Item 1. Reports to Stockholders.
Reaves
Utility Income Fund
|
Table
of Contents
|
Shareholder
Letter
|
2
|
Statement
of Investments
|
5
|
Statement
of Assets and Liabilities
|
8
|
Statement
of Operations
|
9
|
Statement
of Changes in Net Assets
|
10
|
Statement
of Cash Flows
|
11
|
Financial
Highlights
|
12
|
Notes
to Financial Statements
|
15
|
Additional
Information
|
24
|
Privacy
Policy
|
29
|
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.
Semi-Annual
Report | April 30, 2020
|
1
|
Reaves
Utility Income Fund
|
Shareholder
Letter
|
April
30, 2020 (Unaudited)
To
our Shareholders:
Investment
Portfolio Returns: 6 months ended April 30, 2020
Total
net assets of the Fund were $1.45 billion at April 30, 2020, or $29.41 of net asset value (“NAV”) per common share.
At October 31, 2019 net assets totaled $1.78 billion representing $36.52 of net asset value per common share.
Changes
in the market price of the Fund can and do differ from the underlying changes in the net asset value per common share. As a result,
the market return to common shares can be higher or lower than the NAV return.
The
market return for shareholders in the first half of fiscal 2020 was -15.68%, as is reflected in the table below. The share price
of the Fund traded at a premium of 2.96% to the NAV at April 30, 2020 versus a premium of 1.56% at the beginning of the fiscal
year.
|
Period
Ended April 30, 2020
|
|
Six
Months
|
One
Year
|
Three
Years+
|
Five
Years+
|
Ten
Years+
|
Since
Inception+**
|
Total
investment return – Net Asset Value*
|
-16.83%
|
-9.21%
|
1.25%
|
5.36%
|
11.46%
|
10.16%
|
Total investment
return – Market Price*
|
-15.68%
|
-6.93%
|
1.78%
|
7.26%
|
11.63%
|
10.05%
|
S&P
500 Utilities Index1
|
-9.36%
|
0.83%
|
7.08%
|
9.06%
|
10.65%
|
9.54%
|
Dow
Jones Utility Average2
|
-8.91%
|
1.61%
|
6.82%
|
9.45%
|
11.26%
|
10.55%
|
|
*
|
Assumes
all dividends being reinvested
|
|
**
|
Index
data since 02/29/04
|
|
1
|
S&P
500 Utilities Index is a capitalization-weighted index containing 28 Electric and Gas
Utility stocks (including multi-utilities and independent power producers). Prior to
July 1996, this index included telecommunications equities.
|
|
2
|
The
Dow Jones Utility Average is a price-weighted average of 15 utility stocks traded in
the United States.
|
Distributions
to Common Shareholders
The
Fund’s annual distribution rate of $2.16 was unchanged. For the 2020 fiscal year the Fund expects total distributions to
come from earned income (dividend income) and capital gains. For any given month, however, part of the distribution may be temporarily
classified as a return of capital given the irregular realization of capital gains over the course of the year.
Leverage
Facility
The
leverage facility, which does not require re-hypothecation (lending) of Fund assets, was unchanged at $445,000,000. As a percentage
of assets, leverage increased from 25.0% at October 31, 2019 to 30.7% at April 30, 2020. Adjusted for cash on hand, the net leverage
of the Fund fell from 23.3% at October 31, 2019 to 16.9% on April 30, 2020. For details about the facility please refer to Note
5 of the accompanying financial statements.
