Reaves
Utility Income Fund |
Table
of Contents |
Shareholder Letter |
2 |
Report of Independent Registered Public Accounting
Firm |
7 |
Statement of Investments |
8 |
Statement of Assets and Liabilities |
11 |
Statement of Operations |
12 |
Statements of Changes in Net Assets |
13 |
Statement of Cash Flows |
14 |
Financial Highlights |
16 |
Notes to Financial Statements |
21 |
Additional Information |
29 |
Trustees & Officers |
33 |
Summary of Fund Expenses |
37 |
Summary of Updated Information Regarding the
Fund |
39 |
Annual Report | October 31,
2022 |
1 |
Reaves
Utility Income Fund |
Shareholder
Letter |
October 31, 2022 (Unaudited)
To
our Shareholders:
Fiscal
2022 Investment Portfolio Returns
Total
net assets of the Fund were $1.994 billion on October 31, 2022, or $27.71 of net asset value (“NAV”) per common share.
One year ago, net assets totaled $2.158 billion representing $33.09 of net asset value per common share.
The
changes include distributions to shareholders totaling $157 million or $2.28 per share. Changes in the market price of the Fund
can and do differ from the underlying changes in the net asset value per common share. As a result, the market return to common
shares can be higher or lower than the NAV return.
The
fiscal-2022 market return for shareholders was -12.64% as is reflected in the table below. The share price of the Fund traded
at a discount of 0.32% to the NAV at fiscal year-end versus a premium of 2.63% at the beginning of the fiscal year.
|
One
Year |
Three
Years^ |
Five
Years^ |
Ten
Years^ |
Since
Inception^* |
UTG (NAV)** |
-10.05% |
-2.34% |
3.14% |
7.66% |
9.40% |
UTG (Market)** |
-12.64% |
-2.95% |
4.45% |
7.78% |
9.12% |
S&P
500 Utilities Index1 |
2.88% |
4.63% |
7.43% |
9.92% |
9.57% |
Dow Jones
Utility Average2 |
3.16% |
5.20% |
7.45% |
10.45% |
10.51% |
| * | Index
data since February 29, 2004 |
| ** | Assumes
all dividends being reinvested |
| 1 | S&P
500 Utilities Index is a capitalization-weighted index containing 28 Electric and Gas
Utility stocks (including multi-utilities and independent power producers). Prior to
July 1996, this index included telecommunications equities. |
| 2 | The
Dow Jones Utility Average is a price-weighted average of 15 utility stocks traded in
the United States. |
The
performance data quoted represents past performance. Past performance is no guarantee of future results.
Distributions
to Common Shareholders
Since
the Fund’s first distribution in April 2004, distributions to shareholders have totaled over $1 billion consisting of divided
income and realized capital gains with no returns of capital.
The
monthly distribution has been increased on 12 occasions from the initial monthly amount of $0.0967 per share to the current amount
of $0.19 per share, representing a cumulative increase of 96.48%. The Trustees of the Fund regularly review the amount of the
monthly distribution.
For
calendar year 2021, all distributions from the Fund were paid from net investment income including realized capital gains. We
anticipate that all distributions for the 12 months ending December 31, 2022 will also be characterized as paid from net investment
income and realized capital gains.
Leverage
Facility
The
Fund ended the fiscal year with $500 million in debt, up from $450 million at the end of fiscal 2021. Leverage stood at 25.07%
versus 20.85% of net assets on October 31, 2021, year-end. For details about the facility please refer to Note 5 of the accompanying
financial statements.
www.utilityincomefund.com |
2 |
Reaves
Utility Income Fund |
Shareholder
Letter |
October 31, 2022 (Unaudited)
Overview
The
Reaves Utility Income Fund continued to generate tax-advantaged income for investors. The Fund maintained its leverage at about
25% of net assets, which we think is a prudent level given current market conditions. Many holdings grew earnings and increased
dividends throughout the year, highlighting the resilience of the businesses in which the Fund invests.
In
the twelve-month period ending October 31, 2022, the Fund generated a total return of about -10% and paid $157 million ($2.28
per share) in investor distributions. We would note that the results coincide with a sharp rise in the 10-year U.S. Treasury yield,
from about 1.55%, at the end of October 2021, to over 4.00% by the end of October 2022. An increase in long term interest rates
is generally a challenge for investment performance. Additionally, the Federal Reserve (“Fed”) began unwinding it’s
quantitative easing program, effectively eliminating a secondary support mechanism for financial assets. Consequently, investors
decreased exposure to risky assets and markets generally fell in value, including the sectors in which we invest.
Our
utility investments were a bright spot in the portfolio as the sector benefitted from flight-to-safety buying. Additionally, the
passage of the Inflation Reduction Act (IRA) in August was a significant event that remains, in our view, underappreciated by
most investors. This legislation provides a wide array of incentives to utilities to transition more rapidly away from fossil
fuel generation, especially coal. Among them: enhanced and expanded tax credits for new development of renewable generation and
electric storage, new tax credits to support existing nuclear generation and the development of new nuclear technology and the
production of hydrogen, as well as new incentives for industrial and transportation electrification. These incentives will meaningfully
lower the cost of new investments for utilities in these emerging technologies. Additionally, increase in power usage should help
by spreading the cost of new investment across more energy sales.
In
communications infrastructure, where the Fund’s investments are concentrated in cable, data centers, towers, and traditional
telecom, returns were negative and were largely responsible for the Fund’s overall decline. Two factors contributed to the
results. First, rising interest rates negatively impacted companies structured at Real Estate Investment Trusts (REITs) such as
our tower and data center investments. While there was little fundamental business deterioration for these companies, valuation
multiples fell as investors shifted funds to lower duration assets. Another factor was the prospect of increased competition in
the U.S. broadband space. More operators are building fiber and fixed wireless networks to compete with cable, at the same time
as cable companies are more aggressively competing in wireless telephony. While competition is certainly becoming more acute,
we continue to believe our investments have the potential to outgrow their respective industries and inflation. More importantly,
we do not see material risk to the expected cash flows underpinning share repurchase or dividend income contribution from the
space.
While
the preponderance of the Fund’s investments are in utilities and telecommunications, we also retain a small portion of the
portfolio in transportation and natural gas pipelines for diversification and inflation sensitivity. Here, returns were mixed.
Supply chain constraints eased, which helped volumes at our rail investments recover. However, high inflation and the prospect
of a Fed induced economic slowdown hurt returns. Russia’s invasion of Ukraine and subsequent curtailment of gas flows to
Europe resulted in higher natural gas demand in the U.S. as the industry increased liquefied natural gas (LNG) shipments to the
region.
Going
forward, we expect that markets will remain choppy as central banks adjust monetary policy to combat inflation. While headwinds
persist, we would remind investors that we typically invest in businesses that grow cash flows and dividend payments more quickly
than sector averages and faster than long-term inflation. Additionally, we invest in businesses that can pass on increased interest
costs to customers while continuing to grow. Thus, we remain confident that, despite challenges, our investments will grow earnings
and should increase dividends to shareholders over time and remain confident in our ability to continue to pay distributions to
our shareholders.
Annual
Report | October 31, 2022 |
3 |
Reaves
Utility Income Fund |
Shareholder
Letter |
October 31, 2022 (Unaudited)
Sincerely,
Timothy
O. Porter, CFA, Portfolio Manager, Reaves Asset Management-CIO
John
P. Bartlett, CFA, Portfolio Manager, Reaves Asset Management-President
Sources
of distributions to shareholders may include net investment income, net realized short-term capital gains, net realized long-term
capital gains and return of capital. If a distribution includes anything other than net investment income, the Fund provides a
Section 19(a) notice of the best estimate of its distribution sources at that time. Please refer to Additional Information for
a cumulative summary of the Section 19(a) notices for the Fund’s current period. The actual amounts and sources of distributions
for tax reporting purposes will depend upon the Fund’s investment experience during the remainder of its fiscal year and
may be subject to changes based on tax regulations. The estimates may not match the final tax characterization (for the full year’s
distributions) contained in the shareholder’s Form 1099-DIV. Distribution payments are not guaranteed; distribution rates
may vary.
You
cannot invest directly in an index.
Quantitative
easing is a form of monetary policy in which a central bank, like the U.S. Federal Reserve, purchases securities in the open market
to reduce interest rates and increase the money supply.
www.utilityincomefund.com |
4 |
Reaves
Utility Income Fund |
Shareholder
Letter |
October
31, 2022 (Unaudited)
Growth
of a hypothetical $10,000 investment
The
graph below illustrates the growth of a hypothetical $10,000 investment assuming the purchase of common shares at NAV or the closing
market price (NYSE: UTG) of $25.29 on October 31, 2012, and tracking its progress through October 31, 2022.
Past
performance does not guarantee future results. Performance will fluctuate with changes in market conditions. Current performance
may be lower or higher than the performance data shown. Performance information does not reflect the deduction of taxes that shareholders
would pay on Fund distributions or the sale of Fund shares. An investment in the Fund involves risk, including loss of principal.
Annual Report | October 31,
2022 |
5 |
Reaves
Utility Income Fund |
Shareholder
Letter |
October 31, 2022 (Unaudited)
INDUSTRY
ALLOCATION AS OF OCTOBER 31, 2022
Industries
are displayed as a % of net assets. Holdings are subject to change.
www.utilityincomefund.com |
6 |
Reaves
Utility Income Fund |
Report
of Independent Registered
Public
Accounting Firm |
To
the shareholders and the Board of Trustees of Reaves Utility Income Fund
Reaves
Utility Income Fund |
Notes to Financial Statements |
October
31, 2022
Risk
of Foreign Securities. The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers
involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation
of currencies, the inability to repatriate foreign currency, less complete financial information about companies and possible
future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less
liquid and their prices more volatile than those of securities of comparable U.S. issuers.
