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
811-07358
Duff & Phelps Utility and Corporate Bond Trust Inc.
(Exact name of registrant as specified in charter)
200 South
Wacker Drive, Suite 500, Chicago, Illinois 60606
(Address of principal executive
offices) (Zip code)
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Alan M. Meder
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Lawrence R. Hamilton
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Duff & Phelps Utility and Corporate Bond Trust Inc.
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Mayer Brown LLP
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200 South Wacker Drive, Suite 500
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71 South Wacker Drive
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Chicago, Illinois 60606
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Chicago, Illinois 60606
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(Name and address of agents for service)
Registrants telephone number, including area code: (800) 338-8214
Date of fiscal year end: December 31
Date of reporting period: December 31, 2013
ITEM 1.
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REPORTS TO STOCKHOLDERS.
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The
Annual Report to Stockholders follows.
Board of Directors
David J. Vitale,
Chairman
Nancy Lampton,
Vice Chairperson
Stewart E. Conner
Robert J. Genetski
Philip R. McLoughlin
Geraldine M. McNamara
Eileen A. Moran
Nathan I. Partain, CFA
Christian H. Poindexter
Carl F. Pollard
Officers
Nathan I. Partain, CFA
President & Chief Executive Officer
T. Brooks Beittel, CFA
Senior Vice President & Secretary
Daniel J. Petrisko, CFA
Vice President & Chief Investment Officer
Alan M. Meder, CFA, CPA
Treasurer & Assistant Secretary
Joyce B. Riegel
Chief Compliance Officer
Investment Adviser
Duff & Phelps Investment Management Co.
200 South Wacker Drive, Suite 500
Chicago, IL 60606
Call toll-free (800) 338-8214
www.dpimc.com
Administrator
J.J.B. Hilliard, W.L. Lyons, LLC
500 West Jefferson Street
Louisville, KY 40202
Call toll-free (888) 878-7845
Custodian
The Bank of New
York Mellon
One Wall Street
New York, NY 10005
Transfer Agent
Computershare
250 Royall Street
Canton, MA 02021
Call toll-free (866) 221-1681
Independent Registered Public Accounting Firm
Ernst & Young LLP
155 North Wacker Drive
Chicago, IL 60606
Legal Counsel
Mayer Brown LLP
71 South Wacker Drive
Chicago, IL 60606
Duff & Phelps
Utility and
Corporate
Bond Trust Inc.
ANNUAL REPORT
D
ECEMBER
31, 2013
February 18, 2014
Dear Fellow Shareholders:
Y
OUR
F
UND
S
P
ERFORMANCE
During the second half of 2013 the performance of leveraged bond funds, including
Duff & Phelps Utility and Corporate Bond Trust Inc. (the DUC Fund or the Fund), was negatively impacted by concerns that the easy monetary policy of the last five years could be coming to an end. The perception that
the U.S. economic recovery might now be self-sustaining fueled speculation that the Federal Reserve would begin paring back its extraordinary monetary stimulus. The fear of upward pressure on interest rates led many investors to reduce their
exposure to fixed income investments. As a result, returns for the DUC Fund, along with the broader fixed income market, were restrained.
The following table compares the performance of the DUC Fund to a broad-based investment grade bond market benchmark. It is important to note that the index returns stated below include no fees or
expenses, whereas the DUC Funds net asset value (NAV) returns are net of fees and expenses.
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Total Return
i
For the period indicated through December 31, 2013
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Six
Months
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One
Year
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Three Years
(annualized)
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Five Years
(annualized)
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Duff & Phelps Utility and Corporate Bond Trust
Inc.
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Market Value
ii
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-4.61
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%
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-11.68
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%
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3.15
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%
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7.35
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%
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Net Asset Value
ii
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1.16
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%
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-1.48
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%
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4.96
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%
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8.04
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%
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Barclays U.S. Aggregate Bond
Index
iii
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0.43
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%
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-2.02
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%
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3.26
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%
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4.44
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%
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i
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Past performance is not indicative of future results. Current performance may be lower or higher than performance in historical periods.
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ii
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Total return on market value assumes a purchase of common stock at the opening market price on the first business day and a sale at the closing market
price on the last business day of the period shown in the table and assumes reinvestment of dividends at the actual reinvestment prices obtained under the terms of the DUC Funds dividend reinvestment plan. Total return on NAV uses the same
methodology, but with use of NAV for beginning, ending and reinvestment values. For the fiscal year ended December 31, 2013, operating expenses (which are already reflected in the DUC Funds NAV) were 1.69%. The DUC Funds market
price per share may be higher or lower than the NAV. Source: Administrator of the DUC Fund.
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iii
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The Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond
market, including Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM passthroughs), ABS, and CMBS. The index is calculated on a total return basis and rebalanced monthly. Income generated during the month
is held in the index without a reinvestment return until month-end when it is removed from the index. The index is unmanaged; its returns do not reflect any fees, expenses, or sales charges and it is not available for direct investment. Source:
Bloomberg L.P.
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Based on the December 31, 2013 closing price of $10.03 and a monthly distribution of
$0.07 per share, the DUC Fund common stock had an annualized distribution rate of 8.37%. Please refer to the portion of this letter captioned
A
BOUT
Y
OUR
F
UND
for
important information about the sources and characterizations of the DUC Funds distributions.
M
ARKET
O
VERVIEW
AND
O
UTLOOK
U.S. gross domestic product continued to
grow modestly during the second half of 2013. Although household finances improved, due in part to rising home prices, stock market gains and lower energy costs, stubbornly high unemployment and stagnant wages weighed on consumer sentiment. Despite
solid profitability and ample cash reserves, many corporations remained focused on managing costs and were reluctant to meaningfully increase capital spending or hiring, partly due to regulatory and tax uncertainty. On the national level, the fiscal
drag from reduced government spending and increased payroll taxes seemed to fade. On the local level, the financial condition of many municipalities improved as their economies recovered and tax revenues rose. At the same time, global growth
remained modest as Europe continued its climb out of recession and emerging markets stabilized.
1
During the second half of 2013, the Federal Open Market Committee (FOMC), the
committee within the Federal Reserve that sets monetary policy, reaffirmed its commitment to an accommodative monetary policy. Accordingly, the FOMC held the federal funds rate to a target range of zero to 0.25%. In addition, the pace of
the FOMCs asset purchase program, a form of quantitative easing that was intended to lower borrowing costs and push up asset prices, was only
modestly
reduced. Nonetheless, interest rates rose as investors speculated that the
unprecedented easy monetary policy of the last five years could be coming to an end. Over the second half of the year the U.S. Treasury yield curve shifted upward and yields increased by 3 basis points on two-year maturities, by 54 basis points on
ten-year maturities and by 47 basis points on thirty-year maturities. Consequently, many sectors of the broader fixed income markets posted only modest returns.
We believe that the U.S. economy remains on track to experience positive though moderate growth over the next few quarters. As the housing sector shows further signs of recovery and job growth stabilizes
(albeit at modest levels), fiscal uncertainty and restrained global growth will likely keep the U.S. recovery slow and uneven. The FOMC recently stated that economic activity is expanding at a moderate pace, while reaffirming its view
that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. Because the U.S. economy continues to experience
stubbornly high unemployment and moderate inflation, we think it likely that the FOMCs accommodative monetary policy will continue for the foreseeable future.
If the U.S. economy continues to post sub-par growth, debate over the need for further monetary stimulus is likely to persist. As monetary policy evolves under new leadership at the Federal Reserve and
the debate in Washington over the debt ceiling continues, the fixed income market is likely to remain volatile and highly sensitive to the tone of economic data. In the near term, we expect that a tepid U.S. economic recovery and moderate inflation
will limit upward pressure on U.S. Treasury yields. Over the longer term, a self-sustaining economic recovery and growing inflation expectations could set the stage for a further rise in interest rates. If that happens, the total return of leveraged
bond funds, like the DUC Fund, would likely be further reduced.
A
BOUT
Y
OUR
F
UND
The DUC Fund seeks to provide investors with a stable monthly distribution that is primarily derived from current fiscal
year net investment income. At times a portion of the monthly distribution could be derived from realized capital gains, and to the extent necessary, a return of capital, in which case the DUC Fund is required to inform shareholders of the sources
of the distribution based on U.S. generally accepted accounting principles (GAAP). A return of capital distribution does not necessarily reflect the DUC Funds investment performance and should not be confused with yield
or income. A return of capital may occur, for example, when some of the money that is invested in the Fund is paid back to the investor. Based on GAAP, for the twelve month period ended December 31, 2013, 52% of the total
distributions were attributable to current year net investment income and 48% were in excess of current year net investment income. The characterization of the distributions for GAAP purposes and federal income tax purposes differs, primarily
because of a difference in the tax and GAAP accounting treatment of amortization for premiums on fixed income securities. For federal income tax purposes, 100% of the distributions in 2013 were derived from net investment income. In early 2014, a
form 1099-DIV will be sent to shareholders which will state the amount and tax characterization of the DUC Funds 2013 distributions.
The use of leverage enables the DUC Fund to borrow at short-term rates and invest at long-term rates. On September 20, 2013 the amount of leverage being utilized was reduced by $65 million. On that
date, the DUC Fund repaid $17.5 million of the $142.5 million principal outstanding under its credit facility. In addition, the DUC Fund redeemed all 1,900 shares of its outstanding Auction Market Preferred Shares, Series TH7, liquidation preference
$25,000 per share. The shares were redeemed for 100% of their liquidation preference (an aggregate of $47.5 million) plus accrued dividends. The reduction in the amount of leverage outstanding was intended to better align the leverage ratio with
current market conditions and to lessen the potential volatility of the DUC Funds returns. The reduction in leverage was approved by the Board of Directors and was funded by the maturity and sale of portfolio securities.
As of December 31, 2013, the DUC Funds leverage consisted of senior debt in the amount of $125 million. On that date, the
amount of leverage represented by the senior debt constituted approximately 29% of the DUC Funds total assets. The amount and type of leverage is reviewed periodically by the Board of Directors based on the DUC Funds
2
expected earnings relative to the anticipated costs (including fees and expenses) associated with the leverage. In addition, the long-term expected benefits of leverage are weighed against the
potential effect of increasing the volatility of both the DUC Funds NAV and the market value of its common stock. Historically, the tendency of the U.S. yield curve to exhibit a positive slope (i.e., long-term rates higher than short-term
rates) has fostered an environment in which leverage can make a positive contribution to the earnings of the DUC Fund. However, there is no assurance that this will continue to be the case in the future. If the use of leverage was to cease being
beneficial, the amount and type of leverage employed by the DUC Fund could be further modified or eliminated.
The DUC Fund
does not currently use derivatives and has no investments in complex securities or structured investment vehicles. However, due to the inherent interconnectivity of todays financial markets, corporate bond investors are faced with the task of
identifying and quantifying counterparty risk among both financial and non-financial companies. Due to the DUC Funds mandated exposure to the credit markets, any disruptions in the broader credit markets could materially and adversely impact
the valuation of the investments held in the DUC Fund. It is impossible for the DUC Fund to be completely insulated from turmoil in the global financial markets. However, management believes that over the long term the diversification of the
portfolio across sectors and issuers, in addition to the conservative distribution of the DUC Funds assets along the yield curve, should help limit volatility to some degree.
In addition to the risk of disruptions in the broader credit market, an extended environment of relatively low interest rates adds a
significant element of reinvestment risk to bond funds, including the DUC Fund. If bonds held in a portfolio mature during a period of low interest rates, the proceeds may need to be reinvested in lower yielding securities. Therefore, a prolonged
period of low interest rates and modest reinvestment opportunities has the potential to adversely impact both the earnings and distribution policy of the DUC Fund going forward.
D
IVIDEND
R
EINVESTMENT
AND
C
ASH
P
URCHASE
P
LAN
AND
D
IRECT
D
EPOSIT
For those of you receiving dividends in cash, you may want to consider taking advantage of the dividend reinvestment and
cash purchase plan (the Plan) available to all registered shareholders of the DUC Fund. Under the Plan, the DUC Fund absorbs all administrative costs (except brokerage commissions, if any) so that the total amount of your dividends and
other distributions may be reinvested in additional shares of the DUC Fund. The cash purchase option permits Plan participants to make voluntary additional share purchases in the open market through the Plans Agent, Computershare. For those
shareholders who wish to continue receiving their dividends in cash, you may want to consider having your monthly dividends deposited, free of charge, directly into your bank account through electronic funds transfer. Direct deposit provides the
convenience of automatic and immediate access to your funds, while eliminating the possibility of mail delays and lost, stolen or destroyed checks. Further information about the Plan and direct deposit is available from Computershare, at
1-866-221-1681 or www.computershare.com/investor. A summary of the Plan is also contained in this report, beginning on page 21.
For more information about the DUC Fund, shareholders can access www.ducfund.com.
We appreciate your investment in Duff & Phelps Utility and Corporate Bond Trust Inc. and look forward to continuing our service
to you.
Sincerely,
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Daniel J. Petrisko, CFA
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Nathan I. Partain, CFA
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Chief Investment Officer
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Director, President & CEO
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Certain statements in this report are forward-looking statements. Discussions of specific investments are for
illustration only and are not intended as recommendations of individual investments. The forward-looking statements and other views expressed herein, are those of the portfolio managers as of the date of this report. Actual future results or
occurrences may differ significantly from those anticipated in any forward-looking statements, and the views expressed herein are subject to change at any time, due to numerous market and other factors. The DUC Fund disclaims any obligation to
update publicly or revise any forward-looking statements or views expressed herein.
3
DUFF & PHELPS UTILITY AND
CORPORATE BOND TRUST INC.