2
|
www.utilityincomefund.com
|
Reaves
Utility Income Fund
|
Shareholder
Letter
|
April
30, 2020 (Unaudited)
ASSETS:
|
|
|
|
Investments, at value (Cost $1,659,480,148)
|
|
$
|
1,891,858,937
|
|
Foreign currency, at value (Cost $212,691)
|
|
|
212,691
|
|
Dividends receivable
|
|
|
2,820,737
|
|
Interest receivable
|
|
|
34,431
|
|
Receivable for investments sold
|
|
|
548,250
|
|
Deferred offering costs (Note 4)
|
|
|
236,614
|
|
Total Assets
|
|
|
1,895,711,660
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
Loan payable
|
|
|
445,000,000
|
|
Interest payable on loan outstanding
|
|
|
176,887
|
|
Accrued investment advisory fees
|
|
|
885,597
|
|
Accrued administration fees
|
|
|
408,145
|
|
Accrued trustees' fees
|
|
|
46,928
|
|
Accrued chief compliance officer fees
|
|
|
3,146
|
|
Other payables and accrued expenses
|
|
|
224,062
|
|
Total Liabilities
|
|
|
446,744,765
|
|
Net Assets Applicable to Common Shareholders
|
|
$
|
1,448,966,895
|
|
|
COMPOSITION OF NET ASSETS ATTRIBUTABLE TO COMMON SHARES:
|
Paid-in capital
|
|
$
|
1,159,454,658
|
|
Total distributable earnings
|
|
|
289,512,237
|
|
Net Assets Applicable to Common Shareholders
|
|
$
|
1,448,966,895
|
|
|
|
|
|
|
Shares of common stock outstanding of no par value, unlimited shares authorized
|
|
|
49,275,164
|
|
Net asset value per common share
|
|
$
|
29.41
|
|
See
Notes to Financial Statements.
8
|
www.utilityincomefund.com
|
Reaves Utility Income Fund
|
Statement
of Operations
|
|
For
the Six Months Ended April 30, 2020 (Unaudited)
|
INVESTMENT INCOME:
|
|
|
|
Dividends (Net of foreign withholding taxes of $1,267,011)
|
|
$
|
34,831,944
|
|
Interest on investment securities
|
|
|
47,965
|
|
Total Investment Income
|
|
|
34,879,909
|
|
|
|
|
|
|
EXPENSES:
|
|
|
|
|
Interest on loan
|
|
|
4,965,009
|
|
Investment advisory fees
|
|
|
6,111,852
|
|
Administration fees
|
|
|
2,820,157
|
|
Chief compliance officer fees
|
|
|
19,396
|
|
Trustees' fees
|
|
|
138,148
|
|
Miscellaneous fees
|
|
|
145,404
|
|
Total Expenses
|
|
|
14,199,966
|
|
|
|
|
|
|
Net Investment Income
|
|
|
20,679,943
|
|
|
|
|
|
|
Net realized gain/(loss) on:
|
|
|
|
|
Investment securities
|
|
|
57,232,780
|
|
Foreign currency transactions
|
|
|
297,417
|
|
Change in unrealized appreciation/(depreciation) of:
|
|
|
|
|
Investment securities
|
|
|
(375,771,858
|
)
|
Translation of assets and liabilities denominated in foreign currencies
|
|
|
2,605
|
|
Net loss on investments and foreign currency transactions
|
|
|
(318,239,056
|
)
|
|
|
|
|
|
Net Decrease in Net Assets Attributable to Common Shares from Operations
|
|
$
|
(297,559,113
|
)
|
See
Notes to Financial Statements.
Semi-Annual Report | April
30, 2020
|
9
|
Reaves Utility Income Fund
|
Statement of Changes in Net
Assets
|
|
|
For the Six
Months Ended
April 30, 2020
(Unaudited)
|
|
|
For the
Year Ended
October 31, 2019
|
|
|
|
|
|
|
|
|
COMMON SHAREHOLDER OPERATIONS:
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
20,679,943
|
|
|
$
|
31,870,118
|
|
Net realized gain
|
|
|
57,530,197
|
|
|
|
73,155,004
|
|
Change in unrealized appreciation/(depreciation)
|
|
|
(375,769,253
|
)
|
|
|
229,026,278
|
|
Net increase/(decrease) in net assets attributable to common shares from operations
|
|
|
(297,559,113
|
)
|
|
|
334,051,400
|
|
|
|
|
|
|
|
|
|
|
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
|
|
|
|
|
|
|
|
|
Total amount of distributions
|
|
|
(52,946,046
|
)
|
|
|
(101,291,071
|
)
|
Net decrease in net assets from distributions to common shareholders
|
|
|
(52,946,046
|
)
|
|
|
(101,291,071
|
)
|
|
|
|
|
|
|
|
|
|
CAPITAL SHARE TRANSACTIONS:
|
|
|
|
|
|
|
|
|
Proceeds from common shares issued to shareholders from reinvestment of dividends
|
|
|
2,051,108
|
|
|
|
2,263,910
|
|
Proceeds from sales of shares, net of offering costs
|
|
|
17,435,601
|
|
|
|
–
|
|
Net increase from capital share transactions
|
|
|
19,486,709
|
|
|
|
2,263,910
|
|
|
|
|
|
|
|
|
|
|
Net Increase/(Decrease) in Net Assets Attributable to Common Shares
|
|
|
(331,018,450
|
)
|
|
|
235,024,239
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS:
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
$
|
1,779,985,345
|
|
|
$
|
1,544,961,106
|
|
End of period
|
|
$
|
1,448,966,895
|
|
|
$
|
1,779,985,345
|
|
See
Notes to Financial Statements.