Market
Disruption and Geopolitical Risk. The value of your investment in the Fund is based on the values of the Fund’s investments,
which may change due to economic and other events that affect markets generally, as well as those that affect particular regions,
countries, industries, companies or governments. These movements, sometimes called volatility, may be greater or less depending
on the types of securities the Fund owns and the markets in which the securities trade. The increasing interconnectivity between
global economies and financial markets increases the likelihood that events or conditions in one region or financial market may
adversely impact issuers in a different country, region or financial market. Securities in the Fund’s portfolio may underperform
due to inflation (or expectations for inflation), interest rates, global demand for particular products or resources, natural
disasters, pandemics, epidemics, terrorism, regulatory events and governmental or quasi-governmental actions. The occurrence of
global events similar to those in recent years, such as the war in Ukraine, terrorist attacks around the world, natural disasters,
social and political discord or debt crises and downgrades, among others, may result in market volatility and may have long term
effects on both the U.S. and global financial markets. The occurrence of such events may be sudden and unexpected, and it is difficult
to predict when similar events affecting the U.S. or global financial markets may occur, the effects that such events may have
and the duration of those effects. Any such event(s) could have a significant adverse impact on the value, liquidity and risk
profile of the Fund’s portfolio, as well as its ability to sell securities to meet redemptions. There is a risk that you
may lose money by investing in the Fund.
Social,
political, economic and other conditions and events, such as natural disasters, health emergencies (e.g., epidemics and pandemics),
terrorism, wars, conflicts and social unrest, may occur and could significantly impact issuers, industries, governments and other
systems, including the financial markets. As global systems, economies and financial markets are increasingly interconnected,
events that once had only local impact are now more likely to have regional or even global effects. Events that occur in one country,
region or financial market will, more frequently, adversely impact issuers in other countries, regions or markets. These impacts
can be exacerbated by failures of governments and societies to adequately respond to an emerging event or threat. These types
of events quickly and significantly impact markets in the U.S. and across the globe leading to extreme market volatility and disruption.
The extent and nature of the impact on supply chains or economies and markets from these events is unknown. These events could
reduce consumer demand or economic output, result in market closures, travel restrictions or quarantines, and generally have a
significant impact on the economies and financial markets and the Adviser’s investment advisory activities and services
of other service providers, which in turn could adversely affect the Fund’s investments and other operations. The value
of the Fund’s investments may decrease as a result of such events, particularly if these events adversely impact the operations
and effectiveness of the Adviser or key service providers or if these events disrupt systems and processes necessary or beneficial
to the investment advisory or other activities on behalf the Fund.
www.utilityincomefund.com |
24 |
Reaves
Utility Income Fund |
Notes to Financial Statements |
October
31, 2022
NOTE
3. INCOME TAXES AND TAX BASIS INFORMATION
The
Fund complies with the requirements under Subchapter M of the Code applicable to regulated investment companies and intends to
distribute substantially all of its net taxable income and net capital gains, if any, each year. The Fund is not subject to income
taxes to the extent such distributions are made.
As
of and during the year ended October 31, 2022, the Fund did not have a liability for any unrecognized tax benefits in the accompanying
financial statements. The Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are
subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally
three years after the filing of the tax return but which can be extended to six years in certain circumstances. Tax returns for
open years have incorporated no uncertain tax positions that require a provision for income taxes.
Net
investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of distributions
made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal
income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ
from the fiscal year in which the income or realized gain was recorded by the Fund.
The
tax character of the distributions paid by the Fund were as follows:
| |
For
the Year Ended October
31, 2022 | |
Distributions Paid From: | |
| | |
Ordinary Income | |
$ | 36,286,616 | |
Long-Term Capital Gain | |
| 120,729,083 | |
Total | |
$ | 157,015,699 | |
| |
For the Year Ended
October 31, 2021 | |
Distributions Paid From: | |
| | |
Ordinary Income | |
$ | 49,217,155 | |
Long-Term Capital Gain | |
| 80,292,345 | |
Total | |
$ | 129,509,500 | |
As
of October 31, 2022, the components of distributable earnings on a tax basis were as follows:
Accumulated
Capital Gain |
|
$ |
19,920,420 |
|
Unrealized Appreciation
|
|
|
73,341,586 |
|
Other Cumulative
Effect of Timing Differences |
|
|
(79,407 |
) |
Total |
|
$ |
93,182,599 |
|
The
tax components of distributable earnings are determined in accordance with income tax regulations which may differ from composition
of net assets reported under U.S. GAAP.
The
tax basis components of capital differ from the amounts reflected in the Statement of Assets and Liabilities due to temporary
book/tax differences primarily arising from wash sales.
Annual
Report | October 31, 2022 |
25 |
Reaves
Utility Income Fund |
Notes to Financial Statements |
October
31, 2022
As
of October 31, 2022, net unrealized appreciation/depreciation of investments based on federal tax cost were as follows:
Gross appreciation (excess of value over tax cost) | |
$ | 258,827,421 | |
Gross depreciation (excess of tax cost over value) | |
| (185,472,561 | ) |
Net depreciation of foreign currency | |
| (13,274 | ) |
Net unrealized appreciation | |
$ | 73,341,586 | |
Cost of investments for income tax purposes | |
$ | 2,418,180,724 | |
NOTE
4. CAPITAL TRANSACTIONS
Common
Shares: There are an unlimited number of no par value common shares of beneficial interest authorized.
The
Fund has a registration statement on file with the SEC (the “Shelf Registration Statement”), pursuant to which the
Fund may offer common shares, from time to time, in one or more offerings, up to a maximum aggregate offering price of $600,000,000
on terms to be determined at the time of the offering.
On
September 19, 2022, the Fund entered into a distribution agreement (the “Distribution Agreement”) with Paralel Distributors
LLC (“Paralel Distributors”), pursuant to which the Fund may offer and sell up to 8,000,000 of the Fund’s common
shares from time to time through Paralel Distributors and a sub-placement agent in transactions deemed to be “at the market”
as defined in Rule 415 under the Securities Act of 1933, as amended.
The
Distribution Agreement replaced the materially similar distribution agreement (“ADI Agreement”) between the Fund and
ALPS Distributors, Inc. (“ADI”), which originally became effective November 14, 2019 and continued through September
19, 2022. Under the ADI Agreement, the Fund could offer up offer and sell up to 23,000,000 of the Fund’s common shares through
ADI and a sub-placement agent in transactions deemed to be “at the market.”
During
the year ended October 31, 2022, 6,600,257 common shares were sold totaling $210,386,361, in proceeds to the Fund, net of offering
costs of $152,357. For the shares sold during the year ended October 31, 2022 pursuant to the Distribution Agreement, commissions
totaling $171,174 were paid, of which $42,794 was retained by Paralel Distributors with the remainder paid to a sub-placement agent.
For the shares sold during the year ended October 31, 2022 pursuant to the ADI Agreement, commissions totaling $1,912,707 were
paid, of which $382,541 was retained by ADI with the remainder paid to the sub-placement agent.
Offering
costs paid as a result of the Fund’s Shelf Registration Statement but not yet incurred as of October 31, 2022 are approximately
$103,544.
www.utilityincomefund.com |
26 |
Reaves
Utility Income Fund |
Notes to Financial Statements |
October
31, 2022
Transactions
in common shares were as follows:
| |
Year
Ended October
31, 2022 | | |
Year
Ended October
31, 2021 | |
Common Shares outstanding - beginning of period | |
| 65,211,164 | | |
| 53,936,356 | |
Common Shares issued from sale of shares | |
| 6,600,257 | | |
| 11,135,737 | |
Common Shares issued as reinvestment of dividends | |
| 165,932 | | |
| 139,071 | |
Common Shares outstanding - end of period | |
| 71,977,353 | | |
| 65,211,164 | |
NOTE
5. BORROWINGS
On
April 27, 2022, the Fund entered into a Credit Agreement with State Street Bank and Trust Company. Under the terms of the Credit
Agreement, the Fund is allowed to borrow up to $650,000,000 (“Commitment Amount”). Interest is charged at a rate of
the one month SOFR (“Secured Overnight Financing Rate”) plus 0.65%. Borrowings under the Credit Agreement are secured
by all or a portion of assets of the Fund that are held by the Fund’s custodian in a memo-pledged account (the “pledged
collateral”). Borrowing commenced under the terms of the Credit Agreement on April 27, 2022. Under the terms of the Credit
Agreement, effective June 27, 2022, a commitment fee applies when the amount outstanding is less than 80% of the Commitment Amount.
This commitment fee is equal to 0.15% times the Commitment Amount less the amount outstanding under the Credit Agreement and is
computed daily and payable quarterly in arrears.
Prior
to April 27, 2022, the Fund operated under a Credit Agreement with Pershing LLC. Under the terms of the Credit Agreement the Fund
was allowed to borrow up to $455,000,000. Interest was charged at a rate of OBFR (“Overnight Bank Funding Rate”) plus
0.80%. Borrowings under the Credit Agreement were secured by pledged collateral.
For
the year ended October 31, 2022, the average amount borrowed under the Credit Agreement was $467,671,233, at a weighted average
rate of 1.73%. As of October 31, 2022, the amount of outstanding borrowings was $500,000,000, the interest rate was 3.92% and
the fair value of pledged collateral was $1,000,000,008.
NOTE
6. PORTFOLIO SECURITIES
Purchases
and sales of investment securities, other than short-term securities, for the year ended October 31, 2022, aggregated $1,041,143,365
and $975,959,588, respectively.
NOTE
7. MANAGEMENT FEES, ADMINISTRATION FEES AND TRANSACTIONS WITH AFFILIATES
Reaves
serves as the Fund’s investment adviser pursuant to an Investment Advisory and Management Agreement (the “Advisory
Agreement”) with the Fund. As compensation for its services to the Fund, Reaves receives an annual investment advisory fee
of 0.575% on assets up to $2.5 billion and 0.525% based on the Fund’s average daily total assets, computed daily and payable
monthly 0.575% annually on assets up to $2.5 billion and 0.525% annual on assets over $2.5 billion.
