereto may be used as a means of effecting subscription and payment for all
shares of the Fund's Common Stock (the "Shares") subscribed for under the
Primary Subscription and the Over-Subscription Privilege. Such form may be
delivered by hand or sent by facsimile transmission, overnight courier or first
class mail to the Subscription Agent.

                           THE SUBSCRIPTION AGENT IS:

                                   EQUISERVE

                          Attention: Corporate Actions

       BY MAIL:                                            BY FACSIMILE:
    P.O. Box 9573                                          (781) 575-4826
Boston, MA 02205-9573

                         CONFIRM BY TELEPHONE TO:

                              (781) 575-4816

BY OVERNIGHT COURIER:                                     BY HAND:
 40 Campanelli Drive                                Securities Transfer and
 Braintree, MA 02184                               Reporting Services, Inc.

                                 c/o EquiServe

                           100 Williams St. Galleria

                               New York, NY 10038

DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA
A TELECOPY FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE
A VALID DELIVERY.

The New York Stock Exchange member firm or bank or trust company which
completes this form must communicate this guarantee and the number of Shares
subscribed for in connection with this guarantee (separately disclosed as to
the Primary Subscription and the Over-Subscription Privilege) to the
Subscription Agent and must deliver this Notice of Guaranteed Delivery of
Payment, guaranteeing delivery of (a) payment in full for all subscribed Shares
and (b) a properly completed and signed copy of the Subscription Certificate
(which certificate and full payment must then be delivered no later than the
close of business of the third business day after the Expiration Date, unless
extended) to the Subscription Agent prior to 5:00 p.m., New York time, on the
Expiration Date, unless extended. Failure to do so will result in a forfeiture
of the Rights.

                                   GUARANTEE

The undersigned, a member firm of the New York Stock Exchange or a bank or
trust company having an office or correspondent in the United States,
guarantees delivery to the Subscription Agent by no later than 5:00 p.m., New
York time, on September , 2003 (unless extended as described in the Prospectus)
of (a) a properly completed and executed Subscription Certificate and (b)
payment of the full Subscription Price for Shares subscribed for on Primary
Subscription and for any additional Shares subscribed for pursuant to the
Over-Subscription Privilege, as subscription for such Shares is indicated
herein or in the Subscription Certificate.

                                                    BROKER ASSIGNED CONTROL #


                         THE GABELLI UTILITY TRUST

<TABLE>
<CAPTION>
<S>                          <C>                        <C>                         <C>
1.  Primary Subscription     Number of Rights to be     Number of Primary Shares    Payment to be made in
                             exercised                  requested for which you     connection with Primary
                                                        are guaranteeing delivery   Shares.
                                                        of Rights and Payment


                             _______________Rights      _______________Shares        $_______________
                                                        (Rights / by 3)

2.  Over-Subscription                                   Number of                   Payment to be made in
                                                        Over-Subscription Shares    connection with
                                                        requested for which you     Over-Subscription Shares
                                                        are guaranteeing payment


                                                        _______________Shares       $_______________

3.  Totals                   Total Number of Rights
                             to be Delivered


                             _______________Rights                                  $_________________
                                                                                      Total Payment
</TABLE>

Method of delivery (circle one)

A. Through DTC

B. Direct to EquiServe, as Subscription Agent. Please reference below the
registration of the Rights to be delivered.

PLEASE SIGN A UNIQUE CONTROL NUMBER FOR EACH GUARANTEE SUBMITTED. This number
needs to be referenced on any direct delivery of Rights or any delivery through
DTC. In addition, please note that if you are guaranteeing for
Over-Subscription Privilege Shares and are a DTC participant, you must also
execute and forward to EquiServe a DTC Participant Over-Subscription Exercise
form.