SCHEDULE OF INVESTMENTS
December 31, 2013
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Principal
Amount
(000)
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Description
|
|
Value
(Note 2)
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LONG-TERM INVESTMENTS135.9%
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U.S. Government and Agency Mortgage-Backed Securities0.2%
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Federal National Mortgage Association, Pass-Through Certificates,
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$
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115
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8.00%, 10/01/30
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$
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136,860
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402
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7.00%, 12/01/31
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456,431
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Government National Mortgage Association Pass-Through Certificates,
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9
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7.00%, 3/15/26
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9,639
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34
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8.00%, 11/15/30
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37,798
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31
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8.00%, 2/15/31
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31,451
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Total U.S. Government and Agency Mortgage-Backed Securities
(Cost $602,154)
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672,179
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Corporate Bonds134.0%
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Financial31.0%
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5,000
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American Express Co.,
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6.15%, 8/28/17 (a)
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5,773,260
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5,000
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Bank of America Corp.,
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6.50%, 8/01/16 (a)
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5,648,845
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6,000
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Caterpillar Financial Services Corp.,
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6.125%, 2/17/14 (a)
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6,042,252
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5,000
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Duke Realty Limited Partnership,
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6.75%, 3/15/20 (a)
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5,783,455
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5,000
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The Goldman Sachs Group, Inc.,
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5.50%, 11/15/14 (a)
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5,212,395
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5,000
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HCP, Inc.,
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6.00%, 1/30/17
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5,607,645
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5,000
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JPMorgan Chase & Co.,
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|
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|
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6.00%, 1/15/18
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5,762,620
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5,000
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Kimco Realty Corp.,
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5.584%, 11/23/15 (a)
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5,417,100
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5,000
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|
Liberty Property L.P.,
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5.125%, 3/02/15
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5,228,640
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|
5,000
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Mack-Cali Realty L.P.,
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5.125%, 1/15/15
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5,208,370
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|
6,000
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Morgan Stanley,
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6.00%, 4/28/15 (a)
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6,392,256
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|
|
5,000
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National City Corp.,
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6.875%, 5/15/19 (a)
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5,931,470
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|
|
5,000
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ProLogis L.P.,
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5.75%, 4/01/16 (a)
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5,485,870
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|
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6,000
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Realty Income Corp.,
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6.75%, 8/15/19 (a)(b)
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7,032,564
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Principal
Amount
(000)
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Description
|
|
Value
(Note 2)
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$
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5,000
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Simon Property Group, L.P.,
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5.25%, 12/01/16 (a)
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$
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5,537,800
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|
|
6,000
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|
Wachovia Bank NA,
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|
|
|
|
|
|
|
|
6.00%, 11/15/17 (a)
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|
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6,929,472
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|
|
|
|
|
|
|
|
|
|
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|
|
|
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92,994,014
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|
|
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|
|
|
|
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|
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|
Industrial19.0%
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|
|
|
|
|
1,348
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|
ConocoPhillips
|
|
|
|
|
|
|
|
|
4.75%, 2/01/14
|
|
|
1,352,595
|
|
|
6,000
|
|
|
Dow Chemical Company,
|
|
|
|
|
|
|
|
|
9.00%, 4/01/21
|
|
|
7,660,962
|
|
|
7,000
|
|
|
Hewlett-Packard Co.,
|
|
|
|
|
|
|
|
|
6.125%, 3/01/14 (a)
|
|
|
7,059,570
|
|
|
5,000
|
|
|
Sun Company, Inc.,
|
|
|
|
|
|
|
|
|
9.00%, 11/01/24
|
|
|
5,848,622
|
|
|
5,275
|
|
|
Tele-Communications, Inc.,
|
|
|
|
|
|
|
|
|
10.125%, 4/15/22 (a)(b)
|
|
|
7,162,232
|
|
|
3,200
|
|
|
Tele-Communications, Inc.,
|
|
|
|
|
|
|
|
|
9.875%, 6/15/22 (a)(b)
|
|
|
4,269,347
|
|
|
5,000
|
|
|
Time Warner Cable, Inc.,
|
|
|
|
|
|
|
|
|
7.50%, 4/01/14
|
|
|
5,083,325
|
|
|
5,000
|
|
|
Time Warner, Inc.,
|
|
|
|
|
|
|
|
|
9.15%, 2/01/23
|
|
|
6,641,350
|
|
|
5,000
|
|
|
Wal-Mart Stores, Inc.,
|
|
|
|
|
|
|
|
|
6.75%, 10/15/23
|
|
|
6,176,625
|
|
|
5,000
|
|
|
Xerox Corp.,
|
|
|
|
|
|
|
|
|
6.35%, 5/15/18
|
|
|
5,719,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,974,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telephone2.2%
|
|
|
|
|
|
6,000
|
|
|
Rogers Communications, Inc.,
|
|
|
|
|
|
|
|
|
7.50%, 3/15/15 (Canada) (a)
|
|
|
6,485,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,485,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilities81.8%
|
|
|
|
|
|
10,000
|
|
|
CalEnergy Company, Inc.,
|
|
|
|
|
|
|
|
|
8.48%, 9/15/28 (a)(b)
|
|
|
13,552,160
|
|
|
5,000
|
|
|
CenterPoint Energy Resources Corp.,
|
|
|
|
|
|
|
|
|
6.00%, 5/15/18
|
|
|
5,766,250
|
|
|
10,713
|
|
|
Cleveland Electric Illumination Co.,
|
|
|
|
|
|
|
|
|
8.875%, 11/15/18 (a)(b)
|
|
|
13,564,169
|
|
|
5,000
|
|
|
Commonwealth Edison Co.,
|
|
|
|
|
|
|
|
|
6.95%, 7/15/18 (a)
|
|
|
5,703,500
|
|
|
5,000
|
|
|
Consolidated Edison Company of New York Inc.,
|
|
|
|
|
|
|
|
|
5.85%, 4/01/18 (a)
|
|
|
5,788,015
|
|
|
5,000
|
|
|
Dominion Resources, Inc.
|
|
|
|
|
|
|
|
|
5.15%, 7/15/15 (a)
|
|
|
5,322,160
|
|
The
accompanying notes are an integral part of these financial statements.
DUFF & PHELPS UTILITY AND
CORPORATE BOND TRUST INC.
SCHEDULE OF INVESTMENTS(Continued)
December 31, 2013
|
|
|
|
|
|
|
|
|
Principal
Amount
(000)
|
|
|
Description
|
|
Value
(Note 2)
|
|
$
|
8,000
|
|
|
EQT Corporation,
|
|
|
|
|
|
|
|
|
8.125%, 6/01/19 (a)
|
|
$
|
9,716,320
|
|
|
10,000
|
|
|
Entergy Texas, Inc.,
|
|
|
|
|
|
|
|
|
7.125%, 2/01/19 (a)(b)
|
|
|
11,768,760
|
|
|
5,000
|
|
|
Enterprise Products Operating LLC
|
|
|
|
|
|
|
|
|
6.50%, 1/31/19 (a)
|
|
|
5,871,720
|
|
|
5,475
|
|
|
Exelon Generation Co. LLC,
|
|
|
|
|
|
|
|
|
6.20%, 10/01/17 (a)
|
|
|
6,192,236
|
|
|
7,750
|
|
|
FPL Group Capital Inc.,
|
|
|
|
|
|
|
|
|
7.875%, 12/15/15 (a)(b)
|
|
|
8,763,568
|
|
|
10,000
|
|
|
Hydro-Quebec,
|
|
|
|
|
|
|
|
|
7.50%, 4/01/16 (Canada) (a)
|
|
|
11,427,020
|
|
|
8,115
|
|
|
Indiana Michigan Power Co.,
|
|
|
|
|
|
|
|
|
7.00%, 3/15/19 (a)(b)
|
|
|
9,661,825
|
|
|
5,000
|
|
|
Kinder Morgan Energy Partners, L.P.,
|
|
|
|
|
|
|
|
|
7.75%, 3/15/32 (a)
|
|
|
6,093,030
|
|
|
3,500
|
|
|
Magellan Midstream Energy Partners, L.P.,
|
|
|
|
|
|
|
|
|
6.40%, 7/15/18
|
|
|
4,112,549
|
|
|
5,000
|
|
|
Magellan Midstream Energy Partners, L.P.,
|
|
|
|
|
|
|
|
|
6.55%, 7/15/19 (a)
|
|
|
5,923,735
|
|
|
7,000
|
|
|
National Fuel Gas Co.
|
|
|
|
|
|
|
|
|
6.50%, 4/15/18 (a)
|
|
|
8,019,613
|
|
|
6,000
|
|
|
National Grid PLC
|
|
|
|
|
|
|
|
|
6.30%, 8/01/16
(United Kingdom)
|
|
|
6,751,578
|
|
|
5,000
|
|
|
Nevada Power Company
|
|
|
|
|
|
|
|
|
7.125%, 3/15/19
|
|
|
6,090,510
|
|
|
5,000
|
|
|
Oncor Electric Delivery Co., LLC,
|
|
|
|
|
|
|
|
|
7.00%, 9/01/22 (a)
|
|
|
5,974,935
|
|
|
9,441
|
|
|
ONEOK Partners, L.P.,
|
|
|
|
|
|
|
|
|
6.15%, 10/01/16 (a)(b)
|
|
|
10,608,767
|
|
|
5,230
|
|
|
PPL Energy Supply LLC,
|
|
|
|
|
|
|
|
|
6.50%, 5/01/18 (a)
|
|
|
5,823,359
|
|
|
5,000
|
|
|
PSEG Power LLC,
|
|
|
|
|
|
|
|
|
5.32%, 9/15/16 (a)(b)
|
|
|
5,504,900
|
|
|
10,000
|
|
|
Progress Energy, Inc.,
|
|
|
|
|
|
|
|
|
7.05%, 3/15/19 (a)(b)
|
|
|
11,999,320
|
|
|
8,000
|
|
|
Sempra Energy
|
|
|
|
|
|
|
|
|
6.15%, 6/15/18 (a)(b)
|
|
|
9,192,880
|
|
|
7,785
|
|
|
South Carolina Electric & Gas Co.,
|
|
|
|
|
|
|
|
|
6.50%, 11/01/18 (a)(b)
|
|
|
9,321,409
|
|
|
7,000
|
|
|
Spectra Energy Capital LLC,
|
|
|
|
|
|
|
|
|
6.20%, 4/15/18 (a)(b)
|
|
|
7,905,394
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount
(000)
|
|
|
Description
|
|
Value
(Note 2)
|
|
$
|
10,000
|
|
|
Trans-Canada Pipelines Limited,
|
|
|
|
|
|
|
|
|
9.875%, 1/01/21
(Canada) (a)(b)
|
|
$
|
13,627,120
|
|
|
8,571
|
|
|
Williams Partners L.P.,
|
|
|
|
|
|
|
|
|
7.25%, 2/01/17 (a)
|
|
|
9,890,514
|
|
|
5,000
|
|
|
Xcel Energy, Inc.,
|
|
|
|
|
|
|
|
|
5.613%, 4/01/17 (a)
|
|
|
5,513,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
245,450,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Corporate Bonds
(Cost $378,622,453)
|
|
|
401,904,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-Backed Securities1.3%
|
|
|
|
|
|
3,862
|
|
|
Detroit Edison Securitization Funding LLC 2001-1 A6,
|
|
|
|
|
|
|
|
|
6.62%, 3/01/16
|
|
|
4,022,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Asset-Backed Securities
(Cost $3,997,840)
|
|
|
4,022,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
|
|
|
|
Non-Convertible Preferred Stock0.4%
|
|
|
|
|
|
Financial0.4%
|
|
|
|
|
|
50,000
|
|
|
Vornado Realty Trust, Series I,
|
|
|
|
|
|
|
|
|
6.625%
|
|
|
1,147,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Convertible Preferred Stock
(Cost $1,175,000)
|
|
|
1,147,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL INVESTMENTS135.9%
|
|
|
|
|
|
(Cost $384,397,447)
|
|
|
407,746,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets in excess of liabilities5.8%
|
|
|
17,374,050
|
|
|
|
|
|
Borrowings(41.7%)
|
|
|
(125,000,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS APPLICABLE TO COMMON STOCK100%
|
|
$
|
300,120,893
|
|
|
|
|
|
|
|
|
|
|
(a)
|
All or a portion of this security has been segregated and made available for loan.
|
(b)
|
All or a portion of this security has been loaned.
|
The percentage shown for each investment category is the total value of that category as a percentage of the net assets applicable to common stock of the Fund.
The
accompanying notes are an integral part of these financial statements.
DUFF & PHELPS UTILITY AND
CORPORATE BOND TRUST INC.
SCHEDULE OF INVESTMENTS(Continued)
December 31, 2013
The Funds investments are carried at fair value which is defined as the price that the Fund would
receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. The three-tier hierarchy of inputs established to classify fair value measurements for disclosure
purposes is summarized in the three broad levels listed below:
Level 1quoted prices in active markets for identical securities.
Level 2other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit
risks, etc.).
Level 3significant unobservable inputs (including the Funds own assumptions in determining fair value of
investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in
these securities. The following is a summary of the inputs used to value each of the Funds investments at December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
Asset-backed securities
|
|
$
|
|
|
|
$
|
4,022,341
|
|
Corporate bonds
|
|
|
|
|
|
|
401,904,823
|
|
Non-convertible preferred stock
|
|
|
1,147,500
|
|
|
|
|
|
U.S. Government and Agency mortgage-backed securities
|
|
|
|
|
|
|
672,179
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,147,500
|
|
|
$
|
406,599,343
|
|
|
|
|
|
|
|
|
|
|
There were no Level 3 priced securities held and there were no transfers between Level 1 and Level 2 related to securities
held at December 31, 2013.
Summary of Ratings as a Percentage of
Long-Term Investments
(Unaudited)
At December 31, 2013
|
|
|
|
|
Rating *
|
|
%
|
|
AAA
|
|
|
1.2
|
%
|
AA
|
|
|
1.5
|
%
|
A
|
|
|
20.4
|
%
|
BBB
|
|
|
76.9
|
%
|
|
|
|
|
|
|
|
|
100.0
|
%
|
|
|
|
|
|
*
|
Individual ratings are grouped based on the lower rating of Standard & Poors Financial Services LLC (S&P) or Moodys Investors Service
Inc. (Moodys) and are expressed using the S&P ratings scale. If a particular security is rated by either S&P or Moodys, but not both, then the single rating is used. If a particular security is not rated by either
S&P or Moodys, then a rating from Fitch Ratings, Inc., is used, if available.
|
Sector Allocation as a
Percentage of
Total Investments at December 31, 2013
The
accompanying notes are an integral part of these financial statements.
