<PAGE>
As filed with the Securities and Exchange Commission on April 29, 1996
Investment Company Act file no. 811-4915
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______
FORM N-2
_______
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 37 [X]
_______
DUFF & PHELPS UTILITIES INCOME INC.
(Exact name of registrant as specified in charter)
_______
55 East Monroe Street
Chicago, Illinois 60603
(Address of principal executive offices)
Registrant's telephone number: 312/368-5510
Richard J. Spletzer John R. Sagan
Duff & Phelps Utilities Income Inc. Mayer, Brown & Platt
55 East Monroe Street 190 South LaSalle Street
Chicago, Illinois 60603 Chicago, Illinois 60603
(Names and addresses of agents for service)
It is proposed that this filing will become effective:
[X] immediately upon filing pursuant to Section 8(c).
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
PART A INFORMATION REQUIRED IN A PROSPECTUS
Item 1.Outside Front Cover
Not applicable.
Item 2.Inside front and Outside Back Cover Page
Not applicable.
Item 3.Fee Table and Synopsis
1.
Shareholder Transaction Expenses
Sales Load (as a percentage of offering price)................... N/A
Dividend Reinvestment and Cash Purchase Plan Fees................ (1)
Annual Expenses (as a percentage of net assets attributable to common shares)
Management Fees...................................................57%
Interest Payments on Borrowed Funds...............................45%
Other Expenses....................................................29%
Total Annual Expenses...................................1.31%
Example (2) 1 year 2 years 5 years 10 years
You would pay the following expenses on
a $1,000 investment, assuming a 5%
annual return: $13 $27 $72 $158
(1) Shareholders that reinvest dividends and/or capital gains distributions
will be charged only brokerage fees in the event that shares are
purchased in the open market. Investors investing cash in addition to
any cash dividends reinvested will be charged $1.50 plus brokerage
commissions. See Item 10.1(c).
(2) This Example should not be considered a representation of future
expenses, and actual expenses may be greater or lesser than those
shown.
The purpose of the foregoing table is to assist an investor in
understanding the costs and expenses that an investor will bear directly or
indirectly, and the information contained therein is not necessarily
indicative of future performance. See Item 9.
2. Not applicable.
3. Not applicable.
Item 4. Financial Highlights
Not applicable.
Item 5. Plan of Distribution
Not applicable.
Item 6. Selling Shareholders
Not applicable.
Item 7. Use of Proceeds
Not applicable.
Item 8. General Description of the Registrant
1. General
(a) The Registrant, Duff & Phelps Utilities Income Inc. (the
"Fund"), is a corporation organized under the laws of the State of
Maryland on November 26, 1986.
(b) The Fund is a diversified closed-end investment company.
2. Investment Objectives and Policies
Investment objectives
The Fund seeks to achieve its investment objectives by investing
primarily in a diversified portfolio of equity and fixed income securities
of companies in the public utilities industry. Under normal conditions,
more than 65% of the Fund's total assets will be invested in securities of
public utility companies engaged in the production, transmission or
distribution of electric energy, gas or telephone services. The Fund's
investment objectives stated in the preceding sentence and its policy of
concentrating its investments in the utilities industry are fundamental
policies and may not be changed without the approval of the holders of a
"majority" (as defined in the Investment Company Act of 1940, as amended
(the "1940 Act")) of the outstanding shares of the common stock and the
preferred stock voting separately by class.
Fundamental investment restrictions
The following are fundamental investment restrictions of the Fund
that may be changed only with approval of the holders of a "majority" of
the outstanding shares of the common stock and the preferred stock voting
separately by class, which means for each class the lesser of (i) 67% of
the shares of the class represented at a meeting at which more than 50% of
the outstanding shares of the class are represented or (ii) more than 50%
of the outstanding shares of the class:
1. The Fund may not invest more than 25% of its total assets
(valued at the time of investment) in securities of companies engaged
principally in any one industry other than the utilities industry,
which includes companies engaged in the production, transmission or
distribution of electric energy or gas or in telephone services,
except that this restriction does not apply to securities issued or
guaranteed by the United States Government or its agencies or
instrumentalities.
2. The Fund may not:
(a) invest more than 5% of its total assets (valued at the
time of the investment) in the securities of any one issuer,
except that this restriction does not apply to United States
Government securities; or
(b) acquire more than 10% of the outstanding voting
securities of any one issuer (at the time of acquisition);
except that up to 25% of the Fund's total assets (at the time of
investment) may be invested without regard to the limitations set
forth in this restriction.
3. The Fund may borrow money on a secured or unsecured basis for
any purpose of the Fund in an aggregate amount not exceeding 15% of
the value of the Fund's total assets at the time of any such
borrowing (exclusive of all obligations on amounts held as collateral
for securities loaned to other persons to the extent that such
obligations are secured by assets of at least equivalent value).
4. The Fund may not pledge, mortgage or hypothecate its assets,
except to secure indebtedness permitted by restriction 3 above. (The
deposit in escrow of securities in connection with the writing of put
and call options, collateralized loans of securities and collateral
arrangements with respect to margin requirements for futures
transactions and with respect to segregation of securities in
connection with forward contracts are not deemed to be pledges or
hypothecations for this purpose.)
5. The Fund may make loans of securities to other persons to the
extent of not more than 33 1/3% of its total assets (valued at the
time of the making of loans), and may invest without limitation in
short-term obligations and publicly distributed obligations.
6. The Fund may not underwrite the distribution of securities of
other issuers, although it may acquire securities that, in the event
of a resale, might be required to be registered under the Securities
Act of 1933, as amended, because the Fund could be regarded as an
underwriter as defined in that act with respect to the resale.
7. The Fund may not purchase or sell real estate or any interest
therein, except that the Fund may invest in securities secured by
real estate or interests therein, such as mortgage pass-throughs,
pay-throughs, collateralized mortgage obligations, and securities
issued by companies (including partnerships and real estate
investment trusts) that invest in real estate or interests therein.
8. The Fund may acquire securities of other investment companies
to the extent (at the acquisition) of (i) not more than 3% of the
outstanding voting stock of any one investment company, (ii) not more
than 5% of the assets of the Fund in any one investment company and
(iii) not more than 10% of the assets of the Fund in all investment
companies (exclusive in each case of securities received as a
dividend or as a result of a merger, consolidation or other plan of
reorganization).
9. The Fund may not invest for the purpose of exercising control
over or management of any company.
10.The Fund may not purchase securities on margin, or make short
sales of securities, except the use of short-term credit necessary
for the clearance of purchases and sales of portfolio securities, but
it may make margin deposits in connection with transactions in
options, futures and options on futures.
11.The Fund may not purchase or sell commodities or commodity
contracts, except that it may enter into (i) stock index futures
transactions, interest rate futures transactions and options on such
future transactions and (ii) forward contracts on foreign currencies
to the extent permitted by applicable law.
12.The Fund may not issue any security senior to its common
stock, except that the Fund may borrow money subject to investment
restriction 3 and except as permitted by the Fund's Charter.
If a percentage restriction set forth above is adhered to at the time
a transaction is effected, later changes in percentages resulting from
changes in value or in the number of outstanding securities of an issuer
will not be considered a violation.