- ------------------------------       ---------------------------------------
Name of Firm                         Authorized Signature

- ------------------------------       ---------------------------------------
DTC Participant Number               Title

- ------------------------------       ---------------------------------------
Address                              Name (Please Type or Print)


- ------------------------------       ---------------------------------------
Zip Code                             Phone Number


- ------------------------------       ---------------------------------------
Contact Name                         Date





<PAGE>

                                                                 EX99(D)(VI)

                           THE GABELLI UTILITY TRUST

                                RIGHTS OFFERING

                 NOMINEE HOLDER OVER-SUBSCRIPTION CERTIFICATION

                   PLEASE COMPLETE ALL APPLICABLE INFORMATION

<TABLE>
<CAPTION>
 By Express Mail or Overnight Courier:             By Mail:                            By Hand:

                                                                         Securities Transfer and Reporting

<S>                                     <C>                                <C>
          Equiserve                               Equiserve                         Services, Inc.
    Att: Corporate Actions                 Att: Corporate Actions                  c/o Equiserve
     40 Campanelli Drive                       P.O. Box 9573                100 Williams Street Galleria
Braintree, Massachusetts 02184          Boston, Massachusetts 02205-9573           New York, NY 10038
</TABLE>



THIS FORM IS TO BE USED ONLY BY NOMINEE HOLDERS TO EXERCISE THE OVER-
SUBSCRIPTION PRIVILEGE IN RESPECT OF RIGHTS WITH RESPECT TO WHICH THE PRIMARY
SUBSCRIPTION PRIVILEGE WAS EXERCISED IN FULL AND DELIVERED THROUGH THE
FACILITIES OF A COMMON DEPOSITORY. ALL OTHER EXERCISES OF OVER-SUBSCRIPTION
PRIVILEGES MUST BE EFFECTED BY THE DELIVERY OF THE SUBSCRIPTION CERTIFICATES.

THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH IN THE FUND'S
PROSPECTUS DATED AUGUST __, 2003 (THE "PROSPECTUS") AND ARE INCORPORATED HEREIN
BY REFERENCE. COPIES OF THE PROSPECTUS ARE AVAILABLE UPON REQUEST FROM THE
SUBSCRIPTION AGENT.

VOID UNLESS RECEIVED BY THE SUBSCRIPTION AGENT WITH PAYMENT IN FULL OR WITH A
PROPERLY COMPLETED NOTICE OF GUARANTEED DELIVERY BEFORE 5:00 P.M., NEW YORK
CITY TIME, ON SEPTEMBER , 2003, UNLESS EXTENDED BY THE FUND (THE "EXPIRATION
DATE").

1. The undersigned hereby certifies to the Subscription Agent that it is a
participant in ____________ [Name of Depository] (the "Depository") and that it
has either (i) exercised the Primary Subscription in respect of the Rights and
delivered such exercised Rights to the Subscription Agent by means of transfer
to the Depository Account of the Subscription Agent or (ii) delivered to the
Subscription Agent a Notice of Guaranteed Delivery in respect of the exercise
of the Primary Subscription Privilege and will deliver the Rights called for in
such Notice of Guaranteed Delivery to the Subscription Agent by means of
transfer to such Depository Account of Subscription Agent.

2. The undersigned hereby exercises the Over-Subscription Privilege to
purchase, to the extent available, ____________ shares of Common Stock and
certifies to the Subscription Agent that such Over-Subscription Privilege is
being exercised for the account or accounts of persons (which may include the
undersigned) on whose behalf all Primary Subscription Rights have been
exercised.*

3. The undersigned understands that payment of the Subscription Price of $ per
share for each share of Common Stock subscribed for pursuant to the
Over-Subscription Privilege must be received by the Subscription Agent before
5:00 p.m., New York City time, on the Expiration Date, unless a Notice of
Guaranteed Delivery is used, in which case, payment in full must be received by
the Subscription Agent no later than the close of business on the third
business day after the Expiration Date and represents that such payment, in the
aggregate amount of $________, either

                            (check appropriate box)