10
|
www.utilityincomefund.com
|
Reaves Utility Income Fund
|
Statement
of Cash Flows
|
|
For
the Six Months Ended April 30, 2020 (Unaudited)
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
Net decrease in net assets from operations
|
|
$
|
(297,559,113
|
)
|
Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities:
|
|
|
|
|
Purchase of investment securities
|
|
|
(276,887,062
|
)
|
Proceeds from disposition of investment securities
|
|
|
455,241,516
|
|
Net purchases of short-term investment securities
|
|
|
(164,842,970
|
)
|
Premium amortization
|
|
|
(5,113
|
)
|
Net realized (gain)/loss on:
|
|
|
|
|
Investment securities
|
|
|
(57,232,780
|
)
|
Net change in unrealized (appreciation)/depreciation on:
|
|
|
|
|
Investments
|
|
|
375,771,858
|
|
(Increase)/Decrease in assets:
|
|
|
|
|
Dividends receivable
|
|
|
(220,245
|
)
|
Interest receivable
|
|
|
54,217
|
|
Deferred offering costs
|
|
|
(236,614
|
)
|
Other Assets
|
|
|
771
|
|
Increase/(Decrease) in liabilities:
|
|
|
|
|
Interest payable on loan outstanding
|
|
|
(210,717
|
)
|
Accrued investment advisory fees
|
|
|
(203,971
|
)
|
Accrued administration fees
|
|
|
(94,004
|
)
|
Accrued trustees' fees
|
|
|
6,068
|
|
Accrued chief compliance officer fees
|
|
|
(104
|
)
|
Other payables and accrued expenses
|
|
|
(6,513
|
)
|
Net Cash Provided by Operating Activities
|
|
|
33,575,224
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
Proceeds from sales of shares, net of offering costs
|
|
|
17,435,601
|
|
Cash distributions paid on Common Shares
|
|
|
(50,894,938
|
)
|
Net Cash Used in Financing Activities
|
|
|
(33,459,337
|
)
|
|
|
|
|
|
Net Increase in cash
|
|
|
115,887
|
|
Foreign currency, beginning of year
|
|
$
|
96,804
|
|
Foreign currency, end of year
|
|
$
|
212,691
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
Cash paid during the period for interest from bank borrowing
|
|
$
|
5,175,726
|
|
Non-cash financing activities not included herein consist of reinvestment of distributions of:
|
|
|
2,051,108
|
|
See
Notes to Financial Statements.
Semi-Annual Report | April
30, 2020
|
11
|
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
|
Common
share offering costs charged to paid-in capital
|
Total
distributions and offerings
|
|
Net
asset value per common share, end of period
|
Market
price per common share, end of period
|
|
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 period (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(7)
|
See
Notes to Financial Statements.