Effective
September 19, 2022, Paralel Technologies LLC (“Paralel”) serves as the Fund’s administrator pursuant to an
administration and fund accounting agreement (the “Administration Agreement”) with the Fund. As compensation for
its services to the Fund, Paralel receives an annual administration fee based on the Fund’s average daily total assets,
computed daily and payable monthly. From its fees, Paralel pays all routine operating expenses incurred by the Fund with the
exception of advisory fees; taxes and governmental fees; expenses related to portfolio transactions and management of the
portfolio; expenses associated with secondary offerings of shares; trustee fees and expenses; expenses associated with tender
offers and other share repurchases; and other extraordinary expenses.
Annual
Report | October 31, 2022 |
27 |
Reaves
Utility Income Fund |
Notes to Financial Statements |
October
31, 2022
Prior
to September 19, 2022, ALPS Fund Services, Inc. (“ALPS”) served as the Fund’s administrator and received a fee
based on the Fund’s average daily total assets. From its fees, ALPS paid all routine operating expenses incurred by the
Fund subject to materially similar exceptions as listed in the Administration Agreement.
Prior
to September 19, 2022, pursuant to a Chief Compliance Officer Services Agreement, the Fund paid ALPS for providing Chief Compliance
Officer services to the Fund an annual fee payable in monthly installments.
NOTE
8. INDEMNIFICATIONS
In
the normal course of business, the Fund enters into contracts that contain a variety of representations which provide general
indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that
may be made against the Fund that have not yet occurred.
www.utilityincomefund.com |
28 |
Reaves
Utility Income Fund |
Additional Information |
October
31, 2022 (Unaudited)
DIVIDEND
REINVESTMENT PLAN
Unless
the registered owner of Common Shares elects to receive cash by contacting DST Systems, Inc. (the “Plan Administrator”),
all dividends declared on Common Shares will be automatically reinvested by the Plan Administrator for shareholders in the Fund’s
Dividend Reinvestment Plan (the “Plan”), in additional Common Shares. Shareholders who elect not to participate in
the Plan will receive all dividends and other distributions in cash paid by check mailed directly to the shareholder of record
(or, if the Common Shares are held in street or other nominee name, then to such nominee) by the Plan Administrator as dividend
disbursing agent. You may elect not to participate in the Plan and to receive all dividends in cash by contacting the Plan Administrator,
as dividend disbursing agent, at the address set forth below. Participation in the Plan is completely voluntary and may be terminated
or resumed at any time without penalty by notice if received and processed by the Plan Administrator prior to the dividend record
date; otherwise, such termination or resumption will be effective with respect to any subsequently declared dividend or other
distribution. Some brokers may automatically elect to receive cash on your behalf and may re-invest that cash in additional Common
Shares for you. If you wish for all dividends declared on your Common Shares to be automatically reinvested pursuant to the Plan,
please contact your broker.
The
Plan Administrator will open an account for each Common Shareholder under the Plan in the same name in which such Common
Shareholder’s Common Shares are registered. Whenever the Fund declares a dividend or other distribution (together, a
“Dividend”) payable in cash, nonparticipants in the Plan will receive cash and participants in the Plan will
receive the equivalent in Common Shares. The Common Shares will be acquired by the Plan Administrator for the
participants’ accounts, depending upon the circumstances described below, either (i) through receipt of additional
unissued but authorized Common Shares from the Fund (“Newly Issued Common Shares”) or (ii) by purchase of
outstanding Common Shares on the open market (“Open- Market Purchases”) on the NYSE American LLC or elsewhere.
If, on the payment date for any Dividend, the closing market price plus estimated brokerage commissions per Common Share is
equal to or greater than the net asset value per Common Share, the Plan Administrator will invest the Dividend amount in
Newly Issued Common Shares on behalf of the participants. The number of Newly Issued Common Shares to be credited to each
participant’s account will be determined by dividing the dollar amount of the Dividend by the net asset value per
Common Share on the payment date; provided that, if the net asset value is less than or equal to 95% of the closing market
value on the payment date, the dollar amount of the Dividend will be divided by 95% of the closing market price per
Common Share on the payment date. If, on the payment date for any Dividend, the net asset value per Common Share is greater
than the closing market value plus estimated brokerage commissions, the Plan Administrator will invest the Dividend amount in
Common Shares acquired on behalf of the participants in Open-Market Purchases. In the event of a market discount on the
payment date for any Dividend, the Plan Administrator will have until the last business day before the next date on which the
Common Shares trade on an “ex-dividend” basis or 30 days after the payment date for such Dividend, whichever is
sooner (the “Last Purchase Date”), to invest the Dividend amount in Common Shares acquired in Open-Market
Purchases. It is contemplated that the Fund will pay monthly income Dividends. Therefore, the period during which Open-Market
Purchases can be made will exist only from the payment date of each Dividend through the date before the next
“ex-dividend” date which typically will be approximately ten days. If, before the Plan Administrator has
completed its Open-Market Purchases, the market price per Common Share exceeds the net asset value per Common Share, the
average per Common Share purchase price paid by the Plan Administrator may exceed the net asset value of the Common Shares,
resulting in the acquisition of fewer Common Shares than if the Dividend had been paid in Newly Issued Common Shares on the
Dividend payment date. Because of the foregoing difficulty with respect to Open- Market Purchases, the Plan provides that if
the Plan Administrator is unable to invest the full Dividend amount in Open-Market Purchases during the purchase period or if
the market discount shifts to a market premium during the purchase period, the Plan Administrator may cease making
Open-Market Purchases and may invest the uninvested portion of the Dividend amount in Newly Issued Common Shares at the net
asset value per Common Share at the close of business on the Last Purchase Date, provided that, if the net asset value is
less than or equal to 95% of the then current market price per Common Share, the dollar amount of the Dividend will be
divided by 95% of the market price on the payment date.
Annual
Report | October 31, 2022 |
29 |
Reaves
Utility Income Fund |
Additional Information |
October
31, 2022 (Unaudited)
The
Plan Administrator maintains all shareholders’ accounts in the Plan and furnishes written confirmation of all transactions
in the accounts, including information needed by shareholders for tax records. Common Shares in the account of each Plan participant
will be held by the Plan Administrator on behalf of the Plan participant, and each shareholder proxy will include those shares
purchased or received pursuant to the Plan. The Plan Administrator will forward all proxy solicitation materials to participants
and vote proxies for shares held under the Plan in accordance with the instructions of the participants.
In
the case of Common Shareholders such as banks, brokers or nominees which hold shares for others who are the beneficial owners,
the Plan Administrator will administer the Plan on the basis of the number of Common Shares certified from time to time by the
record shareholder’s name and held for the account of beneficial owners who participate in the Plan.
There
will be no brokerage charges with respect to Common Shares issued directly by the Fund. However, each participant will pay a pro
rata share of brokerage commissions incurred in connection with Open-Market Purchases. The automatic reinvestment of Dividends
will not relieve participants of any federal, state or local income tax that may be payable (or required to be withheld) on such
Dividends. Participants that request a sale of Common Shares through the Plan Administrator are subject to brokerage commissions.
The
Fund reserves the right to amend or terminate the Plan. There is no direct service charge to participants with regard to purchases
in the Plan; however, the Fund reserves the right to amend the Plan to include a service charge payable by the participants.
All
correspondence or questions concerning the Plan should be directed to the Plan Administrator, DST Systems, Inc., 333 West 11th
Street, 5th Floor, Kansas City, Missouri 64105.
FUND
PROXY VOTING POLICIES & PROCEDURES
A
description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities
is available without charge upon request by calling toll-free 1-800-644-5571, or on the Fund’s website at https://www.utilityincomefund.com.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended
June 30 is also available without charge upon request by calling toll-free 1-800-644-5571, or on the SEC’s website at https://www.sec.gov.
PORTFOLIO
HOLDINGS
The
Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year
on Form N-PORT. Copies of the Fund’s Forms N-PORT are available on the Commission’s website at https://www.sec.gov.
Quarterly Holdings statements as of the first and third quarter of each fiscal year, and information on the Fund’s Forms
N-PORT, are available on the Fund’s website at https://www.utilityincomefund.com, and are available without a charge, upon
request, by contacting the Fund at 1-800-644-5571.
www.utilityincomefund.com |
30 |
Reaves
Utility Income Fund |
Additional Information |
October
31, 2022 (Unaudited)
NOTICE
Notice
is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Fund may purchase at market prices
from time to time common shares in the open market.
TAX
INFORMATION
The
Fund designates the following for federal income tax purposes for distributions made during the calendar year ended December 31,
2021 qualified dividend income (“QDI”) and as qualifying for the corporate dividends received deduction (“DRD”):
|
QDI |
DRD |
Reaves
Utility Income Fund |
87.81% |
63.72% |
In
early 2022, if applicable, shareholders of record received this information for the distributions paid to them by the Fund during
the calendar year 2021 via Form 1099. The Fund will notify shareholders in early 2023 of amounts paid to them by the Fund, if
any, during the calendar year 2022.
Pursuant
to Section 852(b)(3) of the Internal Revenue Code, the Fund designated $120,729,083 as long-term capital gain distribution for
the year ended October 31, 2022.
SECTION
19(A) NOTICES
The
following table sets forth the estimated amount of the sources of distribution for purposes of Section 19 of the Investment Company
Act of 1940, as amended, and the related rules adopted there under. The Fund estimates the following percentages, of the total
distribution amount per share, attributable to (i) current and prior fiscal year net investment income, (ii) net realized short-term
capital gain, (iii) net realized long-term capital gain and (iv) return of capital or other capital source as a percentage of
the total distribution amount. These percentages are disclosed for the fiscal year-to-date cumulative distribution amount per
share for the Fund.
The
amounts and sources of distributions reported in these 19(a) notices are only estimates and not for tax reporting purposes. The
actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund’s investment experience during
the remainder of its fiscal year and may be subject to changes based on tax regulations. Shareholders will receive a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.
