Amended Certified Annual Shareholder Report for Management Investment Companies (n-csr/a)

Date : 01/10/2020 @ 10:28PM
Source : Edgar (US Regulatory)
Stock : Reaves Utility Income Fund (UTG)
Quote : 27.62  3.33 (13.71%) @ 12:55AM
Reaves Utility Income share price Chart
After Hours
Last Trade
Last $ 27.62 ◊ 0.00 (0.00%)

Amended Certified Annual Shareholder Report for Management Investment Companies (n-csr/a)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number: 811-21432

 

Reaves Utility Income Fund

(Exact name of registrant as specified in charter)

 

1290 Broadway, Suite 1000, Denver, Colorado 80203

(Address of principal executive offices) (Zip code)

 

Karen S. Gilomen, Esq.

ALPS Fund Services, Inc.

1290 Broadway, Suite 1000

Denver, Colorado 80203

(Name and address of agent for service)

 

Registrant’s telephone number, including area code: 303-623-2577

 

Date of fiscal year end: October 31

 

Date of reporting period: November 1, 2018 - October 31, 2019

 

 

 

Item 1. Reports to Stockholders.

 

(a)

 

 

 

 

section 19(b) disclosure 

October 31, 2019 (Unaudited)

 

Reaves Utility Income Fund (the “Fund”), acting pursuant to a Securities and Exchange Commission (“SEC”) exemptive order and with the approval of the Fund’s Board of Trustees (the “Board”), has adopted a plan, consistent with its investment objectives and policies to support a level distribution of income, capital gains and/or return of capital (the “Plan”). In accordance with the Plan, the Fund currently distributes $0.18 per share on a monthly basis.

 

The fixed amount distributed per share is subject to change at the discretion of the Fund’s Board. Under the Plan, the Fund will distribute all available investment income to its shareholders, consistent with its primary invest-ment objectives and as required by the Internal Revenue Code of 1986, as amended (the “Code”). If sufficient investment income is not available on a monthly basis, the Fund will distribute long-term capital gains and/or return of capital to shareholders in order to maintain a level distribution. Each monthly distribution to shareholders is expected to be at the fixed amount established by the Board, except for extraordinary distributions and potential distribution rate increases or decreases to enable the Fund to comply with the distribution requirements imposed by the Code.

 

Shareholders should not draw any conclusions about the Fund’s investment performance from the amount of these distributions or from the terms of the Plan. The Fund’s total return performance on net asset value is presented in its financial highlights table.

 

The Board may amend, suspend or terminate the Fund’s Plan without prior notice if it deems such action to be in the best interest of the Fund or its shareholders. The suspension or termination of the Plan could have the effect of creating a trading discount (if the Fund’s stock is trading below net asset value) or widening an existing trading discount. The Fund is subject to risks that could have an adverse impact on its ability to maintain level distributions. Examples of potential risks include, but are not limited to, economic down-turns impacting the markets, increased market volatility, companies suspend-ing or decreasing corporate dividend distributions and changes in the Code.

 

Please refer to Additional Information for a cumulative summary of the Section 19(a) notices for the Fund’s current fiscal period. Section 19(a) notices for the Fund, as applicable, are available on the Reaves Utility Income Fund website www.utilityincomefund.com.

 

 

 

Reaves Utility Income Fund Table of Contents

 

 

Shareholder Letter 2
Report of Independent Registered Public Accounting Firm 6
Statement of Investments 7
Statement of Assets and Liabilities 11
Statement of Operations 12
Statement of Changes in Net Assets 13
Statement of Cash Flows 14
Financial Highlights 16
Notes to Financial Statements 18
Additional Information 26
Trustees & Officers 30

 

Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the Funds’ annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website at www.utilityincomefund.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

 

Beginning on January 1, 2019, you may, notwithstanding the availability of shareholder reports online, elect to receive all future shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the Fund, you can call 1-866-230-0315, from 8am to 5pm CT, to let the Fund know you wish to continue receiving paper copies of your shareholder reports.

 

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from a Fund electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 1-866-230-0315.

 

 

Annual Report  |  October 31, 2019 1

 

 

 

Reaves Utility Income Fund Shareholder Letter

 

October 31, 2019 (Unaudited)

 

To our Shareholders:

 

2019 Investment Portfolio Returns 

Total net assets of the Fund were $1,779,985,345 at October 31, 2019, or $36.52 of net asset value (“NAV”) per common share. One year ago, net assets totaled $1,544,961,106 representing $31.74 of net asset value per common share.

 

The changes include distributions to shareholders totaling $101,291,071. 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 2019 market return for shareholders was 29.94% as is reflected in the table to follow. The share price of the Fund traded at a premium of 1.56% to the NAV at fiscal year-end in contrast to the 6.4% discount at the beginning of the fiscal year.

 

    Year Ended October 31, 2019
 
One Year Three Years+ Five Years+ Ten Years+ Since Inception+**
Total investment return – Net Asset Value* 22.38% 11.64% 9.33% 16.24% 11.81%
Total investment return – Market Price* 29.94% 15.29% 10.94% 16.80% 11.59%
S&P Utilities Index1 23.71% 12.97% 10.98% 12.77% 10.55%
Dow Jones Utility Average2 22.11% 12.41% 11.49% 13.30% 11.56%

 

+ Annualized

* Assumes all dividends being reinvested

** Index data since 02/29/04

 

1 S&P 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 power producers.

2 The Dow Jones Utility Average (DJUA) is a price-weighted average of the 15 utility stocks traded in the United States.

 

Distributions to Common Shareholders

Since the Fund’s first distribution in April 2004, distributions to shareholders have totaled over $800 million consisting of divided income and realized capital gains with no returns of capital. The Trustees of the Fund regularly review the amount of the monthly distribution. The monthly distribution has been increased on eleven occasions from the initial monthly amount of $0.0967 per share to the current amount of $0.18 per share, representing a cumulative increase of 86.1%. For calendar year 2018, 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, 2019 will also be characterized as paid from net investment income and realized capital gains.

 

 

2 www.utilityincomefund.com

 

 

 

Reaves Utility Income Fund Shareholder Letter

 

October 31, 2019 (Unaudited)

 

Leverage Facility 

The $445,000,000 principal amount of the loan facility was unchanged during this fiscal year. Due to the appreciation of the Fund, the leverage decreased from 28.8% of net assets to about 25.0% at October 31, 2019. For details about the facility please refer to Note 4 of the accompanying financial statements.

 

Overview 

Fiscal year 2019 experienced a steadily declining interest rate on the 10-year U.S. Treasury. The decline from 3.15% to 1.69% produced a favorable climate for investors focused on utilities and communications companies that produce and grow dividend income. In contrast, high-yielding energy companies with poor earnings experienced stock price declines in spite of higher-than-market dividend yields.

 

California wildfires were once again a factor for utility investors to consider. PG&E Corp. was forced to file for bankruptcy given the liabilities incurred from wildfires. The Fund did not own PG&E shares, but did continue to own San Diego-based Sempra Energy which earned an exceptional total return for the year. Sempra’s service territory is much less prone to wildfires, and its Southern California based utility assets are part of a diversified multi-state portfolio.

 

Earnings and dividend growth of portfolio companies have generally met our expectations. Good earnings predictability is characteristic of the Fund’s communications and utility holdings. Energy company valuations are challenged by weak commodity prices and the prospect that climate-related regulation, and increasingly competitive renewable alternatives, will result in declining global fossil-fuel demand in the foreseeable future.

 

Utilities 

For the third time in the last four fiscal years the S&P Utilities sector generated double-digit returns. Earnings and dividend growth met our expectations with total returns for Fund holdings exceeding our expectations due to the meaningful expansion of earnings multiples. We continue to look for earnings and dividend growth in 2020, but multiple expansion, comparable to fiscal year 2019, is not likely.

 

Communications 

The cable, towers and telecom services investments delivered double-digit returns led by the cable companies. The sector’s weighting remains largely unchanged. Our view is that growth in demand for broadband services will persist in the years ahead. Cable companies are two of the Fund’s top-10 holdings. Communications services dividends will provide a material amount of the Fund’s dividend income.

 

Energy 

Total returns have not kept pace with the overall portfolio. However, energy stocks provide meaningful dividend income. We expect the Fund’s energy investments will increase their dividends in 2020. The industry faces long-term challenges from weak commodity prices, investor and legislative emphasis on environmental stewardship and concern that the demand for fossil fuels will experience long-term decline. The production and consumption of energy is changing; we will look to identify beneficiaries from the change.