12
|
www.utilityincomefund.com
|
For the
Six Months
Ended 4/30/20
(Unaudited)
|
|
|
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
|
|
$
|
36.52
|
|
|
$
|
31.74
|
|
|
$
|
33.14
|
|
|
$
|
32.53
|
|
|
$
|
30.29
|
|
|
$
|
32.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.42
|
|
|
|
0.65
|
|
|
|
0.84
|
|
|
|
1.00
|
|
|
|
0.84
|
|
|
|
0.84
|
|
|
(6.45
|
)
|
|
|
6.21
|
|
|
|
(0.25
|
)
|
|
|
3.87
|
|
|
|
3.89
|
|
|
|
(1.47
|
)
|
|
(6.03
|
)
|
|
|
6.86
|
|
|
|
0.59
|
|
|
|
4.87
|
|
|
|
4.73
|
|
|
|
(0.63
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.08
|
)
|
|
|
(0.64
|
)
|
|
|
(0.83
|
)
|
|
|
(1.04
|
)
|
|
|
(0.99
|
)
|
|
|
(0.89
|
)
|
|
–
|
|
|
|
(1.44
|
)
|
|
|
(1.16
|
)
|
|
|
(1.80
|
)
|
|
|
(0.83
|
)
|
|
|
(0.90
|
)
|
|
(1.08
|
)
|
|
|
(2.08
|
)
|
|
|
(1.99
|
)
|
|
|
(2.84
|
)
|
|
|
(1.82
|
)
|
|
|
(1.79
|
)
|
|
–
|
|
|
|
–
|
|
|
|
(0.00
|
)(2)
|
|
|
(1.42
|
)(3)
|
|
|
(0.67
|
)(3)
|
|
|
–
|
|
|
0.00
|
(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
(1.08
|
)
|
|
|
(2.08
|
)
|
|
|
(1.99
|
)
|
|
|
(4.26
|
)
|
|
|
(2.49
|
)
|
|
|
(1.79
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29.41
|
|
|
$
|
36.52
|
|
|
$
|
31.74
|
|
|
$
|
33.14
|
|
|
$
|
32.53
|
|
|
$
|
30.29
|
|
$
|
30.28
|
|
|
$
|
37.09
|
|
|
$
|
30.36
|
|
|
$
|
31.02
|
|
|
$
|
30.00
|
|
|
$
|
29.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16.83
|
)%(5)
|
|
|
22.38
|
%
|
|
|
2.39
|
%
|
|
|
11.04
|
%
|
|
|
14.31
|
%
|
|
|
(1.78
|
)%
|
|
(15.68
|
)%(5)
|
|
|
29.94
|
%
|
|
|
4.63
|
%
|
|
|
12.70
|
%
|
|
|
7.62
|
%
|
|
|
1.91
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,448,967
|
|
|
$
|
1,779,985
|
|
|
$
|
1,544,961
|
|
|
$
|
1,612,865
|
|
|
$
|
1,116,576
|
|
|
$
|
878,952
|
|
|
1.70
|
%(6)
|
|
|
2.06
|
%
|
|
|
1.90
|
%
|
|
|
1.66
|
%
|
|
|
1.59
|
%
|
|
|
1.62
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.11
|
%(6)
|
|
|
1.17
|
%
|
|
|
1.10
|
%
|
|
|
1.09
|
%
|
|
|
1.14
|
%
|
|
|
1.15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.47
|
%(6)
|
|
|
1.93
|
%
|
|
|
2.62
|
%
|
|
|
2.97
|
%
|
|
|
2.66
|
%
|
|
|
2.67
|
%
|
|
14
|
%(5)
|
|
|
22
|
%
|
|
|
24
|
%
|
|
|
15
|
%
|
|
|
34
|
%
|
|
|
32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
445,000
|
|
|
$
|
445,000
|
|
|
$
|
445,000
|
|
|
$
|
320,000
|
|
|
$
|
320,000
|
|
|
$
|
320,000
|
|
$
|
4,256
|
|
|
$
|
5,000
|
|
|
$
|
4,472
|
|
|
$
|
6,040
|
|
|
$
|
4,489
|
|
|
$
|
3,747
|
|
Semi-Annual Report | April
30, 2020
|
13
|
Reaves Utility Income Fund
|
Financial
Highlights
|
|
(1)
|
Calculated
using average common shares outstanding.
|
|
(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.
|
|
(7)
|
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.
