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
Exact name of registrant as specified in charter: Duff & Phelps Utility &
Corporate Bond Trust Inc.
Address of principal executive offices: 55 East Monroe St
Suite 3600
Chicago, IL 60603
Name and address of agent for service: Alan Meder, Principal
Financial Officer
55 East Monroe St.
Suite 3600
Chicago, IL 60603
Registrant's telephone number, including area code: 312-541-5555
Date of fiscal year end: 12/31/04
Date of reporting period: 12/31/04
Item 1 - Reports to Stockholders
DEAR FELLOW SHAREHOLDERS:
YOUR FUND'S PERFORMANCE
During the second half of the year, the performance of leveraged bond
funds, including the Duff and Phelps Utility and Corporate Bond Trust ("DUC
Fund"), was generally positive. After the first six months of the year, when the
return on such funds was hurt by both the actual rise in interest rates and the
expectation of tighter monetary policy, the fixed income markets became more
comfortable with the idea of the Federal Reserve tightening monetary policy at a
measured pace. Therefore, leveraged bond funds, including the DUC Fund, posted
solid returns.
<Table>
<Caption>
DUC FUND
(PER SHARE
DOW JONES PERFORMANCE WITH DUC FUND LEHMAN
INDUSTRIAL INDEX S&P 500 INDEX DIVIDENDS REINVESTED (NAV-BASED AGGREGATE
(DIVIDENDS REINVESTED) (DIVIDENDS REINVESTED) IN FUND PLAN) PERFORMANCE) BOND INDEX
---------------------- ---------------------- -------------------- ------------ -----------
July - December 2004...... 4.47% 7.19% 20.70% 6.20% 4.18%
January - December 2004... 5.31% 10.88% 5.55% 5.15% 4.34%
</Table>
- ---------------
Performance returns for both the Dow Jones Industrial Index and the S&P 500
Index were obtained from Bloomberg LLP. Fund stock-based returns obtained from
Administrator of the Fund. Fund NAV-based returns obtained from Lipper Inc.
Lehman Aggregate Index performance returns obtained from Lehman Brothers.
Based on the 2004 year-end closing price of $14.69 and actual dividends of
$1.02 for the past year, the common stock had an annual dividend yield of 6.94%.
MARKET OVERVIEW
During the second half of 2004, investors were once again confronted with
countervailing forces that influenced the returns of the broad equity markets.
The U.S. economy grew at a solid, though not spectacular pace. The lagged
effects of unprecedented economic stimulus introduced over the last few years,
both monetary and fiscal, provided a tailwind to the U.S. economy and
potentially set the stage for a self-sustaining recovery. Corporate America,
which had taken a back seat to the consumer during the early days of the
economic recovery, began to strengthen, as evidenced by solid corporate
profitability and improved balance sheet fundamentals. However, in addition to
the situation in Iraq and the ongoing war against terrorism, investors had to
consider the potential negative affects of rising energy prices, expanding
deficits, a weaker U.S. dollar, the threat of inflation and the re-emergence of
M&A (mergers and acquisitions) activity. Fortunately, the momentum enjoyed by
the U.S. economy allowed equity investors to look beyond the negative
influences, resulting in the traditional equity markets posting positive
returns.
The Federal Reserve, recognizing at mid-year that an inordinate amount of
monetary stimulus was no longer required, began to tighten monetary policy for
the first time in more than three years. Just prior to the beginning of the
third quarter, many of the fixed income market's expectations were confirmed, as
the Federal Reserve raised the Federal Funds target by 25 basis points and
stated that further increases would come at a measured pace based on economic
prospects. That move was the first of five 25 basis point increases, bringing
the Federal Funds target to 2.25% at the end of the year. Returns for the second
half of 2004 were positive in the broad fixed income markets. Most of the gains
were derived in the third quarter, as the market rebounded from the second
quarter rise in interest rates. In addition, due to a re-shaping of the U.S.
Treasury yield curve, returns in the fixed income markets were highly dependent
on the term to maturity of a given investment. Expectations of the Federal
Reserve's reversal of an overly accommodative monetary policy, along with
increased faith in the Federal Reserve's ability to keep inflation under
control, allowed short-term and long-term
1
interest rates to move in opposite directions. Over the second half of the year,
the U.S. Treasury yield curve flattened, as yields increased by 39 basis points
on two-year maturities, while yields decreased by 36 basis points on ten-year
maturities and by 46 basis points on thirty-year maturities.
ECONOMIC OUTLOOK
Looking forward to the first half of 2005, barring an unforeseen escalation
of geopolitical tension or a further devaluation of the U.S. dollar, the U.S.
economy is expected to grow at a moderate pace with rising inflation
expectations. Generally sound fundamentals underpinning the U.S. economy should
allow the Federal Reserve to maintain a measured pace of tightening to a more
neutral monetary policy. At this stage of the recovery, the consumer is expected
to give way to business as the main driver behind the economic expansion. The
consumer, though still relatively healthy, should be slowed by rising interest
rates, increased debt burdens and higher energy prices. However, healthy balance
sheets and solid profitability should enable business investment, in the form of
expanding payrolls and capital expenditures, to continue. An environment of
sustained U.S. economic growth and increasing inflation expectations could lead
to upward pressure on interest rates. Under this scenario, we believe returns
will be restrained by the potential of rising interest rates, while the outlook
for corporate bonds will remain positive as it is supported by steady economic
growth and sound credit fundamentals.
DIVIDEND REINVESTMENT, CASH PURCHASE PLAN AND DIRECT DEPOSIT
To 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 Fund. Under the Plan,
the 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 Fund. Also, the cash purchase option
permits participants to purchase shares in the open-market through the Plan
Agent. Additional information about the Plan is available from The Bank of New
York, 1-800-524-4458, or for more details, please turn to page 17.
For those shareholders receiving dividend checks, 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. Additional
information about direct deposit is available from The Bank of New York,
1-800-432-8224.
We appreciate your investment in Duff & Phelps Utility and Corporate Bond
Trust Inc. and look forward to continuing our service to you.