 

 

Annual Report  |  October 31, 2019 3

 

 

 

Reaves Utility Income Fund Shareholder Letter

 

October 31, 2019 (Unaudited)

 

Sincerely,

 

Ronald J. Sorenson, Chief Investment Officer

 

John P. Bartlett, Vice President, CFA

 

Timothy O. Porter, Vice President, CFA

 

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.

 

 

4 www.utilityincomefund.com

 

 

 

Reaves Utility Income Fund Shareholder Letter

 

October 31, 2019 (Unaudited)

 

Industry Allocation as of October 31, 2019

 

 

 

*  Includes Money Market Funds

 

Holdings are subject to change

 

 

Annual Report  |  October 31, 2019 5

 

 

 

  Report of Independent Registered
Reaves Utility Income Fund Public Accounting Firm

 

 

To the shareholders and the Board of Trustees of Reaves Utility Income Fund

 

Opinion on the Financial Statements and Financial Highlights

 

We have audited the accompanying statement of assets and liabilities of Reaves Utility Income Fund (the “Fund”), including the statement of investments, as of October 31, 2019, the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2019, and the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2019, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

 

DELOITTE & TOUCHE LLP

 

Denver, Colorado 

December 20, 2019

 

We have served as the auditor of Reaves Utility Income Fund since 2005.

 

 

6 www.utilityincomefund.com

 

 

 

Reaves Utility Income Fund Statement of Investments

 

October 31, 2019

 

      SHARES       VALUE  
COMMON STOCKS 121.00%                
Airlines 1.79%                
Delta Air Lines, Inc.(1)      580,000     $ 31,946,400  
                 
Diversified Telecommunication Services 16.40%                
AT&T, Inc.     613,234       23,603,377  
BCE, Inc.(1)      1,900,000       90,155,000  
TELUS Corp.     1,880,000       66,872,669  
Verizon Communications, Inc.(1)      1,840,000       111,264,800  
              291,895,846  
                 
Electric Utilities 23.81%                
Edison International(1)      860,000       54,094,000  
Eversource Energy(1)      555,000       46,475,700  
FirstEnergy Corp.     500,000       24,160,000  
Fortis, Inc.(1)      1,400,000       58,192,681  
NextEra Energy, Inc.(1)      454,000       108,206,360  
Pinnacle West Capital Corp.(1)      350,000       32,942,000  
PPL Corp.(1)      960,000       32,150,400  
The Southern Co.     1,080,000       67,672,800  
              423,893,941  
                 
Gas Utilities 2.02%                
Atmos Energy Corp.     161,500       18,165,520  
South Jersey Industries, Inc.     361,000       11,609,760  
Southwest Gas Corp.     70,000       6,111,000  
              35,886,280  
                 
Independent Power and Renewable Electricity Producers 3.08%                
NextEra Energy Partners LP(1)      1,040,000       54,808,000  
                 
Interactive Media & Services 0.78%                
Alphabet, Inc., Class C(2)      11,000       13,861,210  
                 
Media 13.62%                
Altice USA, Inc., Class A(2)      2,610,000       80,779,500  
CBS Corp., Class B     100,000       3,604,000  
Charter Communications, Inc., Class A(1)(2)      200,000       93,572,000  
Comcast Corp., Class A(1)      1,440,000       64,540,800  
              242,496,300  
                 
Multi-Utilities 29.02%                
CMS Energy Corp.(1)      571,000       36,498,320  
Dominion Energy, Inc.(1)      920,000       75,946,000  

 

 

Annual Report | October 31, 2019 7

 

 

 

Reaves Utility Income Fund Statement of Investments

 

October 31, 2019

 

    SHARES     VALUE  
Multi-Utilities (continued)                
DTE Energy Co.(1)      932,000     $ 118,662,240  
National Grid PLC, Sponsored ADR     1       58  
NiSource, Inc.     442,000       12,393,680  
Public Service Enterprise Group, Inc.(1)      1,100,000       69,641,000  
Sempra Energy(1)      840,000       121,388,400  
WEC Energy Group, Inc.(1)      868,700       82,005,280  
              516,534,978  
                 
Oil, Gas & Consumable Fuels 16.11%                
BP PLC     375,000       2,376,812  
BP PLC, Sponsored ADR     850,000       32,223,500  
EOG Resources, Inc.     71,000       4,921,010  
Exxon Mobil Corp.     450,000       30,406,500  
Marathon Petroleum Corp.     575,000       36,771,250  
Occidental Petroleum Corp.     295,000       11,947,500  
ONEOK, Inc.(1)      1,100,000       76,813,000  
Royal Dutch Shell PLC:                
Class A     200,000       5,785,049  
Class A, Sponsored ADR(1)      1,300,000       75,361,000  
TC Energy Corp.     200,000       10,066,000  
              286,671,621  
                 
Real Estate Investment Trusts (REITs) 5.85%                
CoreSite Realty Corp.     40,000       4,700,000  
Crown Castle International Corp.(1)      335,000       46,494,650  
Equinix, Inc.(1)      85,000       48,176,300  
SBA Communications Corp.     20,000       4,813,000  
              104,183,950  
                 
Road & Rail 5.19%                
Union Pacific Corp.(1)      558,000       92,326,680  
                 
Water Utilities 2.71%                
American Water Works Co., Inc.(1)      392,000       48,321,840  
                 
Wireless Telecommunication Services 0.62%                
T-Mobile US, Inc.(2)      133,000       10,993,780  
                 
TOTAL COMMON STOCKS                
(Cost $1,548,539,206)             2,153,820,826  

 

 

8 www.utilityincomefund.com

 

 

 

Reaves Utility Income Fund Statement of Investments

 

October 31, 2019

 

    SHARES     VALUE  
LIMITED PARTNERSHIPS 2.03%                
Oil, Gas & Consumable Fuels 2.03%                
Bastion Energy LLC (Anglo Dutch)(3)(4)            $ 437,324  
Enterprise Products Partners LP(1)      1,370,000       35,661,100  
Talara Opportunities II, LP(2)(3)(4)(5)               
              36,098,424  
TOTAL LIMITED PARTNERSHIPS                
(Cost $32,192,946)             36,098,424  

 

    BOND RATING
MOODY/S&P
  PRINCIPAL
AMOUNT
    VALUE  
CORPORATE BONDS 0.05%                    
Diversified Telecommunication Services 0.05%                    
Frontier Communications Corp., 7.125%, 01/15/2023   Caa3/CCC   $ 2,000,000       907,500  
                     
TOTAL CORPORATE BONDS                    
(Cost $1,943,951)                 907,500  

 

    SHARES     VALUE  
MONEY MARKET FUNDS 1.91%                
Federated Treasury Obligations Money Market Fund, 1.700% (7-Day Yield)     33,971,281       33,971,281  
                 
TOTAL MONEY MARKET FUNDS                
(Cost $33,971,281)             33,971,281  
                 
TOTAL INVESTMENTS - 124.99%                
(Cost $1,616,647,384)           $ 2,224,798,031  
                 
LEVERAGE FACILITY - (25.00%)             (445,000,000 )
                 
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.01%             187,314  
                 
NET ASSETS - 100.00%           $ 1,779,985,345  

 

(1) Pledged security; a portion or all of the security is pledged as collateral for borrowings as of October 31, 2019. (See Note 4)

(2) Non-Income Producing Security.

(3) Restricted security. Investment represents a non-public partnership interest and is not unitized. (See Note 5)

 

 

Annual Report | October 31, 2019 9

 

 

 

Reaves Utility Income Fund Statement of Investments

 

October 31, 2019

 

(4) Security fair valued by management, pursuant to procedures approved by the Board of Trustees, using significant unobservable inputs. (See Note 1)

(5) Underlying investment filed for bankruptcy in May 2019. Received notice of dissolution in November 2019.

 

Common Abbreviations:  

ADR - American Depositary Receipt  

Co. - Company  

Corp. - Corporation  

Inc. - Incorporated  

LLC - Limited Liability Company  

LP - Limited Partnership 

PLC - Public Limited Company

 

See Notes to Financial Statements.

 

 

10 www.utilityincomefund.com

 

 

 

Reaves Utility Income Fund Statement of Assets and Liabilities

 

October 31, 2019

 

ASSETS:      
Investments, at value (Cost $1,616,647,384)   $ 2,224,798,031  
Foreign currency, at value (Cost $96,804)     96,804  
Dividends receivable     2,600,492  
Interest receivable     88,648  
Receivable for investments sold     403,090  
Other assets     771  
Total Assets     2,227,987,836  
         
LIABILITIES:        
Loan payable     445,000,000  
Interest payable on loan outstanding     387,604  
Payable for investments purchased     748,485  
Accrued investment advisory fees     1,089,568  
Accrued administration fees     502,149  
Accrued trustees' fees     40,860  
Accrued chief compliance officer fees     3,250  
Other payables and accrued expenses     230,575  
Total Liabilities     448,002,491  
Net Assets Applicable to Common Shareholders   $ 1,779,985,345  
         
COMPOSITION OF NET ASSETS ATTRIBUTABLE TO COMMON SHARES:        
Paid-in capital   $ 1,139,967,949  
Total distributable earnings     640,017,396  
Net Assets Applicable to Common Shareholders   $ 1,779,985,345  
         
Shares of common stock outstanding of no par value, unlimited shares authorized     48,736,871  
Net asset value per common share   $ 36.52  

 

See Notes to Financial Statements.