14
|
www.utilityincomefund.com
|
Reaves Utility
Income Fund
|
Notes
to Financial Statements
|
|
April
30, 2020 (Unaudited)
|
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
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.
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.
Semi-Annual Report | April 30, 2020
|
15
|
Reaves Utility Income Fund
|
Notes
to Financial Statements
|
|
April 30, 2020
(Unaudited)
|
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
|
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.
|
16
|
www.utilityincomefund.com
|
Reaves Utility Income Fund
|
Notes
to Financial Statements
|
Reaves Utility Income Fund
|
Notes
to Financial Statements
|
|
April 30, 2020
(Unaudited)
|
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 six months ended April 30, 2020, 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 3.
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.
2. RISKS
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.
Concentration
Risk. 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.
Risk
of Foreign Securities. The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers
involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation
of currencies, the inability to repatriate foreign currency, less complete financial information about companies and possible
future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less
liquid and their prices more volatile than those of securities of comparable U.S. issuers.
18
|
www.utilityincomefund.com
|
Reaves Utility Income Fund
|
Notes
to Financial Statements
|
|
April 30, 2020
(Unaudited)
|
Market
Disruption and Geopolitical Risk. The value of investment in the Fund is based on the values of the Fund’s investments,
which may change due to economic and other events that affect markets generally, as well as those that affect particular regions,
countries, industries, companies or governments. These movements, sometimes called volatility, may be greater or less depending
on the types of securities the Fund owns and the markets in which the securities trade. The increasing interconnectivity between
global economies and financial markets increases the likelihood that events or conditions in one region or financial market may
adversely impact issuers in a different country, region or financial market. Securities in the Fund’s portfolio may underperform
due to inflation (or expectations for inflation), interest rates, global demand for particular products or resources, natural
disasters, pandemics, epidemics, terrorism, regulatory events and governmental or quasi-governmental actions. The occurrence of
global events similar to those in recent years, such as terrorist attacks around the world, natural disasters, social and political
discord or debt crises and downgrades, among others, may result in market volatility and may have long term effects on both the
U.S. and global financial markets. The occurrence of such events may be sudden and unexpected, and it is difficult to predict
when similar events affecting the U.S. or global financial markets may occur, the effects that such events may have and the duration
of those effects. Any such event(s) could have a significant adverse impact on the value, liquidity and risk profile of the Fund’s
portfolio, as well as its ability to sell securities to meet redemptions. There is a risk that you may lose money by investing
in the Fund.
Social,
political, economic and other conditions and events, such as natural disasters, health emergencies (e.g., epidemics and pandemics),
terrorism, conflicts and social unrest, may occur and could significantly impact issuers, industries, governments and other systems,
including the financial markets. As global systems, economies and financial markets are increasingly interconnected, events that
once had only local impact are now more likely to have regional or even global effects. Events that occur in one country, region
or financial market will, more frequently, adversely impact issuers in other countries, regions or markets. These impacts can
be exacerbated by failures of governments and societies to adequately respond to an emerging event or threat. These types of events
quickly and significantly impact markets in the U.S. and across the globe leading to extreme market volatility and disruption.
The extent and nature of the impact on supply chains or economies and markets from these events is unknown, particularly if a
health emergency or other similar event, such as the recent COVID-19 (the “Coronavirus”) outbreak, persists for an
extended period of time. Social, political, economic and other conditions and events, such as natural disasters, health emergencies
(e.g., epidemics and pandemics), terrorism, conflicts and social unrest, could reduce consumer demand or economic output, result
in market closures, travel restrictions or quarantines, and generally have a significant impact on the economies and financial
markets and the Adviser’s investment advisory activities and services of other service providers, which in turn could adversely
affect the Fund’s investments and other operations. The value of the Fund’s investment may decrease as a result of
such events, particularly if these events adversely impact the operations and effectiveness of the Adviser or key service providers
or if these events disrupt systems and processes necessary or beneficial to the investment advisory or other activities on behalf
the Fund.