Sincerely,
/s/ Francis E. Jeffries /s/ Nathan I. Partain
Francis E. Jeffries, CFA Nathan I. Partain
Chairman President and Chief Executive Officer
2
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
RATINGS*
------------------
PRINCIPAL STANDARD MARKET
AMOUNT & VALUE
(000) DESCRIPTION MOODY'S POOR'S (NOTE 1)
- --------- ------------------------------------------------------ ------- -------- -------------
LONG-TERM INVESTMENTS--134.0%
U.S. GOVERNMENT AND AGENCY OBLIGATIONS(A)--14.3%
Federal National Mortgage Association,
$ 853 8.00%, 10/01/30..................................... Aaa AAA $ 925,192
2,196 7.00%, 12/01/31..................................... Aaa AAA 2,328,594
Government National Mortgage Association
Pass-Through Certificates,
75 7.00%, 3/15/26...................................... Aaa AAA 80,339
332 7.50%, 5/15/26...................................... Aaa AAA 358,144
228 8.00%, 11/15/30..................................... Aaa AAA 247,892
141 8.00%, 2/15/31...................................... Aaa AAA 153,348
U.S. Treasury Bonds,
40,000 10.375%, 11/15/12................................... Aaa AAA 47,703,160
-------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(cost $50,963,978).................................... 51,796,669
-------------
CORPORATE BONDS--115.1%
AUTO & TRUCK--6.8%
10,000 DaimlerChrysler NA Holdings,
7.20%, 9/01/09...................................... A3 BBB 11,141,260
7,250 Ford Motor Company,
9.215%, 9/15/21..................................... Baa1 BBB- 8,371,959
5,000 General Motors Corporation,
8.10%, 6/15/24...................................... Baa2 BBB- 5,241,055
-------------
24,754,274
-------------
BROADCASTING & PUBLISHING--2.0%
6,550 Continental Cablevision, Inc.,
9.50%, 8/01/13...................................... Baa3 BBB 7,092,229
-------------
FINANCIAL--29.9%
7,000 Countrywide Capital I,
8.00%, 12/15/26..................................... Baa1 BBB+ 7,374,192
John Deere Capital Corp.,
5,000 3.125%, 12/15/05.................................... A3 A- 4,993,590
5,000 5.125%, 10/19/06.................................... A3 A- 5,151,260
13,000 Ford Motor Credit Company,
7.60%, 8/01/05...................................... A3 BBB- 13,305,253
</Table>
The accompanying notes are an integral part of the financial statements.
3
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
RATINGS*
------------------
PRINCIPAL STANDARD MARKET
AMOUNT & VALUE
(000) DESCRIPTION MOODY'S POOR'S (NOTE 1)
- --------- ------------------------------------------------------ ------- -------- -------------
FINANCIAL (CONTINUED)
$ 5,000 General Motors Acceptance Corporation,
7.75%, 1/19/10...................................... Baa1 BBB- $ 5,372,180
10,000 Great Western Financial Trust II,
8.206%, 2/01/27..................................... Baa1 BBB 10,928,130
16,000 Household Finance Corp.,
8.00%, 7/15/10...................................... A1 A 18,852,464
10,000 KeyCorp Institution Capital B,
8.25%, 12/15/26..................................... A3 BBB 11,031,990
Merrill Lynch & Co.,
5,000 6.50%, 7/15/18...................................... Aa3 A+ 5,496,425
5,000 6.875%, 11/15/18.................................... Aa3 A+ 5,783,850
10,000 NationsBank Capital Trust IV,
8.25%, 4/15/27...................................... Aa3 A- 11,156,090
7,500 Verizon Global Funding Corp.,
7.375%, 9/01/12..................................... A2 A+ 8,839,140
-------------
108,284,564
-------------
INDUSTRIAL--27.7%
5,000 Archer-Daniels-Midland Company,
8.125%, 6/01/12..................................... A2 A+ 6,173,870
3,450 Fort James Corporation,
9.25%, 11/15/21..................................... Ba2 BB+ 4,355,625
5,000 International Paper Co.,
3.80%, 4/01/08...................................... Baa2 BBB 4,983,210
Occidental Petroleum Corporation,
5,000 7.65%, 2/15/06...................................... Baa1 BBB+ 5,235,655
5,000 9.25%, 8/01/19...................................... Baa1 BBB+ 6,898,380
5,000 Sun Company, Inc.,
9.00%, 11/01/24..................................... Baa2 BBB 6,518,725
Tele-Communications, Inc.,
5,275 10.125%, 4/15/22.................................... Baa3 BBB 7,590,857
3,200 9.875%, 6/15/22..................................... Baa3 WR 4,553,722
5,000 Time Warner Entertainment Company, L.P.,
8.875%, 10/01/12.................................... Baa1 BBB+ 6,273,315
5,000 Time Warner Inc.,
9.15%, 2/01/23...................................... Baa1 BBB+ 6,716,650
10,000 Trans-Canada Pipelines Limited,
9.875%, 1/01/21..................................... A2 A- 14,276,980
</Table>
The accompanying notes are an integral part of the financial statements.
4
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
RATINGS*
------------------
PRINCIPAL STANDARD MARKET
AMOUNT & VALUE
(000) DESCRIPTION MOODY'S POOR'S (NOTE 1)
- --------- ------------------------------------------------------ ------- -------- -------------
INDUSTRIAL (CONTINUED)
$10,000 USX Corporation,
9.125%, 1/15/13..................................... Baa1 BBB+ $ 12,708,400
12,500 Weyerhaeuser Co.,
6.75%, 3/15/12...................................... Baa2 BBB 14,105,762
-------------
100,391,151
-------------
RETAIL--1.5%
5,000 Wal-Mart Stores, Inc.,
6.875%, 8/10/09..................................... Aa2 AA 5,620,045
-------------
TELEPHONE--15.6%
10,000 Bell Canada Inc.,
9.50%, 10/15/10..................................... A3 A 12,492,420
10,000 British Telecom PLC,
7.875%, 12/15/05.................................... Baa1 A- 10,432,270
12,000 Deutsche Telekom International Finance,
8.50%, 6/15/10...................................... Baa1 BBB+ 14,312,436
5,000 New York Telephone Co.,
8.625%, 11/15/10.................................... Baa2 A+ 5,971,050
10,125 Sprint Corp.,
9.25%, 4/15/22...................................... Baa3 BBB- 13,280,740
-------------
56,488,916
-------------
UTILITIES--ELECTRIC--31.6%
1,500 Alabama Power Co.,
7.125%, 10/01/07.................................... A2 A 1,633,306
10,000 CalEnergy Company, Inc.,
8.48%, 9/15/28...................................... Baa3 BBB- 13,192,290
17,438 ComEd Financing II,
8.50%, 1/15/27...................................... Baa2 BBB 19,104,951
10,000 Dominion Resources, Inc.,
8.125%, 6/15/10..................................... Baa1 BBB+ 11,783,550
5,000 DTE Energy Co.,
6.45%, 6/01/06...................................... Baa2 BBB- 5,206,750
10,000 Duke Energy Corporation,
7.375%, 3/01/10..................................... Baa1 BBB 11,377,880
10,000 Hydro-Quebec,
7.50%, 4/01/16...................................... A1 A+ 12,360,650
5,000 KeySpan Corporation,
6.15%, 6/01/06...................................... A3 A 5,207,005
</Table>
The accompanying notes are an integral part of the financial statements.