Total Cumulative Distributions for the fiscal
year ended October 31, 2022 |
%
Breakdown of the Total Cumulative
Distributions
for the fiscal year ended October 31, 2022
|
Net
Investment |
Net
Realized
Capital
Gains |
Return
of
Capital |
Total
Per
Common
Share |
Net
Investment
Income |
Net
Realized
Capital
Gains |
Return
of
Capital |
Total
Per
Common
Share |
$0.65955 |
$1.62045 |
$– |
$2.28000 |
28.93% |
71.07% |
–% |
100.00% |
Annual
Report | October 31, 2022 |
31 |
Reaves
Utility Income Fund |
Additional Information |
October
31, 2022 (Unaudited)
The
Fund’s dividend policy is to distribute all or a portion of its net investment income to its shareholders on a monthly
basis. In order to provide shareholders with a more stable level of dividend distributions, the Fund may at times pay out
less than the entire amount of net investment income earned in any particular month and may at times in any particular month
pay out such accumulated but undistributed income in addition to net investment income earned in that month. As a result, the
dividends paid by the Fund for any particular month may be more or less than the amount of net investment income earned by
the Fund during such month. The Fund’s current accumulated but undistributed net investment income, if any, is
disclosed in the Statement of Assets and Liabilities, which comprises part of the financial information included in this
report
www.utilityincomefund.com |
32 |
Reaves Utility Income Fund
|
Trustees
& Officers |
October
31, 2022 (Unaudited)
Name
and
Age |
Position(s)
Held with
Fund |
Term of
Office and
Length
of Time
Served(1) |
Principal
Occupation(s)
During
Past 5 Years |
Number of
Portfolios
in Fund
Complex
Overseen by
Trustee(2) |
Other
Directorships
Held
by
Trustee or
Nominee(3) |
Christopher Moore
Birth Year: 1984 |
Secretary |
Secretary Since 2022 |
Mr. Moore is General Counsel of Paralel Technologies LLC and Paralel Advisors LLC since 2021. Mr. Moore served as Deputy General
Counsel and Legal Operations Manager of RiverNorth Capital Management, LLC from 2020-2021; VP and Senior Counsel of ALPS Fund
Services, Inc. from 2016- 2020 |
N/A |
N/A |
| (1) | The
Trust commenced operations on February 24, 2004. The Trust’s Board of Trustees
is divided into three classes, each class serves for a term of three years. Each year
the term of office of one class expires and the successors elected to such class serve
for a term of three years. |
| * | Term
expires at the Trust’s 2023 Annual Meeting of Shareholders. |
| ** | Term
expires at the Trust’s 2024 Annual Meeting of Shareholders. |
| *** | Term
expires at the Trust’s 2025 Annual Meeting of Shareholders. |
| (2) | The
term “Fund Complex” means two or more registered investment companies that
hold themselves out to investors as related companies for purposes of investment and
investor services; or have a common investment adviser or that have an investment adviser
that is an affiliated person of the investment adviser of any of the other registered
investment companies. |
| (3) | The
numbers enclosed in the parentheticals represent the number of funds overseen in each
respective directorship held by the Trustee. |
www.utilityincomefund.com |
36 |
Reaves Utility Income Fund
|
Summary
of Fund Expenses |
October
31, 2022 (Unaudited)
The
following information is intended to assist investors in understanding the fees and expenses (annualized) that an investor in
common shares of the Fund would bear, directly or indirectly. The table is based on the capital structure of the Fund as of October
31, 2022.
The
table assumes the use of leverage in the form of amounts borrowed by the Fund under a credit agreement in an amount equal to 20.02%
of the Fund’s total assets as of October 31, 2022 (including the amounts of any additional leverage obtained through the
use of borrowed funds) and shows Fund expenses as a percentage of net assets attributable to common shares. The following table
should not be considered a representation of the Fund’s future expenses. Actual expenses may be greater or less than those
shown below. Interest payments on borrowings are included in the total annual expenses of the Fund.
Shareholder
Transaction Expenses (as a percentage of offering price)
Sales
Load(a) |
—% |
Offering
Expenses Borne by Common Shareholders(a) |
—% |
Dividend Reinvestment
Plan Fees(b) |
None |
Annual
Expenses |
Percentage of Net Assets
Attributable to Common Shares |
Investment
Advisory Fees(c) |
0.69% |
Interest
Payments on Borrowed Funds(d) |
0.38% |
Other
Expenses(e) |
0.35% |
Acquired
Fund Fees & Expenses |
0.00% |
Total
Annual Fund Operating Expenses |
1.42% |
| (a) | If
common shares are sold to or through underwriters, the applicable prospectus supplement will set forth any applicable sales load
and the estimated offering expenses borne by the Fund. Under the Fund’s effective registration statement (“Shelf Registation
Statement”), as of October 31, 2022, the Fund had commenced an offering of its shares made at-the-market with a maximum
sales load paid by investors of 1.00% of the offering price. |
| (b) | There
will be no brokerage charges with respect to common shares of beneficial interest issued directly by the Fund under the dividend
reinvestment plan. You will pay brokerage charges in connection with open market purchases or if you direct the plan agent to
sell your common shares held in a dividend reinvestment account. |
| (c) | The
investment advisory fee is charged as a percentage of the Fund’s average daily total assets. |
| (d) | Assumes
the use of leverage in the form of borrowing under the Credit Agreement representing 20.02% of the Fund’s total assets as
of October 31, 2022, (including any additional leverage obtained through the use of borrowed funds) at an average annual interest
rate cost to the Fund of 1.79%. |
| (e) | Other
Expenses are estimated based on estimated amounts for the current fiscal year. |
Example
The
purpose of the following table is to help a holder of common shares understand the fees and expenses that such holder would bear
directly or indirectly. The following example illustrates the expenses that you would pay on a $1,000 investment in common shares
of the Fund assuming (1) that the Fund incurs total annual expenses of 1.42% of its net assets in years 1 through 10 (assuming
borrowing equal to 20.02% of the Fund’s total assets) and (2) a 5% annual return.
Annual
Report | October 31, 2022 |
37 |
Reaves Utility Income Fund
|
Summary
of Fund Expenses |
October
31, 2022 (Unaudited)
1
Year |
3
Years |
5
Years |
10
Years |
$14 |
$45 |
$78 |
$170 |
The
example should not be considered a representation of future expenses or rate of return. The example assumes that all dividends
and distributions are reinvested at NAV. The Fund’s actual rate of return may be greater or less than the hypothetical 5%
annual return shown in the example.
www.utilityincomefund.com |
38 |
Reaves
Utility Income Fund |
Summary
of Updated Information
Regarding
the Fund |
October
31, 2022 (Unaudited)
The
following information in this annual report is a summary of certain information about the Fund and changes since the most recent
annual report dated October 31, 2021 (the “prior disclosure date”). This information may not reflect all of the changes
that have occurred since you purchased shares of the Fund.
Investment
Objective
There
have been no material changes in the Fund’s investment objective since the prior disclosure date that have not been approved
by shareholders. The Fund’s investment objective is to provide a high level of after-tax income and total return consisting
primarily of tax-advantaged dividend income and capital appreciation.
Principal
Investment Strategies.
There
have been no material changes in the Fund’s Principal Investment Strategies and Policies since the prior disclosure date.
The
Fund pursues its investment objective by investing at least 80% of its total assets in the securities of domestic and foreign
companies involved to a significant extent in providing products, services or equipment for (i) the generation or distribution
of electricity, gas or water, (ii) telecommunications activities or (iii) infrastructure operations, such as airports, toll roads
and municipal services (“Utilities” or the “Utility Industry”).
A
company will be deemed to be involved in the Utility Industry to a significant extent if at least 50% of its assets, gross income
or profits are committed to or derived from activities in the areas described above. The remaining 20% of the Fund’s total
assets may be invested in other securities including stocks, debt obligations and money market instruments, as well as certain
derivative instruments (described below) and other investments.
As
used in the Annual Report, as well as the Fund’s Prospectus Supplement and the accompanying Prospectus and Statement of
Additional Information, the terms “debt securities” and “debt obligations” refer to bonds, debentures
and similar long and intermediate term debt investments and do not include short-term fixed income securities such as money market
instruments in which the Fund may invest temporarily pending investment of the proceeds of an offering and during periods of abnormal
market conditions. The Fund may invest in preferred stocks and bonds of below investment grade quality (i.e., “junk bonds”).
Under
normal market conditions, the Fund invests at least 80% of its total assets in dividend-paying common and preferred stocks of
companies in the Utility Industry. In pursuing its objective, the Fund invests primarily in common and preferred stocks that pay
dividends that qualify for federal income taxation at rates applicable to long-term capital gains (“tax-advantaged dividends”).
The
Fund may invest in the securities of both domestic and foreign issuers, including those located in emerging market countries (i.e.,
a country not included in the MSCI World Index, a free float-adjusted market capitalization weighted index that is designed to
measure the equity market performance of developed markets).
As
an alternative to holding foreign-traded securities, the Fund may invest in dollar-denominated securities of foreign companies
that trade on U.S. exchanges or in the U.S. over-the-counter market (including depositary receipts, which evidence ownership in
underlying foreign securities).
To
date, the Fund’s derivatives usage has been limited to equity options, including writing covered calls, the purchase of
calls and the sale of puts. Options may be used as both hedges against the value of existing holdings or as speculative trades
as part of the Fund’s overall investment strategy.
Annual
Report | October 31, 2022 |
39 |
Reaves
Utility Income Fund |
Summary
of Updated Information
Regarding
the Fund |
October
31, 2022 (Unaudited)
In
addition, the Fund may choose to use interest rate swaps (or options thereon) from time to time for hedging purposes. Although
the Fund does not currently use interest rate swaps (or options thereon), the Fund may do so in the future, depending on the interest
rate outlook of W.H. Reaves & Co., Inc. (dba Reaves Asset Management, the “Adviser”) and other factors. Such usage
would be limited to no more than 20% of the Fund’s total assets. The Fund may choose to use other derivatives from time
to time, as described in the Statement of Additional Information.