Semi-Annual Report | April 30, 2020
|
19
|
Reaves Utility Income Fund
|
Notes
to Financial Statements
|
|
April 30, 2020
(Unaudited)
|
3. INCOME
TAXES AND TAX BASIS INFORMATION
The
Fund complies with the requirements under Subchapter M of the Code applicable to regulated investment companies and intends to
distribute substantially all of its net taxable income and net capital gains, if any, each year. The Fund is not subject to income
taxes to the extent such distributions are made.
As
of and during the six months ended April 30, 2020, 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
amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized
at fiscal year-end and are not available for the six months ended April 30, 2020.
The
tax character of the distributions paid by the Fund were as follows:
|
|
For the
Year Ended
October 31, 2019
|
|
Distributions paid from:
|
|
|
|
|
Ordinary Income
|
|
$
|
31,216,062
|
|
Long-Term Capital Gain
|
|
|
70,075,009
|
|
Total
|
|
$
|
101,291,071
|
|
As
of April 30, 2020, net unrealized appreciation/depreciation of investments based on federal tax cost were as follows:
Gross appreciation (excess of value over tax cost)
|
|
$
|
382,319,156
|
|
Gross depreciation (excess of tax cost over value)
|
|
|
(122,885,753
|
)
|
Net unrealized appreciation
|
|
|
259,433,403
|
|
Cost of investments for income tax purposes
|
|
$
|
1,632,425,534
|
|
20
|
www.utilityincomefund.com
|
Reaves Utility Income Fund
|
Notes
to Financial Statements
|
|
April 30, 2020
(Unaudited)
|
4. CAPITAL
TRANSACTIONS
Common
Shares: There are an unlimited number of no par value common shares of beneficial interest authorized.
The
Fund has a registration statement on file with the SEC (the “Shelf Registration Statement”), pursuant to which the
Fund may offer shares of common stock, from time to time, in one or more offerings, up to a maximum aggregate offering price of
$600,000,000 on terms to be determined at the time of the offering.
On
November 4, 2019, as allowed by the Shelf Registration Statement, the Fund entered into a distribution agreement with ALPS Distributors,
Inc. (“ADI”), an affiliate of ALPS, pursuant to which the Fund may offer and sell up to 5,500,000 of the Fund’s
Common Shares, from time to time through ADI. During the six months ended April 30, 2020, 478,842 shares of common stock were
sold totaling $17,435,601 in proceeds to the Fund, net of offering costs of $17,782. Under the agreement ADI was paid $35,529
for the shares sold.
Offering
costs incurred as a result of the Fund’s Shelf Registration Statement through April 30, 2020 are approximately $253,775.
Management estimates an additional $341,105 of costs expected to be incurred resulting in total offering costs of approximately
$594,880. The Statement of Assets and Liabilities reflects the current offering costs of $236,614 as deferred offering costs.
These offering costs, as well as offering costs incurred subsequent to April 30, 2020 will be charged to paid-in-capital upon
the issuance of shares.
Transactions
in common shares were as follows:
|
|
For the
Six
Months Ended
April
30, 2020
|
|
|
For the
Year Ended
October 31, 2019
|
|
Common Stock outstanding - beginning of period
|
|
|
48,736,871
|
|
|
|
48,670,001
|
|
Common Stock issued from sale of shares
|
|
|
478,842
|
|
|
|
–
|
|
Common Stock issued as reinvestment of dividends
|
|
|
59,451
|
|
|
|
66,870
|
|
Common Stock outstanding - end of period
|
|
|
49,275,164
|
|
|
|
48,736,871
|
|
5. 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 six months ended April 30, 2020, the average amount borrowed under the Credit Agreement was $445,000,000, at an average rate
of 2.21%. As of April 30, 2020, the amount of outstanding borrowings was $445,000,000, the interest rate was 1.13% and the amount
of pledged collateral was $825,827,410.