DUFF & PHELPS UTILITY AND CORPORATE BOND
TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2013
|
|
|
|
|
|
|
ASSETS:
|
|
|
|
|
|
|
Investments at value (cost $384,397,447) including $113,443,436 of securities loaned
|
|
$
|
407,746,843
|
|
|
|
Cash
|
|
|
11,136,298
|
|
|
|
Receivables:
|
|
|
|
|
|
|
Interest
|
|
|
6,576,589
|
|
|
|
Dividends
|
|
|
20,703
|
|
|
|
Securities lending income
|
|
|
335
|
|
|
|
Prepaid expenses
|
|
|
7,946
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
425,488,714
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
Borrowings (Note 9)
|
|
|
125,000,000
|
|
|
|
Investment advisory fee (Note 3)
|
|
|
181,378
|
|
|
|
Administrative fee (Note 3)
|
|
|
107,239
|
|
|
|
Interest on borrowings (Note 9)
|
|
|
7,614
|
|
|
|
Accrued expenses
|
|
|
71,590
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
125,367,821
|
|
|
|
|
|
|
|
|
NET ASSETS APPLICABLE TO COMMON STOCK
|
|
$
|
300,120,893
|
|
|
|
|
|
|
|
|
CAPITAL:
|
|
|
|
|
|
|
Common stock ($0.01 par value, 600,000,000 shares authorized, 27,494,683 shares issued and outstanding)
|
|
$
|
274,947
|
|
|
|
Additional paid-in capital
|
|
|
354,102,009
|
|
|
|
Accumulated distributions in excess of net investment income
|
|
|
(17,757,065
|
)
|
|
|
Accumulated net realized loss on investments
|
|
|
(59,848,394
|
)
|
|
|
Net unrealized appreciation on investments
|
|
|
23,349,396
|
|
|
|
|
|
|
|
|
Net assets applicable to common stock.
|
|
$
|
300,120,893
|
|
|
|
|
|
|
|
|
NET ASSET VALUE PER SHARE OF COMMON STOCK
|
|
$
|
10.92
|
|
|
|
|
|
|
DUFF & PHELPS UTILITY AND CORPORATE BOND
TRUST INC.
STATEMENT OF OPERATIONS
For the year ended December 31, 2013
|
|
|
|
|
|
|
INVESTMENT INCOME:
|
|
|
|
|
|
|
Interest
|
|
$
|
17,558,208
|
|
|
|
Dividends
|
|
|
83,281
|
|
|
|
Securities lending income, net
|
|
|
66,760
|
|
|
|
|
|
|
|
|
Total investment income
|
|
|
17,708,249
|
|
|
|
|
|
|
|
|
EXPENSES:
|
|
|
|
|
|
|
Investment advisory fees (Note 3)
|
|
|
2,432,142
|
|
|
|
Interest expense and fees (Note 9)
|
|
|
1,907,299
|
|
|
|
Administrative fees (Note 3)
|
|
|
439,557
|
|
|
|
Directors fees
|
|
|
128,141
|
|
|
|
Professional fees
|
|
|
102,125
|
|
|
|
Reports to shareholders
|
|
|
69,250
|
|
|
|
Broker-dealer commissionsauction market preferred shares
|
|
|
50,469
|
|
|
|
Custodian fees
|
|
|
49,900
|
|
|
|
Transfer agent fees
|
|
|
24,850
|
|
|
|
Other expenses
|
|
|
99,444
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
5,303,177
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
12,405,072
|
|
|
|
|
|
|
|
|
REALIZED AND UNREALIZED GAIN (LOSS):
|
|
|
|
|
|
|
Net realized gain on investments
|
|
|
4,299,406
|
|
|
|
Net change in unrealized appreciation (depreciation) on investments
|
|
|
(21,059,716
|
)
|
|
|
|
|
|
|
|
Net realized and unrealized gain (loss) on investments
|
|
|
(16,760,310
|
)
|
|
|
|
|
|
|
DISTRIBUTIONS ON AUCTION MARKET
PREFERRED SHARES FROM:
|
|
|
|
Net investment income
|
|
|
(575,548
|
)
|
|
|
|
|
|
|
|
Total distributions
|
|
|
(575,548
|
)
|
|
|
|
|
|
|
|
NET DECREASE IN NET ASSETS APPLICABLE TO COMMON STOCK RESULTING FROM OPERATIONS
|
|
$
|
(4,930,786
|
)
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial statements.
DUFF & PHELPS UTILITY AND
CORPORATE BOND TRUST INC.
STATEMENTS OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
year ended
December 31, 2013
|
|
|
For the
year ended
December 31, 2012
|
|
INCREASE (DECREASE) IN NET ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
FROM OPERATIONS:
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
12,405,072
|
|
|
$
|
13,535,153
|
|
|
|
|
Net realized gain (loss)
|
|
|
4,299,406
|
|
|
|
(205,421
|
)
|
|
|
|
Net change in unrealized appreciation (depreciation)
|
|
|
(21,059,716
|
)
|
|
|
16,145,020
|
|
|
|
|
Distributions on auction market preferred shares from net investment income
|
|
|
(575,548
|
)
|
|
|
(1,429,414
|
)
|
|
|
|
Benefit to common shareholders from tender offer for auction market preferred shares (Note 8)
|
|
|
|
|
|
|
217,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets applicable to common stock resulting from operations
|
|
|
(4,930,786
|
)
|
|
|
28,262,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DISTRIBUTIONS TO COMMON STOCKHOLDERS FROM:
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(23,085,796
|
)
|
|
|
(23,005,876
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
FROM CAPITAL STOCK TRANSACTIONS:
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued to common stockholders from dividend reinvestment of 46,530 shares and 111,626 shares, respectively
|
|
|
548,697
|
|
|
|
1,331,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in net assets derived from capital stock transactions
|
|
|
548,697
|
|
|
|
1,331,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total increase (decrease) in net assets
|
|
|
(27,467,885
|
)
|
|
|
6,588,323
|
|
|
|
|
TOTAL NET ASSETS APPLICABLE TO COMMON STOCK:
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
327,588,778
|
|
|
|
321,000,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year (including distributions in excess of net investment income of ($17,757,065) and ($12,055,912))
|
|
$
|
300,120,893
|
|
|
$
|
327,588,778
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an
integral part of these financial statements.
DUFF & PHELPS UTILITY AND
CORPORATE BOND TRUST INC.
STATEMENT OF CASH FLOWS
For the year ended December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Interest received
|
|
$
|
27,171,789
|
|
|
|
|
|
|
|
|
Income dividends received
|
|
|
83,281
|
|
|
|
|
|
|
|
|
Securities lending income, net
|
|
|
67,189
|
|
|
|
|
|
|
|
|
Operating expenses paid
|
|
|
(3,744,859
|
)
|
|
|
|
|
|
|
|
Interest paid on borrowing
|
|
|
(1,570,263
|
)
|
|
|
|
|
|
|
|
Dividends paid on preferred stock
|
|
|
(584,516
|
)
|
|
|
|
|
|
|
|
Purchase of investment securities
|
|
|
(20,053,510
|
)
|
|
|
|
|
|
|
|
Proceeds from sales and maturities of investment securities
|
|
|
83,438,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
|
|
|
|
84,807,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in) financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in borrowings
|
|
|
(17,500,000
|
)
|
|
|
|
|
|
|
|
Payout for auction market preferred shares redeemed
|
|
|
(47,500,000
|
)
|
|
|
|
|
|
|
|
Dividends paid on common stock
|
|
|
(23,085,796
|
)
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock under dividend reinvestment plan
|
|
|
548,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
|
|
|
|
(87,537,099
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash
|
|
|
|
|
|
|
(2,729,347
|
)
|
|
|
|
Cash at beginning of year
|
|
|
|
|
|
|
13,865,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
|
|
|
|
|
11,136,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net decrease in net assets resulting from operations to
net cash provided by operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in net assets resulting from operations
|
|
|
|
|
|
$
|
(4,930,786
|
)
|
|
|
|
Purchase of investment securities
|
|
|
(20,053,510
|
)
|
|
|
|
|
|
|
|
Proceeds from sale and maturities of investment securities
|
|
|
83,438,641
|
|
|
|
|
|
|
|
|
Amortization of premiums and discounts on debt securities
|
|
|
8,802,856
|
|
|
|
|
|
|
|
|
Net realized gain on investments
|
|
|
(4,299,406
|
)
|
|
|
|
|
|
|
|
Net change in unrealized (appreciation) depreciation on investments
|
|
|
21,059,716
|
|
|
|
|
|
|
|
|
Decrease in interest receivable
|
|
|
810,725
|
|
|
|
|
|
|
|
|
Decrease in interest payable on borrowings
|
|
|
(10,713
|
)
|
|
|
|
|
|
|
|
Decrease in other receivable
|
|
|
429
|
|
|
|
|
|
|
|
|
Decrease in accrued expenses
|
|
|
(10,200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
|
|
|
|
89,738,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
|
|
|
$
|
84,807,752
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an
integral part of these financial statements.
DUFF & PHELPS UTILITY AND
CORPORATE BOND TRUST INC.
FINANCIAL HIGHLIGHTSSELECTED PER SHARE DATA AND RATIOS
The table below provides information about income and capital
changes for a share of common stock outstanding throughout the years indicated (excluding supplemental data provided below):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
PER SHARE DATA:
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
Net asset value, beginning of year
|
|
$
|
11.93
|
|
|
$
|
11.74
|
|
|
$
|
11.71
|
|
|
$
|
11.70
|
|
|
$
|
10.61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
(1)
|
|
|
0.45
|
|
|
|
0.49
|
|
|
|
0.53
|
|
|
|
0.66
|
|
|
|
0.77
|
|
Net realized and unrealized gain (loss)
|
|
|
(0.60
|
)
|
|
|
0.58
|
|
|
|
0.39
|
|
|
|
0.24
|
|
|
|
1.22
|
|
Distributions on auction market preferred shares from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(0.02
|
)
|
|
|
(0.05
|
)
|
|
|
(0.05
|
)
|
|
|
(0.05
|
)
|
|
|
(0.07
|
)
|
Benefit to common shareholders from tender offer for auction market preferred shares
|
|
|
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) from investment operations
|
|
|
(0.17
|
)
|
|
|
1.03
|
|
|
|
0.87
|
|
|
|
0.85
|
|
|
|
1.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions on common stock from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(0.84
|
)
|
|
|
(0.84
|
)
|
|
|
(0.84
|
)
|
|
|
(0.84
|
)
|
|
|
(0.83
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of year
|
|
$
|
10.92
|
|
|
$
|
11.93
|
|
|
$
|
11.74
|
|
|
$
|
11.71
|
|
|
$
|
11.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share market value, end of year
|
|
$
|
10.03
|
|
|
$
|
12.26
|
|
|
$
|
12.04
|
|
|
$
|
11.39
|
|
|
$
|
12.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RATIOS TO AVERAGE NET ASSETS
APPLICABLE TO COMMON STOCK:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
1.69
|
%
|
|
|
1.79
|
%
|
|
|
1.86
|
%
|
|
|
1.89
|
%
|
|
|
2.12
|
%
|
Expenses (excluding interest expense)
|
|
|
1.19
|
%
|
|
|
1.39
|
%
|
|
|
1.43
|
%
|
|
|
1.46
|
%
|
|
|
1.72
|
%
|
Net investment income
|
|
|
3.95
|
%
|
|
|
4.15
|
%
|
|
|
4.51
|
%
|
|
|
5.53
|
%
|
|
|
6.82
|
%
|
SUPPLEMENTAL DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return on market value
(2)
|
|
|
(11.68
|
)%
|
|
|
9.23
|
%
|
|
|
13.79
|
%
|
|
|
(0.61
|
)%
|
|
|
30.69
|
%
|
Total return on net asset value
(2)
|
|
|
(1.48
|
)%
|
|
|
9.01
|
%
|
|
|
7.66
|
%
|
|
|
7.61
|
%
|
|
|
18.62
|
%
|
Portfolio turnover rate
|
|
|
4
|
%
|
|
|
14
|
%
|
|
|
36
|
%
|
|
|
37
|
%
|
|
|
23
|
%
|
Asset coverage ratio on borrowings, end of year
|
|
|
340
|
%
|
|
|
363
|
%
|
|
|
538
|
%
|
|
|
537
|
%
|
|
|
535
|
%
|
Asset coverage ratio on preferred stock, end of year
|
|
|
|
|
|
|
790
|
%
|
|
|
438
|
%
|
|
|
437
|
%
|
|
|
435
|
%
|
Net assets applicable to common stock, end of year (000s omitted)
|
|
$
|
300,121
|
|
|
$
|
327,589
|
|
|
$
|
321,000
|
|
|
$
|
319,922
|
|
|
$
|
318,393
|
|
(1)
|
Based on average number of shares of common stock outstanding.
|
(2)
|
Total return on market value assumes a purchase of common stock at the opening market price on the first business day and a sale at the closing market
price on the last business day of each year shown in the table and assumes reinvestment of dividends at the actual reinvestment prices obtained under the terms of the Funds dividend reinvestment plan. Total return on net asset value uses the
same methodology, but with use of net asset value for beginning, ending and reinvestment values.
|
The accompanying notes are an integral part of these financial statements.
DUFF & PHELPS UTILITY AND
CORPORATE BOND TRUST INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2013
Note 1. Organization
Duff & Phelps Utility and Corporate Bond Trust Inc. (the Fund) was incorporated under the laws of the State of Maryland on November 23, 1992. The Fund commenced operations
on January 29, 1993 as a diversified, closed-end management investment company registered under the Investment Company Act of 1940, as amended (the 1940 Act). The Funds investment objective is to seek high current income consistent
with investing in securities of investment-grade quality.
Note 2. Significant Accounting Policies
The following are the significant accounting policies of the Fund:
A. Investment Valuation:
Equity securities traded on a national or foreign securities exchange or traded over-the-counter and
quoted on the NASDAQ Stock Market are valued at the last reported sale price or, if there was no sale on the valuation date, then the security is valued at the mean of the bid and ask prices as obtained on that day from one or more dealers regularly
making a market in that security and are generally classified as Level 1. Equity securities traded on more than one securities exchange shall be valued at the last sale price on the pricing date at the close of the exchange representing the
principal market for such securities and are classified as Level 1. Fixed income securities are valued at the mean of bid and ask prices provided by an independent pricing service or broker-dealers when such prices are believed to reflect the fair
value of such securities and are generally classified as Level 2. Such bid and ask prices are determined taking into account securities prices, yields, maturities, call features, ratings, and institutional size trading in similar securities and
developments related to specific securities. Short-term investments having a maturity of 60 days or less at time of purchase are valued on an amortized cost basis, to the extent that amortized cost approximates market value, and are classified as
Level 2. Any securities for which it is determined that market prices are unavailable or inappropriate are valued at a fair value using a procedure determined in good faith by the Board of Directors and are classified as Level 2 or 3 based on the
valuation inputs.
B. Investment Transactions and Investment Income:
Securities transactions are recorded on the trade
date. Realized gains and losses on sales of securities are calculated on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income is recognized on the accrual basis. The Fund amortizes premiums and
accretes discounts on securities using the effective interest method.