There
is no assurance that the Fund will achieve its investment objective. Further, the Fund’s ability to pursue its investment
objective, the value of the Fund’s investments and the Fund’s NAV may be adversely affected by changes in tax rates
and policies. Because the Fund’s investment objective is to provide a high level of after-tax yield and total return consisting
primarily of dividend and interest income and capital appreciation, the Fund’s ability to invest, and the attractiveness
of investing in, equity securities that pay qualified dividend income in relation to other investment alternatives will be affected
by changes in federal income tax laws and regulations, including changes in the qualified dividend income provisions. Any proposed
or actual changes in such rates, therefore, can significantly and adversely affect the after-tax returns of the Fund’s investments
in equity securities. Any such changes also could significantly and adversely affect the Fund’s NAV, as well as the Fund’s
ability to acquire and dispose of equity securities at desirable returns and price levels and the Fund’s ability to pursue
its investment objective. The Fund cannot assure you as to the portion, if any, of the Fund’s dividends that will be qualified
dividend income
Leverage
The
Fund currently uses leverage through borrowing. More specifically, the Fund has entered into a credit agreement (the “Credit
Agreement”) with State Street Bank and Trust Company (the “Bank”). As of October 31, 2022, the Fund had outstanding
$500,000,000 in principal amount of borrowings from the Credit Agreement representing approximately 20.02% of the Fund’s
total assets (including assets attributable to the Fund’s use of leverage). The Bank has the ability to terminate the Credit
Agreement upon 360-days’ notice. The provisions of the 1940 Act further provide that the Fund may borrow or issue notes
or debt securities in an amount up to 33 1/3% of its total assets or may issue preferred shares in an amount up to 50% of the
Fund’s total assets (including the proceeds from leverage).
The
Fund has no present intention of issuing preferred shares, although it has done so in the past and may choose to do so in the
future.
The
Fund also may borrow money as a temporary measure for extraordinary or emergency purposes.
Leverage
creates risks for common shareholders, including the likelihood of greater volatility of NAV and market price of, and dividends
paid on, the common shares. There is a risk that fluctuations in the dividend rates on any preferred shares issued by the Fund
may adversely affect the return to the common shareholders. If the income from the securities purchased with such funds is not
sufficient to cover the cost of leverage, the return on the Fund will be less than if leverage had not been used, and therefore
the amount available for distribution to common shareholders as dividends and other distributions will be reduced.
Changes
in the value of the Fund’s portfolio (including investments bought with the proceeds of the leverage program) will be borne
entirely by the common shareholders. If there is a net decrease (or increase) in the value of the Fund’s investment portfolio,
the leverage will decrease (or increase) the NAV per share to a greater extent than if the Fund were not leveraged.
www.utilityincomefund.com |
40 |
Reaves
Utility Income Fund |
Summary
of Updated Information
Regarding
the Fund |
October
31, 2022 (Unaudited)
The
issuance of a class of preferred shares or incurrence of borrowings having priority over the common shares creates an opportunity
for greater return per common share, but at the same time such leveraging is a speculative technique in that it will increase
the Fund’s exposure to capital risk. Unless the income and appreciation, if any, on assets acquired with leverage proceeds
exceed the associated costs of the leverage program (and other Fund expenses), the use of leverage will diminish the investment
performance of the common shares compared with what it would have been without leverage.
The
fees received by Reaves and certain other service providers are based on the total assets of the Fund, including assets represented
by leverage. During periods in which the Fund is using leverage, the fees paid to Reaves for investment advisory services (and
separately, to Paralel for administrative services will be higher than if the Fund did not use leverage because the fees paid
will be calculated on the basis of the Fund’s total assets, including proceeds from borrowings and the issuance of any preferred
shares. Therefore, Reaves may have a financial incentive to use leverage, which creates a conflict of interest between Reaves
and common shareholders. Reaves will seek to manage this conflict of interest by utilizing leverage only when they determine such
action is in the best interests of the Fund. The Board of Trustees of the Fund (the “Board”) reviews the Fund’s
leverage on a periodic basis, and the Fund’s use of leverage may be increased or decreased subject to the Board’s
oversight and applicable law.
Under
the Investment Company Act of 1940, as amended, and the rules and regulations thereunder (the “1940 Act”), the Fund
is not permitted to issue preferred shares unless immediately after such issuance the total asset value of the Fund’s portfolio
is at least 200% of the liquidation value of the outstanding preferred shares (i.e., such liquidation value may not exceed 50%
of the Fund’s total assets). In addition, the Fund is not permitted to declare any cash dividend or other distribution on
its common shares unless, at the time of such declaration, the NAV of the Fund’s portfolio (determined after deducting the
amount of such dividend or other distribution) is at least 200% of such liquidation value.
To
qualify for federal income taxation as a “regulated investment company,” the Fund must satisfy certain requirements
relating to sources of its income and diversification of its assets, and must distribute in each taxable year at least 90% of
its net investment income (including net interest income and net short-term gain). The Fund also will be required to distribute
annually substantially all of its income and capital gain, if any, to avoid imposition of a nondeductible 4% federal excise tax.
The
Fund’s willingness to issue new securities for investment purposes, and the amount the Fund will issue, depends on many
factors, the most important of which are market conditions and interest rates.
There
is no assurance that a leveraging strategy will be successful during any period in which it is employed.
The
Fund may increase the amount of leverage following the completion of an offering, subject to applicable law.
Effects
of Leverage
The
following table is furnished in response to requirements of the SEC. It is designed to illustrate the effect of leverage on total
return on common shares, assuming investment portfolio total returns (comprised of income, net expenses and changes in the value
of investments held in the Fund’s portfolio) of -10%, -5%, 0%, 5% and 10%. These assumed investment portfolio returns are
hypothetical figures and are not necessarily indicative of what the Fund’s investment portfolio returns
will be. In other words, the Fund’s actual returns may be greater or less than those appearing in the table below. The table
further reflects the use of leverage as of October 31, 2022, representing approximately 20.02% of the Fund’s Total Assets
and the Fund’s assumed annual leverage interest and fee rate of 3.92%.
Annual
Report | October 31, 2022 |
41 |
Reaves
Utility Income Fund |
Summary
of Updated Information
Regarding
the Fund |
October
31, 2022 (Unaudited)
Assumed
Portfolio Return
(Net of Expenses) |
-10.00% |
-5.00% |
0.00% |
5.00% |
10.00% |
Corresponding
Common
Share Total Return |
-14.15% |
-7.59% |
-1.03% |
5.53% |
12.09% |
Total
return is composed of two elements—the dividends on common shares paid by the Fund (the amount of which is largely determined
by the Fund’s net investment income after paying the cost of leverage) and realized and unrealized gains or losses on the
value of the securities the Fund owns. As the table shows, leverage generally increases the return to common shareholders when
portfolio return is positive or greater than the costs of leverage and decreases return when the portfolio return is negative
or less than the costs of leverage.
During
the time in which the Fund is using leverage, the amount of the fees paid to the Adviser for investment management services is
higher than if the Fund did not use leverage because the fees paid are calculated based on the Fund’s Managed Assets. This
may create a conflict of interest between the Adviser, on the one hand, and common shareholders, on the other. Also, because the
leverage costs are borne by the Fund at a specified interest rate, only the Fund’s common shareholders bear the cost of
the Fund’s management fees and other expenses. There can be no assurance that a leveraging strategy will be successful during
any period in which it is employed.
Risk
Factors
Investing
in any investment company security involves risk, including the risk that you may receive little or no return on your investment
or even that you may lose part or all of your investment. Investors should consider the following risk factors and special considerations
associated with investing in the Fund’s common shares:
Risks
Associated with Offerings of Additional Common Shares. The voting power of current shareholders will be diluted to the
extent that current shareholders do not purchase shares in any future offerings of shares or do not purchase sufficient shares
to maintain their percentage interest. If the Fund is unable to invest the proceeds of such offering as intended, the Fund’s
per common share distribution may decrease and the Fund may not participate in market advances to the same extent as if such proceeds
were fully invested as planned. If the Fund sells common shares at a price below NAV pursuant to the consent of shareholders,
shareholders will experience a dilution of the aggregate NAV per common share because the sale price will be less than the Fund’s
then-current NAV per common share. Similarly, were the expenses of the offering to exceed the amount by which the sale price exceeded
the Fund’s then current NAV per common share, shareholders would experience a dilution of the aggregate NAV per common share.
This dilution will be experienced by all shareholders, irrespective of whether they purchase common shares in any such offering.
Additional
Risks of Rights. There are additional risks associated with an offering of subscription rights to purchase common shares
(“Rights”). Shareholders who do not exercise their Rights may, at the completion of such an offering, own a smaller
proportional interest in the Fund than if they exercised their Rights. As a result of such an offering, a shareholder may experience
dilution in NAV per share if the subscription price per share is below the NAV per share on the expiration date. If the subscription
price per share is below the NAV per share of the Fund’s common shares on the expiration date, a shareholder will experience
an immediate dilution of the aggregate NAV of such shareholder’s common
shares if the shareholder does not participate in such an offering and the shareholder will experience a reduction in the NAV
per share of such shareholder’s common shares whether or not the shareholder participates in such an offering. Such a reduction
in NAV per share may have the effect of reducing market price of the common shares. The Fund cannot state precisely the extent
of this dilution (if any) if the shareholder does not exercise such shareholder’s Rights because the Fund does not know
what the NAV per share will be when the offer expires or what proportion of the Rights will be exercised. If the subscription
price is substantially less than the then current NAV per common share at the expiration of a rights offering, such dilution could
be substantial. Any such dilution or accretion will depend upon whether (i) such shareholders participate in the rights offering
and (ii) the Fund’s NAV per common share is above or below the subscription price on the expiration date of the rights offering.
In addition to the economic dilution described above, if a Common Shareholder does not exercise all of their rights, the Common
Shareholder will incur voting dilution as a result of this rights offering. This voting dilution will occur because the Common
Shareholder will own a smaller proportionate interest in the Fund after the rights offering than prior to the rights offering.