Other Significant Investment Policies
Fixed Income Securities. The Fund purchases a fixed income security
only if, at time of purchase, it is (i) rated investment grade by at least
two of the following three nationally recognized rating services: Phoenix
Duff & Phelps Corporation ("Phoenix Duff & Phelps"), the parent of the
Fund's investment adviser, Moody's Investors Service, Inc. ("Moody's"), and
Standard & Poor's Corporation ("S&P"), or (ii) determined by the Adviser to
be of investment grade and not rated below investment grade by any of the
aforementioned rating services. A fixed income security rated investment
grade has a rating of BBB by Phoenix Duff & Phelps, Baa or better by
Moody's, or BBB or better by S&P. In making its determination that a fixed
income security is investment grade, the Adviser will use the standards
used by Phoenix Duff & Phelps.
Leverage. The Fund is authorized to borrow money in amounts of up to
15% of the value of its total assets at the time of such borrowings.
However, for so long as the Fund's preferred stock is rated by S&P, the
Fund will limit the aggregate amount of its borrowings to 10% of the value
of its total assets and will not incur any borrowings, unless advised by
S&P that such borrowings would not adversely affect S&P's then-current
rating of the preferred stock.
Lending of Portfolio Securities. In order to generate additional
income, the Fund may from time to time lend securities from its portfolio,
with a value not in excess of 33 1/3% of its total assets, to brokers,
dealers and financial institutions such as banks and trust companies for
which it will receive collateral in cash, United States Government
securities or an irrevocable letter of credit that will be maintained in an
amount equal to at least 100% of the current market value of the loaned
securities.
Rating Agency Guidelines. The Fund's preferred stock is currently
rated by Moody's and S&P, nationally recognized statistical ratings
organizations, which issue ratings for various securities reflecting the
perceived creditworthiness of those securities. The Fund intends that, so
long as shares of its preferred stock are outstanding, the composition of
its portfolio will reflect guidelines established by Moody's and S&P in
connection with the Fund's receipt of a rating for its preferred stock of
"Aaa" from Moody's and "AAA" from S&P.
Options and Futures Transactions. The Fund may seek to increase its
current return by writing covered options. In addition, through the
writing and purchase of options and the purchase and sale of futures
contracts and related options, the Fund may at times seek to hedge against
a decline in the value of securities owned by it or an increase in the
price of securities which it plans to purchase. However, for so long as
shares of the Fund's preferred stock are rated either by Moody's or S&P,
the Fund will not purchase or sell futures contracts or related options or
engage in other hedging transactions unless Moody's or S&P, as the case may
be, advises the Fund that such action or actions will not adversely affect
its then-current rating of the Fund's preferred stock.
Temporary Investments. For temporary defensive purposes, the Fund
may be invested primarily in money market securities. These securities
include securities issued or guaranteed by the United States Government and
its agencies and instrumentalities, commercial paper and certificates of
deposit.
Nonfundamental Restrictions. The Fund may not (i) invest in
securities subject to legal or contractual restrictions on resale, if, as a
result of such investment, more than 10% of the Fund's total assets would
be invested in such securities, or (ii) acquire 5% or more of the
outstanding voting securities of a public utility company.
Each of the policies and restrictions described above may be changed
by the Board of Directors without the approval of the Fund's shareholders.
If a percentage restriction set forth above is adhered to at the time a
transaction is effected, later changes in percentages resulting from
changes in value or in the number of outstanding securities of an issuer
will not be considered a violation.
3. Risk Factors
Leverage. As of December 31, 1995, the Fund has outstanding
indebtedness of $113,310,612 and five series of preferred stock with
an aggregate liquidation preference of $500 million. The dividend
rate on each series of preferred stock is reset every 49 days through
a remarketing procedure. As of April 12, 1996, the dividend rate on
the five series of preferred stock averaged 3.93% and the interest
rate on the Fund's outstanding indebtedness averaged 5.17%. The Fund
must experience an annual return of 1.21% on its portfolio in order
to cover annual interest and dividend payments on the Fund's
outstanding indebtedness and preferred stock.
Leverage creates certain risks for holders of common stock, including
higher volatility of both the net asset value and market value of the
common stock. Fluctuations in dividend rates on the preferred stock
and interest rates on the Fund's indebtedness will affect the
dividend to holders of common stock. Holders of the common stock
receive all net income from the Fund remaining after payment of
dividends on the preferred stock and interest on the Fund's
indebtedness, and generally are entitled to a pro rata share of net
realized capital gains, if any.
Upon any liquidation of the Fund, the holders of shares of preferred
stock will be entitled to liquidating distributions (equal to
$100,000 per share of preferred stock plus any accumulated and unpaid
dividends thereon) and the holders of the Fund's indebtedness will be
entitled to receive repayment of outstanding principal plus
accumulated and unpaid interest thereon before any distribution is
made to holders of common stock.
The leverage obtained through the issuance of the preferred stock and
from the Fund's presently outstanding indebtedness has provided
holders of common stock with a higher dividend than such holders
would have otherwise received. However, there can be no assurance
that the Fund will be able to continue to realize such a higher net
return on its investment portfolio. Changes in certain factors could
cause the relationship between the dividends paid on the preferred
stock and interest paid on the Fund's indebtedness to increase
relative to the dividend and interest rates on the portfolio
securities in which the Fund may be invested. Under such conditions
the benefit of leverage to holders of common stock will be reduced
and the Fund's leveraged capital structure could result in a lower
rate of return to holders of common stock than if the Fund were not
leveraged. The Fund is required by the 1940 Act to maintain an asset
coverage of 200% on outstanding preferred stock and 300% on
outstanding indebtedness. If the asset coverage declines below those
levels (as a result of market fluctuations or otherwise), the Fund
may be required to sell a portion of its investments at a time when
it may be disadvantageous to do so.
The following table illustrates the effects of leverage on a return
to common stockholders. The figures appearing in the table are
hypothetical and actual returns may be greater or less than those
appearing in the table.
Assumed return on portfolio
(net of expenses) -10.00% -5.00% 0.00% 5.00% 10.00%
Corresponding return to
common Stockholder -14.99% -8.25% -1.51% 5.23% 11.98%
Investments in Securities of Foreign Issuers. While the Fund is
prohibited from investing 10% or more of its assets in securities of
foreign issuers, the Fund may be exposed to certain risks as a result
of foreign investments. Investing in securities of foreign issuers
involves certain considerations not typically associated with
investing in securities of U.S. companies, including (a) controls on
foreign investment and limitations on repatriation of invested
capital and on the Fund's ability to exchange local currencies for
U.S. dollars, (b) greater price volatility, substantially less
liquidity and significantly smaller market capitalization of
securities markets, (c) currency devaluations and other currency
exchange rate fluctuations, (d) more substantial government
involvement in the economy, (e) higher rates of inflation, (f) less
government supervision and regulation of the securities markets and
participants in those markets and (g) political uncertainty and other
considerations. The Fund will treat investments in countries with
repatriation restrictions as illiquid for purposes of any applicable
limitations under the 1940 Act; however, as a closed-end fund, the
Fund is not currently limited under that Act in the amount of
illiquid securities it may acquire. Because of the limited forward
market for the purchase of U.S. dollars in most foreign countries and
the limited circumstances in which the Fund expects to hedge against
declines in the value of foreign country currencies generally, the
Fund will be adversely affected by devaluations of foreign country
currencies against the U.S. dollar to the extent the Fund is invested
in securities denominated in currencies experiencing a devaluation.
The Fund's fundamental investment policies permit the Fund to enter
into currency hedging transactions.
In addition, accounting, auditing and financial reporting standards
in foreign countries are different from U.S. standards. As a result,
certain material disclosures may not be made and less information may
be available to the Fund and other investors than would be the case
if the Fund's investments were restricted to securities of U.S.
issuers. Moreover, it may be more difficult to obtain a judgment in
a court outside the United States. Interest and dividends paid on
securities held by the Fund and gains from the disposition of such
securities may be subject to withholding taxes imposed by foreign
countries.