Semi-Annual Report | April
30, 2020
|
21
|
Reaves Utility Income Fund
|
Notes
to Financial Statements
|
|
April 30, 2020
(Unaudited)
|
6. RESTRICTED
SECURITIES
As
of April 30, 2020, 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 April 30, 2020 were as follows:
Description
|
|
Acquisition Date(s)
|
|
|
Cost
|
|
|
Value
|
|
|
Market
Value
as Percentage
of Net Assets
|
|
Bastion Energy LLC (Anglo Dutch)
|
|
7/30/2015
|
|
|
$
|
–
|
|
|
$
|
327,451
|
|
|
|
0.02
|
%
|
Talara Opportunities II, LP
|
|
8/30/2013 - 7/24/2015
|
|
|
|
4,051,936
|
|
|
|
–
|
|
|
|
0.00
|
%
|
TOTAL
|
|
|
|
|
$
|
4,051,936
|
|
|
$
|
327,451
|
|
|
|
0.02
|
%
|
7. PORTFOLIO
SECURITIES
Purchases
and sales of investment securities, other than short-term securities, for the six months ended April 30, 2020, aggregated $276,138,577
and $455,382,823, respectively.
8. 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.
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.
22
|
www.utilityincomefund.com
|
Reaves Utility Income Fund
|
Notes
to Financial Statements
|
|
April 30, 2020
(Unaudited)
|
9. 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.
Semi-Annual Report | April
30, 2020
|
23
|
Reaves Utility Income Fund
|
Additional
Information
|
|
April 30, 2020
(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.
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Additional
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April 30, 2020
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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.
APPROVAL
OF INVESTMENT ADVISORY AGREEMENT
At
the March 9, 2020 meeting of the Board of the Fund (the “Meeting”), the Board, including those Trustees who are not
“interested Trustees” of the Fund, as that term is defined in the 1940 Act (the “Independent Trustees”),
approved W.H. Reaves & Co. Inc. (the “Adviser” or “Reaves”) to serve as the Fund’s investment
adviser and approved the investment advisory agreement between Reaves and the Fund (the “Advisory Agreement”), upon
the terms and conditions set forth therein, for an additional one-year term. In connection with considering the approval of the
Advisory Agreement, the Independent Trustees met in executive session with independent counsel, who provided assistance and advice.
Although
not meant to be all-inclusive, the following discussion summarizes the factors considered and conclusions reached by the Trustees
in the executive session and at the Meeting in determining to approve the Advisory Agreement.
Nature,
extent, and quality of services. The Trustees considered the nature, extent, and quality of the services provided to the Fund
by the Adviser. In evaluating the quality of the Adviser’s services, the Trustees noted the various complexities involved
in the operations of the Fund, such as
the use of leverage, and concluded that the Adviser continues to consistently provide high-quality services to the Fund in an
increasingly complex environment. The Trustees also considered the Fund’s investment performance and took into account its
evaluation of the quality of the Adviser’s compliance program. The Trustees also considered the qualifications, experience,
and capability of the Adviser’s management team and other personnel and the extent of care with which the Adviser performs
its duties and obligations. The Trustees also considered information from the Adviser regarding the overall financial strength
of the Adviser and considered the resources and staffing in place with respect to the services provided to the Fund. In light
of the foregoing, the Trustees concluded that it was generally satisfied with the nature, extent, and quality of the services
provided to the Fund by the Adviser.
Semi-Annual Report | April
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Performance
of the Fund and the Adviser. The Trustees reviewed the Fund’s investment performance over time and compared that performance
to other funds in its peer group. In making its comparisons, the Trustees utilized a report from an independent provider of investment
company data (the “Data Provider”). As reported by the Data Provider, the Fund’s net total return (annualized)
ranked 3rd, 3rd, 4th, 2nd, 2nd, and 1st for the 1-, 2-, 3-,
4-, 5- and 10-year periods ended December 31, 2019, respectively, among the performance universe consisting of the Fund and all
leveraged closed-end utility funds, regardless of asset size. The Fund also outperformed the Lipper Closed-End Sector Equity Fund
Index for the 1-, 2-, 4-, 5-, and 10-year periods.