There is a risk that changes in market conditions may result in the underlying common shares purchasable upon exercise of the
subscription rights being less attractive to investors at the conclusion of the subscription period. This may reduce or eliminate
the value of the subscription rights. If investors exercise only a portion of the rights, the number of common shares issued may
be reduced, and the common shares may trade at less favorable prices than larger offerings for similar securities. Subscription
rights issued by the Fund may be transferable or non-transferable rights. In a non-transferable rights offering, Common Shareholders
who do not wish to exercise their rights will be unable to sell their rights. In a transferrable rights offering, the Fund will
use its best efforts to ensure an adequate trading market for the rights; however, investors may find that there is no market
to sell rights they do not wish to exercise.
www.utilityincomefund.com |
42 |
Reaves
Utility Income Fund |
Summary
of Updated Information
Regarding
the Fund |
October
31, 2022 (Unaudited)
Investment
and Market Risk. An investment in common shares is subject to investment risk, including the possible loss of the entire
principal amount invested. An investment in common shares represents an indirect investment in the securities owned by the Fund,
which are generally traded on a securities exchange or in the over-the-counter markets. The value of these securities, like other
market investments, may move up or down, sometimes rapidly and unpredictably. The Fund anticipates using leverage, which will
magnify the Fund’s investment, market and certain other risks. The common shares at any point in time may be worth less
than the original investment, even after taking into account any reinvestment of dividends and distributions.
Issuer
Risk. The value of common and preferred stocks may decline for a number of reasons which directly relate to the issuer,
such as management performance, financial leverage and reduced demand for the issuer’s goods and services.
Income
Risk. The income that common shareholders receive from the Fund is based primarily on the dividends and interest it earns
from its investments, which can vary widely over the short and long-term. If prevailing market interest rates drop, distribution
rates of the Fund’s holdings and common shareholder’s income from the Fund could drop as well. The Fund’s income
also would likely be affected adversely if prevailing short-term interest rates increase and the Fund is utilizing leverage.
Leverage
Risk. Described in the “Use of Leverage” section above.
Tax
Risk. The Fund’s investment program and the tax treatment of Fund distributions may be affected by Internal Revenue
Service (“IRS”) interpretations of the Internal Revenue Code of 1986, as amended (the “Code”), future
changes in tax laws and regulations. There can be no assurance that any portion of the Fund’s income distributions will
not be fully taxable as ordinary income. The Fund’s ability to pursue its investment objective, the value of the Fund’s
investments and the Fund’s NAV
may be adversely affected by changes in tax rates and policies. Because the Fund’s investment objective is to provide a
high level of after-tax yield and total return consisting primarily of dividend and interest income and capital appreciation,
the Fund’s ability to invest, and the attractiveness of investing in, equity securities that pay qualified dividend income
in relation to other investment alternatives will be affected by changes in federal income tax laws and regulations, including
changes in the qualified dividend income provisions. Any proposed or actual changes in such rates, therefore, can significantly
and adversely affect the after-tax returns of the Fund’s investments in equity securities. Any such changes also could significantly
and adversely affect the Fund’s NAV, as well as the Fund’s ability to acquire and dispose of equity securities at
desirable returns and price levels and the Fund’s ability to pursue its investment objective. The Fund cannot assure you
as to the portion, if any, of the Fund’s dividends that will be qualified dividend income. Further, in order to avoid corporate
income tax at the level of the Fund, it must qualify each year as a regulated investment company under the Code.
Annual Report | October 31, 2022 |
43 |
Reaves
Utility Income Fund |
Summary
of Updated Information
Regarding
the Fund |
October
31, 2022 (Unaudited)
Sector/Industry
Risk. The “Utility Industry” generally includes companies involved in providing products, services or equipment
for (i) the generation or distribution of electricity, gas or water, (ii) telecommunications activities or (iii) infrastructure
operations, such as airports, toll roads and municipal services. The Fund invests a significant portion of its total assets in
securities of utility companies, which may include companies in the electric, gas, water, telecommunications sectors, as well
as other companies engaged in other infrastructure operations. This may make the Fund more susceptible to adverse economic, political
or regulatory occurrences affecting those sectors. As concentration of the Fund’s investments in a sector increases, so
does the potential for fluctuation in the NAV of common shares.
Risks
that are intrinsic to utility companies include difficulty in obtaining an adequate return on invested capital, difficulty in
financing large construction programs during an inflationary period, restrictions on operations and increased cost and delays
attributable to environmental considerations and regulation, difficulty in raising capital in adequate amounts on reasonable terms
in periods of high inflation and unsettled capital markets, technological innovations that may render existing plants, equipment
or products obsolete, the potential impact of natural or man-made disasters, increased costs and reduced availability of certain
types of fuel, occasional reduced availability and high costs of natural gas and other fuels, the effects of energy conservation,
the effects of a national energy policy and lengthy delays and greatly increased costs and other problems associated with the
design, construction, licensing, regulation and operation of nuclear facilities for electric generation, including, among other
considerations, the problems associated with the use of radioactive materials, the disposal of radioactive wastes, shutdown of
facilities or release of radiation resulting from catastrophic events, disallowance of costs by regulators which may reduce profitability,
and changes in market structure that increase competition.
In
many regions, including the United States, the Utility Industry is experiencing increasing competitive pressures, primarily in
wholesale markets, as a result of consumer demand, technological advances, greater availability of natural gas with respect to
electric utility companies and other factors. For example, the Federal Energy Regulatory Commission (the “FERC”) has
implemented regulatory changes to increase access to the nationwide transmission grid by utility and non-utility purchasers and
sellers of electricity. A number of countries, including the United States, are considering or have implemented methods to introduce
and promote retail competition. Changes in regulation may result in consolidation among domestic utilities and the disaggregation
of many vertically integrated utilities into separate generation, transmission and distribution businesses. As a result, additional
significant competitors could become active in certain parts of the Utility Industry.
www.utilityincomefund.com |
44 |
Reaves
Utility Income Fund |
Summary
of Updated Information
Regarding
the Fund |
October
31, 2022 (Unaudited)
Due
to the high costs of developing, constructing, operating and distributing assets and facilities many utility companies are highly
leveraged. As such, movements in the level of interest rates may affect the returns from these assets. See “Risk Factors—Sector/Industry
Risk—Interest Rate Risk.”
Concentration
Risk. The Fund’s investments will be concentrated in the Utility industry. The focus of the Fund’s portfolio
on this sector may present more risks than if the Fund’s portfolio were broadly spread over numerous sectors of the economy.
A downturn in this sector (or any sub-sectors within it) would have a larger impact on the Fund than on an investment company
that does not concentrate solely in this specific sector (or in specific sub-sectors). At times, the performance of companies
in the Utility industry (or a specific sub-sector) may lag the performance of other sectors or the broader market as a whole.
Common
Stock Risk. The Fund will have substantial exposure to common stocks. Although common stocks have historically generated
higher average returns than fixed-income securities over the long-term, common stocks also have experienced significantly more
volatility in returns. An adverse event, such as an unfavorable earnings report, may depress the value of a particular common
stock held by the Fund. Also, the price of common stocks are sensitive to general movements in the stock market and a drop in
the stock market may depress the price of common stocks to which the Fund has exposure. Common stock prices fluctuate for many
reasons, including changes in investors’ perceptions of the financial condition of an issuer or the general condition of
the relevant stock market, or when political or economic events affecting the issuer occur. Common stock is subordinated to preferred
stock and debt in a company’s capital structure with respect to priority in the right to a share of corporate income, and
therefore will be subject to greater dividend risk than preferred stock or debt instruments. In addition, common stock prices
may be sensitive to rising interest rates, as the costs of capital rise and borrowing costs increase.
Foreign
Securities Risk. Investments in securities of non-U.S. issuers will be subject to risks not usually associated
with owning securities of U.S. issuers. These risks can include fluctuations in foreign currencies, foreign currency exchange
controls, social, political and economic instability, differences in securities regulation and trading, expropriation or nationalization
of assets, and foreign taxation issues. In addition, changes in government administrations or economic or monetary policies in
the United States or abroad could result in appreciation or depreciation of the Fund’s securities. It may also be more difficult
to obtain and enforce a judgment against a non-U.S. issuer. Foreign investments made by the Fund must be made in compliance with
U.S. and foreign currency restrictions and tax laws restricting the amounts and types of foreign investments. The risks of foreign
investing may be magnified for investments in issuers located in emerging market countries.
To
the extent the Fund invests in depositary receipts, the Fund will be subject to many of the same risks as when investing directly
in non-U.S. securities. The holder of an unsponsored depositary receipt may have limited voting rights and may not receive as
much information about the issuer of the underlying securities as would the holder of a sponsored depositary receipt.
Foreign
Currency Risk. Investments in securities that trade in and receive revenues in foreign currencies are subject to the risk
that those currencies will decline in value relative to the U.S. dollar. Currency rates in foreign countries may fluctuate significantly
over short periods of time. A decline in the value of foreign currencies relative to the U.S. dollar will reduce the value of
securities held by the Fund and denominated in those currencies. Some foreign governments levy withholding taxes against dividend
and interest income. Although in some countries portions of these taxes are recoverable, any amounts not recovered will reduce
the income received by the Fund, and may reduce distributions to common shareholders. These risks are generally heightened for
investments in emerging market countries.
Annual Report | October 31, 2022 |
45 |
Reaves
Utility Income Fund |
Summary
of Updated Information
Regarding
the Fund |
October
31, 2022 (Unaudited)
Small
and Mid-Cap Stock Risk. The Fund may invest in companies of any market capitalization. The Fund considers small companies
to be those with a market capitalization up to $2 billion and medium-sized companies to be those with a market capitalization
between $2 billion and $10 billion. Smaller and medium-sized company stocks may be more volatile than, and perform differently
from, larger company stocks. There may be less trading in the stock of a smaller or medium-sized company, which means that buy
and sell transactions in that stock could have a larger impact on the stock's price than is the case with larger company stocks.