5
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
RATINGS*
------------------
PRINCIPAL STANDARD MARKET
AMOUNT & VALUE
(000) DESCRIPTION MOODY'S POOR'S (NOTE 1)
- --------- ------------------------------------------------------ ------- -------- -------------
UTILITIES--ELECTRIC (CONTINUED)
$ 5,000 KeySpan Gas East Corporation,
7.875%, 2/01/10..................................... A2 A+ $ 5,876,280
10,000 Progress Energy, Inc.,
7.10%, 3/01/11...................................... Baa2 BBB- 11,256,620
5,000 PSE&G Power LLC,
7.75%, 4/15/11...................................... Baa1 BBB 5,837,385
6,000 South Carolina Electric & Gas Co.,
6.125%, 3/01/09..................................... A1 A- 6,493,344
5,000 Wisconsin Energy Corp.,
6.50%, 4/01/11...................................... A3 BBB+ 5,529,125
-------------
114,859,136
-------------
TOTAL CORPORATE BONDS (cost $391,200,887)................................. 417,490,315
-------------
ASSET-BACKED SECURITIES--4.6%
5,000 California Infrastructure SCE 1997-1 A7
6.420%, 12/26/09.................................... Aaa AAA 5,324,743
5,000 Detroit Edison Securitization Funding LLC 2001-1 A6
6.620%, 3/01/16..................................... Aaa AAA 5,716,875
5,000 PSE&G Transition Funding 2001-1 A5
6.450%, 3/15/13..................................... Aaa AAA 5,562,193
-------------
TOTAL ASSET-BACKED (cost $17,012,500)..................................... 16,603,811
-------------
TOTAL LONG-TERM INVESTMENTS (cost $459,177,365)........................... 485,890,795
-------------
</Table>
The accompanying notes are an integral part of the financial statements.
6
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
RATINGS*
------------------
PRINCIPAL STANDARD MARKET
AMOUNT & VALUE
(000) DESCRIPTION MOODY'S POOR'S (NOTE 1)
- --------- ------------------------------------------------------ ------- -------- -------------
SHORT-TERM INVESTMENTS(A)--1.3%
U.S. Treasury Bills,(a)
$ 2,300 1.945%, 1/27/05..................................... Aaa AAA $ 2,296,769
2,300 2.050%, 2/24/05..................................... Aaa AAA 2,292,928
-------------
TOTAL SHORT-TERM INVESTMENTS (cost $4,589,697)............................ 4,589,697
-------------
TOTAL INVESTMENTS--135.3%
(cost $463,767,062)....................................................... 490,480,492
LIABILITIES, LESS CASH AND OTHER ASSETS--(35.3%).......................... (127,880,076)
-------------
NET ASSETS--100%.......................................................... $ 362,600,416
=============
</Table>
- ------------------------------------
* Ratings of issues shown have not been audited by Ernst &Young LLP.
(a) AAA ratings on U.S. government and agency obligations are assumed because
they are not rated.
SECTOR ALLOCATION AS A PERCENTAGE OF MARKET VALUE
AS OF 12/31/04 (UNAUDITED)
[FUND PIE CHART]
<Table>
Corporates 85.1%
U.S. Gov't/Agency 10.6%
Asset-Backed 3.4%
Short-Term 0.9%
100.00%
</Table>
The accompanying notes are an integral part of the financial statements.
7
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
<Table>
ASSETS
Investments, at value (cost $463,767,062)................... $490,480,492
Cash........................................................ 5,940,411
Interest receivable......................................... 8,619,229
Receivable for common stock reinvestments................... 219,534
Prepaid expenses and other assets (Note 8).................. 618,070
------------
Total assets........................................... 505,877,736
------------
LIABILITIES
Commercial paper (Note 5)................................... 142,298,616
Deferred compensation payable (Note 8)...................... 558,224
Investment advisory fee payable (Note 2).................... 213,720
Administrative fee payable (Note 2)......................... 46,031
Accrued expenses............................................ 160,729
------------
Total liabilities...................................... 143,277,320
------------
NET ASSETS.................................................. $362,600,416
============
CAPITAL
Common stock, $.01 par value, 600,000,000 shares authorized,
26,834,444 shares issued and outstanding (Note 7)......... $ 268,344
Additional paid-in capital.................................. 366,489,424
Distributions in excess of net investment income............ (9,626,550)
Accumulated net realized loss on investment transactions.... (21,244,232)
Net unrealized appreciation on investments.................. 26,713,430
------------
NET ASSETS.................................................. $362,600,416
============
Net asset value per share of common stock:
($362,600,416 / 26,834,444 shares of common stock issued
and outstanding).......................................... $ 13.51
============
</Table>
The accompanying notes are an integral part of the financial statements.
8
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
<Table>
INVESTMENT INCOME
Interest income........................................... $29,556,152
-----------
EXPENSES
Investment advisory fees (Note 2)......................... 2,532,808
Administrative fees (Note 2).............................. 545,999
Directors' fees and expenses.............................. 378,768
Commercial paper fees..................................... 221,687
Commitment fees (Note 5).................................. 152,500
Commissions expense -- commercial paper................... 145,386
Transfer agent fees and expenses.......................... 143,420
Professional fees......................................... 128,214
Custodian fees and expenses............................... 49,543
Reports to shareholders................................... 36,455
Registration fees......................................... 23,750
Other..................................................... 31,329
-----------
Total operating expenses.................................. 4,389,859
Interest expense -- commercial paper (Note 5)............. 2,100,027
-----------
Total expenses......................................... 6,489,886
-----------
Net investment income.................................. 23,066,266
-----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investment transactions.............. (760,530)
Net change in unrealized appreciation/depreciation on
investments............................................ (4,087,463)
-----------
Net realized and unrealized loss on investments........ (4,847,993)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $18,218,273
===========
</Table>
The accompanying notes are an integral part of the financial statements.
9
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2004
<Table>
INCREASE (DECREASE) IN CASH
Cash flows provided from (used for) operating activities:
Interest received...................................... $ 33,882,202
Expenses paid.......................................... (4,427,070)
Interest expense paid.................................. (1,847,357)
Purchase of long-term portfolio investments............ (85,050,853)
Proceeds from sale of long-term portfolio
investments.......................................... 82,093,193
Net purchases in excess of proceeds from sales of
short-term portfolio investments..................... (4,502,036)
------------
Net cash provided from operating activities............ 20,148,079
------------
Cash flows provided from (used for) financing activities:
Net cash used for commercial paper..................... (576,582)
Cash dividends paid to shareholders(a)................. (25,227,652)
------------
Net cash used for financing activities................. (25,804,234)
------------
Net decrease in cash........................................ (5,656,155)
Cash at beginning of year........................... 11,596,566
------------
Cash at end of year................................. $ 5,940,411
============
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH PROVIDED FROM OPERATING ACTIVITIES
Net increase in net assets resulting from operations........ $ 18,218,273
------------
Increase in investments................................ (3,411,539)
Net realized loss on investments transactions.......... 760,530
Net change in unrealized appreciation/depreciation on
investments.......................................... 4,087,463
Decrease in interest receivable........................ 277,893
Increase in prepaid expenses........................... (3,386)
Increase in interest payable........................... 252,670
Decrease in accrued expenses and other liabilities..... (33,825)
------------
Total adjustments................................... 1,929,806
------------
Net cash provided from operating activities................. $ 20,148,079
============
</Table>
- ------------------------------------
(a) Non cash financing activities not included herein consist of reinvestment of
dividends of $2,042,369.