Anti-takeover Provisions. Certain provisions of the Fund's charter
may be regarded as "anti-takeover" provisions because they could have
the effect of limiting the ability of other entities or persons to
acquire control of the Fund. See Item 10.l(e).
Premium/Discount From Net Asset Value. Shares of closed-end
investment companies trade in the market above, at and below net
asset value. This characteristic of shares of closed-end investment
companies is a risk separate and distinct from the risk that the
Fund's net asset value will decline. Since inception, the Fund's
common stock has generally traded at a premium to net asset value.
For example, in the two-year period ended December 31, 1995, as of
the close of business of the New York Stock Exchange on the last day
in each week on which the New York Stock Exchange was open (the date
the Fund calculates its net asset value per share), the Fund's shares
were trading at a premium to net asset value 97.37% of the time. The
Fund usually does not calculate its net asset value per share on any
other day and does not know whether the Fund's shares were trading at
a premium to net asset value on such days. The Fund is not able to
predict whether its shares will trade above, below or at net asset
value in the future.
4. Other Policies
None.
5. Share Price Data
The Fund's common stock has been listed on the New York Stock
Exchange since January 21, 1987 (trading symbol DNP). Since the
commencement of trading, the Fund's common stock has most frequently traded
at a premium to net asset value, but has periodically traded at a slight
discount. The following table shows the range of the market prices of the
Fund's common stock, net asset value of the Fund's shares corresponding to
such high and low prices and the premium to net asset value presented by
such high and low prices:
<TABLE>
<CAPTION>
Market Premium (Discount)
Market Price Net Asset Value at to Net Asset Value at
------------ ------------------ -------------------------
Quarter Ended Market Market Market Market
High Low High Low High Low
---- --- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
1996 March 31 $9.750 $ 8.750 $8.90 $8.22 9.55% 6.45%
1995 December 31 9.125 8.750 8.50 8.39 7.35 4.29
September 30 8.875 8.625 7.84 7.80 13.20 10.58
June 30 9.000 8.125 8.01 7.56 12.36 7.47
March 31 8.750 7.875 7.56 7.25 15.74 8.62
1994 December 31 8.250 7.875 7.13 7.23 15.71 8.92
September 30 8.875 8.000 7.40 7.37 19.93 8.55
June 30 9.000 8.000 7.97 7.37 12.92 8.55
March 31 10.500 8.125 9.65 8.19 8.80 (0.79)
</TABLE>
On April 12, 1996, the net asset value was $8.09, trading prices ranged
between $8.875 and $8.750 (representing a premium to net asset value of
9.70% and 8.16%, respectively), the closing price was $8.875 (representing
a premium to net asset value of 9.70%).
6. Business Development Companies
Not applicable.
Item 9. Management
1. General
(a) Board of Directors
The business and affairs of the Fund are managed under the
direction of the board of directors.
(b) Investment Adviser
The Fund's investment adviser (the "Adviser") is Duff &
Phelps Investment Management Co., 55 East Monroe Street, Chicago,
Illinois 60603. The Adviser (together with its predecessor) has
been in the investment advisory business for more than 60 years
and, excluding the Fund, currently has more than $15 billion in
client accounts under discretionary management. The Adviser also
provides non-discretionary investment advisory and portfolio
consulting services to corporate and public retirement funds and
endowment funds aggregating more than $17 billion. The Adviser
acts as adviser to two other closed-end investment companies
registered under the 1940 Act and as sub-adviser to six open-end
investment companies registered under the 1940 Act. The Adviser
is a wholly-owned subsidiary of Phoenix Duff & Phelps, which is an
indirect, majority-owned subsidiary of Phoenix Home Life Mutual
Insurance Company. Phoenix Duff & Phelps, through its
subsidiaries, provides investment management, investment research,
financial consulting and investment banking services.
The Adviser is responsible for the management of the Fund's
investment portfolio, subject to the overall control of the board
of directors of the Fund.
Under the terms of an investment advisory agreement between
the Fund and the Adviser (the "Advisory Agreement"), the Adviser
receives from the Fund a quarterly fee at an annual rate of .60%
of the average weekly net asset value of the Fund (i.e., the
average weekly value of total assets of the Fund, minus the sum of
accrued liabilities of the Fund, including accumulated dividends
on shares of the Fund's preferred stock) up to $1.5 billion and
.50% of average weekly net assets in excess of $1.5 billion. The
net assets for each weekly period are determined by averaging the
net assets at the end of a week with the net assets at the end of
the prior week.
Under the terms of a service agreement among the Adviser,
Phoenix Duff & Phelps, and the Fund (the "Service Agreement"),
Phoenix Duff & Phelps makes available to the Adviser the services,
on a part-time basis, of its employees and various facilities to
enable the Adviser to perform certain of its obligations to the
Fund. However, the obligation of performance under the Advisory
Agreement is solely that of the Adviser, for which Phoenix Duff &
Phelps assumes no responsibility, except as described in the
preceding sentence. The Adviser reimburses Phoenix Duff & Phelps
for any costs, direct or indirect, fairly attributable to the
services performed and the facilities provided by Phoenix Duff &
Phelps under the Service Agreement. The Fund does not pay any
fees pursuant to the Service Agreement.
(c) Portfolio Management
The Fund's portfolio is managed by Richard J. Spletzer and
T. Brooks Beittel. See Item 18 for a description of the position
and business experience of Messrs. Spletzer and Beittel. Mr.
Spletzer has been responsible for the management of the equity
investments in the Fund's portfolio since the Fund's inception in
1987. Mr. Beittel has been responsible for the management of the
fixed income investments in the Fund's portfolio since April 1994.
(d) Administrator
The Fund's administrator (the "Administrator") is J.J.B.
Hilliard, W.L. Lyons, Inc., Hilliard Lyons Center, Louisville,
Kentucky 40202. Under the terms of an administration agreement
(the "Administration Agreement"), the Administrator provides all
management and administrative services required in connection with
the operation of the Fund not required to be provided by the
Adviser pursuant to the Advisory Agreement, as well as the
necessary office facilities, equipment and personnel to perform
such services. For its services, the Administrator receives from
the Fund a quarterly fee at annual rates of .25% of the Fund's
average weekly net assets up to $100 million, .20% of the Fund's
average weekly net assets from $100 million to $1.0 billion, .10%
of average weekly net assets from $1.0 billion to $1.5 billion,
and .06% of average weekly net assets in excess of $1.5 billion.
(e) Custodian
The Fund's custodian is The Bank of New York, Church Street
Station, Post Office Box 11258, New York, New York 10286. The
transfer agent and dividend disbursing agent for the Fund's common
stock is The Bank of New York, Church Street Station, P.O. Box
11258, New York, New York 10286. The transfer agent and dividend
disbursing agent for the Fund's preferred stock is IBJ Schroeder
Bank & Trust Company, One State Street, New York, New York 10004.
(f) Expenses
The Fund is responsible for all expenses not paid by the
Adviser or the Administrator, including brokerage fees.
(g) Affiliated Brokerage
The Fund has paid, and in the future may pay, broker
commissions to the Administrator and Duff & Phelps Securities Co.,
an affiliate of the Adviser. See Item 21.2.
2. Non-resident Managers.
Not applicable.
3. Control Persons.
The Fund does not consider that any person "controls" the
Fund within the meaning of this item. For information concerning
the Fund's officers and directors, see Item 18. No person is
known by the Fund to own of record or beneficially five percent or
more of any class of the Fund's outstanding equity securities.