C. Federal Income Taxes:
It is the Funds
intention to comply with requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income and capital gains to its shareholders. Therefore, no
provision for Federal income or excise taxes is required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Since tax authorities can examine
previously filed tax returns, the Funds tax returns filed for the tax years 2010 to 2013 are subject to review.
D.
Dividends and Distributions:
The Fund declares and pays dividends on its common stock monthly from net investment income. Net long-term capital gains, if any, in excess of loss carryforwards are expected to be distributed annually. The Fund will
make a determination at the end of its fiscal year as to whether to retain or distribute such gains. Dividends and distributions are recorded on the ex-dividend date.
The amount and timing of distributions are generally determined in accordance with federal tax regulations, which may differ from U.S. generally accepted accounting principles.
DUFF & PHELPS UTILITY AND
CORPORATE BOND TRUST INC.
NOTES TO FINANCIAL STATEMENTS(Continued)
December 31, 2013
E. Use of Estimates:
The preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
F. Accounting Standards:
The Fund adopted Accounting Standards Update (ASU) No. 2013-01,
Clarifying the Scope
of Disclosures about Offsetting Assets and Liabilities
which amended ASU No. 2011-11,
Disclosures about Offsetting Assets and Liabilities
, which required an entity to disclose information about offsetting and related arrangements for
assets and liabilities, financial instruments and derivatives that are either currently offset in accordance with current requirements or are subject to enforceable master netting arrangements or similar agreements. ASU No. 2013-01 limits the
scope of the new balance sheet disclosures to derivatives, repurchase agreements and securities lending transactions to the extent that they are (i) offset in the financial statements or (ii) subject to an enforceable master netting
arrangement or similar agreement. The adoption of this ASU did not require any additional disclosure in the Funds financial statements.
Note 3. Agreements and Management Arrangements
A. Adviser:
The Fund has an Advisory Agreement with Duff & Phelps Investment Management Co. (the Adviser), an indirect, wholly owned subsidiary of Virtus Investment Partners,
Inc. (Virtus).
The investment advisory fee is payable monthly at an annual rate of 0.50% of the Funds
average weekly managed assets, which is defined as the average weekly value of the total assets of the Fund minus the sum of all accrued liabilities of the Fund (other than the aggregate amount of any outstanding borrowings or other indebtedness
constituting financial leverage).
B. Administrator:
The Fund has an Administration Agreement with J.J.B. Hilliard, W.L.
Lyons, LLC (Hilliard). The administration fee is payable monthly at an annual rate of 0.14% of the Funds average weekly net assets, which is defined as the average weekly value of the total assets of the Fund minus the sum of all
accrued liabilities of the Fund (including the aggregate amount of any outstanding borrowings or other indebtedness constituting financial leverage).
C. Directors:
The Fund pays each director not affiliated with the Adviser an annual fee plus a fee for certain meetings of the board or committees of the board attended. Total fees paid to
directors for the year ended December 31, 2013 were $128,141.
D. Affiliated Shareholder:
At December 31,
2013, Virtus Partners, Inc. (a wholly owned subsidiary of Virtus) held 40,321 shares of the Fund, which represents 0.15% of the shares of common stock outstanding. These shares may be sold at any time.
Note 4. Investment Transactions
Purchases and sales of investment securities (excluding U.S. Government and agency mortgage-backed securities and short-term investments) for the year ended December 31, 2013 were $20,053,510 and
$83,294,385, respectively. Purchases and sales of U.S. Government and agency mortgage-backed securities for the year ended December 31, 2013 were $-0- and $144,256, respectively.
DUFF & PHELPS UTILITY AND
CORPORATE BOND TRUST INC.
NOTES TO FINANCIAL STATEMENTS(Continued)
December 31, 2013
Note 5. Distributions and Tax Information
At December 31, 2013, the federal tax cost of investments and the aggregate gross unrealized appreciation (depreciation) were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Tax
Cost
|
|
Unrealized
Appreciation
|
|
|
Unrealized
Depreciation
|
|
|
Net
Unrealized
Depreciation
|
|
$407,982,461
|
|
$
|
11,332,157
|
|
|
($
|
11,567,775
|
)
|
|
($
|
235,618
|
)
|
The difference between the book basis and tax basis unrealized appreciation (depreciation) is primarily
attributable to the difference between book and tax amortization methods for premiums and discounts on fixed income securities.
The tax character of distributions paid during the fiscal years ended December 31, 2013 and 2012 was as follows:
|
|
|
|
|
|
|
|
|
|
|
12/31/2013
|
|
|
12/31/2012
|
|
Distributions paid from:
|
|
|
|
|
|
|
|
|
Ordinary income
|
|
$
|
23,670,312
|
|
|
$
|
24,433,900
|
|
|
|
|
|
|
|
|
|
|
Total distributions
|
|
$
|
23,670,312
|
|
|
$
|
24,433,900
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2013, the components of distributable earnings on a tax basis were as follows:
|
|
|
|
|
Undistributed net ordinary income
|
|
$
|
5,827,948
|
|
Other accumulated loss
|
|
|
(59,848,394
|
)
|
Unrealized net appreciation (depreciation)
|
|
|
(235,618
|
)
|
|
|
|
|
|
|
|
($
|
54,256,064
|
)
|
|
|
|
|
|
At December 31, 2013, the Fund had a net capital loss carryforward of $59,848,394 which may be used
to offset future capital gains. This net capital loss carryforward will be reduced by future realized capital gains.
Under
current law, the Fund may carry forward net capital losses indefinitely to use to offset capital gains realized in future years. Previous law limited the carry forward of capital losses to the eight tax years following the year the capital loss was
realized. If the Fund has capital losses that are subject to current law and also has capital losses subject to prior law, the losses realized under current law will be utilized to offset capital gains before any of the losses governed by prior law
can be used. As a result of these ordering rules, capital losses realized under previous law may be more likely to expire unused. Capital losses realized under current law will carry forward retaining their classification as long-term or short-term
losses; as compared to under prior law in which all capital losses were carried forward as short term capital losses.
At
December 31, 2013, the Fund had net capital losses as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not Subject
to Expiration
|
|
|
|
|
|
|
Subject to
Expiration
|
|
|
Short
Term
|
|
|
Long
Term
|
|
|
Total
|
|
Carryover loss:
|
|
$
|
46,880,315
|
|
|
$
|
155,708
|
|
|
$
|
12,812,371
|
|
|
$
|
59,848,394
|
|
Expiration dates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
4,213,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
13,096,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
18,907,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
10,662,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DUFF & PHELPS UTILITY AND
CORPORATE BOND TRUST INC.
NOTES TO FINANCIAL STATEMENTS(Continued)
December 31, 2013
Note 6. Reclassification of Capital Accounts
Due to inherent differences in the recognition and distribution of income and realized gains (losses) under U.S. generally accepted
accounting principles and for federal income tax purposes, permanent differences between book and tax basis reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities. At December 31, 2013, the
following reclassifications were recorded:
|
|
|
|
|
Paid-in Capital
|
|
Accumulated net realized
loss on investments
|
|
Distributions in excess of
net investment income
|
($3,265,594)
|
|
($2,289,525)
|
|
$5,555,119
|
The reclassifications primarily relate to permanent differences attributable to amortization methods on
fixed income securities and the expiration of a net capital loss carryforward. These reclassifications have no impact on the net asset value of the Fund.
Note 7. Auction Market Preferred Shares
In 2006, the Fund issued 7,600
shares of Auction Market Preferred Shares (AMPS) in two series of 3,800 shares each at a public offering price of $25,000 per share. The underwriting discount and other offering costs incurred in connection with the issuance of the AMPS
were recorded as a reduction of paid-in capital on common stock. Dividends on shares of AMPS were cumulative from their date of original issue and paid on each dividend payment date. During the years ended December 31, 2009, December 31, 2012 and
December 31, 2013, the Fund redeemed $95,000,000, $47,500,000, and $47,500,000, respectively, of its AMPS.
In 2009, the Fund
redeemed all 3,800 shares of its Series T7 AMPS at a redemption price of $25,000 per share plus accrued but unpaid dividends. In 2012, the Fund conducted a tender offer for its outstanding Series TH7 AMPS that expired on June 18, 2012 and accepted
for purchase 217 shares of AMPS, as more fully described in Note 8. On December 21, 2012, the Fund redeemed 1,683 shares of its Series TH7 AMPS at a redemption price of $25,000 per share plus accrued but unpaid dividends. On September 20, 2013,
the Fund redeemed its remaining 1,900 shares of Series TH7 AMPS at a redemption price of $25,000 per share plus accrued but unpaid dividends.
Note 8. Auction Market Preferred Share Tender Offer
The Fund conducted a tender offer that commenced on May 3, 2012 and expired on June 18, 2012, for up to $47,500,000 of its outstanding AMPS at a price equal to 96% of the per share liquidation
preference of $25,000 plus any unpaid dividends accrued through the expiration of the offer. Under the terms of the tender offer on June 18, 2012, the Fund accepted 217 AMPS at a price equal to 96% of its liquidation preference of $25,000 per
share ($24,000 per share) plus dividends accrued and unpaid through the expiration of the offer. Because the tender offer was less than the AMPS per share liquidation preference, the tender offer had a positive impact on net asset value in the
amount of $217,000, which was reflected in the Statements of Changes in Net Assets under the caption Benefit to common shareholders from tender offer for auction market preferred shares.
Note 9. Borrowings
The
Fund has a Committed Facility Agreement (the Facility) with a commercial bank (the Bank) that allows the Fund to borrow cash up to a limit of $140,000,000. Borrowings under the Facility are collateralized by certain assets of
the Fund (the Hypothecated Securities). The Fund expressly grants the Bank the right to re-register the Hypothecated
DUFF & PHELPS UTILITY AND
CORPORATE BOND TRUST INC.
NOTES TO FINANCIAL STATEMENTS(Continued)
December 31, 2013
Securities in its own name or in another name other than the Funds and to pledge, repledge, hypothecate, rehypothecate, sell, lend or otherwise transfer or use the Hypothecated Securities.
Interest is charged at 3 month LIBOR (London Inter-bank Offered Rate) plus an additional percentage rate on the amount borrowed and a percentage rate on the undrawn balance (the commitment fee). The Fund also paid a one time arrangement fee
based on a percentage of the total borrowing limit. Total commitment fees paid for the year ended December 31, 2013 were $351,125 and are included in Interest expense and fees on the Statement of Operations. The Bank has the ability to require
repayment of outstanding borrowings under the Facility upon six months notice or following an event of default. For the year ended December 31, 2013, the average daily borrowings under the Facility and the weighted daily average interest rate
were $137,561,644 and 1.12%, respectively. As of December 31, 2013, the amount of such outstanding borrowings was $125,000,000. The interest rate applicable to the borrowing on December 31, 2013 was 1.10%.
The Bank has the ability to borrow the Hypothecated Securities (Rehypothecated Securities). The Fund is entitled to receive a
fee from the Bank in connection with any borrowing of Rehypothecated Securities. The fee is computed daily based on a percentage of the difference between the fair market rate as determined by the Bank and the Fed Funds Open and is paid monthly. The
Fund can designate any Hypothecated Security as ineligible for rehypothecation and can recall any Rehypothecated Security at any time and if the Bank fails to return it (or an equivalent security) in a timely fashion, the Bank will be liable to the
Fund for the ultimate delivery of such security and certain costs associated with delayed delivery. In the event the Bank does not return the Rehypothecated Security or an equivalent security, the Fund will have the right to, among other things,
apply and set off an amount equal to 100% of the then-current fair market value of such Rehypothecated Securities against any amounts owed to the Bank under the Facility. The Fund is entitled to receive an amount equal to any and all interest,
dividends, or distributions paid or distributed with respect to any Hypothecated Security on the payment date. At December 31, 2013, Hypothecated Securities under the Facility had a market value of $317,721,162 and Rehypothecated Securities had
a market value of $113,443,436. If at the close of any business day, the value of all outstanding Rehypothecated Securities exceeds the value of the borrowings, the Bank shall promptly, at its option, either reduce the amount of the outstanding
securities or deliver an amount of cash at least equal to the excess amount.
Note 10. Indemnifications
Under the Funds organizational documents, its officers and directors are indemnified against certain liabilities arising out of the
performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts that provide general indemnifications to other parties. The Funds maximum exposure under these arrangements is unknown as
this would involve future claims that may be made against the Fund that have not occurred. However, the Fund has not had prior claims or losses pursuant to these arrangements and expects the risk of loss to be remote.
Note 11. Subsequent Events
Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were available for issuance, and has determined that there were no subsequent events
requiring recognition or disclosure in these financial statements.
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Shareholders and Board of Directors of
Duff & Phelps Utility and Corporate Bond Trust Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Duff & Phelps Utility and Corporate Bond Trust Inc. (the Fund) as of December 31, 2013, and the related statement 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, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds management.
Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our
audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. We were not engaged to perform an audit of the Funds internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds internal control over financial reporting. Accordingly, we express no such opinion. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2013, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of
Duff & Phelps Utility and Corporate Bond Trust Inc. at December 31, 2013, 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 U.S. generally accepted accounting principles.
Chicago, Illinois
February 18, 2014
16
TAX INFORMATION (Unaudited)
The following information is provided with respect to the ordinary
income distributions paid by the Fund during the year ended December 31, 2013:
|
|
|
|
|
Interest-Related Dividends for Non-U.S. Residents
|
|
|
87.79
|
%*
|
*
|
Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations under
Sec. 871(k)(1) of the Internal Revenue Code.
|
INFORMATION ABOUT PROXY VOTING BY THE FUND (Unaudited)
Although the Fund does not typically hold voting securities, the Funds Board of Directors has adopted proxy voting policies and
procedures whereby Duff & Phelps Investment Management Co., the Funds investment adviser (the Adviser), would review any proxy solicitation materials on a case-by-case basis and would vote any such securities in accordance
with the Advisers good faith belief as to the best interests of the Fund and its shareholders. These proxy voting policies and procedures may be changed at any time or from time to time by the Funds Board of Directors. 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 the Administrator toll-free at (888) 878-7845 or is available on the
Funds website at www.ducfund.com or on the SECs website at www.sec.gov.
INFORMATION ABOUT THE FUNDS PORTFOLIO HOLDINGS (Unaudited)
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third fiscal quarters of each fiscal year
(quarters ended March 31 and September 30) on Form N-Q. The Funds Form N-Q is available on the SECs website at www.sec.gov and may be reviewed and copied at the SECs Public Reference Room in Washington, D.C.
Information on the operation of the SECs Public Reference Room may be obtained by calling (800) 732-0330. In addition, the Funds Form N-Q is available without charge, upon request, by calling the Administrator toll-free at
(888) 878-7845
or is available on the Funds website at www.ducfund.com.