The accompanying notes are an integral part of the financial statements.
10
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE YEAR ENDED
-------------------------------------
DECEMBER 31, 2004 DECEMBER 31, 2003
------------ ------------
OPERATIONS
Net investment income........................... $ 23,066,266 $ 24,599,544
Net realized loss on investment transactions.... (760,530) (14,179,877)
Net change in unrealized
appreciation/depreciation on investments..... (4,087,463) 38,350,899
------------ ------------
Net increase in net assets resulting from
operations................................... 18,218,273 48,770,566
------------ ------------
DIVIDENDS TO SHAREHOLDERS
From net investment income...................... (27,284,046) (27,109,463)
============ ============
CAPITAL STOCK TRANSACTIONS
Reinvestment of dividends resulting in the
issuance of 146,840 shares and 205,846 shares
of Common Stock, respectively................ 2,042,369 2,831,771
------------ ------------
Total increase (decrease) in net assets......... (7,023,404) 24,492,874
NET ASSETS
Beginning of year............................... 369,623,820 345,130,946
------------ ------------
End of year(a).................................. $362,600,416 $369,623,820
============ ============
(a) includes distributions in excess of net
investment income............................ $ (9,626,550) $ (8,379,366)
============ ============
</Table>
The accompanying notes are an integral part of the financial statements.
11
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------
2004 2003 2002 2001(2) 2000
-------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period................ $ 13.85 $ 13.03 $ 13.23 $ 12.64 12.54
-------- -------- -------- -------- --------
Net investment income(1).......................... 0.86 0.93 0.99 0.96 0.98
Net realized and unrealized gain (loss) on
investments transactions........................ (0.18) 0.91 (0.17) 0.65 0.17
-------- -------- -------- -------- --------
Net increase (decrease) from investment
operations...................................... 0.68 1.84 0.82 1.61 1.15
-------- -------- -------- -------- --------
Dividends from net investment income................ (1.02) (1.02) (1.02) (1.02) (1.05)
-------- -------- -------- -------- --------
Net asset value, end of period(3)................... $ 13.51 $ 13.85 $ 13.03 $ 13.23 $ 12.64
======== ======== ======== ======== ========
Per share market value, end of period(3)............ $ 14.69 $ 14.99 $ 13.16 $ 13.21 $ 12.75
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN(4).......................... 5.55% 22.64% 7.91% 11.90% 20.41%
RATIOS TO AVERAGE NET ASSETS(5)
Operating expenses.................................. 1.78% 1.79% 2.16% 3.07% 4.02%
Operating expenses (excluding all commercial paper
expenses)......................................... 1.06% 1.08% 1.04% 1.02% 1.04%
Net investment income............................... 6.34% 6.81% 7.84% 7.35% 7.98%
SUPPLEMENTAL DATA
Portfolio turnover.................................. 17% 10% 27% 10% 15%
Net assets, end of period (000)..................... $362,600 $369,624 $345,131 $347,114 $329,178
COMMERCIAL PAPER INFORMATION
Aggregate amount outstanding at end of period
(000)............................................. $143,000 $143,000 $140,500 $143,000 $143,000
Average daily amortized cost of commercial paper
outstanding (000)................................. $142,557 $142,115 $141,657 $141,686 $141,152
Asset coverage per $1,000 at end of period.......... $ 3,537 $ 3,585 $ 3,455 $ 3,440 $ 3,294
</Table>
- ------------------------------------
(1) Based on average shares outstanding.
(2) As required, effective January 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on debt securities. The effect of this change for the
period ended December 31, 2001 was to decrease net investment income per
share by $0.08, increase net realized and unrealized gains and losses per
share by $0.08, and decrease the ratio of net investment income to average
net assets from 7.99% to 7.35%. Per share, ratios and supplemental data for
periods prior to January 1, 2001 have not been restated to reflect this
change in presentation.
(3) Net asset value and market value are published in The Wall Street Journal
each Monday.
(4) Total investment return is calculated assuming a purchase of common stock on
the opening of the first day and a sale on the closing of the last day of
each year reported. Dividends and distributions are assumed, for purposes of
this calculation, to be reinvested at prices obtained under the Fund's
dividend reinvestment plan. Brokerage commissions are not reflected.
(5) As a percentage of average weekly net assets which includes any liabilities
or senior securities constituting indebtedness in connection with financial
leverage.
The accompanying notes are an integral part of the financial statements.
12
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004
Duff & Phelps Utility and Corporate Bond Trust Inc. (the "Fund") was
organized in Maryland on November 23, 1992 as a diversified, closed-end
management investment company with operations commencing on January 29, 1993.
The Fund's investment objective is to seek high current income consistent
with investing in securities of investment-grade quality. The Fund seeks to
achieve its investment objective by investing substantially all of its assets in
a diversified portfolio of Utility Income Securities, Corporate Income
Securities, Mortgage-Backed Securities and Asset-Backed Securities. The ability
of the issuers of the securities held by the Fund to meet their obligations may
be affected by economic developments in a specific state, industry or region.
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
SECURITY VALUATION: The Fund values its fixed-income securities by using
market quotations, prices provided by market makers or estimates of market
values obtained from yield data relating to instruments with similar
characteristics in accordance with procedures established by the Board of
Directors of the Fund (the "Board"). Any securities or other assets for which
such current market quotations are not readily available are valued at fair
value as determined in good faith under procedures established by and under the
general supervision and responsibility of the Fund's Board.
Debt securities that mature in 60 days or less are valued at amortized cost
unless this method does not represent fair value.
SECURITIES 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. Interest income, including amortization
of premium and discounts, is recorded on the accrual basis.
FEDERAL INCOME TAXES: It is the Fund's intention to meet the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute sufficient net income and capital gains, if any, to shareholders to
qualify as a regulated investment company. For this reason, no Federal income
tax provision is required.
DIVIDENDS AND DISTRIBUTIONS: The Fund declares and pays dividends to
shareholders on a monthly basis. The dividends are recorded by the Fund on the
ex-dividend date.
REPURCHASE AGREEMENTS: Repurchase agreements are fully collateralized by
U.S. Treasury or Government Agency securities. All collateral is held through
the Fund's custodian and is monitored daily so that its market value exceeds the
carrying value of the repurchase agreement.
RECLASSIFICATION OF CAPITAL ACCOUNTS: U.S. generally accepted accounting
principles require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting. Accordingly, during
the current year, $2,970,596 has been reclassified between accumulated net
realized loss on investment transactions and distributions in excess of net
investment income as a result of permanent
13
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
differences attributable to amortization methods on fixed income securities and
accounting for paydowns. These reclassifications have no effect on net assets or
net asset values per share.
USE OF ESTIMATES: The preparation of financial statements, in conformity
with accounting principles generally accepted in the United States, requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts for income and
expenses during the reporting period. Actual results could differ from those
estimates.