Item 10. Capital Stock, Long-Term Debt, and Other Securities
1. Capital Stock.
(a) Common Stock. Holders of common stock, $.001 par value, of
the Fund are entitled to dividends when and as declared by the
Board of Directors, to one vote per share in the election of
Directors (with no right of cumulation), and to equal rights per
share in the event of liquidation. They have no preemptive
rights. There are no redemption, conversion or sinking fund
provisions. The shares are not liable to further calls or to
assessment by the Fund.
(b) Preferred Stock. Holders of preferred stock, $.001 par
value, of the Fund are entitled to receive dividends before the
holders of the common stock and are entitled to receive the
liquidation value of their shares ($100,000 per share) before any
distributions are made to the holders of the common stock, in the
event the Fund is ever liquidated. Each share of preferred stock
is entitled to one vote per share. The holders of the preferred
stock have the right to elect two directors of the Fund at all
times and to elect a majority of the directors if at any time
dividends on the preferred stock are unpaid for two years. In
addition to any approval by the holders of the shares of the Fund
that might otherwise be required, the approval of the holders of a
majority of the outstanding shares of the preferred stock, voting
separately as a class, will be required under the 1940 Act to
adopt any plan of reorganization that would adversely affect the
holders of preferred stock and to approve, among other things,
changes in the Fund's sub-classification as a closed-end
investment company, changes in its investment objectives or
changes in its fundamental investment restrictions.
Subject to certain restrictions, the Fund may, and under certain
circumstances is required to, redeem shares of its preferred stock
at a price of $100,000 per share, plus accumulated but unpaid
dividends. The shares of preferred stock are not liable to
further calls or to assessment by the Fund. There are no
preemptive rights or sinking fund or conversion provisions.
The Fund, may, however, upon the occurrence of certain events,
authorize the exchange of its current preferred stock on a
share-for-share basis for a separate series of authorized but
unissued preferred stock having different dividend privileges.
(c) Dividend Reinvestment Plan. Under the Fund's dividend
reinvestment plan shareholders may elect to have all dividends and
capital gains distributions paid on their common stock
automatically reinvested by The Bank of New York, as agent for
shareholders, in additional shares of common stock of the Fund.
Registered shareholders may participate in the plan. The plan
permits a nominee, other than a depository, to participate on
behalf of those beneficial owners for whom it is holding shares
who elect to participate. However, some nominees may not permit a
beneficial owner to participate without transferring the shares
into the owner's name. Shareholders who do not elect to
participate in the plan will receive all distributions in cash
paid by check mailed directly to the shareholder (or, if the
shareholder's shares are held in street or other nominee name,
then to such shareholder's nominee) by The Bank of New York as
dividend disbursing agent. Registered shareholders may also elect
to have cash dividends deposited directly into their bank
accounts.
When a dividend or distribution is reinvested under the plan, the
number of shares of common stock equivalent to the cash dividend
or distribution is determined as follows:
(i) If shares of the common stock are trading at net
asset value or at a premium above net asset value at the
valuation date, the Fund issues new shares of common stock
at the greater of net asset value or 95% of the then current
market price.
(ii) If shares of the common stock are trading at a
discount from net asset value at the valuation date, The
Bank of New York receives the dividend or distribution in
cash and uses it to purchase shares of common stock in the
open market, on the New York Stock Exchange or elsewhere,
for the participants' accounts. Shares are allocated to
participants' accounts at the average price per share, plus
commissions, paid by The Bank of New York for all shares
purchased by it. If, before The Bank of New York has
completed its purchases, the market price exceeds the net
asset value of a share, the average purchase price per share
paid by The Bank of New York may exceed the net asset value
of the Fund's shares, resulting in the acquisition of fewer
shares than if the dividend or distribution had been paid in
shares issued by the Fund.
The valuation date is the business day immediately preceding the
date of payment of the dividend or distribution. On that date,
the Administrator compares that day's net asset value per share
and the closing price per share on the New York Stock Exchange and
determines which of the two alternative procedures described above
will be followed.
The reinvestment shares are credited to the participant's plan
account in the Fund's stock records maintained by The Bank of New
York, including a fractional share to four decimal places. The
Bank of New York will send participants written confirmation of
all transactions in the participant's plan account, including
information participants will need for tax records. Shares held
in the participant's plan account have full dividend and voting
rights. Dividends and distributions paid on shares held in the
participant's plan account will also be reinvested.
The cost of administering the plan is borne by the Fund. There is
no brokerage commission on Shares issued directly by the Fund.
However, participants do pay a pro rata share of brokerage
commissions incurred on any open market purchases of shares by The
Bank of New York.
The automatic reinvestment of dividends and distributions does not
relieve participants of any income taxes that may be payable (or
required to be withheld) on dividends or distributions.
If the closing market price of shares of the Fund's common stock
should be equal to or greater than their net asset value on the
valuation date, the participants in the plan would receive shares
priced at the higher of net asset value or 95% of the market
price. Consequently they would receive more shares at a lower per
share price than if they had used the cash distribution to
purchase Fund shares on the payment date in the market at the
market price plus commission.
If the market price should be less than net asset value on the
valuation date, the cash distribution for the plan participants
would be used by The Bank of New York to purchase the shares to be
received by the participants, which would be at a discount from
net asset value unless the market price should rise during the
purchase period so that the average price and commission exceeded
net asset value as of the payment date. Also, since the Fund does
not redeem its shares, the price on resale may be less or more
than the net asset value.
Plan participants may purchase additional shares of common stock
through the plan by delivering to The Bank of New York a check for
at least $100, but not more than $1,000, in any month. The Bank
of New York will use such funds to purchase shares in the open
market or in private transactions. The purchase price of such
shares may be more than or less than net asset value per share.
The Fund will not issue new shares or supply treasury shares for
such voluntary additional share investment. Purchases will be
made commencing with the time of the first 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 distribution. Shares will be
allocated to the accounts of participants purchasing additional
shares at the average price per share, plus a service charge of
$1.50 imposed by The Bank of New York and a pro rata share of any
brokerage commission (or equivalent purchase costs) paid by The
Bank of New York in connection with such purchases. Funds sent to
the bank for voluntary additional share reinvestment may be
recalled by the participant by written notice received by The Bank
of New York not later than two business days before the next
dividend payment date. If for any reason a regular monthly
dividend is not paid by the Fund, funds for voluntary additional
share investment will be returned to the participant, unless the
participant specifically directs that such funds continue to be
held by The Bank of New York for subsequent investment.
Participants will not receive interest on voluntary additional
funds held by The Bank of New York pending investment.
A shareholder may leave the plan at any time by written notice to
The Bank of New York. To be effective for any given distribution,
notice must be received by the Bank at least seven business days
before the record date for that distribution. When a shareholder
leaves the plan: (i) such shareholder may request that The Bank of
New York sell such shareholder's shares held in such shareholder's
plan account and send such shareholder a check for the net
proceeds (including payment of the value of a fractional share,
valued at the closing price of the Fund's common stock on the New
York Stock Exchange on the date discontinuance is effective) after
deducting The Bank of New York's $2.50 charge and any brokerage
commission (or equivalent sale cost) or (ii) if no request is
made, such shareholder will receive a certificate for the number
of full shares held in such shareholder's plan account, along with
a check for any fractional share interest, valued at the closing
price of the Fund's common stock on the New York Stock Exchange on
the date discontinuance is effective. If and when it is
determined that the only balance remaining in a shareholder's plan
account is a fraction of a single share, such shareholder's
participation will be deemed to have terminated, and The Bank of
New York will send to such shareholder a check for the value of
such fractional share, valued at the closing price of the Fund's
common stock on the New York Stock Exchange on the date
discontinuance is effective.