ADDITIONAL
INFORMATION (Unaudited)
Since January 1, 2013: (i) there
have been no material changes in the Funds investment objectives or policies that have not been approved by the shareholders; (ii) there have been no changes in the Funds charter or by-laws that would delay or prevent a change in
control of the Fund which have not been approved by the shareholders; (iii) there have been no material changes in the principal risk factors associated with an investment in the Fund; and (iv) there have been no changes in the persons who
are primarily responsible for the day-to-day management of the Funds portfolio.
Additional information, if any, relating
to the Funds directors and officers, in addition to such information as is found elsewhere in the Annual Report, may be requested by contacting the Fund at the address provided in this report.
Notice is hereby given in accordance with Section 23(c) of the 1940 Act that the Fund may from time to time purchase its shares of
common stock in the open market.
17
INFORMATION ABOUT DIRECTORS AND
OFFICERS OF THE FUND (Unaudited)
Set forth below are the names and
certain biographical information about the directors of the Fund. Directors are di-vided into three classes and are elected to serve staggered three-year terms. All of the current directors of the Fund, with the exception of Mr. Partain, are
classified as independent directors because none of them are interested persons of the Fund, as defined in the 1940 Act. Mr. Partain is an interested person of the Fund by reason of his position as President and Chief
Executive Officer of the Fund and President, Chief Investment Officer and employee of the Adviser. The term Fund Complex refers to the Fund and all the other investment companies advised by affiliates of Virtus.
The address for all directors is c/o Duff & Phelps Investment Management Co., 200 South Wacker Drive, Suite 500, Chicago,
Illinois 60606. All of the Funds directors currently serve on the Board of Directors of three other registered closed-end investment companies that are advised by Duff & Phelps Investment Management Co.: DNP Select Income Fund Inc.
(DNP), Duff & Phelps Global Utility Income Fund Inc. (DPG) and DTF Tax-Free Income Inc. (DTF).
DIRECTORS
OF THE FUND (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Independent Directors
|
|
|
|
|
Name and Age
|
|
Position(s)
Held
with Fund
|
|
Term of
Office and
Length of
Time Served
|
|
Principal Occupation(s)
During Past 5 Years
|
|
Number of
Portfolios in
Fund Complex
Overseen by
Director
|
|
Other
Directorships Held
by the Director
During Past 5
Years
|
Stewart E. Conner
Age:
72
|
|
Director
|
|
Term expires 2015; Director since 2009
|
|
Retired attorney since 2005; Attorney, Wyatt Tarrant & Combs LLP 1966-2005 (Chairman, Executive Committee 2000-2004, Managing Partner 1988-2000)
|
|
4
|
|
|
|
|
|
|
|
|
Robert J. Genetski
Age:
71
|
|
Director
|
|
Term expires 2016; Director since 2009
|
|
President, Robert Genetski & Associates, Inc. (economic and financial consulting firm) since 1991; Senior Managing Director, Chicago Capital Inc. (financial services firm)
1995-2001; former Senior Vice President and Chief Economist, Harris Trust & Savings Bank; author of several books
|
|
4
|
|
Director, Midwest Banc Holdings, Inc. 2005-2010
|
|
|
|
|
|
|
Nancy Lampton
Age:
71
|
|
Director and Vice Chairperson of the Board
|
|
Term expires 2015; Director since 2005
|
|
Vice Chairperson of the Board of the Fund and DTF since 2007, DNP since 2006 and DPG since 2011; Chairman and Chief Executive Officer, Hardscuffle Inc. (insurance holding company)
since 2000; Chairman and Chief Executive Officer, American Life and Accident Insurance Company of Kentucky since 1971
|
|
4
|
|
Advisory Board Member, CanAlaska Uranium Ltd. (uranium exploration company); Director, Constellation Energy Group, Inc. (public utility holding company)
1999-2012
|
18
|
|
|
|
|
|
|
|
|
|
|
Independent Directors
|
|
|
|
|
Name and Age
|
|
Position(s)
Held
with Fund
|
|
Term of
Office and
Length of
Time Served
|
|
Principal Occupation(s)
During Past 5 Years
|
|
Number of
Portfolios in
Fund Complex
Overseen by
Director
|
|
Other
Directorships Held
by the Director
During Past 5 Years
|
Philip R. McLoughlin
Age:
67
|
|
Director
|
|
Term expires 2016; Director since 1996
|
|
Private investor since 2010; Partner, CrossPond Partners, LLC (investment management consultant) 2006-2010; Managing Director, SeaCap Partners LLC (strategic advisory firm)
2009-2010
|
|
66
|
|
Chairman of the Board, The World Trust Fund (closed-end fund) since 2010 (Director since 1991); Director, Argo Group International Holdings, Ltd. (insurance holding company; f/k/a
PXRE Group Ltd.) 1985-2009
|
|
|
|
|
|
|
Geraldine M. McNamara
Age: 62
|
|
Director
|
|
Term expires 2014; Director since 2003
|
|
Private investor since 2006; Managing Director, U.S. Trust Company of New York 1982-2006
|
|
52
|
|
|
|
|
|
|
|
|
Eileen A. Moran
Age:
59
|
|
Director
|
|
Term expires 2015; Director since 1996
|
|
Private investor since 2011; President and Chief Executive Officer, PSEG Resources L.L.C. (investment company) 1990-2011
|
|
4
|
|
|
|
|
|
|
|
|
Christian H. Poindexter
Age
75
|
|
Director
|
|
Term expires 2014; Director since 2008
|
|
Retired Executive Committee Chairman, Constellation Energy Group, Inc. (public utility holding company) since 2003 (Executive Committee Chairman, 2002-2003; Chairman of the Board,
1999-2002; Chief Executive Officer, 1999-2001; President, 1999-2000); Chairman, Baltimore Gas and Electric Company, 1993-2002 (Chief Executive Officer, 1993-2000; President, 1998-2000; Director,
1988-2003)
|
|
4
|
|
Director, The Baltimore Life Insurance Company 1998-2011
|
|
|
|
|
|
|
Carl F. Pollard
Age:
75
|
|
Director
|
|
Term expires 2014; Director since 2006
|
|
Owner, CFP Thoroughbreds LLC (f/k/a Hermitage Farm LLC) since 1995; Chairman, Columbia Healthcare Corporation 1993-1994; Chairman and Chief Executive Officer, Galen Health Care,
Inc. March-August 1993; President and Chief Operating Officer, Humana Inc. 1991-1993 (previously Senior Executive Vice President, Executive Vice President and Chief Financial Officer)
|
|
4
|
|
Chairman of the Board and Director, Churchill Downs Incorporated 2001-2011 (Director 1985-2011)
|
19
|
|
|
|
|
|
|
|
|
|
|
Independent
Directors
|
|
|
|
|
Name and Age
|
|
Position(s)
Held
with Fund
|
|
Term of
Office and
Length of
Time Served
|
|
Principal Occupation(s)
During Past 5 Years
|
|
Number of
Portfolios in
Fund Complex
Overseen by
Director
|
|
Other
Directorships Held
by the Director
During Past 5 Years
|
David J. Vitale
Age:
67
|
|
Director and Chairman of
the Board
|
|
Term expires 2015; Director since 2005
|
|
Chairman of the Board of the Fund, DNP and DTF since 2009 and DPG since 2011; President, Chicago Board of Education since 2011; Chairman, Urban Partnership Bank since 2010; Private
investor, 2009-2010; Senior Advisor to the CEO, Chicago Public Schools, 2007-2008 (Chief Administrative Officer 2003-2007); President and Chief Executive Officer, Board of Trade of the City of Chicago, Inc. 2001-2002; Vice Chairman and Director,
Bank One Corporation, 1998-1999; Vice Chairman and Director, First Chicago NBD Corporation, and President, The First National Bank of Chicago, 1995-1998; Vice Chairman, First Chicago Corporation and The First National Bank of Chicago, 1993-1998
(Director, 1992-1998; Executive Vice President, 1986-1993)
|
|
4
|
|
Director, United Continental Holdings Inc. (airline holding company; f/k/a UAL Corporation), Urban Partnership Bank, Alion Science and Technology Corporation, ISO New England Inc.
(not for profit independent system operator of New Englands electricity supply), Ariel Capital Management, LLC and Wheels, Inc. (automobile fleet management)
|
|
|
|
|
|
Interested Director
|
|
|
|
|
|
|
|
|
Nathan I. Partain, CFA
Age:
57
|
|
Director, President and Chief Executive Officer
|
|
Term expires 2016; Director since 2007
|
|
President and Chief Investment Officer of the Adviser since 2005 (Executive Vice President 1997-2005); Director of Utility Research, Duff & Phelps Investment Research Co.
1989-1996 (Director of Equity Research, 1993-1996 and Director of Fixed Income Research, 1993); President and Chief Executive Officer of the Fund and DTF since 2004 and DPG since 2011; President and Chief Executive Officer of DNP since 2001 (Chief
Investment Officer since 1998; Executive Vice President, 1998-2001; Senior Vice President, 1997-1998)
|
|
4
|
|
Chairman of the Board and Director, Otter Tail Corporation (manages diversified operations in the electric, plastics, manufacturing and other business operations
sectors)
|
20
OFFICERS OF THE FUND (Unaudited)
The officers of the Fund are elected at the annual meeting of the
board of directors of the Fund and serve until their respective successors are chosen and qualified. The Funds officers receive no compensation from the Fund, but are also officers of the Adviser or Virtus and receive compensation in such
capacities. Information pertaining to Nathan I. Partain, the President and Chief Executive Officer of the Fund, is provided under the caption Interested Director. Information pertaining to the other officers of the Fund is set forth
below. The address for all officers noted below is c/o Duff & Phelps Investment Management Co., 200 South Wacker Drive, Suite 500, Chicago, Illinois 60606.
|
|
|
|
|
Name and Age
|
|
Position(s) Held with Fund and
Length of Time Served
|
|
Principal Occupation(s) During Past 5 Years
|
T. Brooks Beittel, CFA
Age:
63
|
|
Senior Vice President and Secretary since 2005
|
|
Executive Vice President and Assistant Chief Investment Officer of the Adviser since 2008 (Senior Vice President 1993-2008; Vice President
1987-1993)
|
|
|
|
Alan M. Meder, CFA, CPA
Age:
54
|
|
Treasurer since 2000; Principal Financial and Accounting Officer and Assistant Secretary since 2002
|
|
Senior Vice President of the Adviser since 1994 (Chief Risk Officer since 2001); Chair of the Board of Governors of CFA Institute 2012-2013 (Vice Chairman of the Board 2011-2012;
Member since 2008); Financial Accounting Standards Advisory Council Member since 2011
|
|
|
|
Daniel J. Petrisko, CFA
Age:
53
|
|
Chief Investment Officer since 2004 (Vice President since 2000; Portfolio Manager 2002-2004)
|
|
Senior Vice President of the Adviser since 1997 (Vice President 1995-1997)
|
|
|
|
Joyce B. Riegel
Age:
59
|
|
Chief Compliance Officer since 2003
|
|
Senior Vice President and Chief Compliance Officer of the Adviser since 2004 (Vice President and Chief Compliance Officer 2002-2004); Vice President and Chief Compliance Officer,
Stein Roe Investment Counsel LLC
2001-2002
|
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (Unaudited)
Registered common shareholders are automatically enrolled in the Funds Dividend Reinvestment and Cash Purchase Plan (the Plan). Under the Plan, all distributions to common shareholders
will automatically be reinvested by Computershare Trust Company, N.A. (the Plan Agent) in additional shares of common stock of the Fund unless an election is made to receive distributions in cash. Shareholders who elect not to
participate in the Plan will receive all distributions in cash via direct deposit or paid by check in U.S. dollars mailed directly to the shareholder of record (or if the shares are held in street or other nominee name, then to the nominee) by the
Plan Agent.
The Plan Agent serves as agent for the common shareholders in administering the Plan. After the Fund declares a
dividend or determines to make a capital gains distribution, if (1) the market price of shares on the valuation date equals or exceeds the net asset value of these shares, the Fund will issue new shares at net asset value, provided that the
Fund will not issue new shares at a discount of more than 5% from the then current market price; or if (2) the market price is lower than the net asset value, or if dividends or capital gains distributions are declared and payable only in cash,
then the Plan Agent will, as agent for the participants, receive the cash payment and use it to buy shares of common stock in the open market, on the New York Stock Exchange or elsewhere, for the participants accounts. If, before the Plan
Agent has completed its purchases, the market price exceeds the net asset value per share of the common stock, the average per share purchase price paid by the Plan Agent may exceed the net asset value of the Funds common stock, resulting in
the acquisition of fewer shares of common stock than if the dividend or distribution had been paid in common stock issued by the Fund. As described below, the Plan was amended, effective December 1, 1999, whereby the Fund will issue new shares
in circumstances in which it will be beneficial to Plan participants.
21
The reinvestment shares are credited to the Plan participants account in the
Funds stock records maintained by the Plan Agent, including a fractional share to six decimal places. The Plan Agent sends to each Plan participant a monthly written statement of each transaction in the Plan participants share account,
including information that the participant will need for income tax records. Shares held in the Plan participants account have full distribution and voting rights. Plan participants may elect to send to the Plan Agent certificates for their
other shares of the Funds stock, which will be included in statements of their share accounts as non-certificated shares. The Plan Agent does not currently charge a fee per deposit, but may do so in the future.
The cost of administering the Plan is borne by the Fund. There is no brokerage commission charged on shares issued directly by the Fund.
However, Plan participants will pay a per share fee (which includes brokerage commissions or equivalent purchase costs) incurred in connection with purchases by the Plan Agent for reinvestment of distributions and voluntary cash payments.
The Plan also permits Plan participants to periodically purchase additional shares of common stock through the Plan by
delivering to the Plan Agent a check for at least $100, but not more than $5,000 in any month. The Plan Agent will use the funds to purchase shares in the open market or in private transactions. The Fund will not issue any new shares in connection
with voluntary additional share investments. Purchases will be made commencing with the date of the first distribution payment after receipt of the funds for additional purchases (assuming funds have been received at least two business days prior to
the distribution date), and may be aggregated with purchases of shares for reinvestment of distributions. Shares will be allocated to the accounts of Plan participants purchasing additional shares at the weighted average price per share, plus a
service charge imposed by the Plan Agent and a per share fee incurred in connection with such purchases. Checks are to be drawn in U.S. dollars and drawn against a U.S. bank.