 
Annual Report | October 31, 2019 11

 

 

 

Reaves Utility Income Fund Statement of Operations

 

For the Year Ended October 31, 2019

 

INVESTMENT INCOME:      
Dividends (Net of foreign withholding taxes of $2,089,315)   $ 65,745,287  
Interest on investment securities     153,790  
Total Investment Income     65,899,077  
         
EXPENSES:        
Interest on loan     14,703,356  
Investment advisory fees     12,109,922  
Administration fees     5,581,068  
Chief compliance officer fees     39,000  
Trustees' fees     179,449  
State tax     1,137,768  
Miscellaneous fees     278,396  
Total Expenses     34,028,959  
         
Net Investment Income     31,870,118  
         
Net realized gain/(loss) on:        
Investment securities     73,218,951  
Foreign currency transactions     (63,947 )
Change in unrealized appreciation/(depreciation) of:        
Investment securities     229,026,410  
Translation of assets and liabilities denominated in foreign currencies     (132 )
Net gain on investments and foreign currency transactions     302,181,282  
         
Net Increase in Net Assets Attributable to Common Shares from Operations   $ 334,051,400  

 

See Notes to Financial Statements.

 

12 www.utilityincomefund.com

 

 

 

Reaves Utility Income Fund Statement of Changes in Net Assets

 

 

    For the
Year Ended
October 31, 2019
    For the
Year Ended
October 31, 2018
 
COMMON SHAREHOLDER OPERATIONS:                
Net investment income   $ 31,870,118     $ 40,898,540  
Net realized gain     73,155,004       54,172,551  
Change in unrealized appreciation/(depreciation)     229,026,278       (66,012,058 )
Net increase in net assets attributable to common shares from operations     334,051,400       29,059,033  
                 
DISTRIBUTIONS TO COMMON SHAREHOLDERS:                
Total amount of distributions     (101,291,071 )     (96,853,302 )
Net decrease in net assets from distributions to common shareholders     (101,291,071 )     (96,853,302 )
                 
CAPITAL SHARE TRANSACTIONS:                
Proceeds from common shares issued to shareholders from reinvestment of dividends     2,263,910        
Offering cost(1)            (109,237 )
Net increase/(decrease) from capital share transactions     2,263,910       (109,237 )
                 
Net Increase/(Decrease) in Net Assets Attributable to Common Shares     235,024,239       (67,903,506 )
                 
NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS:                
Beginning of year   $ 1,544,961,106     $ 1,612,864,612  
End of year   $ 1,779,985,345     $ 1,544,961,106  

 

(1) Additional offering cost associated with rights offering which expired on October 4, 2017.

 

See Notes to Financial Statements.

 
Annual Report | October 31, 2019 13

 

 

 

Reaves Utility Income Fund Statement of Cash Flows

 

For the Year Ended October 31, 2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:      
Net increase in net assets from operations   $ 334,051,400  
Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities:        
Purchase of investment securities     (461,155,193 )
Proceeds from disposition of investment securities     547,908,984  
Net purchases of short-term investment securities     (19,888,983 )
Premium amortization     (13,804 )
Net realized (gain)/loss on:        
Investment securities     (73,218,951 )
Net change in unrealized (appreciation)/depreciation on:        
Investments     (229,026,410 )
(Increase)/Decrease in assets:        
Dividends receivable     190,834  
Interest receivable     (45,642 )
Other assets     69,389  
Increase/(Decrease) in liabilities:        
Interest payable on loan outstanding     (100,652 )
Accrued investment advisory fees     103,419  
Accrued administration fees     47,663  
Accrued trustees' fees     (3,361 )
Accrued chief compliance officer fees     (3,250 )
Other payables and accrued expenses     168,425  
Net Cash Provided by Operating Activities     99,083,868  
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Cash distributions paid on Common Shares     (99,027,161 )
Net Cash Used in Financing Activities     (99,027,161 )
         
Net Increase in cash     56,707  
Foreign currency, beginning of year   $ 40,097  
Foreign currency, end of year   $ 96,804  
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid during the period for interest from bank borrowing   $ 14,804,008  
Non-cash financing activities not included herein consist of reinvestment of distributions of:     2,263,910  

 

See Notes to Financial Statements.

 
14 www.utilityincomefund.com

 

 

 

Page Intentionally Left Blank

 

 

 

Reaves Utility Income Fund

 

 

PER COMMON SHARE OPERATING PERFORMANCE:
Net asset value per share, beginning of period
INCOME/LOSS FROM INVESTMENT OPERATIONS:
Net investment income(1) 
Net realized and unrealized gain/(loss)
Total income/(loss) from investment operations
 
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
From net investment income
From net realized gains
Total distributions to common shareholders
Change due to rights offering
Total distributions and rights offering
 
Net asset value per common share, end of year
Market price per common share, end of year
 
Total Investment Return - Net Asset Value(4) 
Total Investment Return - Market Price(4) 
 
RATIOS AND SUPPLEMENTAL DATA
Net assets attributable to common shares, end of year (000s)
Ratio of expenses to average net assets attributable to common shares
 
Ratio of expenses excluding interest expense to average net assets attributable to common shares
 
Ratio of net investment income to average net assets attributable to common shares
Portfolio turnover rate
 
BORROWINGS AT END OF PERIOD
Aggregate amount outstanding (000s)
Asset coverage per $1,000(5) 

 

(1) Calculated using average common shares outstanding.

(2) Less than $(0.005).

(3) Effect of rights offerings for common shares at a price below market price.
(4) Total investment return is calculated assuming a purchase of a common share at the opening on the first day and a sale at closing on the last day of each period reported. Total investment return excludes any sales charges. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund’s dividend reinvestment plan.

(5) Calculated by subtracting the Fund's total liabilities (excluding the principal amount of Leverage Facility) from the Fund's total assets and dividing by the principal amount of the Leverage Facility and then multiplying by $1,000.

 

See Notes to Financial Statements.

 

16 www.utilityincomefund.com

 

 

 

Financial Highlights

 

 

For the
Year Ended
10/31/19
  For the
Year Ended
10/31/18
  For the
Year Ended
10/31/17
  For the
Year Ended
10/31/16
  For the
Year Ended
10/31/15
$ 31.74     $ 33.14     $ 32.53     $ 30.29     $ 32.71  
                                     
  0.65       0.84       1.00       0.84       0.84  
  6.21       (0.25 )     3.87       3.89       (1.47 )
  6.86       0.59       4.87       4.73       (0.63 )
                                     
  (0.64 )     (0.83 )     (1.04 )     (0.99 )     (0.89 )
  (1.44 )     (1.16 )     (1.80 )     (0.83 )     (0.90 )
  (2.08 )     (1.99 )     (2.84 )     (1.82 )     (1.79 )
        (0.00 )(2)      (1.42 )(3)      (0.67 )(3)       
  (2.08 )     (1.99 )     (4.26 )     (2.49 )     (1.79 )
                                     
$ 36.52     $ 31.74     $ 33.14     $ 32.53     $ 30.29  
$ 37.09     $ 30.36     $ 31.02     $ 30.00     $ 29.67  
                                     
  22.38 %     2.39 %     11.04 %     14.31 %     (1.78 )%
  29.94 %     4.63 %     12.70 %     7.62 %     1.91 %
                                     
$ 1,779,985     $ 1,544,961     $ 1,612,865     $ 1,116,576     $ 878,952  
  2.06 %     1.90 %     1.66 %     1.59 %     1.62 %
                                     
  1.17 %     1.10 %     1.09 %     1.14 %     1.15 %
                                     
  1.93 %     2.62 %     2.97 %     2.66 %     2.67 %
  22 %     24 %     15 %     34 %     32 %
                                     
$ 445,000     $ 445,000     $ 320,000     $ 320,000     $ 320,000  
$ 5,000     $ 4,472     $ 6,040     $ 4,489     $ 3,747  

 

 

Annual Report | October 31, 2019 17

 

 

 

Reaves Utility Income Fund Notes to Financial Statements

 

October 31, 2019

 

1. SIGNIFICANT ACCOUNTING AND OPERATING POLICIES

 

Reaves Utility Income Fund (the “Fund”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a closed-end management investment company. The Fund was organized under the laws of the state of Delaware by an Agreement and Declaration of Trust dated September 15, 2003. 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. The Fund is a diversified investment company for purpose of the 1940 Act. The Agreement and Declaration of Trust provides that the Trustees may authorize separate classes of shares of beneficial interest. The Fund’s common shares are listed on the NYSE American LLC (the “Exchange”) and trade under the ticker symbol “UTG”.