The Fund may change, suspend or terminate the plan at any time
upon mailing a notice to participants.
For more information regarding, and an authorization form for, the
dividend reinvestment plan, please contact The Bank of New York at
1-800-432-8224. You may also contact The Bank of New York by
calling the Fund's toll free number at 1-800-680-4DNP.
(d) Capital Gains Distribution Reinvestment Plan. Unless
otherwise indicated by a holder of shares of common stock of the
Fund that does not participate in the Fund's dividend reinvestment
plan, all distributions in respect of capital gains distributions
on shares of common stock held by such holder will be
automatically invested by The Bank of New York, as agent of the
common shareholders participating in the plan, in additional
shares of common stock of the Fund. Distributions in respect of
capital gains distributions on shares of common stock that
participate in the Fund's dividend reinvestment plan will be
reinvested in accordance with the terms of such plan.
In any year in which the Fund declares a capital gains
distribution, the Fund after the declaration of such dividend and
prior to its payment, will provide to each registered holder of
Fund common stock that does not participate in the Fund's dividend
reinvestment plan a cash election card. A registered shareholder
may elect to receive cash in lieu of shares in respect of a
capital gains distribution by signing the cash election card in
the name(s) of the registered shareholder(s), and mailing the card
to The Bank of New York.
If a holder's shares of common stock, or some of them, are
registered in the name of a broker or other nominee, and the
holder wishes to receive a capital gains distribution in cash in
lieu of shares of common stock, such shareholder must exercise
that election through its nominee (including any depositor of
shares held in a securities depository).
When a distribution is reinvested under the plan, the number of
reinvestment shares is determined as follows:
(i) If, at the time of valuation, the shares are being
traded in the securities markets at net asset value or at a
premium over net asset value, the reinvestment shares are
obtained by The Bank of New York directly from the Fund, at
a price equal to the greater of net asset value or 95% of
the then current market price, without any brokerage
commissions (or equivalent purchase costs).
(ii) If, at the time of valuation, the shares are being
traded in the securities markets at a discount from net
asset value, The Bank of New York receives the distribution
in cash, and uses it to purchase shares in the open market,
including on the New York Stock Exchange, or in private
purchases. Shares of common stock are allocated to
participants at the average price per share, plus any
brokerage commissions (or equivalent transaction costs),
paid by The Bank of New York for all shares purchased by it
in reinvestment of the distribution(s) paid on a particular
day.
The time of valuation is the close of trading on the New York
Stock Exchange on the most recent day preceding the date of
payment of the dividend or distribution on which that exchange is
open for trading. As of that time, J.J.B. Hilliard, W.L. Lyons,
Inc., the Fund's administrator, compares the net asset value per
share as of the time of the close of trading on the New York Stock
Exchange on that day and the last reported sale price per share on
the New York Stock Exchange, and determines which of the
alternative procedures described above are to be followed.
If as of any day on which the last reported sale price of the
Fund's shares on the New York Stock Exchange is required to be
determined pursuant to this plan, no sales of the shares are
reported on that exchange, the mean of the bid prices and of the
asked prices on that exchange as of the time of the close of
trading on the exchange will be substituted.
No certificates will be issued representing fractional shares, nor
will The Bank of New York purchase fractional shares in the
market. The Bank of New York will send to all registered holders
of common stock that do not participate in the Fund's dividend
reinvestment plan certificates for all shares of common stock
purchased or issued pursuant to the capital gains distribution
plan and cash in lieu of fractional shares of common stock.
The Fund may change, suspend or terminate the plan at any time
upon mailing a notice to participants.
(e) Anti-takeover provisions of charter and bylaws. The Fund's
charter includes provisions that could have the effect of limiting
the ability of other entities or persons to acquire control of the
Fund or to change the composition of its Board of Directors and
could have the effect of depriving shareholders of an opportunity
to sell their shares at a premium over prevailing market prices by
discouraging a third party from seeking to obtain control of the
Fund. The Board of Directors is divided into three classes, each
having a term of three years. At each annual meeting of
shareholders, the term of one class will expire. This provision
could delay for up to two years the replacement of a majority of
the Board of Directors. A Director may be removed from office
only by vote of the holders of at least 75% of the shares of
preferred stock or of common stock, as the case may be, entitled
to be voted on the matter.
The Fund's charter requires the favorable vote of the holders of
at least 75% of the shares of preferred stock and common stock of
the Fund entitled to be voted on the matter, voting together as a
single class, to approve, adopt or authorize the following:
(i) a merger or consolidation of the Fund with
another corporation,
(ii) a sale of all or substantially all of the
Fund's assets (other than in the regular course of the
Fund's investment activities), or
(iii) a liquidation or dissolution of the Fund,
unless such action has been approved, adopted or authorized
by the affirmative vote of two-thirds of the total number of
directors fixed in accordance with the bylaws, in which case
the affirmative vote of the holders of a majority of the
outstanding shares of preferred stock and common stock
entitled to be voted on the matter, voting together as a
single class, is required.
In addition, the holders of a majority of the outstanding shares
of the preferred stock, voting separately as a class, would be
required under the 1940 Act to adopt any plan of reorganization
that would adversely affect the holders of the preferred stock.
Finally, conversion of the Fund to an open-end investment company
would require an amendment to the charter. Such an amendment
would require the favorable vote of the holders of a majority of
the shares of preferred stock and common stock entitled to be
voted on the matter voting separately by class. At any time, the
amendment would have to be declared advisable by the Board of
Directors prior to its submission to shareholders. Shareholders
of an open-end investment company may require the company to
redeem their shares of common stock at any time (except in certain
circumstances as authorized by or under the 1940 Act) at their net
asset value, less such redemption charge, if any, as might be in
effect at the time of a redemption. In addition, conversion to an
open-end investment company would require redemption of all
outstanding shares of the preferred stock.
The Board of Directors has determined that the 75% voting
requirements described above, which are greater than the minimum
requirements under Maryland law or the 1940 Act, are in the best
interests of shareholders generally. Reference should be made to
the charter on file with the Securities and Exchange Commission
for the full text of these provisions.
2. Long-Term Debt.
Not applicable.
3. General
Not applicable.
4. Taxes. The Fund intends to continue to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as it has
in each year since the inception of its operations, so as to be
relieved of Federal income tax on net investment income and net
capital gains distributed to shareholders.
Dividends paid by the Fund from its ordinary income and distributions
of the Fund's net realized short-term capital gains are taxable to
shareholders as ordinary income. Shareholders may be proportionately
liable for taxes on income and gains of the Fund but shareholders not
subject to tax on their income will not be required to pay tax on
amounts distributed to them. The Fund will inform shareholders of
the amount and nature of the income or gains. Dividends from
ordinary income may be eligible for the dividends-received deduction
available to corporate shareholders. Under its Charter, the Fund is
required to designate dividends paid on its preferred stock as
qualifying for the dividends-received deduction to the extent such
dividends do not exceed the Fund's qualifying income. In the event
the Fund is required to allocate all of its qualifying income to
dividends on the preferred stock, dividends payable on the common
stock will not be eligible for the dividends-received deduction. Any
distributions attributable to the Fund's net realized long-term
capital gains are taxable to shareholders as long-term capital gains,
regardless of the holding period of shares of the Fund.