[ ] has been or is being delivered to the Subscription Agent pursuant to the
    Notice of Guaranteed Delivery referred to above

or

[ ] is being delivered to the Subscription Agent herewith

or

[ ] has been delivered separately to the Subscription Agent; and, in the case
    of funds not delivered pursuant to a Notice of Guaranteed Delivery, is or
    was delivered in the manner set forth below (check appropriate box and
    complete information relating thereto):

[ ] uncertified check

[ ] certified check

[ ] bank draft

                    PRIMARY SUBSCRIPTION CONFIRMATION NUMBER

                             NAME OF NOMINEE HOLDER

                                    ADDRESS:

- --------------------------------       ---------------------------------------
Depository Participant Number

                                       ---------------------------------------
                                       City           State        Zip Code


- --------------------------------
Contact Name

- --------------------------------
Phone Number                          By:
                                           -----------------------------------
                                           Name:
                                           Title:

Dated:            , 200_



* PLEASE ATTACH A BENEFICIAL OWNER LISTING CONTAINING THE RECORD DATE POSITION
OF RIGHTS OWNED, THE NUMBER OF PRIMARY SHARES SUBSCRIBED AND THE NUMBER OF
OVER-SUBSCRIPTION SHARES, IF APPLICABLE, REQUESTED BY EACH SUCH OWNER.


<PAGE>

                                                                 EX99(d)(vii)

                                    FORM OF

             SUBSCRIPTION, DISTRIBUTION AND ESCROW AGENCY AGREEMENT

This Subscription, Distribution and Escrow Agency Agreement (the "Agreement")
is made as of ______________, 2003 between The Gabelli Utility Trust, a
Delaware business trust ("Gabelli") and Equiserve Trust Company, N.A., a
national banking association, as subscription, distribution and escrow agent
("Agent").

WHEREAS, Gabelli proposes to make a subscription offer by issuing certificates
or other evidences of subscription rights, in the form designated by Gabelli
("Subscription Certificates") to shareholders of record ("Record Date
Shareholders") of its Common Shares of Beneficial Interest as of a record date
specified by Gabelli (the "Record Date"), pursuant to which each Record Date
Shareholder will have certain rights (the "Rights") to subscribe to shares of
Gabelli Common Shares of Beneficial Interest, par value $.001 ("Common Capital
Stock"), as described in and upon such terms as are set forth in the prospectus
(the "Prospectus") included in the Form N-2 Registration Statement filed by
Gabelli with the Securities and Exchange Commission on May 22, 2003, as amended
by any amendment filed with respect thereto (the "Registration Statement");

WHEREAS, Gabelli wishes the Agent to perform certain acts on behalf of Gabelli,
and the Agent is willing to so act, in connection with the distribution of the
Subscription Certificates and the issuance and exercise of the Rights to
subscribe therein set forth, all upon the terms and conditions set forth
herein;

NOW, THEREFORE, in consideration of the foregoing and of the mutual agreements
set forth herein, the parties agree as follows:

1. Pursuant to resolution of its Board of Trustees Gabelli hereby appoints and
authorizes the Agent to act on its behalf in accordance with the provisions
hereof, and the Agent hereby accepts such appointment and agrees to so act.

2. (a) Each Subscription Certificate shall evidence the Rights of the Record
Date Shareholder therein named to purchase Common Capital Stock upon the terms
and conditions therein and herein set forth.

(b) Upon the written advice of Gabelli, signed by its Chairman, President,
Secretary or Assistant Secretary, as to the Record Date, the Agent shall, from
a list of Gabelli Shareholders as of the Record Date to be prepared by the
Agent in its capacity as Transfer Agent of Gabelli, prepare and record
Subscription Certificates in the names of the Record Date Shareholders, setting
forth the number of Rights to subscribe to Gabelli Common Capital Stock
calculated on the basis of one Right for each share of Common Capital Stock
recorded on the Gabelli books in the name of each such Record Date Shareholder
as of the Record Date. Each Subscription Certificate shall be dated as of the
Record Date and shall be executed manually or by facsimiles signature of a duly
authorized Officer of Gabelli. Upon the written advice, signed as aforesaid, as
to the effective date of the Registration Statement, the Agent shall as
promptly as practicable countersign and deliver the Subscription Certificates,
together with a copy of the Prospectus, to all Record Date Shareholders. No
Subscription Certificate shall be valid for any purpose unless so executed.
Should any Officer whose signature has been placed upon any Subscription
Certificate cease to hold such office at any time thereafter, such event shall
have no effect on the validity of such Subscription Certificate.