 

The Fund may have elements of risk, including the risk of loss of equity. There is no assurance that the investment process will consistently lead to successful results. An investment concentrated in sectors and industries may involve greater risk and volatility than a more broadly diversified investment.

 

The Fund invests a significant portion of its total assets in securities of utility companies, which may include companies in the electric, gas, water, and telecommunications sectors, as well as other companies engaged in other infrastructure operations. This may make the Fund particularly 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 net asset value of common shares.

 

The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements is in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), which requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.

 

Investment Valuation: The net asset value per common share (“NAV”) of the Fund is determined no less frequently than daily, on each day that the Exchange is open for trading, as of the close of regular trading on the Exchange (normally 4:00 p.m. New York time). The NAV is determined by dividing the value of the Fund’s total assets less its liabilities by the number of shares outstanding.

 

The Board of Trustees (the “Board”) has established the following procedures for valuation of the Fund’s asset values under normal market conditions. For domestic equity securities, foreign equity securities and funds that are traded on an exchange, the market price is usually the closing sale or official closing price on that exchange. In the case of a domestic and foreign equity security not traded on an exchange, or if such closing prices are not otherwise available, the mean of the closing bid and ask price will be used. The fair value for debt obligations is generally the evaluated mean price supplied by the Fund’s primary and/or secondary independent third-party pricing service, approved by the Board. An evaluated mean is considered to be a daily fair valuation price which may use a matrix, formula or other objective method that takes into consideration various factors, including, but not limited to: structured product markets, fixed income markets, interest rate movements, new issue information, trading, cash flows, yields, spreads, credit quality and other pertinent information as determined by the pricing services evaluators and methodologists. If the Fund’s primary and/or secondary independent third-party pricing services are unable to supply a price, or if the price supplied is deemed to be unreliable, the market price may be determined using quotations received from one or more broker-dealers that make a market in the security. Investments in non-exchange traded funds are fair valued at their respective net asset values.

 

 

18 www.utilityincomefund.com

 

 

 

Reaves Utility Income Fund Notes to Financial Statements

 

October 31, 2019

 

Securities, for which market quotations or valuations are not available, are valued at fair value in good faith by or at the direction of the Board. When applicable, fair value of an investment is determined by the Fund’s Fair Valuation Committee as a designee of the Board. In fair valuing the Fund’s investments, consideration is given to several factors, which may include, among others, the following: the fundamental business data relating to the issuer, borrower or counterparty; an evaluation of the forces which influence the market in which the investments are purchased and sold; the type, size and cost of the investment; the information as to any transactions in or offers for the investment; the price and extent of public trading in similar securities (or equity securities) of the issuer, or comparable companies; the coupon payments, yield data/cash flow data; the quality, value and saleability of collateral, if any, securing the investment; the business prospects of the issuer, borrower or counterparty, as applicable, including any ability to obtain money or resources from a parent or affiliate and an assessment of the issuer’s, borrower’s or counterparty’s management; the prospects for the industry of the issuer, borrower or counterparty, as applicable, and multiples (of earnings and/or cash flow) being paid for similar businesses in that industry; one or more non-affiliated independent broker quotes for the sale price of the portfolio security; and other relevant factors.

 

The Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.

 

Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments. These inputs are categorized in the following hierarchy under applicable financial accounting standards:

 

Level 1   – Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that the Fund has ability to access at the measurement date;

 

Level 2   – Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and

 

 

Annual Report | October 31, 2019 19

 

 

 

Reaves Utility Income Fund Notes to Financial Statements

 

October 31, 2019

 

Level 3   – Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date.

 

The following is a summary of the Fund’s investments in the fair value hierarchy as of October 31, 2019:

 

    Valuation Inputs          
Investments in Securities at Value*   Level 1     Level 2     Level 3     Total  
Common Stocks   $ 2,153,820,826     $     $     $ 2,153,820,826  
Limited Partnerships     35,661,100             437,324       36,098,424  
Corporate Bonds           907,500             907,500  
Money Market Funds     33,971,281                   33,971,281  
Total   $ 2,223,453,207     $ 907,500     $ 437,324     $ 2,224,798,031  

 

* See Statement of Investments for industry classifications.

 

The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:

 

Investments

in Securities

at Value

Balance as of

October 31,

2018

Realized

Gain/(Loss)

Change in

Unrealized

Appreciation/

Depreciation

Purchases Sales Proceeds

Transfer in

and/or (out)

of Level 3

Balance as of

October 31,

2019

Net change

in unrealized

appreciation/

(depreciation)

included in the

Statements of

Operations

attributable

to Level 3

investments

held at

October 31, 2019

Limited Partnerships $5,845,732 $– $(5,408,408) $– $– $– $437,324 $(5,408,408)
Total $5,845,732 $– $(5,408,408) $– $– $– $437,324 $(5,408,408)

 

The table below provides additional information about the Level 3 fair value measurements as of October 31, 2019:

 

Investment Type Value as of 10/31/19 Valuation Technique* Unobservable Input** Amount
      Discount Rate 12.5%
      Decline Rate 25%
Limited Partnership $437,324 Discounted Cash Flow Discount for Lack of Marketability 15%
Total $437,324      

 

* The fair valuation procedures used to value the Level 3 investments are in accordance with the Fund's Board-approved fair valuation policies.

 

 

20 www.utilityincomefund.com

 

 

 

Reaves Utility Income Fund Notes to Financial Statements

 

October 31, 2019

 

** A change in the unobservable input may result in a significant change to the value of the investment as of October 31, 2019 as follows:

 

Unobservable Input

Impact to Value if

Input Increases

Impact to Value if

Input Decreases

Discount Rate Decrease Increase
Decline Rate Decrease Increase
Discount for Lack of Marketability Decrease Increase

 

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.

 

Foreign Currency Translation: The books and records of the Fund are maintained in U.S. dollars. Investment valuations and other assets and liabilities initially expressed in foreign currencies are converted each business day the Exchange is open into U.S. dollars based upon current exchange rates. Prevailing foreign exchange rates may generally be obtained at the close of the Exchange (normally, 4:00 p.m. New York time). The portion of realized and unrealized gains or losses on investments due to fluctuations in foreign currency exchange rates is not separately disclosed and is included in realized and unrealized gains or losses on investments, when applicable. As of and during the year ended October 31, 2019, the Fund had no outstanding forward foreign currency contracts.

 

Distributions to Shareholders: The Fund intends to make a level distribution each month to common shareholders after payment of interest on any outstanding borrowings. The level dividend rate may be modified by the Board of Trustees from time to time. Any net capital gains earned by the Fund are distributed at least annually. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

 

Income Taxes: The Fund’s policy is to comply with the provisions of the Code applicable to regulated investment companies and to distribute all of its taxable income and gains to its shareholders. See Note 2.

 

Investment Transactions: Investment security transactions are accounted for as of trade date. Dividend income is recorded on the ex-dividend date, or as soon as information is available to the Fund. Interest income, which includes amortization of premium and accretion of discount, is accrued as earned. Realized gains and losses from investment transactions are determined using the first-in first-out basis for both financial reporting and income tax purposes.

 

 

Annual Report | October 31, 2019 21

 

 

 

Reaves Utility Income Fund Notes to Financial Statements

 

October 31, 2019

 

2. 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, 2019, 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, 2019

   

For the

Year Ended

October 31, 2018

 
Distributions paid from:                
Ordinary Income   $ 31,216,062     $ 40,326,896  
Long-Term Capital Gain     70,075,009       56,526,406  
Total   $ 101,291,071     $ 96,853,302  

 

As of October 31, 2019, the components of distributable earnings on a tax basis were as follows:

 

Accumulated Capital Gain   $ 16,793,651  
Unrealized Appreciation     632,444,731  
Other Cumulative Effect of Timing Differences     (9,220,986 )
Total   $ 640,017,396  

 

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. Accordingly, for the year ended October 31, 2019, certain differences were reclassified. The Fund increased total distributable earnings by $1,193 and decreased paid-in capital by $1,193.

 

 

22 www.utilityincomefund.com

 

 

 

Reaves Utility Income Fund Notes to Financial Statements

 

October 31, 2019

 

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 and the tax treatment of investments in partnerships.