The Fund intends to distribute substantially all its net investment
income and net realized capital gains in the year earned or realized.
A dividend reinvestment plan is available to all holders of common
stock of the Fund. Under the dividend reinvestment plan, all cash
distributions to participating shareholders are reinvested in
additional shares of common stock. See Item 10.1(c).
5. Outstanding Stock
(4)
(3) Amount Outstanding
Amount Held by at 3/31/96 Exclusive
(1) (2) the Fund or for of Amount Shown
Title of Class Amount Authorized its Account Under (3)
-------------- ----------------- --------------- --------------------
Common, $.001
par value 250,000,000 -0- 197,305,491
Preferred, $.001
par value 100,000,000 -0- 5,000
6. Securities Ratings.
Not applicable.
Item 11. Defaults and Arrears on Senior Securities
Not applicable.
Item 12. Pending Legal Proceedings
There are no pending legal proceedings to which the Fund, any
subsidiary of the Fund, or the Adviser is a party.
Item 13. Table of Contents of the Statement of Additional Information
Not applicable.
<PAGE>
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 14. Cover Page
Not applicable.
Item 15. Table of Contents
Not applicable.
Item 16. General Information and History
During the past five years, the Fund has not engaged in any business
other than that of an investment company and has not been the subject of
any bankruptcy, receivership or similar proceedings, or any other material
reorganization, readjustment or succession. The Fund's name was changed
from Duff & Phelps Selected Utilities Inc. on November 1, 1990.
Item 17. Investment Objective and Policies
1. See Item 8.2.
2. See Item 8.2.
3. See Item 8.2.
4. There have been no significant changes in the Fund's portfolio
turnover rates over the last two fiscal years.
Item 18. Management
1.
<PAGE>
<TABLE>
<CAPTION>
Name, Address and Age Position(s) Held Principal Occupation(s)
- --------------------- With the Fund During Past 5 Years
---------------- -----------------------
<S> <C> <C>
Claire V. Hansen (1)(2) Director and Chairman Senior Advisor to the Board of Directors,
Three First National Plaza Phoenix Duff & Phelps Corporation since
Suite 1400 November 1995; Senior Advisor to the Board
Chicago, Illinois 60602 of Directors, Duff & Phelps
Age: 70 Corporation, 1988-November 1995 (Chairman
of the Board, 1987-1988:
Chairman of the Board and
Chief Executive Officer prior
thereto); Chairman of the Board,
Duff Research Inc. and Duff & Phelps
Investment Management Co., 1985-1987
Wallace B. Behnke(3) Director Consulting engineer since July 1989;
323 Glen Eagle prior thereto, Vice Chairman, Commonwealth
Kiawah Island, Edison Company (public utility)
South Carolina 29455
Age: 70
Harry J. Bruce(3) Director Private ivnestor; Chairman, Roman
88 Woodley Road Holdings, Inc.; former Chaimran and Chief
Winnetka, Illinois 60093 Executive Officer, Illinois Central Railroal
Age: 64 Co.; director, General Binding Corporation
Franklin A. Cole(2) Director Chairman, Croesus Corporation (private
11 South LaSalle St. management and investment company);
Chicago, Illinois 60602 former Chairman and Chief Executive
Age: 69 Officer, Amerifin Corporation (formerly named
Walter E. Heller International
Corporation); director, American
National Bank and Trust Company of
Chicago, American National
Corporation, Aon Corporation, CNA
Income Shares, GATX Corporation and
People's Energy Corporation
Gordon B. Davidson Director Senior Counsel, Wyatt, Tarrant & Combs (law
Citizens Plaza firm) since September 1995 (Chairman
Louisville, Kentucky 40202 of the Executive Committee prior thereto);
Age: 69 Chairman of the Board and Director, Trans
Financial Advisers, Inc. (family of mutual
funds) since September 1995
Beryl W. Sprinkel(3)(4) Director Consulting economist since January 1989;
20140 St. Andrews Drive Chairman of the Council of Economic
Olympia Fields, Illinois 60461 Advisers under President Reagan (1985-1989);
Age: 72 member of President Reagan's cabinet (1987-1989);
Under Secretary of the Treasury for
Monetary Affairs (1981-1985);
director, US Life Corp.
Robert J. Day Director Retired Chairman and Director, USG
125 South Franklin Street Corporation (manufacturer of construction
Chicago, Illinois 60606 materials) since June 1990 (Chairman
Age: 71 and Chief Executive Officer prior
thereto); former Chairman of the Board,
Federal Reserve Bank of Chicago
Francis E. Jeffries (1)(2) Director Chairman, Phoenix Duff & Phelps
55 East Monroe Street corporation since November 1995; Chairman
Chicago, Illinois 60603 and Chief Executive Officer, Duff & Phelps
Age: 65 corporation June 1993-November 1995 (President
and Chief Executive Officer, January
1992-June 1993); President and Chief
Executive Officer, Duff & Phelps
Illinois Inc. since 1987 (President
and Chief Operating Officer,
1984-1987); and Chairman of the
Board, Duff & Phelps Investment
Management Co. (1988-1993);
director, Phoenix Duff & Phelps
Corporation, The Empire District
Electric Company, Duff & Phelps
Utilities Tax-Free Income Inc. and
Duff & Phelps Utility and Corporate
Bond Trust Inc.; director/trustee,
Phoenix Funds
Nancy Lampton(4) Director Chairman and Chief Executive Officer,
3 Riverfront Plaza American Life and Accident Insurance
Louisville, Kentucky 40202 Company of Kentucky; director, BancOne
Age: 53 Kentucky Corporation and Baltimore
Gas and Electric
Richard J. Spletzer Senior Vice President, Executive Vice President, Duff & Phelps
55 East Monroe Street Chief Investment Investment Management Co. since 1993
Chicago, Illinois 60603 Officer and Assistant (Senior Vice President, 1986-1993); Senior
Age: 58 Secretary Vice President and Head of Public Utility
Research, Duff & Phelps Corporation,
prior thereto; director, Nuveen-Duff &
Phelps Investment Advisors (a joint
venture between Nuveen Institutional
Advisory Corp. and Duff & Phelps
Investment Management Co.)
Joseph C. Curry, Jr. Vice President Senior Vice President, J.J.B. Hilliard, W.L.
Hilliard Lyons Center Lyons, Inc. since 1994 (Vice President 1982-
Louisville, Kentucky 40202 1994); Vice President Hilliard Lyons Trust
Age: 51 Company; President and Director,
Hilliard-Lyons Government Fund,
Inc.; Vice President, Hilliard Lyons
Growth Fund, Inc.
Calvin J. Pedersen President and Chief President, Phoenix Duff & Phelps Corporation
55 East Monroe Street Executive Officer since November 1995; President, Duff & Phelps
Chicago, Illinois 60603 Corporation, 1993-November 1995
Age: 54 (Senior Vice President, 1986-1988 and
Executive Vice President,
1988-1993); Executive Vice President
and Director, Duff & Phelps
Investment Management Co. since 1988
(Senior Vice President, 1986-1988);
President and Chief Executive
Officer, Duff & Phelps Utilities
Tax-Free Income Inc. and Duff &
Phelps Utility and Corporate Bond
Trust Inc.; Trustee, Duff & Phelps
Enhanced Reserves Fund
T. Brooks Beittel Secretary, Treasurer Senior Vice President, Duff & Phelps
55 East Monroe Street and Senior Vice Investment Management Co. since 1993
Chicago, Illinois 60603 President (Vice President 1987-1993)
Age: 45
Dianna P. Wengler Assistant Secretary Vice President, J.J.B. Hilliard, W.L. Lyons,
Hilliard Lyons Center Inc. since 1990; Vice President and Treasurer,
Louisville, Kentucky 40202 Hilliard-Lyons Government Fund, Inc.; Vice
Age: 35 President, Hilliard Lyons Growth
Fund, Inc.