NOTE 2. AGREEMENTS
The Fund has an Advisory Agreement with the Duff & Phelps Investment
Management Co. (the "Adviser"), a subsidiary of Phoenix Investment Partners,
Ltd. and an Administration Agreement with Princeton Administrators, L.P. (the
"Administrator").
The investment advisory fee paid to the Adviser is computed weekly and
payable monthly at an annual rate of .50% of the Fund's 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).
The administrative fee paid to the Administrator is also computed weekly
and payable monthly at an annual rate of .15% of the Fund's average weekly net
assets, (which includes any liabilities or senior securities constituting
indebtedness in connection with financial leverage) subject to a monthly minimum
of $12,500.
Pursuant to the agreements, the Adviser provides continuous supervision of
the investment portfolio and pays the compensation of directors and officers of
the Fund who are fulltime employees of the Adviser. The Administrator pays
certain occupancy, clerical and accounting costs of the Fund. The Fund bears all
other costs and expenses.
NOTE 3. PORTFOLIO SECURITIES
For the year ended December 31, 2004, the Fund had purchases of $85,050,853
and sales of $79,713,788 of investment securities, other than U.S. Government
securities and short-term investments.
The cost of investments of the Fund for federal income tax purposes was
$477,544,741. The net unrealized appreciation aggregated $12,935,751, of which
$20,284,899 related to appreciated securities and $7,349,148 related to
depreciated securities.
NOTE 4. SECURITY LENDING
The Fund may lend its portfolio securities to qualified institutions. The
loans are secured by collateral at least equal, at all times, to the market
value of the securities loaned. The Fund may bear the risk of delay in recovery
of, or even loss of rights in, the securities loaned should the borrower of the
securities fail financially. The Fund receives compensation for lending its
securities in the form of fee income. The Fund also continues to receive
interest on the securities loaned, and any gain or loss in the market price of
the securities loaned that
14
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
may occur during the term of the loan will be for the account of the Fund.
During the year ended December 31, 2004, there were no securities loaned.
NOTE 5. COMMERCIAL PAPER
As of December 31, 2004, $143,000,000 of commercial paper was outstanding
with an amortized cost of $142,298,616. The average discount rate of commercial
paper outstanding at December 31, 2004 was 2.34%. The average daily balance of
commercial paper outstanding for the year ended December 31, 2004 was
$142,556,971 at a weighted average discount rate of 1.65%. The maximum amount of
commercial paper outstanding at any time during the year was $143,000,000. In
conjunction with the issuance of the commercial paper, the Fund entered into a
line of credit arrangement with a bank for $75,000,000. Interest on borrowings
is based on market rates in effect at the time of borrowing. The commitment fee
is computed at the rate of 0.20% per annum on the unused balance. During the
year ended December 31, 2004 there were no borrowings under this agreement.
NOTE 6. DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions paid during the fiscal years ended
December 31, 2004 and December 31, 2003 was as follows:
<Table>
<Caption>
12/31/2004 12/31/2003
----------- -----------
Distributions paid from:
Ordinary income........................................... $27,284,046 $27,109,463
----------- -----------
Total taxable distributions................................. $27,284,046 $27,109,463
----------- -----------
</Table>
As of December 31, 2004, the components of accumulated earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income -- net........................ $ 4,732,173
Undistributed long-term capital gains -- net................ $ 0
------------
Total undistributed earnings................................ $ 4,732,173
Capital loss carryforward................................... (21,244,232)*
Unrealized gains / (losses) -- net.......................... 12,354,707**
------------
Total accumulated earnings / (losses)....................... $ (4,157,352)
============
</Table>
- ---------------
* On December 31, 2004, the Fund had a net capital loss carryforward of
$21,244,232 of which 17,513,106 expires in 2011 and 3,731,126 expires in
2012. This amount will be available to offset like amounts of any future
taxable gains.
** The difference between book-basis and tax-basis unrealized gains / (losses)
is attributable primarily to the difference between book and tax amortization
methods for premiums and discounts on fixed income securities, the tax
treatment of deferred expenses and other temporary differences.
NOTE 7. CAPITAL
Of the 26,834,444 shares of common stock outstanding at December 31, 2004,
Phoenix Investment Partners Ltd. owned 21,310 shares.
15
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. DEFERRED COMPENSATION PLAN
The Fund has adopted a deferred compensation plan (the "Compensation
Plan"). Under the Compensation Plan, a director who is not an "interested
person" of DUC and has elected to participate in the Compensation Plan (a
"participating director") may defer receipt of all or a portion of his
compensation from the Fund. The deferred compensation payable to the
participating director is credited to the director's deferral account in lieu of
having such compensation paid to the director. The Fund purchases shares of
common stock of the Fund in the open market. Thus, the value of the account
increases with contributions to the account or with increases in the value of
the measuring shares, and the value of the account decreases with withdrawals
from the account or with declines in the value of the measuring shares. If a
participating director retires, the director may elect to receive payments under
the plan in a lump sum or in equal installments over a period of up to ten
years. If a participating director dies, any amount payable under the plan will
be paid to the director's beneficiaries. Deferred compensation investments of
$558,224 are included in "Prepaid expenses and other assets" on the Statement of
Assets and Liabilities at December 31, 2004. The Fund's obligation to make
payment under the Compensation Plan is a general obligation of the Fund.
NOTE 9. INDEMNIFICATIONS
In the ordinary course of business, the Fund enters into contracts that
contain a variety of indemnifications. The Fund's maximum exposure under these
arrangements is unknown. The Fund does not anticipate recognizing any loss
related to these arrangements.
NOTE 10. SUBSEQUENT DIVIDENDS
Subsequent to December 31, 2004, the Board of Directors of the Fund
declared a dividend of $.085 per share payable on January 31, 2005 to
shareholders of record on January 18, 2005.
16
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
of Duff & Phelps Utility & Corporate Bond Trust Inc.:
We have audited the accompanying statement of assets and liabilities of
Duff & Phelps Utility and Corporate Bond Trust Inc., including the schedule of
investments, as of December 31, 2004, the related statements of operations and
cash flows for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended and financial highlights for each
of the years indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's 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.
An audit includes 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 Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also 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, 2004, 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, 2004, 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 years indicated, in conformity with
U.S. generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
February 10, 2005
17
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Common shareholders are automatically enrolled in the Fund's Dividend
Reinvestment and Cash Purchase Plan (the "Plan"). Under the Plan, all
distributions to common shareholders of dividends and capital gains will
automatically be reinvested by The Bank of New York (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 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 Fund's 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.
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Fund. However, each participant will pay a pro
rata share of brokerage commissions (or equivalent purchase costs) incurred with
respect to the Plan Agent's open market purchases in connection with the
reinvestment of dividends and distributions and with voluntary additional share
investments. There are no other charges to participants for reinvesting
dividends or capital gains distributions, except for certain brokerage
commissions (or equivalent purchase costs) as described above.