 

As of October 31, 2019, net unrealized appreciation/depreciation of investments based on federal tax cost were as follows:

 

Gross appreciation (excess of value over tax cost)   $ 668,724,037  
Gross depreciation (excess of tax cost over value)     (36,278,062 )
Net depreciation of foreign currency     (1,244 )
Net unrealized appreciation     632,444,731  
Cost of investments for income tax purposes   $ 1,592,352,056  

 

3. CAPITAL TRANSACTIONS

 

Common Shares: There are an unlimited number of no par value common shares of beneficial interest authorized.

 

Transactions in common shares were as follows:

 

   

For the

Year Ended

October 31, 2019

   

For the

Year Ended

October 31, 2018

 
Common Stock outstanding - beginning of period     48,670,001       48,670,001  
Common Stock issued as reinvestment of dividends     66,870        
Common Stock outstanding - end of period     48,736,871       48,670,001  

 

4. BORROWINGS

 

On December 8, 2016, the Fund entered into a Credit Agreement with Pershing LLC. Under the terms of the Amended Credit Agreement, the Fund is allowed to borrow up to $455,000,000. Interest is charged at a rate of the one month LIBOR (“London Interbank Offered Rate”) plus 0.80%. Prior to June 20, 2019 the interest rate was one month LIBOR plus 1.00%. Borrowings under the Credit Agreement are secured by assets of the Fund that are held by the Fund’s custodian in a separate account (the “pledged collateral”). Borrowing commenced under the terms of the Credit Agreement on December 13, 2016.

 

For the year ended October 31, 2019, the average amount borrowed under the Credit Agreement was $445,000,000, at an average rate of 3.26%. As of October 31, 2019, the amount of outstanding borrowings was $445,000,000, the interest rate was 2.58% and the amount of pledged collateral was $784,526,800.

 

 

Annual Report | October 31, 2019 23

 

 

 

Reaves Utility Income Fund Notes to Financial Statements

 

October 31, 2019

 

5. RESTRICTED SECURITIES

 

As of October 31, 2019, investments in securities included issues that are considered restricted. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and may be valued under methods approved by the Board of Trustees as reflecting fair value.

 

Restricted securities as of October 31, 2019 were as follows:

 

Description   Acquisition Date(s)     Cost     Value    

Value as

Percentage

of Net Assets

 
Bastion Energy LLC (Anglo Dutch)   7/30/2015     $     $ 437,324       0.02 %
Talara Opportunities II, LP   8/30/2013 - 7/24/2015       4,051,936             0.00 %
TOTAL         $ 4,051,936     $ 437,324       0.02 %

 

6. PORTFOLIO SECURITIES

 

Purchases and sales of investment securities, other than short-term securities, for the year ended October 31, 2019, aggregated $448,693,855 and $499,715,962, respectively.

 

7. MANAGEMENT FEES, ADMINISTRATION FEES AND OTHER TRANSACTIONS WITH AFFILIATES

 

Reaves Asset Management (“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% based on the Fund’s average daily total assets, computed daily and payable monthly.

 

ALPS Fund Services, Inc. (“ALPS”) serves as the Fund’s administrator pursuant to an Administration, Bookkeeping and Pricing Services Agreement (the “Administration Agreement”) with the Fund. As compensation for its services to the Fund, ALPS receives an annual administration fee based on the Fund’s average daily total assets, computed daily and payable monthly. ALPS will pay all expenses in connection with the performance of its services under the Administration Agreement, with the exception of advisory fees, trustees’ fees, portfolio transaction expenses, litigation expenses, tax, cost of preferred shares, expenses of conducting repurchase offers for the purpose of repurchasing fund shares, the printing and distribution cost incurred to comply with the terms of the Fund’s 19(b) exemptive relief granted on July 14, 2011, certain expenses related to regulatory filings and extraordinary expenses.

 

 

24 www.utilityincomefund.com

 

 

 

Reaves Utility Income Fund Notes to Financial Statements

 

October 31, 2019

 

Pursuant to the Chief Compliance Officer Services Agreement, the Fund has agreed to pay ALPS for providing Chief Compliance Officer services to the Fund an annual fee payable in monthly installments.

 

Both Reaves and ALPS are considered affiliates of the Fund as defined under the 1940 Act.

 

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.

 

 

Annual Report | October 31, 2019 25

 

 

 

Reaves Utility Income Fund Additional Information

 

October 31, 2019 (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, non-participants 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.

 

 

26 www.utilityincomefund.com

 

 

 

Reaves Utility Income Fund Additional Information

 

October 31, 2019 (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 http://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 http://www.sec.gov.

 

 

Annual Report | October 31, 2019 27

 

 

 

Reaves Utility Income Fund Additional Information

 

October 31, 2019 (Unaudited)

 

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 http://www.sec.gov. Information on the Fund’s Forms N-PORT is available without a charge, upon request, by contacting the Fund at 1-800-644-5571 and on the website at http://www.utilityincomefund.com.

 

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 shares of its common stock in the open market.

 

TAX INFORMATION (UNAUDITED)

 

The Fund designates the following for federal income tax purposes for distributions made during the calendar year ended December 31, 2018 qualified dividend income (“QDI”) and as qualifying for the corporate dividends received deduction (“DRD”).

 

  QDI DRD
Reaves Utility Income Fund 100% 100%

 

In early 2019, if applicable, shareholders of record received this information for the distribution paid to them by the Fund during the calendar year 2018 via Form 1099. The Fund will notify shareholders in early 2020 of amounts paid to them by the Fund, if any, during the calendar year 2019.

 

Pursuant to Section 852(b)(3) of the Internal Revenue Code, the Fund designated $70,075,009 as long-term capital gain distribution for the year ended October 31, 2019.

 

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.

 

 

28 www.utilityincomefund.com

 

 

 

Reaves Utility Income Fund Additional Information

 

October 31, 2019 (Unaudited)

 

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 year ended October 31, 2019

% Breakdown of the

Total Cumulative Distributions

for the year ended October 31, 2019

 

Net

Investment

Income

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

Reaves Utility Income Fund $0.80991 $1.27009 $0.0000 $2.08000 38.94% 61.06% 0.00% 100.00%

 

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.

 

 

Annual Report | October 31, 2019 29

 

 

 

Reaves Utility Income Fund Trustees & Officers

 

October 31, 2019 (Unaudited)

 

The following table includes information regarding the Fund’s trustees and officers, and their principal occupations and other affiliations during the past five years. The address for all trustees is 1290 Broadway, Suite 1000, Denver, CO 80203. The “independent trustees” consist of those trustees who are not “interested persons” of the Fund, as that term is defined under the 1940 Act.

 

Name,

Position(s)

Held with

the Fund,

Address1,

and Year

of Birth

Term of

Office and

Length of

Time Served2

Principal Occupation(s)

During Past Five Years

Number of

Portfolios

in Fund

Complex

Overseen

by Trustee

Other Directorships

Held by Trustee

or Nominee4

Independent Trustees

E. Wayne
Nordberg

Trustee
1938

Since 2012* Mr. Nordberg is currently the Chairman and Chief Investment Officer of Hollow Brook Wealth Management, LLC, a private investment management firm. Mr. Nordberg was formerly a Senior Director at Ingalls & Snyder LLC, a privately owned registered investment advisor. 1 Mr. Nordberg is a Director of Annaly Capital Management, Inc., a real estate investment trust and PetroQuest Energy, Inc., an oil and gas exploration company.

Larry W.
Papasan

Trustee
1940

Since Inception* Mr. Papasan is currently a Director/Trustee of Mimedx Inc., Bionova, Inc., and Cogenix Inc., each a medical services company, and Triumph Bankshares, Inc., a financial institution. 1 Mr. Papasan is a Director/Trustee of Mimedx Inc.; Bionova, Inc.; Cogenix Inc.; and Triumph Bankshares

 

 

30 www.utilityincomefund.com

 

 

 

Reaves Utility Income Fund Trustees & Officers

 

October 31, 2019 (Unaudited)

 

Name,

Position(s)

Held with

the Fund,

Address1,

and Year

of Birth

Term of

Office and

Length of

Time Served2

Principal Occupation(s)

During Past Five Years

Number of

Portfolios

in Fund

Complex

Overseen

by Trustee

Other Directorships

Held by Trustee

or Nominee4

Independent Trustees

Mary K.
Anstine

Trustee
1940

Since Inception*** Ms. Anstine is also a Trustee of A.V. Hunter Trust and Director of Colorado Uplift Board. Ms. Anstine was formerly a Director of the Trust Bank of Colorado (later purchased and now known as Northern Trust Bank), HealthONE, and Denver Area Council of the Boy Scouts of America, and a member of the American Bankers Association Trust Executive Committee. 1 Ms. Anstine is a Trustee of ALPS ETF Trust (16 funds); Financial Investors Trust (32 funds); ALPS Variable Investment Trust (7 funds); and Segall Bryant & Hamill Trust (14 funds).