Smaller and medium-sized companies may have fewer business lines; changes in any one line of business, therefore, may have a greater
impact on a smaller or medium-sized company's stock price than is the case for a larger company. As a result, the purchase or
sale of more than a limited number of shares of a small or medium-sized company may affect its market price. The Fund may need
a considerable amount of time to purchase or sell its positions in these securities. In addition, smaller or medium-sized company
stocks may not be well known to the investing public and may be held primarily by insiders or institutional investors.
Non-Investment
Grade Securities Risk. Investments in securities of below investment grade quality, if any, are predominantly speculative
because of the credit risk of their issuers. While offering a greater potential opportunity for capital appreciation and higher
yields, preferred stocks and bonds of below investment grade quality (also known as “junk bonds”) entail greater potential
price volatility and may be less liquid than higher-rated securities. Issuers of below investment grade quality preferred stocks
and bonds are more likely to default on their payments of dividends/interest and liquidation value/principal owed to the Fund,
and such defaults will reduce the Fund’s NAV and income distributions.
Interest
Rate Risk. Interest rate risk is the risk that preferred stocks paying fixed dividend rates and fixed-rate debt securities
will decline in value because of changes in market interest rates. When interest rates rise the market value of such securities
generally will fall. An investment by the Fund in preferred stocks or fixed-rate debt securities means that the NAV and price
of the common shares may decline if market interest rates rise. In typical interest rate environments, the prices of longer term
debt securities generally fluctuate more than the prices of shorter-term debt securities as interest rates change. These risks
may be greater in the current market environment because certain interest rates are near historically low levels. During periods
of declining interest rates, an issuer of preferred stock or fixed-rate debt securities may exercise its option to redeem securities
prior to maturity, forcing the Fund to reinvest in lower yielding securities. During periods of rising interest rates, the average
life of certain types of securities may be extended because of slower than expected payments. This may lock in a below market
yield, increase the security’s duration, and reduce the value of the security. The value of the Fund’s common stock
investments may also be influenced by changes in interest rates
Credit
Risk. Credit risk is the risk that an issuer of a preferred or debt security will become unable to meet its obligation
to make dividend, interest and principal payments. In general, lower rated preferred or debt securities carry a greater degree
of credit risk. If rating agencies lower their ratings of preferred or debt securities in the Fund’s portfolio, the value
of those obligations could decline. In addition, the underlying revenue source for a preferred or debt security may be insufficient
to pay dividends, interest or principal in a timely manner.
Derivatives
Risk. Although it may use other derivative instruments from time to time as described in the Fund’s Statement of
Additional Information, the Fund’s derivatives usage to date has generally been limited to equity options, including writing
covered calls, the purchase of calls and the sale of puts. A decision as to whether, when and how to use options involves the
exercise or skill and judgment, and even a well-conceived transaction may be unsuccessful to some degree because of
market behavior or unexpected events. The Fund may also, from time to time, choose to use interest rate swaps (or options thereon).
Derivatives transactions of the types described above subject the Fund to increased risk of principal loss due to imperfect correlation
or unexpected price or interest rate movements. The Fund’s use of derivative instruments involves investments risks and
transactions costs to which the Fund would not be subject absent the use of these instruments and, accordingly, may result in
losses greater than if they had not been used. The Fund also will be subject to credit risk with respect to the counterparties
to the over-the-counter derivatives contracts purchased by the Fund. If a counterparty becomes bankrupt or otherwise fails to
perform its obligations under a derivative contract due to financial difficulties, the Fund may experience significant delays
in obtaining any recovery under the derivative contract in a bankruptcy or other reorganization proceeding. The Fund may obtain
only a limited recovery or may obtain no recovery in such circumstances. As a general matter, dividends received on hedged stock
positions are characterized as ordinary income and are not eligible for favorable tax treatment. In addition, use of derivatives
may give rise to short-term capital gains and other income that would not qualify for payments by the Fund of tax-advantaged dividends.
www.utilityincomefund.com |
46 |
Reaves
Utility Income Fund |
Summary
of Updated Information
Regarding
the Fund |
October
31, 2022 (Unaudited)
Preferred
Stock Risk. The Fund may have exposure to preferred stocks. In addition to credit risk, investments in preferred stocks
involve certain other risks. Certain preferred stocks contain provisions that allow an issuer under certain conditions to skip
distributions (in the case of “noncumulative” preferred stocks) or defer distributions (in the case of “cumulative”
preferred stocks). If the Fund owns a preferred stock that is deferring its distributions, the Fund may be required to report
income for tax purposes while it is not receiving income on this position. Preferred stocks often contain provisions that allow
for redemption in the event of certain tax or legal changes or at the issuers’ call. In the event of redemption, the Fund
may not be able to reinvest the proceeds at comparable rates of return. Preferred stocks typically do not provide any voting rights,
except in cases when dividends are in arrears beyond a certain time period, which varies by issue. Preferred stocks are subordinated
to bonds and other debt instruments in a company’s capital structure in terms of priority to corporate income and liquidation
payments, and therefore will be subject to greater credit risk than those debt instruments. Preferred stocks may be significantly
less liquid than many other securities, such as U.S. government securities, corporate debt or common stock.
Debt
Securities Risk. In addition to credit risk, investments in debt securities carry certain risks including: redemption
risk (debt securities sometimes contain provisions that allow for redemption in the event of tax or security law changes in addition
to call features at the option of the issuer. In the event of a redemption, the Fund may not be able to reinvest the proceeds
at comparable rates of return); limited voting rights (debt securities typically do not provide any voting rights, except in cases
when interest payments have not been made and the issuer is in default; and liquidity (certain debt securities may be substantially
less liquid than many other securities, such as U.S. government securities or common stocks).
Inflation
Risk. Inflation risk is the risk that the purchasing power of assets or income from investment will be worth less in the
future as inflation decreases the value of money. As inflation increases, the real value of the common shares and distributions
thereon can decline.
Illiquid
Securities Risk. The Fund may invest in securities for which there is no readily available trading market or which
are otherwise illiquid. The Fund may not be able readily to dispose of such securities at prices that approximate those at
which the Fund could sell such securities if they were more widely traded and, as a result of such illiquidity, the Fund may
have to sell other investments or engage in borrowing transactions if necessary to raise cash to meet its obligations. In
addition, the
limited liquidity could affect the market price of the securities, thereby adversely affecting the Fund’s NAV.
Annual Report | October 31, 2022 |
47 |
Reaves
Utility Income Fund |
Summary
of Updated Information
Regarding
the Fund |
October
31, 2022 (Unaudited)
Market
Price of Common Shares. The shares of closed-end management investment companies often trade at a discount from their
NAV, and the Fund’s common shares may likewise trade at a discount from NAV. The trading price of the Fund’s common
shares may be less than the public offering price. The returns earned by common shareholders who sell their common shares below
NAV will be reduced. As of October 31, 2022, the Fund’s common shares are trading at a premium to NAV.
Management
Risk. The Fund is subject to management risk because it has an actively managed portfolio. Reaves and the individual portfolio
managers apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee
that these will produce the desired results.
Market
Disruption and Geopolitical Risk. The value of your investment in the Fund is based on the values of the Fund’s
investments, which may change due to economic and other events that affect markets generally, as well as those that affect particular
regions, countries, industries, companies or governments. These movements, sometimes called volatility, may be greater or less
depending on the types of securities the Fund owns and the markets in which the securities trade. The increasing interconnectivity
between global economies and financial markets increases the likelihood that events or conditions in one region or financial market
may adversely impact issuers in a different country, region or financial market. Securities in the Fund’s portfolio may
underperform due to inflation (or expectations for inflation), interest rates, global demand for particular products or resources,
natural disasters, pandemics, epidemics, terrorism, regulatory events and governmental or quasi-governmental actions. The occurrence
of global events similar to those in recent years, such as the war in Ukraine, terrorist attacks around the world, natural disasters,
social and political discord or debt crises and downgrades, among others, may result in market volatility and may have long term
effects on both the U.S. and global financial markets. The occurrence of such events may be sudden and unexpected, and it is difficult
to predict when similar events affecting the U.S. or global financial markets may occur, the effects that such events may have
and the duration of those effects. Any such event(s) could have a significant adverse impact on the value, liquidity and risk
profile of the Fund’s portfolio, as well as its ability to sell securities to meet redemptions. There is a risk that you
may lose money by investing in the Fund.
Social,
political, economic and other conditions and events, such as natural disasters, health emergencies (e.g., epidemics and pandemics),
terrorism, wars, conflicts and social unrest, may occur and could significantly impact issuers, industries, governments and other
systems, including the financial markets. As global systems, economies and financial markets are increasingly interconnected,
events that once had only local impact are now more likely to have regional or even global effects. Events that occur in one country,
region or financial market will, more frequently, adversely impact issuers in other countries, regions or markets. These impacts
can be exacerbated by failures of governments and societies to adequately respond to an emerging event or threat. These types
of events quickly and significantly impact markets in the U.S. and across the globe leading to extreme market volatility and disruption.
The extent and nature of the impact on supply chains or economies and markets from these events is unknown. These events could
reduce consumer demand or economic output, result in market closures, travel restrictions or quarantines, and generally have a
significant impact on the economies and financial markets and the Adviser’s investment advisory activities and services
of other service providers, which in turn could adversely affect the Fund’s investments and other operations. The value
of the Fund’s investments may decrease as a result of
such events, particularly if these events adversely impact the operations and effectiveness of the Adviser or key service providers
or if these events disrupt systems and processes necessary or beneficial to the investment advisory or other activities on behalf
the Fund.
www.utilityincomefund.com |
48 |
Reaves
Utility Income Fund |
Summary
of Updated Information
Regarding
the Fund |
October
31, 2022 (Unaudited)
Legislation,
Policy and Regulatory Risk. At any time after the date of this report, legislation or additional regulations may be enacted
that could negatively affect the assets of the Fund or the issuers of such assets. Recent changes in the U.S. political landscape
and changing approaches to regulation may have a negative impact on the entities and/or securities in which the Fund invests.