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 made pursuant to the Plan will be made commencing
at the time of the first dividend or distribution payment following the second
business day after receipt of the funds for additional purchases, and may be
aggregated with purchases of shares for reinvestment of the dividends and
distributions. Shares will be allocated to the accounts of participants
purchasing additional shares at the average price per share, plus a service
charge imposed by the Plan Agent and brokerage commissions (or equivalent
purchase costs) paid by the Plan Agent for all shares purchased by it, including
for reinvestment of dividends and distributions. Checks drawn on a foreign bank
are subject to collection and collection fees, and will be invested at the time
of the next distribution after funds are collected by the Plan Agent.
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 dividend or
distribution, except where postponement is deemed necessary to comply with
applicable provisions of the federal securities laws.
18
Funds sent to the Plan Agent for voluntary additional share investment may
be recalled by the participant by 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 participant,
unless the participant specifically directs that they continue to be held by the
Plan Agent for subsequent investment.
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent. When a participant withdraws from the Plan or upon termination
of the Plan as provided below, certificates for whole shares credited to his or
her account under the Plan will be issued and a cash payment will be made for
any fraction of a share credited to such account. 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 dividends and distributions in cash.
Elections will only be effective for dividends and distributions declared after,
and with a record date of at least ten days after, such elections are received
by the Plan Agent. 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. The Plan Agent imposes charges on participants for selling
participants shares on termination of participation (currently a base fee of
$5.00 plus $.10 per share). The Fund reserves the right to amend the Plan to
institute a service charge to participants.
The Plan Agent maintains each shareholder's account in the Plan and
furnishes monthly written confirmations of all transactions in the accounts,
including information needed by shareholders for personal and tax records.
Shares in the account of each Plan participant will be held by the Plan Agent in
non-certificated form in the name of the participant, and each shareholder's
proxy will include those shares purchased pursuant to the Plan.
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.
In the case of shareholders, such as banks, brokers or nominees, that hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
record shareholder as representing the total amount registered in the record
shareholder's name and held for the account of beneficial owners who are
participants in the Plan.
The automatic reinvestment of dividends and distributions will not relieve
participants of any federal income tax that may be payable or required to be
withheld on such dividends or distributions.
The Fund reserves the right to amend or terminate the Plan as applied to
any dividend or distribution paid subsequent to written notice of the change
sent to all participants in the Plan at least 90 days before the record date for
the dividend or distribution. The Plan may also be amended or terminated by the
Plan Agent by at least 90 days' written notice to all participants in the Plan.
All questions concerning the Plan should be directed to the Plan Agent by
calling 1-800-524-4458.
19
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
Of the Trust's distributions paid to shareholders from ordinary income
during the calendar year ended December 31, 2004, 12.57% was attributable to
Federal obligations. In calculating the foregoing percentage, expenses of the
Trust have been allocated on a pro-rata basis.
The law varies in each state as to whether and what percentage of dividend
income attributable to Federal obligations is exempt from state income tax. We
recommend that you consult your tax advisor to determine if any portion of the
dividends you received is exempt from state income tax.
ADDITIONAL INFORMATION (UNAUDITED)
There have been no changes in the Fund's charter or By-Laws that would
delay or prevent a change in control of the Fund which have not been approved by
the shareholders. There have been no changes in the principal risk factors
associated with investment in the Fund. There have been no changes in the
persons who are primarily responsible for the day-to-day management of the
Fund's portfolio.
The Board of Directors has adopted a stock compensation program utilizing
shares of the Fund. Notice is hereby given in accordance with Section 23(c) of
the Investment Company Act of 1940 that the Fund may from time to time purchase
its shares of common stock in the open market.
The Fund does not periodically update its registration statement in
reliance upon prevailing exemptive orders and applicable rules. Additional
information, if any, relating to the Fund's directors and officers, in addition
to such information as found elsewhere in this Annual Report, may be requested
by contacting the Fund at the address provided in this Report.
PROXY VOTING POLICY AND PROCEDURES (UNAUDITED)
The Fund does not typically hold voting securities and the Fund's Board of
Directors has adopted proxy voting procedures whereby the Fund's Investment
Adviser would review any proxy solicitation materials on a case-by-case basis
and would vote any such securities in accordance with the Investment Adviser's
good faith belief as to the best interests of the Fund and its shareholders. 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 Adviser collect at 312-541-5555 and on the
Commission's website at http://www.sec.gov.
AVAILABILITY OF QUARTERLY SCHEDULE OF INVESTMENTS (UNAUDITED)
The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third quarters of
each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the SEC's
Web site at http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and
copied at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
ANNUAL CERTIFICATIONS (UNAUDITED)
In June 2004, the Fund submitted a CEO annual certification to the New York
Stock Exchange ("NYSE") in which the Fund's principal executive officer
certified that he was not aware, as of the date of the certification, of any
violation by the Fund of the NYSE's Corporate Governance listing standards. In
addition, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and
related Securities and Exchange Commission ("SEC") rules, the Fund's principal
executive and principal financial officers have made quarterly certifications,
included in filings with the SEC on Forms N-CSR and N-Q, relating to, among
other things, the Fund's disclosure controls and procedures and internal control
over financial reporting.
20
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
BOARD OF DIRECTORS AND FUND MANAGEMENT
Information pertaining to the Directors of the Fund is set forth below.
Directors who are not deemed to be "interested persons" of the Fund, as defined
in the Investment Company Act of 1940, as amended, are referred to as
"Independent Directors. Directors who are deemed to be "interested persons" of
the Fund are referred to as "Interested Directors." "Fund Complex" consists of
the Fund and any other investment companies managed by affiliates of Phoenix
Investment Partners, Ltd. ("PXP").
INDEPENDENT DIRECTORS
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
IN FUND
POSITIONS TERM OF OFFICE COMPLEX
NAME, ADDRESS AND HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
DATE OF BIRTH REGISTRANT TIME SERVED DURING PAST 5 YEARS BY DIRECTOR HELD BY DIRECTOR
- -----------------------------------------------------------------------------------------------------------------------
Francis E. Jeffries Chairman Term expires Chairman of the Board 31 DNP Select Income
8477 Bay Colony Drive of the 2006; Director of Directors. Until May Fund, Inc. (1987-
#902 Board of since 1993 13, 1997, Chairman of present).
Naples, FL 34108 Directors the Board of Directors
Age: 74 PXP. Prior to July
1995, Chief Executive
Officer of the
predecessor of PXP and
Chairman of the Board
of Duff & Phelps
Investment Management
Co.
E. Virgil Conway Director Term expires Chairman, Rittenhouse 38 Director of Urstadt
Rittenhouse Advisors, 2007; Director Advisors, LLC Biddle Property Corp.
LLC since 1995 (consulting firm) since (1989-present).
101 Park Avenue 2001. Chairman and Director/Trustee, Pace
New York, NY 10178 Board Member of the University (1978-
Age: 75 Metropolitan present), Realty
Transportation Foundation of New York
Authority (1992-2001). (1972-present), Josiah
Chairman and Trustee of Macy, Jr., Foundation
the Harlem Youth (1973- 2004).