Michael F.
Holland

Trustee
1944

Since Inception*** Mr. Holland is Chairman of Holland & Company, an investment management company. 1 Mr. Holland is a Director/Trustee of Blackstone Real Estate Income Fund (1 fund); Blackstone Real Estate Income Fund II (1 fund); Blackstone Real Estate Income Master Fund (1 fund); Holland Series Funds, Inc. (1 fund); State Street Master Funds (5 funds); and China Fund, Inc. (1 fund).

Jeremy W.

Deems

Chairman
and Trustee
1976

Trustee Since 2008**

 

Chairman Since 2017

Mr. Deems is the Co-Founder, Chief Financial Officer of Green Alpha Advisors, LLC, a registered investment adviser, and Co-Portfolio Manager of the Shelton Green Alpha Fund. Prior to joining Green Alpha Advisors, Mr. Deems was Chief Financial Officer and Treasurer of Forward Management, LLC, ReFlow Management, Co., LLC, ReFlow Fund, LLC, a private investment fund, and Sutton Place Management, LLC, an administrative services company from 2004 to 2007. 1 Mr. Deems is a Trustee of ALPS ETF Trust (16 funds); Financial Investors Trust (32 funds); Clough Funds Trust (1); and ALPS Variable Investment Trust (7 funds).

 

 

Annual Report | October 31, 2019 31

 

 

 

Reaves Utility Income Fund Trustees & Officers
 

October 31, 2019 (Unaudited)

 

Name,

Position(s)

Held with

the Fund,

Address1,

and Year

of Birth

Term of

Office and

Length of

Time Served2

Principal Occupation(s)

During Past Five Years

Number of

Portfolios

in Fund

Complex

Overseen

by Trustee

Other Directorships

Held by Trustee

or Nominee4

Interested Trustee

Jeremy O.
May3

Trustee 1970

Trustee Since
2009**

 

President
2010-2019

 

Chairman
2009-2017

Mr. May joined ALPS in 1995 and served as the President of the Fund, President of ALPS Fund Services, Inc., ALPS Portfolio Solutions Distributors and ALPS Distributors, Inc. and Executive Vice President of ALPS Holdings Inc. and ALPS Advisors, Inc. until June 2019. Mr. May is also a director of the University of Colorado Foundation and the A.V. Hunter Trust. 1 Mr. May is Trustee of ALPS Series Trust (9 funds).

 

 

32 www.utilityincomefund.com

 

 

 

Reaves Utility Income Fund Trustees & Officers
 

October 31, 2019 (Unaudited)

 

Name, Position(s)

Held with the Fund,

Address1, and

Year of Birth

Term of

Office and

Length of

Time Served2

Principal Occupation(s)

During Past Five Years

Other Directorships

Held by Trustee

or Nominee4

Officers

Bradley J. Swenson

President 1972

President Since 2019 Mr. Swenson joined ALPS Fund Services, Inc. (“ALPS”) in 2004 and has served as its President since June 2019. He also served as the Chief Operating Officer of ALPS (2015- 2019). Mr. Swenson previously served as Chief Compliance Officer to ALPS, its affiliated entities, and to certain ETF, closed-end and open-end investment companies (2004-2015). N/A

Karen S. Gilomen

Secretary 1970

Since 2016 Ms. Gilomen joined ALPS in August 2016 as Vice President and Senior Counsel. Prior to joining ALPS, Ms. Gilomen served as Vice President – General Counsel and Chief Compliance Officer at Monticello Associates, Inc. from 2010 to 2016. Ms. Gilomen also serves as Secretary of Financial Investors Trust and ALPS Variable Investment Trust and Assistant Secretary of the WesMark Funds. N/A

 

 

Annual Report | October 31, 2019 33

 

 

 

Reaves Utility Income Fund Trustees & Officers
 

October 31, 2019 (Unaudited)

 

Name, Position(s)

Held with the Fund,

Address1, and

Year of Birth

Term of

Office and

Length of

Time Served2

Principal Occupation(s)

During Past Five Years

Other Directorships

Held by Trustee

or Nominee4

Officers (continued)

Jill A. Kerschen

Treasurer 1975

Treasurer Since 2014

 
Assistant Treasurer 2013-2014

Ms. Kerschen joined ALPS in July 2013 and is currently Vice President and Fund Controller at ALPS. Ms. Kerschen also serves as Treasurer of Clough Funds Trust, Clough Global Dividend and Income Fund, Clough Global Equity Fund, Clough Global Opportunities Fund, RiverNorth Opportunities Fund, Inc., Principal Real Estate Income Fund and ALPS Variable Investment Trust. N/A

Ted W. Uhl

Chief Compliance Officer 1974

Chief Compliance Officer Since 2015 Mr. Uhl joined ALPS Fund Services in October 2006, and is currently Deputy Compliance Officer of ALPS. Mr. Uhl is also CCO of the Boulder Growth & Income Fund, Inc., Centre Funds, Elevation ETF Trust, Financial Investors Trust, Index Funds, Reality Shares ETF Trust, Axonic Alternative Income Fund and XAI Octagon Credit Opportunities Alternative Registered Trust. N/A

 

(1) Address: 1290 Broadway, Suite 1000, Denver, Colorado 80203.

(2) The Fund commenced operations on February 24, 2004. The Fund’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 Fund’s 2021 Annual Meeting of Shareholders.
** Term expires at the Fund’s 2022 Annual Meeting of Shareholders.
*** Term expires at the Fund’s 2020 Annual Meeting of Shareholders.
(3) Mr. May is considered to be an “interested person” (as defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) because of his prior affiliation with ALPS, which acts as the Fund’s administrator.
(4) The numbers enclosed in the parentheticals represent the number of funds overseen in each respective directorship held by the Trustee.

 

The Statement of Additional Information includes additional information about the Fund’s Trustees and is available, without a charge, upon request, by contacting the Fund at 1-800-644-5571.

 

 

34 www.utilityincomefund.com

 

 

 

Intentionally Left Blank

 

 

 

(GRAPHIC)

 

 

(b) Not applicable.

 

Item 2. Code of Ethics.

 

(a) As of the end of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party.

 

(b) For purposes of this item, “code of ethics” means written standards that are reasonably designed to deter wrongdoing and to promote:

 

(1) Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

(2) Full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the Commission and in other public communications made by the registrant;

(3) Compliance with applicable governmental laws, rules, and regulations;

(4) The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and

(5) Accountability for adherence to the code.

 

(c) During the period covered by this report, there were no amendments to the provisions of the code of ethics adopted in Item 2(a) of this report.

 

(d) During the period covered by this report, the registrant had not granted any express or implicit waivers from the provisions of the code of ethics adopted in Item 2(a) of this report.

 

(e) Not applicable.

 

(f) The registrant’s Code of Ethics is attached as an Exhibit hereto.

 

Item 3. Audit Committee Financial Expert.

 

The Board of Trustees of the registrant has determined that the registrant has at least one audit committee financial expert serving on its audit committee. The Board of Trustees has designated Jeremy W. Deems and Michael F. Holland as the Registrant’s “audit committee financial expert(s).” Mr. Deems and Mr. Holland are each “independent” as defined in paragraph (a)(2) of Item 3 to Form N-CSR.

 

 

 

Item 4. Principal Accountant Fees and Services.

 

(a) Audit Fees: For the registrant’s last two fiscal years ended October 31, 2018 and October 31, 2019, the aggregate fees billed for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $39,500 and $39,500, respectively.

 

(b) Audit-Related Fees: For the registrant’s last two fiscal years ended October 31, 2018 and October 31, 2019, the aggregate fees billed for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and not otherwise reported under paragraph (a) of Item 4 of this report were $0 and $0, respectively.

 

(c) Tax Fees: For the registrant’s last two fiscal years ended October 31, 2018 and October 31, 2019, the aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning, which were comprised of the preparation of excise filings and income tax returns for the registrant, were $13,700 and $7,400, respectively.

 

(d) All Other Fees: For the registrant’s last two fiscal years ended October 31, 2018 and October 31, 2019, the aggregate fees billed for products and services, provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of Item 4 of this report, were $0 and $7,500, respectively.

 

(e) (1) The audit committee’s pre-approval policies and procedures require that all services to be performed by the registrant’s principal accountant must be pre-approved by the registrant’s audit committee.

 

(2) No services described in paragraphs (b) through (d) of Item 4 of this report were approved by the registrant’s audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

 

(f) Not applicable to the registrant.