Costs
of services and profits realized. The Trustees considered the reasonableness of the compensation paid to the Adviser, in both
absolute and comparative terms, and also the profits realized by the Adviser from its relationship with the Fund. To facilitate
this analysis, the Trustees retained the Data Provider to furnish a report comparing the Fund’s management fee (defined
as the sum of the advisory fee and administration fee) and other expenses to the similar expenses of other comparable funds selected
by the Data Provider (the “the Data Provider expense group”). The Trustees reviewed, among other things, information
provided by the Data Provider comparing the Fund’s contractual management fee rate (at common asset levels) and actual management
fee rate (reflecting fee waivers, if any) as a percentage of total assets and as a percentage of assets attributable to common
stock to other funds in its Data Provider expense group. Based on the data provided on management fee rates, the Trustees noted
that: (i) the Fund’s contractual management fee rate was lower than the median of its Data Provider expense group; and (ii)
the actual management fee rate was lower than the median of its Data Provider expense group both on the basis of assets attributable
to common shares and on a total asset basis.
The
Adviser also furnished the Trustees with copies of its financial statements and other information regarding its expenses in providing
services to the Fund. In reviewing those financial statements and other materials, the Trustees examined the profitability to
the Adviser.
Economies
of scale. The Trustees noted that there were no fee breakpoints in the Advisory Agreement and that any increases in the Fund’s
assets are primarily attributable to market appreciation, dividend reinvestments, and rights offerings.
Comparison
with other advisory contracts. The Trustees also received comparative information from the Adviser with respect to its
standard fee schedule for investment advisory clients other than the Fund. The Trustees noted that, among all accounts
managed by the Adviser, the Fund’s advisory fee rate is comparable to the Adviser’s standard fee schedule.
However, the Trustees noted that the services provided by the Adviser to the Fund are more extensive and demanding than the
services provided by the Adviser to its non-investment company, institutional accounts and to those investment company
accounts for which the Adviser serves only in a sub-advisory capacity. Based on the fact that the Adviser only provides the
enhanced services to its investment company
clients and not to its institutional account clients, the Trustees concluded that comparisons between the two fee structures would
not be appropriate or meaningful. Furthermore, the Trustees noted that many of the Adviser’s other clients would not be
considered “like accounts” of the Fund because these accounts are not of similar size and do not have the same investment
objectives as, or possess other characteristics similar to, the Fund.
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Indirect
benefits. The Trustees considered indirect benefits to the Adviser from its relationship to the Fund, including increased
visibility among its institutional asset manager peer group and “sell side” research obtained from broker-dealers
that execute trades for the Fund.
Based
upon its evaluation of all material factors, including the foregoing, and assisted by the advice of independent legal counsel,
the Trustees concluded that the level of fees paid to the Adviser was fair and reasonable in light of the usual and customary
charges for such services, and that the continued retention of the Adviser as investment adviser to the Fund was in the best interests
of the Fund and its shareholders.
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.
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.
SECTION
19(A) NOTICES
The
following table sets forth the estimated amount of the sources of distribution for purposes of Section 19 of the Investment Company
Act of 1940, as amended, and the related rules adopted there under. The Fund estimates the following percentages, of the total
distribution amount per share, attributable to (i) current and prior fiscal year net investment income, (ii) net realized short-term
capital gain, (iii) net realized long-term capital gain and (iv) return of capital or other capital source as a percentage of
the total distribution amount. These percentages are disclosed for the fiscal year-to-date cumulative distribution amount per
share for the Fund.
The
amounts and sources of distributions reported in these 19(a) notices are only estimates and not for tax reporting purposes.
The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund’s investment
experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. Shareholders will
receive a Form 1099-DIV
for the calendar year that will tell you how to report these distributions for federal income tax purposes.
Semi-Annual Report | April 30, 2020
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Total
Cumulative Distributions
for the six months ended April 30, 2020
|
|
%
Breakdown of the
Total Cumulative Distributions
for the six months ended April 30, 2020
|
|
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
|
$0.39508
|
$0.68492
|
$0.00000
|
$1.08000
|
|
36.58%
|
63.42%
|
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.