Development Foundation
(1987-2002). Chairman
and Director of New
York Housing
Partnership Development
Corp. (1981-2003).
William W. Crawford Director Term expires Currently retired. 4
701 Bobwhite Lane 2005; Director Former President and
Naples, FL 34103 since 1996 Chief Operating Officer
Age: 76 of Hilliard, Lyons,
Inc., a registered
broker-dealer.
</Table>
21
BOARD OF DIRECTORS AND FUND MANAGEMENT (CONTINUED)
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
IN FUND
POSITIONS TERM OF OFFICE COMPLEX
NAME, ADDRESS AND HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
DATE OF BIRTH REGISTRANT TIME SERVED DURING PAST 5 YEARS BY DIRECTOR HELD BY DIRECTOR
- -----------------------------------------------------------------------------------------------------------------------
Harry Dalzell-Payne Director Term expires Currently retired. 38
The Flat 2007; Director Formerly a Major
Elmore Court since 1996 General of the British
Elmore, GLOS GL2 3 NT, Army.
UK
Age: 75
William N. Georgeson Director Term expires Currently retired. 4
575 Glenwood Road 2005; Director Former Vice President
Lake Forest, IL 60045 since 1993 of Nuveen Advisory
Age: 77 Corp, an investment
adviser.
Geraldine M. McNamara Director Term expires Managing Director, U.S. 35
United States Trust 2005; Director Trust Company of New
Company of New York since 2003 York (private
11 West 54th Street bank)(1982-present)
New York, NY 10019
Age: 54
Eileen A. Moran Director Term expires President and Chief 4
PSEG Resources, Inc. 2006; Director Executive Officer, PSEG
80 Park Plaza T-22 since 1996 Resources Inc.
Newark, NJ 07102 (1990-present).
Age: 50
Everett L. Morris Director Term expires Vice President of W.H. 38 Director, Reaves
164 Laird Road 2006; Director Reaves and Company Utility Income Fund.
Colts Neck, NJ 07722 since 1993 (1993-2003).
Age: 76
Richard A. Pavia Director Term expires Currently retired. Vice 4
7145 North Ionia Avenue 2005; Director Chairman Cook County
Chicago, IL 60646 since 1993 Illinois President's
Age: 74 Advisory Council-Forest
Preserve District
(since 1997). Special
Consultant, K&D
Facilities Resource
Corp. (since 1995).
</Table>
22
BOARD OF DIRECTORS AND FUND MANAGEMENT (CONTINUED)
INTERESTED DIRECTORS
The persons listed below are "interested persons" of the Fund/Registrant,
as defined in Section 2(a)(19) of the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder.
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
POSITIONS OFFICE AND COMPLEX
NAME, ADDRESS AND HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
DATE OF BIRTH REGISTRANT TIME SERVED DURING PAST 5 YEARS BY DIRECTOR HELD BY DIRECTOR
- ----------------------------------------------------------------------------------------------------------------------------
Philip R. McLoughlin(1) Director Term expires Director and Chief 49 Director, PXRE Group
56 Prospect Street 2005; Director Executive Officer (1995- (1985-present), and
Hartford, CT 06115 since 1996 2002) and Chairman World Trust Fund (1991-
Age: 57 (1997-2002), PXP. present).
Executive Vice President
and Chief Investment
Officer, The Phoenix
Companies, Inc. (2001-
2002). Director, (1994-
2002) and Executive Vice
President, Investments,
(1988-2002) Phoenix Life
Insurance Company.
Director, Aberdeen Asset
Management plc (1986-
2002). Director (1983-
2002) and Chairman
(1995-2002) Phoenix
Investment Counsel, Inc.
Director (1984-2002),
Chairman (1990-2002) and
President (1990-2000),
Phoenix Equity Planning
Corporation. Chairman
and Chief Executive
Officer, Phoenix/Zweig
Advisers (1999-2002).
Director and Executive
Vice President, Phoenix
Life and Annuity Company
(1996-2002), Director
and Executive Vice
President, PHL Variable
Insurance Company (1995-
2002). Director and Vice
President, PM Holdings,
Inc. (1985-2002).
</Table>
- ---------------
(1) Mr. McLoughlin is an interested person of the Registrant by reason of his
relationship with PXP and its affiliates.
23
BOARD OF DIRECTORS AND FUND MANAGEMENT (CONTINUED)
OFFICERS OF THE FUND WHO ARE NOT DIRECTORS
The following table sets for certain information concerning the principal
executive officers of the Fund. The officers serve until their respective
successors are chosen and qualified. The address of each individual, unless
otherwise noted, is Duff & Phelps Investment Management Co., 55 East Monroe
Street, Chicago, IL 60603.
<Table>
<Caption>
NAME, ADDRESS AND POSITION(S) HELD WITH TRUST AND LENGTH PRINCIPAL OCCUPATION(S)
DATE OF BIRTH OF TIME SERVED DURING PAST 5 YEARS
- ----------------------------------------------------------------------------------------------------------------------
Nathan I. Partain President and Chief Executive Officer Executive Vice President, Duff & Phelps
Age: 48 since 2004. Investment Management Co. since January 1997;
Director of Utility Research, Phoenix
Investment Partners, Ltd., 1989-1996
(Director of Equity Research, 1993-1996 and
Director of Fixed Income Research, 1993);
Director, Otter Tail Corporation.
- ----------------------------------------------------------------------------------------------------------------------
Daniel J. Petrisko Vice President since 2000, Portfolio Senior Vice President (1997- present), Vice
Age: 44 Manager 2002-2004, and Chief President (1995- 1997), Duff & Phelps
Investment Officer 2004 to present. Investment Management Co.
- ----------------------------------------------------------------------------------------------------------------------
Alan M. Meder Treasurer since 2000. Senior Vice President, Duff & Phelps
Age: 45 Investment Management Co. (1994-present).
- ----------------------------------------------------------------------------------------------------------------------
Joyce B. Riegel Chief Compliance Officer since 2003. Chief Compliance Officer for DNP Select
Age: 50 Income Fund, Inc. since 2004. Chief
Compliance Officer for DTF Tax-Free Income
Fund since 2003. Chief Compliance Officer of
Duff & Phelps Investment Management Co. since
August 2002. Vice President and Chief
Compliance Officer, Stein Roe Investment
Counsel LLC (2001-2002). Vice President and
Compliance Officer, Stein Roe & Farnham
Incorporated (1996-2000).
- ----------------------------------------------------------------------------------------------------------------------
Matthew A. Swendiman Secretary since 2004. Counsel, Phoenix Life Insurance Company
One American Row (2002-present). Vice President, Counsel,
Hartford, CT 06102 Chief Legal Officer and Secretary, certain of
Age: 31 the funds within the Phoenix Fund Complex
(2004-present). Assistant Vice President and
Assistant Counsel, Conseco Capital
Management, (2000-2002).