 

(g) Not applicable to the registrant.

 

(h) Not applicable to the registrant

 

 

 

Item 5. Audit Committee of Listed Registrants.

 

(a) The registrant has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act and is comprised of the following members:

 

Mary K. Anstine

Jeremy W. Deems (designated audit committee financial expert)

Michael F. Holland (designated audit committee financial expert)

E. Wayne Nordberg

Larry W. Papasan

(b) Not applicable to registrant.

 

Item 6. Investments.

 

(a) The schedule of investments is included as part of the Reports to Stockholders filed under Item 1 of this report.

 

(b) Not applicable to the registrant.

 

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

 

Reaves Utility Income Fund

 

Proxy Voting Policies and Procedures

 

1. BACKGROUND

 

The act of managing assets of clients may include the voting of proxies related to such managed assets. Where the power to vote in person or by proxy has been delegated, directly or indirectly, to the investment adviser, the investment adviser has the fiduciary responsibility for (a) voting in a manner that is in the best interests of the client, and (b) properly dealing with potential conflicts of interest arising from proxy proposals being voted upon.

 

The policies and procedures of W. H. Reaves & Company, Inc. (“WHR”) ("the Adviser") for voting proxies received for accounts managed by the Adviser are set forth below and are applicable if:

 

The underlying advisory agreement entered into with the client expressly provides that the Adviser shall be responsible to vote proxies received in connection with the client’s account; or

 

The underlying advisory agreement entered into with the client is silent as to whether or not the Adviser shall be responsible to vote proxies received in connection with the client’s account and the Adviser has discretionary authority over investment decisions for the client’s account; or

 

In case of an employee benefit plan, the client (or any plan trustee or other fiduciary) has not reserved the power to vote proxies in either the underlying advisory agreement entered into with the client or in the client’s plan documents.

 

 

 

These Proxy Voting Policies and Procedures are designed to ensure that proxies are voted in an appropriate manner and should complement the Adviser’s investment policies and procedures regarding its general responsibility to monitor the performance and/or corporate events of companies which are issuers of securities held in managed accounts or the Fund. Any questions about these policies and procedures should be directed to the Fund CCO.

 

2. PROXY VOTING POLICIES

 

In the absence of specific voting guidelines from a client, WHR will vote proxies in a manner that is in the best interest of the client, which may result in different voting results for proxies for the same issuer. The Adviser shall consider only those factors that relate to the client's investment or dictated by the client’s written instructions, including how its vote will economically impact and affect the value of the client's investment (keeping in mind that, after conducting an appropriate cost-benefit analysis, not voting at all on a presented proposal may be in the best interest of the client). WHR believes that voting proxies in accordance with the following policies is in the best interests of its clients.

 

A. Specific Voting Policies

 

1. Routine Items:

 

The Adviser will generally vote for the election of directors (where no corporate governance issues are implicated).

The Adviser will generally vote for the selection of independent auditors.

The Adviser will generally vote for increases in or reclassification of common stock.

The Adviser will generally vote for management recommendations adding or amending indemnification provisions in charter or by-laws.

The Adviser will generally vote for changes in the board of directors.

The Adviser will generally vote for outside director compensation.

The Adviser will generally vote for proposals that maintain or strengthen the shared interests of shareholders and management

The Adviser will generally vote for proposals that increase shareholder value

The Adviser will generally vote for proposals that will maintain or increase shareholder influence over the issuer's board of directors and management

The Adviser will generally vote for proposals that maintain or increase the rights of shareholders

 

2. Non-Routine and Conflict of Interest Items:

 

The Adviser will generally vote for management proposals for merger or reorganization if the transaction appears to offer fair value.

The Adviser will generally vote against shareholder resolutions that consider only non-financial impacts of mergers

The Adviser will generally vote against anti-greenmail provisions.

 

B. General Voting Policy

 

If the proxy includes a Routine Item that implicates corporate governance changes, a Non-Routine Item where no specific policy applies or a Conflict of Interest Item where no specific policy applies, then the Adviser may engage an independent third party to determine how the proxies should be voted.

 

 

 

In voting on each and every issue, the Adviser and its employees shall vote in a prudent and timely fashion and only after a careful evaluation of the issue(s) presented on the ballot.

 

In exercising its voting discretion, the Adviser and its employees shall avoid any direct or indirect conflict of interest raised by such voting decision. The Adviser will provide adequate disclosure to the client if any substantive aspect or foreseeable result of the subject matter to be voted upon raises an actual or potential conflict of interest to the Adviser or:

 

any affiliate of the Adviser. For purposes of these Proxy Voting Policies and Procedures, an affiliate means:

 

(i) any person directly, or indirectly through one or more intermediaries, controlling, controlled by or under common control with the Adviser;

 

(ii) any officer, director, principal, partner, employer, or direct or indirect beneficial owner of any 10% or greater equity or voting interest of the Adviser; or

 

(iii) any other person for which a person described in clause (ii) acts in any such capacity;

 

any issuer of a security for which the Adviser (or any affiliate of the Adviser) acts as a sponsor, advisor, manager, custodian, distributor, underwriter, broker, or other similar capacity; or

 

any person with whom the Adviser (or any affiliate of the Adviser) has an existing, material contract or business relationship that was not entered into in the ordinary course of the Adviser’s (or its affiliate’s) business.

 

After informing the client of any potential conflict of interest, the Adviser will take other appropriate action as required under these Proxy Voting Policies and Procedures, as provided below.

 

The Adviser shall keep certain records required by applicable law in connection with its proxy voting activities for clients and shall provide proxy-voting information to clients upon their written or oral request.

 

3. PROXY VOTING PROCEDURES

 

A. The Account Representative or the Portfolio Manager the “Responsible Party”) shall be designated by the Adviser to make discretionary investment decisions for the client's account will be responsible for voting the proxies related to that account. The Responsible Party should assume that he or she has the power to vote all proxies related to the client’s account if any one of the three circumstances set forth in Section 1 above regarding proxy voting powers is applicable.

 

B. All proxies and ballots received by WHR will be forwarded to the Responsible Party and then logged in upon receipt in the “Receipt of Proxy Voting Material” log.

 

C. Prior to voting, the Responsible Party will verify whether his or her voting power is subject to any limitations or guidelines issued by the client (or in the case of an employee benefit plan, the plan's trustee or other fiduciaries).

 

D. Prior to voting, the Responsible Party will verify whether an actual or potential conflict of interest with the Adviser or any Interested Person exists in connection with the subject proposal(s) to be voted upon. The determination regarding the presence or absence of any actual or potential conflict of interest shall be adequately documented by the Responsible Party (i.e., comparing the apparent parties affected by the proxy proposal being voted upon against the Adviser’s internal list of Interested Persons and, for any matches found, describing the process taken to determine the anticipated magnitude and possible probability of any conflict of interest being present), which shall be reviewed and signed off on by the Responsible Party’s direct supervisor (and if none, by the board of trustees or a committee of the board of trustees of the Adviser).

 

 

 

E. If an actual or potential conflict is found to exist, written notification of the conflict (the “Conflict Notice”) shall be given to the client or the client’s designee (or in the case of an employee benefit plan, the plan's trustee or other fiduciary) in sufficient detail and with sufficient time to reasonably inform the client (or in the case of an employee benefit plan, the plan's trustee or other fiduciary) of the actual or potential conflict involved.

 

Specifically, the Conflict Notice should describe:

 

the proposal to be voted upon;

the actual or potential conflict of interest involved;

the Adviser’s vote recommendation (with a summary of material factors supporting the recommended vote); and

if applicable, the relationship between the Adviser and any Interested Person.

 

The Conflict Notice will either request the client’s consent to the Adviser’s vote recommendation or may request the client to vote the proxy directly or through another designee of the client. The Conflict Notice and consent thereto may be sent or received, as the case may be, by mail, fax, electronic transmission or any other reliable form of communication that may be recalled, retrieved, produced, or printed in accordance with the recordkeeping policies and procedures of the Adviser. If the client (or in the case of an employee benefit plan, the plan's trustee or other fiduciary) is unreachable or has not affirmatively responded before the response deadline for the matter being voted upon, the Adviser may:

 

engage a non-Interested Party to independently review the Adviser’s vote recommendation if the vote recommendation would fall in favor of the Adviser’s interest (or the interest of an Interested Person) to confirm that the Adviser’s vote recommendation is in the best interest of the client under the circumstances;

 

cast its vote as recommended if the vote recommendation would fall against the Adviser’s interest (or the interest of an Interested Person) and such vote recommendation is in the best interest of the client under the circumstances; or

 

abstain from voting if such action is determined by the Adviser to be in the best interest of the client under the circumstances.