The Plan Agent will make every effort to invest funds promptly, and in no event more than 30 days after the Plan Agent receives a distribution, and 35 days for voluntary additional share investment,
except where deferral is required under applicable federal or state laws or regulations.
Funds sent to the Plan Agent for
voluntary additional share investment may be recalled by the Plan participant by telephone, Internet, or written notice received by the Plan Agent not later than two business days before the next distribution payment date. If for any reason a
regular monthly distribution is not paid by the Fund, funds for voluntary additional share investment will be returned to the Plan participant, unless the Plan participant specifically directs that they continue to be held by the Plan Agent for
subsequent investment.
A Plan participant may leave the Plan at any time by telephone, Internet or written notice to the Plan
Agent. If notification is received by the Plan Agent after the record date of a distribution, it may not be effective until the next distribution. Upon discontinuing participation, a Plan participant has three choices: (i) if so requested by
telephone, Internet or written notice, the Plan Agent will sell the Plan participants shares and send a check for the net proceeds after deducting the Plan Agents sales fees (currently $5.00) and any per share fee (currently $0.04);
(ii) if so requested by telephone, Internet or written notice, the Plan participants shares may be electronically transferred to the Plan participants stock broker through the Direct Registration System; or (iii) if not so
requested in (i) or (ii), the Plan participant will receive by mail a certificate for the number of whole non-certificated shares held in the Plan participants account and a check for the value of the fractional share, less applicable
fees. The Fund reserves the right to amend the Plan to institute a service charge to participants. An election to withdraw from the Plan will, until such election is changed, be deemed to be an election by a common shareholder to take all subsequent
distributions in cash. There is no penalty for non-participation in or withdrawal from the Plan, and shareholders who have withdrawn from the Plan may rejoin it at any time.
Common shareholders whose common stock is held in the name of a broker or nominee should contact such broker or nominee to determine whether or how they may participate in the Plan. The Plan permits a
nominee to participate on behalf of its underlying owners who wish to participate. However, some nominees may not permit an underlying owner to participate without transferring the shares into the owners name.
22
The automatic reinvestment of dividends and distributions will not relieve Plan participants
of any federal income tax that may be payable (or required to be withheld) on such distributions. The Fund reserves the right to amend or terminate the Plan as applied to any distribution paid subsequent to written notice of the change sent to all
Plan participants at least 90 days before the record date for the distribution. The Plan may also be amended or terminated by the Plan Agent by at least 90 days written notice to all Plan participants. All questions concerning the Plan should
be directed to the Plan Agent by calling (866) 221-1681 or by visiting the Plan Agents website, www.computershare.com/investor.
23
As of the end
of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrants principal executive officer and principal financial officer (the Code of Ethics). The registrants principal
financial officer also performs the functions of principal accounting officer.
The text of the registrants Code of
Ethics is posted on the registrants web site at http://ducfund.com. In the event that the registrant makes any amendment to or grants any waiver from the provisions of its Code of Ethics, the registrant intends to disclose such amendment or
waiver on its web site within five business days.
ITEM 3.
|
AUDIT COMMITTEE FINANCIAL EXPERT.
|
The registrants board of directors has determined that two members of its audit committee, Philip R. McLoughlin and Carl F. Pollard
are audit committee financial experts and that each of them is independent for purposes of this Item.
ITEM 4.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
|
The following table sets forth the aggregate audit and non-audit fees billed to the registrant for each of the last two fiscal years for professional services rendered by the registrants principal
accountant Ernst &Young LLP, an independent registered public accounting firm (the Independent Auditor).
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended
December 31, 2013
|
|
|
Fiscal year ended
December 31, 2012
|
|
Audit Fees (1)
|
|
$
|
53,000
|
|
|
$
|
53,000
|
|
Audit-Related Fees (2)(6)
|
|
|
0
|
|
|
|
3,800
|
|
Tax Fees (3)(6)
|
|
|
6,000
|
|
|
|
6,185
|
|
All Other Fees (4)(6)
|
|
|
1,750
|
|
|
|
1,750
|
|
Aggregate Non-Audit Fees (5)(6)
|
|
|
7,750
|
|
|
|
11,735
|
|
(1)
|
Audit Fees are fees billed for professional services rendered by the Independent Auditor for the audit of the registrants annual financial statements and for
services that are normally provided by the Independent Auditor in connection with statutory and regulatory filings or engagements.
|
(2)
|
Audit-Related Fees are fees billed for assurance and related services by the Independent Auditor that are reasonably related to the performance of the audit of the
registrants financial statements and are not reported under the caption Audit Fees. In both years shown in the table, such services consisted of the performance of periodic agreed-upon procedures relating to the registrants
preferred stock.
|
(3)
|
Tax Fees are fees billed for professional services rendered by the Independent Auditor for tax compliance, tax advice and tax planning. In both years shown in the
table, such services consisted of preparation of the registrants annual federal and state income tax returns and excise tax returns.
|
(4)
|
All Other Fees are fees billed for products and services provided by the Independent Auditor, other than the services reported under the captions Audit
Fees, Audit-Related Fees and Tax Fees.
|
(5)
|
Aggregate Non-Audit Fees are non-audit fees billed by the Independent Auditor for services rendered to the registrant, the registrants investment
adviser (the Adviser) and any entity controlling, controlled by or under common control with the Adviser that provides ongoing
|
-2-
|
services to the registrant (collectively, the Covered Entities). During both years shown in the table, no portion of such fees related to services rendered by the Independent Auditor
to the Adviser or any other Covered Entity.
|
(6)
|
No portion of these fees was approved by the registrants audit committee after the beginning of the engagement pursuant to the waiver of the pre-approval
requirement for certain
de minimis
non-audit services described in Section 10A of the Securities Exchange Act of 1934 (the Exchange Act) and applicable regulations.
|
The audit committee of the board of directors of the registrant (the Audit Committee), jointly with the audit committee of
the board of directors of DNP Select Income Fund Inc. (DNP), Duff & Phelps Global Utility Income Fund Inc. (DPG) and DTF Tax-Free Income Inc. (DTF), has adopted a Joint Audit Committee Pre-Approval Policy
to govern the provision by the Independent Auditor of the following services: (i) all engagements for audit and non-audit services to be provided by the Independent Auditor to the registrant and (ii) all engagements for non-audit services
to be provided by the Independent Auditor to the Adviser or any other Covered Entity, if the engagement relates directly to the operations and financial reporting of the registrant. With respect to non-audit services rendered by the Independent
Auditor to the Adviser or any other Covered Entity that were not required to be pre-approved by the Audit Committee because they do not relate directly to the operations and financial reporting of the registrant, the Audit Committee has nonetheless
considered whether the provision of such services is compatible with maintaining the independence of the Independent Auditor.
Set forth below is a copy of the Joint Audit Committee Pre-Approval Policy (omitting data in the appendices relating to DNP, DPG and
DTF).
DNP SELECT INCOME FUND INC.
DUFF & PHELPS GLOBAL UTILITY INCOME FUND INC.
DUFF &
PHELPS UTILITY AND CORPORATE BOND TRUST INC.
DTF TAX-FREE INCOME INC.
AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES PRE-APPROVAL POLICY
(adopted
February 18, 2013 and amended August 8, 2013)
I.
|
Statement of Principles
|
Under the Sarbanes-Oxley Act of 2002 (the Act), the Audit Committee of the Board of Directors of each of DNP Select
Income Fund Inc., Duff & Phelps Global Utility Income Fund Inc., Duff & Phelps Utility and Corporate Bond Trust Inc. and DTF Tax-Free Income Inc. (each a Fund and, collectively, the Funds)
(1)
is responsible for the appointment, compensation and oversight of
the work of the independent auditor. As part of this responsibility, the Audit Committee is required to pre-approve the audit and non-audit services performed by the independent auditor in order to assure that they do not impair the auditors
independence from the Fund. To implement these provisions of the Act, the Securities and Exchange Commission (the SEC) has issued rules specifying the types of services that an independent auditor may not provide to its audit client, as
well as the Audit Committees administration of the engagement of the independent auditor. Accordingly, the Audit Committee has adopted this Audit and Non-Audit Services Pre-Approval Policy (this Policy), which sets forth the
procedures and the conditions pursuant to which services proposed to be performed by the independent auditor may be pre-approved.
(1)
|
This Joint Audit Committee Pre-Approval Policy has been adopted by the Audit Committee of each Fund. Solely for the sake of clarity and simplicity, this Joint Audit
Committee Pre-Approval Policy has been drafted as if there is a single Fund, a single Audit Committee and a single Board. The terms Audit Committee and Board mean the Audit Committee and Board of each Fund, respectively,
unless the context otherwise requires. The Audit Committee and the Board of each Fund, however, shall act separately and in the best interests of its respective Fund.
|
-3-
The SECs rules establish two different approaches to pre-approving services, which the SEC considers
to be equally valid. Proposed services either: may be pre-approved without consideration of specific case-by-case services by the Audit Committee (general pre-approval); or require the specific pre-approval of the Audit Committee
(specific pre-approval). The Audit Committee believes that the combination of these two approaches in this Policy will result in an effective and efficient procedure to pre-approve services performed by the independent auditor. As set
forth in this Policy, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee if it is to be provided by the independent auditor. Any proposed services exceeding pre-approved cost
levels or budgeted amounts will also require specific pre-approval by the Audit Committee.
For both types of pre-approval, the Audit
Committee will consider whether such services are consistent with the SECs rules on auditor independence. The Audit Committee will also consider whether the independent auditor is best positioned to provide the most effective and efficient
service, for reasons such as its familiarity with the Funds business, people, culture, accounting systems, risk profile and other factors, and whether the service might enhance the Funds ability to manage or control risk or improve audit
quality. All such factors will be considered as a whole, and no one factor should necessarily be determinative.
Under the SECs rules,
the Audit Committee must pre-approve non-audit services provided not only to the Fund but also to the Funds investment adviser and other affiliated entities that provide ongoing services to the Fund if the independent accountants
services to those affiliated entities have a direct impact on the Funds operations or financial reporting.
The Audit Committee is also
mindful of the relationship between fees for audit and non-audit services in deciding whether to pre-approve any such services and may determine, for each fiscal year, the appropriate ratio between the total amount of fees for audit, audit-related
and tax services (including any audit-related or tax service fees for affiliates that are subject to pre-approval) and the total amount of fees for certain permissible non-audit services classified as all other services (including any
such services for affiliates that are subject to pre-approval).
The appendices to this Policy describe the audit, audit-related, tax and
all other services that have the general pre-approval of the Audit Committee. The term of any general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee considers a different period and states otherwise.
The Audit Committee will annually review and pre-approve the services that may be provided by the independent auditor without obtaining specific pre-approval from the Audit Committee. The Audit Committee will add to or subtract from the list of
general pre-approved services from time to time, based on subsequent determinations.
The purpose of this Policy is to set forth the
procedures by which the Audit Committee intends to fulfill its responsibilities. It does not delegate the Audit Committees responsibilities to pre-approve services performed by the independent auditor to management.
The independent auditor has reviewed this Policy and believes that implementation of this Policy will not adversely affect the auditors
independence.
As provided in the Act and the
SECs rules, the Audit Committee may delegate either type of pre-approval authority to one or more of its members who are independent directors. Any member to whom such authority is delegated must report, for informational purposes only, any
pre-approval decisions to the Audit Committee at its next scheduled meeting. In accordance with the foregoing provisions, the Audit Committee has delegated pre-approval to its chairman, since under the Audit Committees charter each member of
the Audit Committee, including the chairman, is required to be an independent director.
-4-
The annual audit services
engagement terms and fees will be subject to the specific pre-approval of the Audit Committee. Audit services include the annual financial statement audit and other procedures required to be performed by the independent auditor to be able to form an
opinion on the Funds financial statements. These other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations relating
to the audit. The Audit Committee will monitor the audit services engagement as necessary, but no less than on a semiannual basis, and will also approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope,
Fund structure or other items.
In addition to the annual audit services engagement approved by the Audit Committee, the Audit Committee may
grant general pre-approval to other audit services, which are those services that only the independent auditor reasonably can provide. Other audit services may include statutory audits and services associated with SEC registration statements (on
Forms N-1A, N-2, N-3, N-4, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings.
The Audit Committee has pre-approved the audit services in Appendix A. All other audit services not listed in Appendix A must be specifically pre-approved by the Audit Committee.
IV.
|
Audit-Related Services
|
Audit-related services
are assurance and related services that are reasonably related to the performance of the audit or review of the Funds financial statements or that are traditionally performed by the independent auditor. Because the Audit Committee believes
that the provision of audit-related services does not impair the independence of the auditor and is consistent with the SECs rules on auditor independence, the Audit Committee may grant general pre-approval to audit-related services.
Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters not classified as audit services; assistance with understanding and implementing new accounting and
financial reporting guidance from rulemaking authorities; agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters; and
assistance with internal control reporting requirements under form N-SAR.
The Audit Committee has pre-approved the audit-related services in
Appendix B. All other audit-related services not listed in Appendix B must be specifically pre-approved by the Audit Committee.
The Audit Committee believes that
the independent auditor can provide tax services to the Fund such as tax compliance, tax planning and tax advice without impairing the auditors independence, and the SEC has stated that the independent auditor may provide such services. Hence,
the Audit Committee believes it may grant general pre-approval to those tax services that have historically been provided by the auditor, that the Audit Committee has reviewed and believes would not impair the independence of the auditor, and that
are consistent with the SECs rules on auditor independence. The Audit Committee will not permit the retention of the independent auditor in connection with a transaction initially recommended by the independent auditor, the sole business
purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee will consult with the Funds Administrator or outside counsel to determine that
the tax planning and reporting positions are consistent with this Policy.
Pursuant to the preceding paragraph, the Audit Committee has
pre-approved the tax services in Appendix C. All tax services involving large and complex transactions not listed in Appendix C must be specifically pre-approved by the Audit Committee, including: tax services proposed to be provided by the
independent auditor to any executive officer or director of the Fund, in his or her individual capacity, where such services are paid for by the Fund.
-5-
The Audit Committee
believes, based on the SECs rules prohibiting the independent auditor from providing specific non-audit services, that other types of non-audit services are permitted. Accordingly, the Audit Committee believes it may grant general pre-approval
to those permissible non-audit services classified as all other services that it believes are routine and recurring services, would not impair the independence of the auditor and are consistent with the SECs rules on auditor independence.
The Audit Committee has pre-approved the all other services in Appendix D. Permissible all other services not listed
in Appendix D must be specifically pre-approved by the Audit Committee.