3. (a) Each Subscription Certificate shall be irrevocable and fully
transferable. The Agent shall, in its capacity as Transfer Agent of Gabelli
maintain a register of Subscription Certificates and the holders of record
thereof (each of whom shall be deemed a "Record Date Shareholder" hereunder for
purposes of determining the rights of holders of Subscription Certificates).
Each Subscription Certificate shall, subject to the provisions thereof, entitle
the Record Date Shareholder in whose name it is recorded to the following:

(1) The right (the "Basic Subscription Right") to purchase a number of shares
of Common Capital Stock equal to one share of Common Capital Stock for every
three Subscription Rights; provided, however, that no fractional shares of
Common Capital Stock shall be issued; and

(2) The right (the "Oversubscription Right") to purchase from Gabelli
additional shares of Common Capital Stock, subject to the availability of such
shares and to allotment of such shares as may be available among Record Date
Shareholders who exercise Oversubscription Rights on the basis specified in the
Prospectus; provided, however, that a Record Date Shareholder who has not
exercised his Basic Subscription Rights with respect to the full number of
shares that such Record Date Shareholder is entitled to purchase by virtue of
his Basic Subscription Rights as of the Expiration Date, if any, shall not be
entitled to any Oversubscription Rights.

(b) A Record Date Shareholder may exercise his Basic Subscription Rights and
Oversubscription Rights by delivery to the Agent at its corporate office
specified in the Prospectus of (i) the Subscription Certificate with respect
thereto, duly executed by such Record Date Shareholder in accordance with and
as provided by the terms and conditions of the Subscription Certificate,
together with (ii) the purchase price of $__. __ for each share of Common
Capital Stock subscribed for by exercise of such Rights, in United States
dollars in cash, by check, or bank draft drawn on a bank in the continental
United States or by postal, telegraphic, or express money order, in each case
payable to the order of Gabelli.

(c) Rights may be exercised at any time after the date of issuance of the
Subscription Certificates with respect thereto but no later than 5:00 P.M.
Eastern Daylight Time on such date as Gabelli shall designate to the Agent in
writing (the "Expiration Date"). For the purpose of determining the time of the
exercise of any Rights, delivery of any material to the Agent shall be deemed
to occur when such materials are received at the corporate office of the Agent
specified in the Prospectus.

(d) Not withstanding the provisions of Section 3(b) and 3(c) retarding delivery
of an executed Subscription Certificate to the Agent prior to 5:00 P.M. Eastern
Daylight Time on the Expiration Date, if prior to such time the Agent receives
notice of guaranteed delivery by telegram or otherwise from a bank, trust
company or a New York Stock Exchange member guaranteeing delivery of (i) full
payment for shares purchased and subscribed for by virtue of a Rights Holder's
Rights, and (ii) a properly completed and executed Subscription Certificate,
then such exercise of Basic Subscription Rights and Oversubscription Rights
shall be regarded as timely, subject, however, to receipt of the duly executed
Subscription Certificate and full payment for the Capital Common Stock by the
Agent within five business days after the Expiration Date (as defined in the
Prospectus).