 

F. The Responsible Party will promptly vote proxies received in a manner consistent with the Proxy Voting Policies and Procedures stated above and guidelines (if any) issued by client (or in the case of an employee benefit plan, the plan's trustee or other fiduciaries if such guidelines are consistent with ERISA).

 

G. In accordance with SEC Rule 204-2(c)(2), as amended, the Responsible Party shall retain in the respective client’s file, the following:

 

A copy of the proxy statement received (unless retained by a third party for the benefit of the Adviser or the proxy statement is available from the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system);

 

 

 

A record of the vote cast (unless this record is retained by a third party for the benefit of the Adviser and the third party is able to promptly provide the Adviser with a copy of the voting record upon its request);

 

A record memorializing the basis for the vote cast;

 

A copy of any document created by the Adviser or its employees that was material in making the decision on how to vote the subject proxy; and,

 

A copy of any Conflict Notice, conflict consent or any other written communication (including emails or other electronic communications) to or from the client (or in the case of an employee benefit plan, the plan's trustee or other fiduciaries) regarding the subject proxy vote cast by, or the vote recommendation of, the Adviser.

 

The above copies and records shall be retained in the client’s file for a period not less than five (5) years (or in the case of an employee benefit plan, no less than six (6) years), which shall be maintained at the appropriate office of the Adviser.

 

H. Periodically, but no less than annually, the Adviser will:

 

1. Verify that all annual proxies for the securities held in the client’s account have been received;

 

2. Verify that each proxy received has been voted in a manner consistent with the Proxy Voting Policies and Procedures and the guidelines (if any) issued by the client (or in the case of an employee benefit plan, the plan's trustee or other fiduciaries);

 

3. Review the files to verify that records of the voting of the proxies have been properly maintained;

 

4. Prepare a written report for each client regarding compliance with the Proxy Voting Policies and Procedures; and

 

5. Maintain an internal list of Interested Persons.

 

Proxies and Class Action Lawsuits

 

WHR will be required to take action and render advice with respect to voting of proxies solicited by or with respect to the issuers of securities in which assets of the Account may be invested from time to time. However, WHR will not take any action or render any advice with respect to any securities held in the Account, which are named in or subject to class action lawsuits. WHR may, only at the client’s request, offer clients advice regarding corporate actions

 

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

 

(a)(1) registrant’s Portfolio Managers as of December 31, 2019 are:

 

Name Title Length of Service Business
Experience 5 Years
John P. Bartlett Portfolio Manager Since April 2017 PM, Reaves Asset Management 1995-present
Timothy O. Porter Portfolio Manager Since December 2018 PM, Reaves Asset Management 2004-present

 

 

 

(a)(2) Other accounts managed by the registrant’s Portfolio Managers as of October 31, 2019 (unless otherwise indicated):

 

PM Name Registered
Investment
Companies, Total
Assets
Other Pooled
Investments
Vehicles, Total
Assets
Other Accounts,
Total Assets
John P. Bartlett

$536,078,102

2 account

0 0
Timothy O. Porter

$44,811,288

1 account

0

$247,801,503

589 accounts

 

Other Accounts Managed by Portfolio Managers. There may be certain inherent conflicts of interest that arise in connection with the portfolio managers’ management of the registrant’s investments and the investments of any other accounts they manage. Such conflicts could include aggregation of orders for all accounts managed by a particular portfolio manager, the allocation of purchases across all such accounts, the allocation of IPOs and any soft dollar arrangements that the registrant’s investment adviser may have in place that could benefit the registrant and/or such other accounts. The investment adviser has adopted policies and procedures designed to address any such conflicts of interest to ensure that all management time, resources and investment opportunities are allocated equitably.

 

None of the accounts disclosed pursuant to Item 8(a)(2) of Form N-CSR have an advisory fee based on the performance of an account.

 

(a)(3) Portfolio Manager compensation as of October 31, 2019:

 

Compensation of Portfolio Managers. Compensation paid by Reaves Assets Management, Inc. (the “Adviser”) to the portfolio managers is designed to be competitive and attractive, and primarily consists of a fixed base salary, based on market factors and each person’s level of responsibility, and a bonus. The amount of the bonus is based on the overall after-tax profitability of the Adviser, each fiscal-year, and the contribution of each portfolio manager to the Adviser’s overall performance.

 

Individual compensation is designed to reward the overall contribution of portfolio managers to the performance of the Adviser. To date, the Adviser has not linked bonuses to the performance of any particular portfolio. Compensation levels are set by senior management following a review of overall performance. From time to time, the Adviser has engaged industry consultants to ensure that compensation remains competitive and to identify and plan for new and emerging compensation trends. Equity holders within the Adviser, including the portfolio managers, receive only a modest return on their capital investment, usually a mid-single digit percentage of their share of the Adviser’s book value. The Adviser believes this practice is consistent with industry standards and that it allows the Adviser to maximize the incentive compensation pool. This pool is critical in the Adviser’s ability to continue to attract and retain professionals of the highest quality while simultaneously growing the intrinsic value of the Adviser. The Adviser has no deferred compensation, stock option or other equity programs. Given the portfolio manager compensation policy described above and the fact that the Adviser has no performance-based advisory relationships, the Adviser does not believe that any material compensation conflicts exist.

 

 

 

(a)(4) Dollar range of securities owned by the registrant’s Portfolio Managers as of October 31, 2019 (unless otherwise indicated):

 

Portfolio Manager Dollar Range of Equity Securities Held in Registrant 1
John P. Bartlett $100,001 - $500,000
Timothy O. Porter* $50,001-$100,000

 

1 “Beneficial Ownership” is determined in accordance with Section 16a-1(a)(2) of the Securities Exchange Act of 1934, as amended.

 

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

 

Not applicable to registrant.

 

Item 10. Submission of Matters to a Vote of Security Holders.

 

No material changes to the procedures by which the shareholders may recommend nominees to the registrant’s Board of Trustees have been implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.

 

Item 11. Controls and Procedures.

 

(a) Based on an evaluation of the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the 1940 Act), the registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures are effective as of a date within 90 days of the filing date of this report.

 

(b) There were no significant changes in the registrant’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

 

 

Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.

 

None.

 

Item 13. Exhibits.

 

(a) (1) The Code of Ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions is attached hereto as Exhibit 13(a)(1).

 

(2) The certifications required by Rule 30a-2(a) of the Investment Company Act of 1940, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto as Ex-99.Cert.

 

(3) None.

 

(4) None.

 

(b) A certification for the Registrant’s Principal Executive Officer and Principal Financial Officer, as required by Rule 30a-2(b) of the Investment Company Act of 1940, as amended, and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as Ex-99.906Cert.

 

(c) Pursuant to the Securities and Exchange Commission’s Order granting relief from Section 19(b) of the Investment Company Act of 1940 dated August 10, 2009, the form of 19(a) Notices to Beneficial Owners are attached hereto as Exhibit 13(c).

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

REAVES UTILITY INCOME FUND  
     
By: /s/ Bradley J. Swenson   
  Bradley J. Swenson  
  President (Principal Executive Officer)  
     
Date: January 10, 2020  

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

By: /s/ Bradley J. Swenson   
  Bradley J. Swenson  
  President (Principal Executive Officer)  
     
Date: January 10, 2020  

 

By: /s/ Jill A. Kerschen   
  Jill A. Kerschen  
  Treasurer (Principal Financial Officer)  
     
Date: January 10, 2020  

Reaves Utility Income (AMEX:UTG)
Historical Stock Chart

1 Year : From Apr 2019 to Apr 2020

Click Here for more Reaves Utility Income Charts.

Reaves Utility Income (AMEX:UTG)
Intraday Stock Chart

Today : Monday 6 April 2020

Click Here for more Reaves Utility Income Charts.

Latest UTG Messages

{{bbMessage.M_Alias}} {{bbMessage.MSG_Date}} {{bbMessage.HowLongAgo}} {{bbMessage.MSG_ID}} {{bbMessage.MSG_Subject}}

Loading Messages....


No posts yet, be the first! No {{symbol}} Message Board. Create One! See More Posts on {{symbol}} Message Board See More Message Board Posts
Your Recent History
LSE
GKP
Gulf Keyst..
LSE
QPP
Quindell
FTSE
UKX
FTSE 100
LSE
IOF
Iofina
FX
GBPUSD
UK Sterlin..
Stocks you've viewed will appear in this box, letting you easily return to quotes you've seen previously.

Register now to create your own custom streaming stock watchlist.

NYSE, AMEX, and ASX quotes are delayed by at least 20 minutes.
All other quotes are delayed by at least 15 minutes unless otherwise stated.

By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions

P: V:us D:20200407 02:20:30