<FN>
(1) Interested director of the Fund, as defined in the Investment Company
Act of 1940.
(2) Member of Executive Committee of the Board of Directors, which has
authority, with certain exceptions, to exercise the powers of the
Board between Board meetings.
(3) Member of the Audit Committee of the Board of Directors.
(4) Director elected by holders of preferred stock.
</TABLE>
<PAGE>
2. Not applicable.
The Fund has not paid an amount in excess of $60,000 during 1995 to any
director, officer, any affiliated person of the Fund, any affiliated person
of an affiliate or principal underwriter of the Fund.
The following table shows the compensation paid by the Fund to the
Fund's current directors (and to Mr. Sidney Davidson, who retired as a
Director in 1995) during 1995:
<TABLE>
<CAPTION>
COMPENSATION TABLE (1)
Aggregate
Compensation
from the
Name of Director Fund
- ----------------- -------------
<S> <C>
Wallace B. Behnke............................................. $25,500
Harry J. Bruce................................................ 23,000
Franklin A. Cole.............................................. 26,500
Gordon B. Davidson............................................ 24,000
Sidney Davidson(2)............................................ 9,479
Robert J. Day................................................. 25,500
Claire V. Hansen.............................................. 0
Francis E. Jeffries........................................... 0
Nancy Lampton................................................. 22,000
Beryl W. Sprinkel(3).......................................... $14,250
<FN>
- ------------------
(1) During 1995, each director not affiliated with the Adviser received
an annual fee of $15,000 (and an additional $2,500 if the director
served as chairman of a committee of the board of directors) plus an
attendance fee of $1,000 for each meeting of the board of directors
or of a committee of the board of directors attended in person or by
telephone. Directors and officers affiliated with the Adviser
receive no compensation from the Fund for their services as such. In
addition to the amounts shown in the table above, all directors and
officers who are not interested persons of the Fund, the Adviser or
the Administrator are reimbursed for the expenses incurred by them in
connection with their attendance at a meeting of the board of
directors or a committee of the board of directors. The Fund does
not have a pension or retirement plan applicable to directors or
officers of the Fund.
(2) Having reached mandatory retirement age for directors of the Fund,
Mr. Sidney Davidson retired effective with the election of his
successor at the annual meeting of shareholders held April 19, 1995.
His annual compensation was pro-rated for the period from January 1,
1995 through April 19, 1995.
(3) Mr. Sprinkel was elected as a director of the Fund at the annual
meeting of shareholders held April 19, 1995, and his annual
compensation was pro-rated for the period from April 19, 1995 through
December 31, 1995.
</TABLE>
<PAGE>
Item 19. Control Persons and Principal Holders of Securities
1. The Fund does not consider that any person "controls" the Fund
within the meaning of this item. For information concerning the
Fund's officers and directors, see Item 18.
2. No person is known by the Fund to own of record or beneficially
five percent or more of any class of the Fund's outstanding
equity securities.
3. As of January 15, 1996, the officers and directors of the Fund
owned in the aggregate 237,266 shares of Common Stock,
representing approximately 1.2% of the Fund's outstanding Common
Stock.
Item 20. Investment Advisory and Other Services
1. The Adviser is a wholly-owned subsidiary of Phoenix Duff &
Phelps, which is an indirect, majority-owned subsidiary of Phoenix
Home Life Mutual Insurance Company. The Phoenix Duff & Phelps
organization has provided investment research regarding public
utility securities since its founding in 1932. Phoenix Duff & Phelps
is one of the nation's largest independent investment research
organizations, providing to institutional investors equity and
fixed-income investment research. Through other subsidiaries it
provides financial consulting and investment banking services. See
Item 18 for the names and capacities of affiliated persons of the
Fund who are also affiliated persons of the Adviser.
For a discussion of the method of calculating the advisory fee under
the Advisory Agreement, see Item 9.1(b). The investment advisory
fees paid by the Fund totaled $11,689,418 in 1995, $11,375,557 in
1994 and $11,912,511 in 1993.
2. See Item 9.1(b) for a discussion of the Service Agreement.
3. No fees, expenses or costs of the Fund were paid by persons
other than the Adviser or the Fund.
4. See Item 9.1 (d) for a discussion of the Administration
Agreement. The administrative fees paid by the Fund totalled
$2,872,728 in 1995, $2,835,067 in 1994 and $2,899,502 in 1993.
5. Not applicable.
6. See Item 9.1 (e).
7. The Fund's independent public accountant is Arthur Andersen LLP.
8. Not applicable.
Item 21. Broker Allocation and Other Practices
1. The Adviser has discretion to select brokers and dealers to
execute portfolio transactions initiated by the Adviser. The Fund
paid brokerage commissions in the aggregate amount of $5,876,415,
$6,105,176 and $2,013,238 during 1995, 1994 and 1993, respectively,
not including the gross underwriting spread on securities purchased
in underwritten public offerings.
2. The Administrator, received $69,195 and $7,500 or approximately
1.2% and 0.1 % of total brokerage commissions in 1995 and 1994,
respectively, for effecting transactions involving approximately 0.5%
and 0.1% of the aggregate dollar amount of transactions in which the
Fund paid brokerage commissions. J.J.B. Hilliard, W. L. Lyons, Inc.
did not receive any commissions from the Fund in 1993. Duff & Phelps
Securities Co. received $75,175 or approximately 1.3% of total
brokerage commissions in 1995 for effecting transactions involving
approximately 0.6% of the aggregate dollar amount of transactions in
which the Fund paid brokerage commissions. No brokerage commissions
were paid to Duff & Phelps Securities Co. during 1993 or 1994. The
differences between the respective percentages of brokerage
commissions paid to the Administrator and Duff & Phelps Securities
Co. and the corresponding percentages of aggregate dollar amount of
transactions in which the Fund paid brokerage commissions resulted
from the fact that the Fund generally pays a fixed commission per
share of common stock, regardless of the price paid for a particular
share.
3. In selecting brokers or dealers to execute portfolio
transactions and in evaluating the best net price and execution
available, the Adviser is authorized to consider "brokerage and
research services" (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934), statistical quotations,
specifically the quotations necessary to determine the Fund's net
asset value, and other information provided to the Fund and/or to the
Adviser (or their affiliates). The Adviser is also authorized to
cause the Fund to pay to a broker or dealer who provides such
brokerage and research services a commission for executing a
portfolio transaction which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction. The Adviser must determine in good faith, however, that
such commission was reasonable in relation to the value of the
brokerage and research services provided, viewed in terms of that
particular transaction or in terms of all the accounts over which the
Adviser exercises investment discretion. It is possible that certain
of the services received by the Adviser attributable to a particular
transaction will benefit one or more other accounts for which
investment discretion is exercised by the Adviser.
4. Neither the Fund nor the Adviser, during the last fiscal year,
pursuant to an agreement or understanding with a broker or otherwise
through an internal allocation procedure, directed the Fund's
brokerage transactions to a broker or brokers because of research
services.
5. The Fund has not acquired during its most recent fiscal year
securities of its regular brokers or dealers as defined in Rule 10b-1
under the 1940 Act, or their parents.