(e) Within ten business days following the Expiration Date (the "Confirmation
Date"), the Agent shall send a confirmation to each Shareholder (or, if shares
of Common Capital Stock on the Record Date are held by Cede & Co. or any other
depository or nominee, to Cede & Co. or such other depository or nominee),
showing (i) the number of shares acquired pursuant to the Basic Subscription
Rights, (ii) the number of shares, if any, acquired pursuant to the
Oversubscription Rights, (iii) the per share and total purchase price for the
shares, (iv) any amount payable to the Shareholder pursuant to Section 9, and
(v) any excess to be refunded by Gabelli to such Shareholder, in each case
based on the Subscription Price. Any excess payment to be refunded by Gabelli
to a Shareholder, shall be mailed by the Agent to the Shareholder within
fifteen business days after the Expiration Date, as provided in Section 6
below.

4. If, after allocation of shares of Common Capital Stock to persons exercising
Basic Subscription Rights, there remain primary or secondary oversubscription
shares, then the Agent shall allot the shares (the "Remaining Shares") to
persons exercising Oversubscription Rights, in the amounts of such
oversubscriptions. If the number of shares for which Oversubscription Rights
have been exercised is greater than the Remaining Shares, the Agent shall allot
the Remaining Shares to the persons exercising Oversubscription Rights pro rata
based solely on the number of Basic Subscription Rights exercised by each of
them. The Agent shall advise Gabelli immediately upon the completion of the
allocation set forth above as to the total number of shares subscribed and
distributable.

5. (a) The Agent, will deliver (i) certificates representing those shares
purchased pursuant to exercise of Basic Subscription Rights as soon as
practicable after the corresponding Rights have been validly exercised and full
payment for such shares has been received and cleared; (ii) certificates
representing those shares purchased pursuant to the exercise of
Oversubscription Rights as soon as practicable after the Expiration Date and
after all allocations have been effected; (iii) in the case of each Rights
Holder whose rights were sold pursuant to Section 9, within fifteen business
days after the Expiration Date, proceeds of such sale (provided, however, that
proceeds of sales on behalf of Record Dale Shareholders whose Subscription
Certificates are undeliverable shall be held by the Agent until they are either
claimed or escheated); (iv) in the case of each Record Date Shareholder who
subscribed, pursuant to the exercise of Oversubscription Rights, for a greater
number of shares than was allotted to such Record Date Shareholder under
Section 4, within fifteen business days after the Expiration Date, a refund
(and interest on such) in the amount of the difference between the purchase
price delivered for the shares subscribed for pursuant to the exercise of such
Oversubscription Rights and the purchase price of the shares so allotted under
Section 4 (an "Excess Payment").

6. (a) All proceeds received by the Agent from Rights holders in respect of the
exercise of rights shall be held by the Agent, on behalf of Gabelli, in a
segregated, interest-bearing escrow account (the "Escrow Account"). Pending
disbursement in the manner described in Section 6(b) below, Funds held in the
Escrow Account shall be invested by the Agent at the direction of Gabelli.

(b) The Agent shall deliver all proceeds received in respect of this exercise
of the Rights (including interest earned thereon) to Gabelli as promptly as
practicable, but in no event later than fifteen business days after the
Confirmation Date. Proceeds held in respect of Excess Payments (including
interest earned thereon) shall be refunded to Record Date Shareholders entitled
to such a refund within fifteen business days after the Expiration Date.

7. The Agent shall promptly advise Gabelli as to the date of delivery of Common
Capital Stock hereunder and shall supply Gabelli with a certified list of
Shareholders as of the Record Date.

8. The Agent shall account promptly to Gabelli with respect to Rights exercised
and concurrently account for all monies received and returned by the Agent with
respect to the purchase of shares of Common Capital Stock upon the exercise of
Rights.

9. The Agent shall use its best efforts to sell on the New York Stock Exchange,
on the terms set forth in the Prospectus, (i) all Rights submitted to it for
sale by Rights Holders in accordance with the Prospectus, provided such Rights
are received by the Agent at least one day prior to the Expiration Date, (ii)
all Rights of Record Date Shareholders whose Subscription Certificates remain
unclaimed as a result of being returned by postal authorities as undeliverable
as of one business day prior to the Expiration Date, and (iii) all rights a
Rights Holder is unable to exercise because such rights represent the right to
subscribe for less than one share. Such sales will be made through a broker or
brokers selected by the Subscription Agent, and the Agent shall deliver the
proceeds of such sales to the Rights Holder net of commissions charged by such
broker or brokers.