A list of the SECs prohibited non-audit services is attached to
this Policy as Appendix E. The SECs rules and relevant guidance should be consulted to determine the precise definitions of these services and the applicability of exceptions to certain of the prohibitions.
VII.
|
Pre-Approval Fee Levels or Budgeted Amounts
|
Pre-approval fee levels or budgeted amounts for all services to be provided by the independent auditor will be established annually by the Audit
Committee. (Note that separate amounts may be specified for services to the Fund and for services to other affiliated entities that are subject to pre-approval.) Any proposed services exceeding these levels or amounts will require specific
pre-approval by the Audit Committee. The Audit Committee is mindful of the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services. For each fiscal year, the Audit Committee may determine
the appropriate ratio between the total amount of fees for audit, audit-related and tax services for the Fund (including any audit-related or tax services fees for affiliates that are subject to pre-approval), and the total amount of fees for
services classified as all other services (including any such services for affiliates that are subject to pre-approval).
All requests or applications for
services to be provided by the independent auditor that do not require specific approval by the Audit Committee will be submitted to the Funds Administrator and must include a detailed description of the services to be rendered. The
Administrator will determine whether such services are included within the list of services that have received the general pre-approval of the Audit Committee. The Audit Committee will be informed on a timely basis of any such services rendered by
the independent auditor.
Requests or applications to provide services that require specific approval by the Audit Committee will be submitted
to the Audit Committee by both the independent auditor and the Funds Administrator, and must include a joint statement as to whether, in their view, the request or application is consistent with the SECs rules on auditor independence.
The Audit Committee has designated the Funds Administrator to monitor the performance of all services provided by the independent
auditor and to determine whether such services are in compliance with this Policy. The Administrator will report to the Audit Committee on a periodic basis on the results of its monitoring. Both the Administrator and any member of management will
immediately report to the Chairman of the Audit Committee any breach of this Policy that comes to their attention.
IX.
|
Additional Requirements
|
The Audit Committee has
determined to take additional measures on an annual basis to meet its responsibility to oversee the work of the independent auditor and to assure the auditors independence from the Fund, such as reviewing a formal written statement from the
independent auditor delineating all relationships between the independent auditor and the Fund, consistent with applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountants communications with
the Audit Committee concerning independence, and discussing with the independent auditor its methods and procedures for ensuring independence.
-6-
Appendix A
Pre-Approved Audit Services for Fiscal Year Ending in 2013
Dated: February 18, 2013
and amended August 8, 2013
|
|
|
|
|
|
|
|
|
Service
|
|
Fees
(1)
|
|
|
|
DUC
|
|
|
Affiliates
(2)
|
|
1. Services required under generally accepted auditing standards to perform the audit of the annual financial statements of the
Fund, including performance of tax qualification tests relating to the Funds regulated investment company status and issuance of an internal control letter for the Funds Form N-SAR
|
|
$
|
53,000
|
|
|
|
N/A
|
|
|
|
|
2. Reading of the Funds semi-annual financial statements
|
|
|
|
(3)
|
|
|
N/A
|
|
|
|
|
3. Consultations by the Funds management as to the accounting or disclosure treatment of transactions or events and/or the
actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard setting bodies (Note: Under SEC rules, some consultations may be audit-related services rather than
audit services)
|
|
|
|
(3
)
|
|
|
N/A
|
|
(1)
|
In addition to the fees shown in the table, the Audit Committee has pre-approved the reimbursement of the reasonable out-of-pocket expenses incurred by
the independent accountant in providing the pre-approved services.
|
(2)
|
These affiliates include the Funds investment adviser (excluding sub-advisers) and any entity controlling, controlled by or under common control
with the adviser that provides ongoing services to the Fund. The Funds Audit Committee must pre-approve non-audit services provided not only to the Fund but also to the adviser and such other affiliated entities, where such entities provide
ongoing services to the Fund
and
the independent accountants services to such entities have a direct impact on the Funds operations or financial reporting.
|
(3)
|
Fees for services designated with a
(3)
shall either be included in the fee approved for item 1 of this Appendix A or may be separately
charged, provided that the aggregate separate charges for all services designated with a
(3)
in Appendices A and B may not exceed 10% of the fee approved for item 1 of this Appendix A.
|
-7-
Appendix B
Pre-Approved Audit-Related Services for Fiscal Year Ending in 2013
Dated:
February 18, 2013 and amended August 8, 2013
|
|
|
|
|
|
|
|
|
Service
|
|
Fees
(1)
|
|
|
|
DUC
|
|
|
Affiliates
(2)
|
|
1. Issuance of annual agreed-upon procedures letters relating to the preferred stock or commercial paper, if any, issued by the
Fund
|
|
$
|
3,800
|
|
|
|
N/A
|
|
2. Services associated with SEC registration statements, periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings (e.g., comfort letters, consents), and assistance in responding to SEC comment letters
|
|
|
|
(3)
|
|
|
N/A
|
|
3. Agreed-upon or expanded audit procedures related to accounting records required to respond to or comply with financial,
accounting or regulatory reporting matters
|
|
|
|
(3
)
|
|
|
N/A
|
|
4. Consultations by the Funds management as to the accounting or disclosure treatment of transactions or events and/or the
actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be audit services rather than
audit-related services)
|
|
|
|
(3
)
|
|
|
N/A
|
|
5. General assistance with implementation of the requirements of SEC rules or listing standards promulgated pursuant to the
Sarbanes-Oxley Act
|
|
|
|
(3
)
|
|
|
N/A
|
|
(1)
|
In addition to the fees shown in the table, the Audit Committee has pre-approved the reimbursement of the reasonable out-of-pocket expenses incurred by
the independent accountant in providing the pre-approved services.
|
(2)
|
These affiliates include the Funds investment adviser (excluding sub-advisers) and any entity controlling, controlled by or under common control
with the adviser that provides ongoing services to the Fund. The Funds Audit Committee must pre-approve non-audit services provided not only to the Fund but also to the adviser and such other affiliated entities, where such entities provide
ongoing services to the Fund
and
the independent accountants services to such entities have a direct impact on the Funds operations or financial reporting.
|
(3)
|
Fees for services designated with a
(3)
shall either be included in the fee approved for item 1 of Appendix A or may be separately
charged, provided that the aggregate separate charges for all services designated with a
(3)
in Appendices A and B may not exceed 10% of the fee approved for item 1 of Appendix A.
|
-8-
Appendix C
Pre-Approved Tax Services for Fiscal Year Ending in 2013
Dated: February 18, 2013 and
amended August 8, 2013
|
|
|
|
|
|
|
|
|
Service
|
|
Fees
(1)
|
|
|
|
DUC
|
|
|
Affiliates
(2)
|
|
|
|
|
1. Preparation of federal and state tax returns, including excise tax returns, and review of required distributions to avoid
excise tax
|
|
$
|
6,000
|
|
|
|
N/A
|
|
|
|
|
2. Preparation of state tax returns
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3. Consultations with the Funds management as to the tax treatment of transactions or events
|
|
$
|
6,000
|
(3)(4)
|
|
|
N/A
|
|
|
|
|
4. Tax advice and assistance regarding statutory, regulatory or administrative developments
|
|
|
|
(5)
|
|
|
|
|
(1)
|
In addition to the fees shown in the table, the Audit Committee has pre-approved the reimbursement of the reasonable out-of-pocket expenses incurred by
the independent accountant in providing the pre-approved services.
|
(2)
|
These affiliates include the Funds investment adviser (excluding sub-advisers) and any entity controlling, controlled by or under common control
with the adviser that provides ongoing services to the Fund. The Funds Audit Committee must pre-approve non-audit services provided not only to the Fund but also to the adviser and such other affiliated entities, where such entities provide
ongoing services to the Fund
and
the independent accountants services to such entities have a direct impact on the Funds operations or financial reporting.
|
(3)
|
This fee was pre-approved by the Audit Committee on August 8, 2013, and thereby became part of this Pre-approval Policy.
|
(4)
|
This is a fund complex fee that covers consultations relating not only to the Fund, but also to three other closed-end investment companies advised by
the Adviser: DNP Select Income Fund Inc., Duff & Phelps Global Utility Income Fund Inc. and DTF Tax-Free Income Inc.
|
(5)
|
Fees for services designated with a (5) shall either be included in the fee approved for item 1 of this Appendix C or may be separately
charged, provided that the aggregate separate charges for all services designated with a (5) in this Appendix C may not exceed 10% of the fee approved for item 1 of this Appendix C.
|
-9-
Appendix D
Pre-Approved All Other Services for Fiscal Year Ending in 2013
Dated:
February 18, 2013 and amended August 8, 2013
|
|
|
|
|
Service
|
|
Fees
(1)
|
|
|
DUC
|
|
Affiliates
(2)
|
|
|
|
None
|
|
|
|
|
(1)
|
In addition to the fees shown in the table, the Audit Committee has pre-approved the reimbursement of the reasonable out-of-pocket expenses incurred by
the independent accountant in providing the pre-approved services.
|
(2)
|
These affiliates include the Funds investment adviser (excluding sub-advisers) and any entity controlling, controlled by or under common control
with the adviser that provides ongoing services to the Fund. The Funds Audit Committee must pre-approve non-audit services provided not only to the Fund but also to the adviser and such other affiliated entities, where such entities provide
ongoing services to the Fund
and
the independent accountants services to such entities have a direct impact on the Funds operations or financial reporting.
|
-10-
Appendix E
Prohibited Non-Audit Services
|
|
|
Bookkeeping or other services related to the accounting records or financial statements of the audit client
|
|
|
|
Financial information systems design and implementation
|
|
|
|
Appraisal or valuation services, fairness opinions or contribution-in-kind reports
|
|
|
|
Internal audit outsourcing services
|
|
|
|
Broker-dealer, investment adviser or investment banking services
|
|
|
|
Expert services unrelated to the audit
|
ITEM 5.
|
AUDIT COMMITTEE OF LISTED REGISTRANTS.
|
The registrant has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The members of the Audit Committee are Robert J. Genetski,
Philip R. McLoughlin and Carl F. Pollard.
A schedule of
investments is included as part of the report to shareholders filed under Item 1 of this report.
ITEM 7.
|
DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
|
Although the registrant does not typically hold voting securities, the registrants board of directors has adopted the following
statement of policy with respect to proxy voting.
DNP SELECT INCOME FUND INC.
DTF TAX-FREE INCOME INC.
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
DUFF & PHELPS GLOBAL UTILITY INCOME FUND INC.
PROXY VOTING POLICIES AND PROCEDURES
As amended May 10, 2012 and
supplemented November 7, 2012
I.
|
Definitions
.
As used in these Policies and Procedures, the following terms shall have the meanings ascribed below:
|
|
A.
|
Adviser refers to Duff & Phelps Investment Management Co.
|
-11-
|
B.
|
Advisers Act refers to the Investment Advisers Act of 1940, as amended.
|
|
C.
|
corporate governance matters refers to changes involving the corporate ownership or structure of an issuer whose voting securities are within a portfolio
holding, including changes in the state of incorporation, changes in capital structure, including increases and decreases of capital and preferred stock issuance, mergers and other corporate restructurings, and anti-takeover provisions such as
staggered boards, poison pills, and supermajority voting provisions.
|
|
D.
|
Delegate refers to the Adviser, any proxy committee to which the Adviser delegates its responsibilities hereunder and any qualified, independent
organization engaged by the Adviser to vote proxies on behalf of the Fund.
|
|
E.
|
executive compensation matters refers to stock option plans and other executive compensation issues, including votes on say on pay and
golden parachutes.
|
|
F.
|
Fund refers to DNP Select Income Fund Inc., DTF Tax-Free Income Inc., Duff & Phelps Utility and Corporate Bond Trust Inc., or Duff &
Phelps Global Utility Income Fund Inc., as the case may be.
|
|
G.
|
Investment Company Act refers to the Investment Company Act of 1940, as amended.
|
|
H.
|
portfolio holding refers to any company or entity whose voting securities are held within the investment portfolio of the Fund as of the date a proxy is
solicited.
|
|
I.
|
proxy contests refer to any meeting of shareholders of an issuer for which there are at least two sets of proxy statements and proxy cards, one solicited by
management and the others by a dissident or group of dissidents.
|
|
J.
|
social issues refers to social, political and environmental issues.
|
|
K.
|
takeover refers to hostile or friendly efforts to effect radical change in the voting control of the board of directors of a
company.
|
II.
|
General policy
.