</Table>
24
DIRECTORS
Francis E. Jeffries, Chairman
E. Virgil Conway
William W. Crawford
Harry Dalzell-Payne
William N. Georgeson
Philip R. McLoughlin
Geraldine M. McNamara
Eileen A. Moran
Everett L. Morris
Richard A. Pavia
OFFICERS
Nathan I. Partain
President & Chief Executive Officer
Daniel J. Petrisko
Vice President & Chief Investment Officer
Alan M. Meder
Treasurer
Joyce B. Riegel
Chief Compliance Officer
Matthew A. Swendiman
Secretary
INVESTMENT ADVISER
Duff & Phelps Investment Management Co.
55 East Monroe Street
Chicago, IL 60603
(312) 541-5555
ADMINISTRATOR
Princeton Administrators, L.P.
P.O. Box 9095
Princeton, NJ 08543-9095
(800) 543-6217
CUSTODIAN AND TRANSFER AGENT
The Bank of New York
P.O. Box 11258
Church Street Station
New York, NY 10286
(800) 524-4458
INDEPENDENT AUDITORS
Ernst & Young LLP
5 Times Square
New York, NY 10036
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
333 West Wacker Drive
Chicago, IL 60606
This report is for stockholder information.
This is not a prospectus intended for use in the
purchase or sale of Fund shares. Information contained
in this report is dated and subject to change. Past
performance is no guarantee of future results.
Duff & Phelps Utility and Corporate Bond Trust Inc.
55 East Monroe Street
Chicago, IL 60603
DUFF & PHELPS
UTILITY AND
CORPORATE
BOND TRUST INC.
(DUFF & PHELPS LOGO)
ANNUAL REPORT
DECEMBER 31, 2004
Item 2 - Code of Ethics
As of the end of the period covered by this report, the Registrant has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer. The registrant's
principal financial officer also performs the functions of principal
accounting officer. A copy of the code of ethics is available without
charge upon request by calling collect to 1-312-541-5555.
Item 3 - Audit Committee Financial Expert
The Registrant's Board of Directors has determined that two members of
its audit committee, Everett L. Morris and E. Virgil Conway are audit
committee financial experts and that each of them is "independent" for
purposes of this item.
Item 4 - Principal Accountant Fees and Services -
(a) Audit Fees -
FY 03-$ 36,500
FY 04-$ 39,250
(b) Audit-Related Fees -
Periodic review of the Fund's commercial paper rating agency
compliance tests.
FY 03-$7,425
FY 04-$2,600
(c) Tax Fees -
Completion of the federal tax return
FY 03-$3,500
FY 04-$3,750
(d) All Other Fees -
FY 03- $0
FY 04- $0
(e)(1) The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must pre-approve other non-audit services
provided to the registrant and those non-audit services provided to the
registrant's affiliated service providers that would have a direct
impact on the operations and the financial reporting of the registrant.
Such audit, audit-related, tax compliance and non-audit services that
may be provided to the Registrant or to such service providers are
referred to collectively as "Covered Services". The Committee is
authorized to pre-approve specified Covered Services, generally for a
period of 12 months from the date of such pre-approval. Any such
pre-approved Covered Services, and the range of fees charged therefore,
are reviewed by the Committee on at least an annual basis. The
Committee may, from time to time, modify the nature of the Covered
Services pre-approved, the aggregate levels of pre-approved fees or
both. In the intervals between scheduled meetings of the Committee, the
Committee has delegated pre-approval authority to the Chairman of the
Committee. However, such services will only be deemed pre-approved
provided that any individual project does not exceed $5,000
attributable to the registrant or $50,000 for the project as a whole.
Any proposed services exceeding the pre-approved cost levels will
require specific pre-approval by the Committee. The Committee is
informed of each service pre-approved under such delegation at the next
scheduled Committee meeting.
(e)(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the audit
committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation
S-X.
0%
(f) If greater than 50%, disclose the percentage of hours expended on
the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees.
N/A
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to the
registrant's investment adviser (not including any sub-adviser whose
role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling,
controlled by, or under common control with the adviser that provides
ongoing services to the registrant for each of the last two fiscal
years of the registrant.
FY03-$10,925
FY04-$ 6,350
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any subadviser whose
role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling,
controlled by, or under common control with the investment adviser that
provides ongoing services to the registrant that were not pre-approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is
compatible with maintaining the principal accountant's independence.
No non-audit services rendered.
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 Securities
Exchange Act of 1934 (the "Exchange Act"). The members of the committee
are E. Virgil Conway, William W. Crawford, Harry Dalzell-Payne, William
N. Georgeson, Geraldine M. McNamara, Eileen Moran, Everett L. Morris
and Richard A. Pavia
Item 6 - Schedule of Investments
Included as part of the report to shareholders filed under Item 1 of
this form.
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies -
The Fund does not typically hold voting securities and the Fund's Board
of Directors has adopted proxy voting procedures whereby the Fund's
Investment Adviser would review any proxy solicitation materials on a
case-by-case basis and would vote any such securities in accordance
with the Investment Adviser's good faith belief as to the best interest
of the Fund and its shareholders. The receipt by the Fund of any such
proxy solicitation materials and any vote in connection with the Fund's
portfolio securities would be reviewed
subsequently by the Fund's Board of Directors. The Fund's Board of
Directors may change these proxy voting procedures at any time or from
time to time. A description of the policies and procedures that the
Fund uses to determine how to vote proxies relating to the portfolio
securities is available without charge, upon request, by calling
collect 1-312-541-5555 or on the Commission's website at
http://www.sec.gov.
Item 8 - Portfolio Managers of Closed-End Management Investment Companies
Not applicable to annual reports for the period ended December 31,
2004.
Item 9 - Purchases of Equity Securities by Closed-end Management Investment
Company and Affiliated Purchasers. - None
Item 10- Submission of Matters to a Vote of Security Holders- None
Item 11- Controls and Procedures
(a)The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
(b)There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act
(17 CFR 270.30a-3(d)) that occurred during the second fiscal
half-year of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12 - Exhibits
(a)(1) Code of Ethics - (see Item 2)
(a)(2) Exhibit 99.Cert - Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act - Attached hereto
(b) Exhibit 99.906 Cert- Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act - Attached hereto
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.
Duff & Phelps Utility and Corporate Bond Trust, Inc.
By: /s/ Alan M. Meder
------------------
Alan M. Meder,
Treasurer & Principal Financial and Accounting Officer of Duff
& Phelps Utility and Corporate Bond Trust, Inc.
Date: March 7, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Nathan I. Partain
----------------------
Nathan I. Partain
President & Chief Executive Officer of
Duff & Phelps Utility and Corporate Bond Trust, Inc.
Date: March 7, 2005
By: /s/ Alan M. Meder
-------------------
Alan M. Meder,
Treasurer & Principal Financial and Accounting Officer of Duff
& Phelps Utility and Corporate Bond Trust, Inc.
Date: March 7, 2005