10. In the event the Agent does not receive, within five business days after
the Expiration Date, any amount due from a Rights Holder as specified in
Section 3(e), then it shall take such action with respect to such Rights
Holder's Subscription Rights as may be instructed in writing by Gabelli,
including without limitation (i) applying any payment actually received by it
toward the purchase of the greatest whole number of shares of Common Capital
Stock which could be acquired with such payment, (ii) allocating the shares
subject to such Subscription Rights to one or more other Record Date
Shareholders, and (iii) selling all or a portion of the shares of Common
Capital Stock deliverable upon exercise of such Subscription Rights on the open
market, and applying the proceeds thereof to the amount owed.

11. No Subscription Certificate shall entitle a Rights Holder to vote or
receive dividends or be deemed the holder of shares of Common Capital Stock for
any purpose, nor shall anything contained in any Subscription Certificate be
construed to confer upon any Rights Holder any of the rights of a shareholder
of Gabelli or any right to vote, give or withhold consent to any action by
Gabelli (whether upon any recapitalization, issue of stock, reclassification of
stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings of other action affecting shareholders, or receive dividends or
otherwise, until the Rights evidenced thereby shall have been exercised and the
shares of Common Capital Stock purchasable upon the exercise thereof shall have
become deliverable as provided in this Agreement and in the Prospectus.

12. If any Subscription Certificate is lost, stolen, mutilated, or destroyed
the Agent may, on such terms which will indemnify Gabelli as the Agent may in
its discretion impose (which shall, in the case of a Subscription Certificate
include the surrender thereof), issue a new Subscription Certificate of like
denomination in substitution for the Subscription Certificate so lost, stolen
or mutilated or destroyed.

13. (a) Gabelli covenants that all shares of Common Capital Stock issued on
exercise of Rights set forth in the Subscription Certificates will be validly
issued, fully paid, nonassessable and free of preemptive rights.

(b) Gabelli shall furnish to the Agent, upon request, an opinion of counsel
satisfactory to the Agent to the effect that a registration statement under the
Securities Act of 1933, as amended (the "Act"), is then in effect with respect
to its shares of Common Capital Stock issuable upon exercise of the Rights set
forth in the Subscription Certificates. Upon written advice to the Agent that
the Securities and Exchange Commission shall have issued or threatened to have
issued any order preventing or suspending the use of the Prospectus, or if for
any reason it shall be necessary to amend or supplement the Prospectus in order
to comply with the Act, the Agent shall cease acting hereunder until receipt of
written instructions from Gabelli and such assurances as it may reasonably
request that it may comply with such instruction without violations of the Act.

14. (a) Any corporation into which the Agent may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Agent shall be a party, or any
corporation succeeding to the corporate trust business of the Agent, shall be
the successor to the Agent hereunder without the execution or filing of any of
the parties hereto, provided that such corporation would be eligible for
appointment as a successor Agent. In case at the time such successor to the
Agent shall succeed to the agency created by this Agreement, any of the
Subscription Certificates shall have been countersigned but not delivered, any
such successor to the Agent may adopt the countersignature of the original
Agent and deliver such Subscription Certificates so countersigned, and in case
at that time any of the Subscription Certificates shall not have been
countersigned, any successor to the Agent may countersign such Subscription
Certificates either in the name of the predecessor Agent or in the name of the
successor Agent, and in all such cases such Subscription Certificates shall
have the full force provided in the Subscription Certificates and in this
Agreement.