It is the intention of the Fund to exercise voting stock ownership rights in portfolio holdings in a manner that is reasonably
anticipated to further the best economic interests of shareholders of the Fund. Accordingly, the Fund or its Delegate(s) shall endeavor to analyze and vote all proxies that are considered likely to have financial implications, and, where
appropriate, to participate in corporate governance, shareholder proposals, management communications and legal proceedings. The Fund and its Delegate(s) must also identify potential or actual conflicts of interests in voting proxies and address any
such conflict of interest in accordance with these Policies and Procedures.
|
III.
|
Factors to consider when voting
.
|
|
A.
|
The Delegate may abstain from voting when it concludes that the effect on shareholders economic interests or the value of the portfolio holding is indeterminable
or insignificant.
|
|
B.
|
In analyzing
anti-takeover measures
, the Delegate shall vote on a case-by-case basis taking into consideration such factors as overall long-term financial
performance of the target company relative to its industry competition. Key measures which shall be considered include, without limitation, five-year annual compound growth rates for sales, operating income, net income, and total shareholder returns
(share price appreciation plus dividends). Other financial indicators that will be considered include margin analysis, cash flow, and debt levels.
|
-12-
|
C.
|
In analyzing
proxy contests for control
, the Delegate shall vote on a case-by-case basis taking into consideration such factors as long-term financial
performance of the target company relative to its industry; managements track record; background to the proxy contest; qualifications of director nominees (both slates); strategic plan of dissident slate and quality of critique against
management; evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met; and stock ownership positions.
|
|
D.
|
In analyzing
contested elections for director
, the Delegate shall vote on a case-by-case basis taking into consideration such factors as the qualifications of
all director nominees. The Delegate shall also consider the independence and attendance record of board and key committee members. A review of the corporate governance profile shall be completed highlighting entrenchment devices that may reduce
accountability.
|
|
E.
|
In analyzing
corporate governance matters
, the Delegate shall vote on a case-by-case basis taking into consideration such factors as tax and economic benefits
associated with amending an issuers state of incorporation, dilution or improved accountability associated with changes in capital structure, management proposals to require a supermajority shareholder vote to amend charters and bylaws and
bundled or conditioned proxy proposals.
|
|
F.
|
In analyzing
executive compensation matters
, the Delegate shall vote on a case-by-case basis, taking into consideration a companys overall pay program and
demonstrated pay-for-performance philosophy, and generally disfavoring such problematic pay practices as (i) repricing or replacing of underwater stock options, (ii) excessive perquisites or tax gross-ups, and (iii) change-in-control
payments that are excessive or are payable based on a single trigger (
i.e.,
without involuntary job loss or substantial diminution of duties). With respect to the advisory vote on the frequency of say on pay votes, the
Delegate shall vote in favor of the option that received majority support from shareholders in the most recent advisory vote. If no option received majority support and the board implemented an option that is less frequent than that which received a
plurality, but not majority, of votes cast, additional factors will be taken into consideration on a case-by-case basis, including the boards rationale for implementing a less recurring say on pay vote, ownership structure,
compensation concerns and say on pay support level from the prior year.
|
|
G.
|
The Delegate shall generally vote against shareholder proposals on
social issues,
except where the Delegate determines that a different position would be in the
clear economic interests of the Fund and its shareholders.
|
IV.
|
Responsibilities of Delegates
.
|
|
A.
|
In the absence of a specific direction to the contrary from the Board of Directors of the Fund, the Adviser will be responsible for voting proxies for all portfolio
holdings in accordance with these Policies and Procedures, or for delegating such responsibility as described below.
|
|
B.
|
The Adviser may delegate the administration of proxy activities hereunder to a proxy committee established from time to time by the Adviser and may engage one or more
qualified, independent organizations to vote proxies on behalf of the Fund. The Adviser shall be responsible for the ensuring that any such Delegate is informed of and complies with these Policies and Procedures.
|
|
C.
|
In voting proxies on behalf of the Fund, each Delegate shall have a duty of care to safeguard the best interests of the Fund and its shareholders and to act in
accordance with these Policies and Procedures.
|
|
D.
|
No Delegate shall accept direction or inappropriate influence from any other client or third party, or from any director, officer or employee of any affiliated company,
and shall not cast any vote inconsistent with these Policies and Procedures without obtaining the prior approval of the Board of Directors of the Fund or its duly authorized representative.
|
-13-
|
A.
|
The Fund and its Delegate(s) seek to avoid actual or perceived conflicts of interest in the voting of proxies for portfolio holdings between the interests of Fund
shareholders, on the one hand, and those of the Adviser or any affiliated person of the Fund or the Adviser, on the other hand. The Board of Directors may take into account a wide array of factors in determining whether such a conflict exists,
whether such conflict is material in nature, and how to properly address or resolve the same.
|
|
B.
|
While each conflict situation varies based on the particular facts presented and the requirements of governing law, the Board of Directors or its duly authorized
representative may take the following actions, among others, or otherwise give weight to the following factors, in addressing material conflicts of interest in voting (or directing Delegates to vote) proxies pertaining to portfolio holdings:
(i) vote pursuant to the recommendation of the proposing Delegate; (ii) abstain from voting; or (iii) rely on the recommendations of an established, independent third party with qualifications to vote proxies, such as Institutional
Shareholder Services.
|
|
C.
|
The Adviser shall notify the Board of Directors of the Fund promptly after becoming aware that any actual or potential conflict of interest exists and shall seek the
Board of Directors recommendations for protecting the best interests of the Funds shareholders. The Adviser shall not waive any conflict of interest or vote any conflicted proxies without the prior written approval of the Board of
Directors or its duly authorized representative.
|
|
A.
|
A copy of the current Proxy Voting Policies and Procedures and the voting records for the Fund, reconciling proxies with portfolio holdings and recording proxy voting
guideline compliance and justification, shall be kept in an easily accessible place and available for inspection either physically or through electronic posting on an approved website.
|
|
B.
|
In the event that a determination, authorization or waiver under these Policies and Procedures is requested at a time other than a regularly scheduled meeting of the
Board of Directors, the Chairman of the Audit Committee shall be the duly authorized representative of the Board of Directors with the authority and responsibility to interpret and apply these Policies and Procedures and shall provide a report of
his or her determinations at the next following meeting of the Board of Directors.
|
|
C.
|
The Adviser shall present a report of any material deviations from these Policies and Procedures at every regularly scheduled meeting of the Board of Directors and
shall provide such other reports as the Board of Directors may request from time to time. The Adviser shall provide to the Fund or any shareholder a record of its effectuation of proxy voting pursuant to these Policies and Procedures at such times
and in such format or medium as the Fund shall reasonably request. The Adviser shall be solely responsible for complying with its disclosure and reporting requirements under applicable laws and regulations, including, without limitation, Rule
206(4)-6 under the Advisers Act. The Adviser shall gather, collate and present information relating to its proxy voting activities and those of each Delegate in such format and medium as the Fund shall determine from time to time in order for the
Fund to discharge its disclosure and reporting obligations pursuant to Rule 30b1-4 under the Investment Company Act.
|
-14-
|
D.
|
The Adviser shall pay all costs associated with proxy voting for portfolio holdings pursuant to these Policies and Procedures and assisting the Fund in providing public
notice of the manner in which such proxies were voted, except that the Fund shall pay the costs associated with any filings required under the Investment Company Act.
|
|
E.
|
In performing its duties hereunder, any Delegate may engage the services of a research and/or voting adviser, the cost of which shall be borne by such Delegate.
|
|
F.
|
These Policies and Procedures shall be presented to the Board of Directors annually for their amendment and/or approval.
|
ITEM 8.
|
PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
|
In this Item, the term Fund refers to the registrant, Duff & Phelps Utility and Corporate Bond Trust Inc.
The Funds Portfolio Managers
A team of investment professionals employed by
Duff & Phelps Investment Management Co., the Funds investment adviser (the Adviser), is responsible for the day-to-day management of the Funds portfolio. The members of that investment team and their respective areas
of responsibility and expertise, as of March 4, 2014, are as follows:
Daniel J. Petrisko, CFA, has been Chief Investment Officer of the Fund
since February 2004 (Portfolio Manager from 2002 to 2004, Vice President since 2000). He has been a Senior Vice President of the Adviser since 1997 (Vice President from 1995 to 1997). Mr. Petrisko has investment authority with respect to the
Funds investment portfolio. He is also a member of the portfolio management team of DNP Select Income Fund Inc. (DNP), a closed-end utilities-oriented fund. He joined the Duff & Phelps organization in 1995 and has served
since then in positions of increasing responsibility.
T. Brooks Beittel, CFA, has served on the Funds portfolio management team since
February 2004 and has been Secretary of the Fund since May 2005. He has been Executive Vice President and Assistant Chief Investment Officer of the Adviser since 2008 (Senior Vice President from 1993 to 2008 and Vice President from 1987 to 1993),
Senior Vice President and Secretary of DNP since January 1995 (Treasurer from January 1995 to September 2002), Secretary of DTF Tax-Free Income Inc. since May 2005, and Senior Vice President and Secretary of Duff & Phelps Global Utility
Income Fund Inc. since March 2011. Mr. Beittel assists Mr. Petrisko in the management of the Funds investment portfolio. He is also a member of the portfolio management teams of DNP and Virtus Global Dividend Fund. He joined the
Duff & Phelps organization in 1987 and has served since then in positions of increasing responsibility.
Other Accounts Managed by
the Funds Portfolio Managers
The following table provides information as of December 31, 2013 regarding the other accounts
besides the Fund that are managed by the portfolio managers of the Fund. As noted in the table, portfolio managers of the Fund may also manage or be members of management teams for certain other accounts. As of December 31, 2013, the
Funds portfolio managers did not manage any accounts with respect to which the advisory fee is based on the performance of the account, nor do they manage any hedge funds.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered Investment
Companies (1)
|
|
|
Other
Pooled
Investment
Vehicles (2)
|
|
|
Other Accounts (3)
|
|
Name of
Portfolio Manager
|
|
Number of
Accounts
|
|
|
Total Assets
(in
millions)
|
|
|
Number of
Accounts
|
|
|
Total Assets
(in
millions)
|
|
|
Number of
Accounts
|
|
|
Total Assets
(in
millions)
|
|
|
|
|
|
|
|
|
T. Brooks Beittel
|
|
|
1
|
|
|
$
|
3,438
|
|
|
|
0
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
Daniel J. Petrisko
|
|
|
1
|
|
|
$
|
3,438
|
|
|
|
0
|
|
|
|
|
|
|
|
9
|
|
|
$
|
1,848.0
|
|
-15-
(1)
|
Registered Investment Companies include all open and closed-end mutual funds. For Registered Investment Companies, assets represent net assets of all open-end
investment companies and gross assets of all closed-end investment companies.
|
(2)
|
Other Pooled Investment Vehicles include, but are not limited to, securities of issuers exempt from registration under Section 3(c) of the Investment Company Act
of 1940 (the 1940 Act), such as private placements and hedge funds.
|
(3)
|
Other Accounts include, but are not limited to, individual managed accounts, separate accounts, institutional accounts, pension funds and collateralized bond
obligations.
|
There may be certain inherent conflicts of interest that arise in connection with the portfolio managers
management of the Funds 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 Adviser may have in place that could benefit the Fund and/or such other accounts. The 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. There have been no material compliance issues with respect to any of these policies and procedures during the Funds most recent
fiscal year.
Compensation of the Funds Portfolio Managers
The following is a description of the compensation structure of the Funds portfolio managers.
The Adviser is a wholly-owned indirect subsidiary of Virtus Investment Partners, Inc. (Virtus). Virtus and its affiliated investment management firms, including the Adviser, believe that their
compensation programs are adequate and competitive to attract and retain high-caliber investment professionals. The portfolio managers receive a base salary, an incentive bonus opportunity, and a benefits package, as detailed below.
Highly-compensated individuals participate in a long-term incentive compensation program, including potential awards of Virtus restricted stock units (RSUs) with multi-year vesting, subject to Virtus board approval, and may also take
advantage of opportunities to defer their compensation and potentially defer their current tax liability.
Base Salary
: Each portfolio
manager is paid a fixed base salary, which is determined by Virtus and the Adviser and is designed to be competitive in light of the individuals experience and responsibilities. Virtus management utilizes results of investment industry
compensation surveys conducted by an independent third party in evaluating competitive market compensation for its investment management professionals.
Incentive Bonus
: Incentive bonus pools are based on firm profits. The short-term incentive payment is generally paid in cash, but a portion may be paid in Virtus RSUs. Individual payments are
assessed using comparisons of actual investment performance with specific peer group or index measures established at the beginning of each calendar year. Performance of the Fund managed is measured over one-, three- and five-year periods.
Generally, an individual managers participation is based on the performance of each fund managed as weighted roughly by total assets in each of these funds. Incentive bonus compensation of the Funds portfolio managers is currently
comprised of two main components:
First, 70% of the incentive bonus is based on: (i) the pre-tax performance of the Fund, as measured by
earnings per share and total return over one-, three- and five-year periods against specified benchmarks and/or peer groups; (ii) the success of the individual manager in achieving assigned goals; and (iii) a subjective assessment of the
managers contribution to the efforts of the team. The total return component of the performance portion of portfolio managers incentive bonus compensation is compared to the Barclays U.S. Aggregate Bond Index. Portfolio managers who
manage more than one product may have other components in their formulaic calculation that are appropriate to the other products, weighted according to the proportion of the managers time that is allocated to each specific product.
-16-
Second, 30% of the target incentive is based on financial measures of Virtus. These financial measures
include adjusted earnings before interest, tax, depreciation and amortization; gross inflows, and product investment performance. A portion of the total incentive bonus can be paid in RSUs of Virtus that vest over three years.
The performance portion of portfolio mangers incentive bonus compensation is not based on the value of assets held in the Funds portfolio
(except to the extent that the level of assets in the Funds portfolio affects the advisory fee received by the Adviser and thus, indirectly, the profitability of Virtus).
Other Benefits
: Portfolio managers are eligible to participate in a 401(k) plan, health insurance, and other benefits offered generally to the firms employees that could include granting of
RSUs in Virtus stock.
Equity Ownership of Portfolio Managers
The following table sets forth the dollar range of equity securities in the Fund beneficially owned, as of December 31, 2013, by each of the portfolio managers identified above.
|
|
|
Name of Portfolio Manager
|
|
Dollar Range of
Equity
Securities in the Fund
|
T. Brooks Beittel
|
|
$10,001-$50,000
|
Daniel J. Petrisko
|
|
$10,001-$50,000
|
ITEM 9.
|
PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
|
During the period covered by this report, no purchases were made by or on behalf of the registrant or any affiliated purchaser
(as defined in Rule 10b-18(a)(3) under the Exchange Act) of shares or other units of any class of the registrants equity securities that is registered by the registrant pursuant to Section 12 of the Exchange Act.
ITEM 10.
|
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
|
No changes to the procedures by which shareholders may recommend nominees to the registrants board of directors have been implemented after the registrant last provided disclosure in response to the
requirements of Item 22(b)(15) of Schedule 14A (
i.e.,
in the registrants Proxy Statement dated April 3, 2013) or this Item.
ITEM 11.
|
CONTROLS AND PROCEDURES.
|
(a)
The registrants principal executive officer and principal financial officer have concluded that the registrants disclosure controls and procedures (as defined in Rule 30a-3(c) under the 1940 Act) are effective, based on an evaluation of
those controls and procedures made as of a date within 90 days of the filing date of this report as required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Exchange Act.
(b) There has been no change in the registrants internal control over financial reporting (as defined in Rule 30a-3(d) under the
1940 Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting.
-17-
|
|
|
|
|
(a) Exhibit 99.CERT
|
|
Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
(b) Exhibit 99.906CERT
|
|
Certifications pursuant to Section 906 of the Sarbanes-OxleyAct of 2002
|
-18-
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.
|
|
|
(Registrant)
|
|
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
|
|
|
|
By (Signature and Title)
|
|
/
S
/ N
ATHAN
I. P
ARTAIN
|
|
|
Nathan I. Partain
|
|
|
President and Chief Executive Officer
|
Date
|
|
March 4, 2014
|
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 (Signature and Title)
|
|
/
S
/ N
ATHAN
I. P
ARTAIN
|
|
|
Nathan I. Partain
|
|
|
President and Chief Executive Officer
|
Date
|
|
March 4, 2014
|
|
|
By (Signature and Title)
|
|
/
S
/ A
LAN
M. M
EDER
|
|
|
Alan M. Meder
|
|
|
Treasurer
|
|
|
(Principal Financial and Accounting Officer)
|
Date
|
|
March 4, 2014
|
-19-
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