Legislation or regulation may also change the way in which the Fund itself is regulated. New or amended regulations may be imposed
by the Commodity Futures Trading Commission (“CFTC”), the SEC, the Board of Governors of the Federal Reserve System
(the “Federal Reserve”) or other financial regulators, other governmental regulatory authorities or self-regulatory
organizations that supervise the financial markets that could adversely affect the Fund. In particular, these agencies are empowered
to promulgate a variety of new rules pursuant to financial reform legislation in the United States. There can be no assurance
that future legislation, regulation or deregulation will not have a material adverse effect on the Fund or will not impair the
ability of the Fund to achieve its investment objective. The Fund also may be adversely affected by changes in the enforcement
or interpretation of existing statutes and rules by these governmental agencies.
Portfolio
Turnover Risk. The techniques and strategies contemplated by the Fund might result in a high degree of portfolio turnover.
The Fund cannot accurately predict its securities portfolio turnover rate, but anticipates that its annual portfolio turnover
rate will not exceed 100% under normal market conditions, although it could be materially higher under certain conditions. Higher
portfolio turnover rates could result in corresponding increases in brokerage commissions and generate short term capital gains
taxable as ordinary income.
Portfolio
Manager Information
Since
the prior disclosure date, there have been no changes in the Fund’s portfolio managers or their business experience.
Fund
Organizational Structure
Since
the prior disclosure date, there have been no changes in the Fund’s charter or by-laws that would delay or prevent a change
of control of the Fund that have not been approved by shareholders.
Other
Disclosures
Delaware
Statutory Trust Act – Control Share Acquisitions The Fund is organized as a Delaware statutory trust and thus is subject
to the control share acquisition statute contained in Subchapter III of the Delaware Statutory Trust Act (the “DSTA Control
Share Statute”). The DSTA Control Share Statute applies to any closed-end investment company organized as a Delaware statutory
trust and listed on a national securities exchange, such as the Fund. The DSTA Control Share Statute became automatically applicable
to the Fund on August 1, 2022.
The
DSTA Control Share Statute defines “control beneficial interests” (referred to as “control shares” herein)
by reference to a series of voting power thresholds and provides that a holder of control shares acquired in a control share acquisition
has no voting rights under the Delaware Statutory Trust Act (“DSTA”) or the Fund’s governing documents with
respect to the control shares acquired in the control share acquisition, except to the extent approved by the Fund’s shareholders
by the affirmative vote of two–thirds of all the votes entitled to be cast on the matter, excluding all interested shares (generally,
shares held by the acquiring person and their associates and shares held by Fund insiders).
Annual Report | October 31, 2022 |
49 |
Reaves
Utility Income Fund |
Summary
of Updated Information
Regarding
the Fund |
October
31, 2022 (Unaudited)
The
DSTA Control Share Statute provides for a series of voting power thresholds above which shares are considered control shares.
Whether one of these thresholds of voting power is met is determined by aggregating the holdings of the acquiring person as well
as those of his, her or its “associates.” These thresholds are:
(1)
10% or more, but less than 15% of all voting power;
(2)
15% or more, but less than 20% of all voting power;
(3)
20% or more, but less than 25% of all voting power;
(4)
30% or more, but less than a majority of all voting power; or
(5)
a majority or more of all voting power.
Under
the DSTA Control Share Statute, once a threshold is reached, an acquirer has no voting rights with respect to shares in excess
of that threshold (i.e., the “control shares”) until approved by a vote of shareholders, as described above, or otherwise
exempted by the Fund’s Board of Trustees. The DSTA Control Share Statute contains a statutory process for an acquiring person
to request a shareholder meeting for the purpose of considering the voting rights to be accorded control shares. An acquiring
person must repeat this process at each threshold level.
Under
the DSTA Control Share Statute, an acquiring person’s “associates” are broadly defined to include, among others,
relatives of the acquiring person, anyone in a control relationship with the acquiring person, any investment fund or other collective
investment vehicle that has the same investment adviser as the acquiring person, any investment adviser of an acquiring person
that is an investment fund or other collective investment vehicle and any other person acting or intending to act jointly or in
concert with the acquiring person.
Voting
power under the DSTA Control Share Statute is the power (whether such power is direct or indirect or through any contract, arrangement,
understanding, relationship or otherwise) to directly or indirectly exercise or direct the exercise of the voting power of shares
of the Fund in the election of the Fund’s Trustees (either generally or with respect to any subset, series or class of trustees,
including any Trustees elected solely by a particular series or class of shares, such as the preferred shares). Thus, Fund preferred
shares, including the Series B Preferred Shares, acquired in excess of the above thresholds would be considered control shares
with respect to the preferred share class vote for two Trustees.
Any
control shares of the Fund acquired before August 1, 2022 are not subject to the DSTA Control Share Statute; however, any further
acquisitions on or after August 1, 2022 are considered control shares subject to the DSTA Control Share Statute.
The
DSTA Control Share Statute requires shareholders to disclose to the Fund any control share acquisition within 10 days of such
acquisition, and also permits the Fund to require a shareholder or an associate of such person to disclose the number of shares
owned or with respect to which such person or an associate thereof can directly or indirectly exercise voting power. Further,
the DSTA Control Share Statute requires a shareholder or an associate of such person to provide to the Fund within 10 days of
receiving a request therefor from the Fund any information that the Fund’s Trustees reasonably believe is necessary or desirable
to determine whether a control share acquisition has occurred.
www.utilityincomefund.com |
50 |
Reaves
Utility Income Fund |
Summary
of Updated Information
Regarding
the Fund |
October
31, 2022 (Unaudited)
The
DSTA Control Share Statute permits the Fund’s Board of Trustees, through a provision in the Fund’s governing documents
or by Board action alone, to eliminate the application of the DSTA Control Share Statute to the acquisition of control shares
in the Fund specifically, generally, or generally by types, as to specifically identified or unidentified existing or future beneficial
owners or their affiliates or associates or as to any series or classes of shares. The DSTA Control Share Statute does not provide
that the Fund can generally “opt out” of the application of the DSTA Control Share Statute; rather, specific acquisitions
or classes of acquisitions may be exempted by the Fund’s Board of Trustees, either in advance or retroactively, but other
aspects of the DSTA Control Share Statute, which are summarized above, would continue to apply. The DSTA Control Share Statute
further provides that the Board of Trustees is under no obligation to grant any such exemptions.
The
foregoing is only a summary of the material terms of the DSTA Control Share Statute. Shareholders should consult their own counsel
with respect to the application of the DSTA Control Share Statute to any particular circumstance.
Market
and Net Asset Value Information
The
common shares are listed on the NYSE American under the symbol “UTG” and began trading on the NYSE American on February
24, 2004. Shares of closed-end investment companies often trade on an exchange at prices lower than NAV. The Fund’s common
shares have traded in the market at both premiums to and discounts from NAV. The following table shows, for each fiscal quarter
since the quarter ended January 31, 2020; (i) high and low NAVs per common share, (ii) the high and low sale prices per common
share, as reported in the consolidated transaction reporting system, and (iii) the percentage by which the common shares traded
at a premium over, or discount from, the high and low NAVs per common share. The Fund’s NAV per common share is determined
on a daily basis.
| | |
| | |
Market
Price | | |
Net
Asset Value at | | |
Market
Premium (Discount) to Net Asset Value at | |
Quarter
Ended | | |
| | |
Low | | |
High | | |
Market
Low | | |
Market
High | | |
Market
Low | | |
Market
High | |
2022 | | |
| October
31 | | |
$ | 24.55 | | |
$ | 34.02 | | |
$ | 25.10 | | |
$ | 33.85 | | |
| (5.58 | )% | |
| 0.51 | % |
| | |
| July
31 | | |
$ | 28.85 | | |
$ | 34.50 | | |
$ | 28.56 | | |
$ | 34.02 | | |
| 1.02 | % | |
| 2.59 | % |
| | |
| April
30 | | |
$ | 30.76 | | |
$ | 35.43 | | |
$ | 30.71 | | |
$ | 36.13 | | |
| (0.65 | )% | |
| (1.94 | )% |
| | |
| January
31 | | |
$ | 32.20 | | |
$ | 35.44 | | |
$ | 31.95 | | |
$ | 34.79 | | |
| (1.08 | )% | |
| 1.90 | % |
2021 | | |
| October
31 | | |
$ | 32.34 | | |
$ | 36.50 | | |
$ | 31.76 | | |
$ | 36.07 | | |
| 0.84 | % | |
| 3.40 | % |
| | |
| July
31 | | |
$ | 33.85 | | |
$ | 35.61 | | |
$ | 33.43 | | |
$ | 34.83 | | |
| (0.21 | )% | |
| 4.12 | % |
| | |
| April
30 | | |
$ | 30.50 | | |
$ | 35.10 | | |
$ | 29.95 | | |
$ | 34.64 | | |
| (0.39 | )% | |
| 1.50 | % |
| | |
| January
31 | | |
$ | 31.24 | | |
$ | 34.60 | | |
$ | 31.29 | | |
$ | 33.62 | | |
| (0.16 | )% | |
| 2.91 | % |
As
of October 31, 2022, the last reported closing sale price for the Fund’s Common Shares was $25.70 per share and the reported
NAV on that date for the Fund’s Common Shares was $26.01, representing a discount to NAV of (1.19)%. Market prices on that
same date ranged from $26.29 to a low of $25.70, representing a premium to NAV of 1.08% and a discount to NAV of (1.19)%, respectively.
Annual Report | October 31, 2022 |
51 |
REAVES
UTILITY INCOME FUND
1700 Broadway, Suite 1230
Denver, CO 80290
1-800-644-5571
Paralel
Technologies LLC’s affiliate, Paralel Distributors LLC, a FINRA
member, serves as underwriter to the Fund’s at the
market offering.