(b) In case at any time the name of the Agent shall be changed and at such time
any of the Subscription Certificates shall have been countersigned but not
delivered, the Agent may adopt the countersignature under its prior name and
deliver Subscription Certificates so countersigned, and in case at that time
any of the Subscription Certificates shall not have been countersigned, the
Agent may countersign such Subscription Certificates either in its prior name
or in its changed name, and in all such cases such Subscription Certificates
shall have the full force provided in the Subscription Certificates and in this
Agreement.

15. Gabelli agrees to pay to the Agent from time to time, on demand of the
Agent, reasonable compensation for all services rendered by it hereunder and
also its reasonable expenses and other disbursements incurred in the
administration and execution of this Agreement and the exercise and performance
of its duties hereunder.

16. The Agent undertakes the duties and obligations imposed by this Agreement
upon the following terms and conditions:

(a) Whenever in the performance of its duties under this Agreement the Agent
shall deem it necessary or desirable that any fact or matter be proved or
established, prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof is herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board or President or a Vice
President or the Secretary or Assistant Secretary or the Treasurer of Gabelli
delivered to the Agent, and such certificate shall be full authorization to the
Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.

(b) The Agent shall not be responsible for and Gabelli shall indemnify and hold
the Agent harmless from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability arising out of or
attributable to all actions of the Agent 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.

(c) The Agent shall be liable hereunder only for its own negligence or willful
misconduct.

(d) Nothing herein shall preclude the Agent from acting in any othercapacity
for Gabelli or for any other legal entity.

(e) The Agent is hereby authorized and directed to accept instructions with
respect to the performance of its duties hereunder from any officer or
assistant officer of Gabelli and to apply to any such officer of Gabelli for
advice or instructions in connection with its duties, and shall be indemnified
and not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any officer or assistant officer.

(f) The Agent shall be indemnified and shall incur no liability for or in
respect of any action taken, suffered, or omitted by it in reliance upon any
Subscription Certificate or certificate for Common Capital Stock, instrument of
assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document
that it reasonably believes to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper person or persons.

(g) Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement of for any
consequential damages arising out of any act or failure to act hereunder.

17. The Agent, may without the consent or concurrence of the Shareholders in
whose names Subscription Certificates are registered, by supplemental agreement
or otherwise, concur with Gabelli in making any changes or corrections in a
Subscription Certificate that it shall have been advised by counsel (who may be
counsel for Gabelli) is appropriate to cure any ambiguity or to correct any
defective or inconsistent provision or clerical omission or mistake or manifest
error therein or herein contained, and which shall not be inconsistent with the
provisions of the Subscription Certificate except insofar as any such change
may confer additional rights upon the Rights Holders.

18. Assignment

(a) Except as provided in Section c below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without the
written consent of the other party.

(b) This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.

(c) [The Agent may, without further consent on the part of Gabelli, subcontract
for the performance hereof with (i) Boston Financial Data Services, Inc., a
Massachusetts corporation ("BFDS") which is duly registered as a transfer agent
pursuant to Section 17(c)(1) of the Securities Exchange Act of 1934 ("Section
A(c)(1)"), or (ii) the current third party vendor utilized by BFDS; provided,
however, that the Agent shall be as fully responsible to Gabelli for the acts
and omissions of any subcontractor as it is for its own acts and omissions.]

19. All the covenants and provisions of this Agreement by or for the benefit of
Gabelli, or the Agent shall bind and insure to the benefit of their respective
successors and assigns hereunder.

20. The validity, interpretation and performance of this Agreement shall be
governed by the law of the Commonwealth of Massachusetts.

Equiserve Trust Company, N.A.                   The Gabelli Utility Trust

By:                                             By:
      -----------------------------                 ---------------------------
      Vice President                                Vice President

Dated:                                          Dated:
      -----------------------------                    ------------------------



9/10/2001

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>6
<FILENAME>s422946.txt
<DESCRIPTION>EXHIBIT 99(I)
<TEXT>
                                                                     Exhibit I


                                              August 13, 2003




Gabelli Utility Trust
One Corporate Center
Rye, New York 10580-1435

             Re:   The Gabelli Utility Trust Registration Statement on
                   Form N-2

Ladies and Gentlemen:

         We have acted as special counsel to The Gabelli Utility Trust, a
statutory trust created under the Delaware Statutory Trust Act (the "Trust"),
in connection with the issuance by the Trust of up to 7,500,000 shares of the
Trust's common shares (the "Common Shares") of beneficial interest, par value
$0.001 per share, pursuant to the exercise of rights to purchase Common Shares
to be distributed to the shareholders of the Trust in accordance with the
Trust's Registration Statement (as defined below) on Form N-2 under the
Securities Act of 1933, as amended (the "1933 Act"), and the Investment
Company Act of 1940, as amended (the "1940 Act").

         This opinion is being furnished in accordance with the requirements
of Item 24 of the Form N-2 Registration Statement.

         In connection with this opinion, we have examined and relied upon
originals or copies, certified or otherwise identified to our satisfaction, of
(i) the Notification of Registration of the Trust as an investment company
under the 1940 Act, on Form N-8A, dated February 26, 1999, as filed with the
Securities and Exchange Commission (the "Commission") on February 26, 1999,
(ii) the Registration Statement of the Trust on Form N-2 (File Nos. 333-105467
and 811- 09243), as filed with the Commission on May 22, 2003, and as proposed
to be amended by Pre-Effective Amendment No. 1 (such Registration Statement,
as so amended and proposed to be amended being hereinafter referred to as the
"Registration Statement"); (ii) a specimen certificate representing the Common
Shares; (iii) the Certificate of Trust and Agreement and Declaration of Trust
of the Trust, as currently in effect; (iv) the By-Laws of the Trust, as
currently in effect; (v) certain resolutions of the Board of Trustees of the
Trust relating to the issuance and sale of the Common Shares and related
matters; and (vi) certain resolutions of the Pricing Committee of the Board of
Trustees approving the purchase price for the Common Shares. We also have
examined originals or copies, certified or otherwise identified to our
satisfaction, of such records of the Trust and such agreements, certificates
of public officials, certificates of officers or other representatives of the
Trust 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 or photostatic copies and
the authenticity of the originals of such copies. In making our examination of
executed documents, we have assumed that the parties thereto, other than the
Trust, 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 on
such parties. We have assumed that the share certificates representing the
Common Shares will conform to the specimen examined by us and will have been
signed manually or by facsimile by an authorized officer of the transfer agent
and registrar for the Common Shares and registered by such transfer agent and
registrar. 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 Trust and
others.

         Members of our firm are admitted to the bar in the State of Delaware
and we do not express any opinion as to the laws of any jurisdiction other
than the Delaware Statutory Trust Act.

         Based upon and subject to the foregoing, we are of the opinion that
the Common Shares have been duly authorized and when the Common Shares have
been sold, issued and paid for at a price per share not less than the per
share par value of the Common Shares as contemplated by the Registration
Statement, the Common Shares will be validly issued, fully paid and
non-assessable. We bring to your attention, however, the last sentence of
Section 3.7 of the Agreement and Declaration of Trust.

         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" and "Counsel and Independent
Accountants" 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

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>7
<FILENAME>gabcon.txt
<DESCRIPTION>EXHIBIT 99(N)(1)
<TEXT>
                                                                    Exhhibit N


                      CONSENT OF INDEPENDENT ACCOUNTANTS


We hereby consent to the use in this Registration Statement on Form N-2 of our
report dated February 13, 2003, relating to the financial statements and
financial highlights of The Gabelli Utility Trust which appear in the December
31, 2002 Annual Report to Shareholders of The Gabelli Utility Trust which are
also incorporated by reference into the Registration Statement. We also
consent to the references to us under the headings "Financial Highlights",
"Experts", "Counsel and Independent Accountants" and "Financial Statements" in
such Registration Statement.


/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
August 7, 2003


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