Item 22. Tax Status
The Fund intends to continue to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as it has in each year
since the inception of its operations, so as to be relieved of Federal
income tax on net investment income and net capital gains distributed to
shareholders.
Dividends paid by the Fund from its ordinary income and distributions
of the Fund's net realized short-term capital gains are taxable to
shareholders as ordinary income. Dividends from ordinary income may be
eligible for the dividends-received deduction available to corporate
shareholders. Under its Charter, the Fund is required to designate
dividends paid on its preferred stock as qualifying for the
dividends-received deduction to the extent such dividends do not exceed the
Fund's qualifying income. In the event the Fund is required to allocate
all of its qualifying income to dividends on the preferred stock, dividends
payable on the common stock will not be eligible for the dividends-received
deduction. Any distributions attributable to the Fund's net realized
long-term capital gains are taxable to shareholders as long-term capital
gains, regardless of the holding period of shares of the Fund.
The Fund intends to distribute substantially all its net investment
income and net realized capital gains in the year earned or realized. A
dividend reinvestment plan is available to all holders of common stock of
the Fund. Under the dividend reinvestment plan, all cash distributions to
participating shareholders are reinvested in additional shares of common
stock. See Item 10.1(c).
As of December 31, 1995, the Fund had capital loss carryforwards of
$201,770,357 which expire beginning on December 31, 2002.
Item 23. Financial Statements
The financial statements listed below are filed as Exhibit o hereto
and incorporated by reference herein.
- Report of independent public accountants
- Schedule of Investments at December 31, 1995
- Balance Sheet at December 31, 1995
- Statement of Operations for the year ended December 31, 1995
- Statement of Changes in Net Assets for the years ended December
31, 1995 and 1994
- Statement of Cash Flows for the year ended December 31, 1995
- Notes to Financial Statements
- Financial Highlights - Selected Per Share Data and Ratios
<PAGE>
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
1. Financial Statements
In Part B:
Report of independent public accountants
Schedule of Investments at December 31, 1995
Balance Sheet at December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statement of Changes in Net Assets for the years ended
December 31, 1995 and 1994
Statement of Cash Flows for the year ended December 31, 1995
Notes to Financial Statements
Financial Highlights - Selected Per Share Data and Ratios
In Part C:
None
2. Exhibits
a.1 Articles of Incorporation (Incorporated by reference from
Registrant's registration statement on Form N-2, no.
33-10421)
a.2 Amendment to Articles of Incorporation (Incorporated by
reference from Registrant's registration statement on Form
N-2, no. 33-10421)
a.3 Second Amendment to Articles of Incorporation
(Incorporated by reference from Registrant's registration
statement on Form N-2, no. 33-22933)
a.4 Form of Articles Supplementary creating Remarketed
Preferred Stock, Series A, B, C, D and E (Incorporated by
reference from pre-effective amendment no. 3 to
Registrant's registration statement on Form N-2, no.
33-22933)
a.5 Form of Articles Supplementary creating Remarketed
Preferred Stock, Series I (Incorporated by reference from
pre-effective amendment no. 3 to Registrant's registration
statement on Form N-2, no. 33-22933)
a.6 Third Amendment to Articles of Incorporation (Incorporated
by reference from post-effective amendment no. 26 to
Registrant's registration statement under the Investment
Company Act of 1940 on Form N-2, no. 811-4915)
a.7 Fourth Amendment to Articles of Incorporation
(Incorporated by reference from post-effective amendment
no. 27 to Registrant's registration statement under the
Investment Company Act of 1940 on Form N-2, no. 811-4915)
a.8 Fifth Amendment to Articles of Incorporation (Incorporated
by reference from Registrant's registration statement on
Form N-2, no. 33-71942)
b. Bylaws (as amended through February 15, 1995)
(Incorporated by reference from post-effective amendment
no. 36 to Registrant's registration statement under the
Investment Company Act of 1940 on Form N-2, no. 811-4915)
c. None
d.1 Specimen common stock certificate (Incorporated by
reference from Registrant's registration statement on Form
N-2, no. 33-10421)
d.2 Form of certificate of Remarketed Preferred Stock, Series
A (Incorporated by reference from pre-effective amendment
no. 2 to Registrant's registration statement on Form N-2,
no. 33-22933)
d.3 Form of certificate of Remarketed Preferred Stock, Series
B (Incorporated by reference from pre-effective amendment
no. 1 to Registrant's registration statement on Form N-2,
no. 33-24101)
d.4 Form of certificate of Remarketed Preferred Stock, Series
C (Incorporated by reference from pre-effective amendment
no. 1 to Registrant's registration statement on Form N-2,
no. 33-24100)
d.5 Form of certificate of Remarketed Preferred Stock, Series
D (Incorporated by reference from pre-effective amendment
no. 1 to Registrant's registration statement on Form N-2,
no. 33-24102)
d.6 Form of certificate of Remarketed Preferred Stock, Series
E (Incorporated by reference from pre-effective amendment
no. 1 to Registrant's registration statement on Form N-2,
no. 33-24099)
d.7 Form of certificate of Remarketed Preferred Stock, Series
I (Incorporated by reference from pre-effective amendment
no. 2 to Registrant's registration statement on Form N-2,
no. 33-22933)
e. None
f. None
g.1 Advisory Agreement
g.2 Service Agreement
g.3 Administration Agreement
h. Not applicable
i. Not applicable
j. Custodian agreement (Incorporated by reference from
Registrant's registration statement on Form N-2, no.
33-10421)
k.1 Loan agreement (Incorporated by reference from
Registrant's registration statement on Form N-2, no.
33-10421)
k.2 Amendment dated November 15, 1988 to Loan Agreement
(Incorporated by reference from post-effective amendment
no. 1 to Registrant's registration statement on Form N-2,
no. 33-20433)
k.3 Form of Remarketing Agreement (Incorporated by reference
from pre-effective amendment no. 3 to Registrant's
registration statement on Form N-2, no. 33-22933)
k.4 Form of Paying Agent Agreement (Incorporated by reference
from pre-effective amendment no. 3 to Registrant's
registration statement on Form N-2, no. 33-22933)
l. Not applicable
m. Not applicable
n. Not applicable
o. Financial statements, as of December 31, 1995 and for the
years ended December 31, 1995 and 1994, required by Item
23
p. Subscription Agreement for initial capital (Incorporated
by reference from Registrant's registration statement on
Form N-2, no. 33-10421)
q. Not applicable
r. Financial Date Schedule
Item 25. Marketing Arrangements
Not applicable.
Item 26. Other Expenses of Issuance and Distribution
Not applicable.
Item 27. Persons Controlled by or Under Common Control
The Fund does not consider that it is controlled, directly or
indirectly, by any person. The information on Item 20 is incorporated by
reference.
<PAGE>
Item 28. Number of Holders of Securities
Number of
Record Holders
Title of Class March 31, 1996
-------------- ----------------
Common Stock, $.001 par value 41,093
Preferred Stock, $.001 par value 1
Item 29. Indemnification
Section 2-418 of the General Corporation Law of Maryland authorizes
the indemnification of directors and officers of Maryland corporations
under specified circumstances.
Article Ninth of the Articles of Incorporation (exhibit 1.1 to the
Registrant's registration statement no. 33-10421, which is incorporated by
reference) provides that the Registrant shall indemnify its directors and
officers under specified circumstances; the provision contains the
exclusion required by section 17(h) of the Investment Company Act of 1940.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "1933 Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person in connection with the
securities being registered), the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
Registrant, its directors and officers, its Adviser and persons
affiliated with them are insured under a policy of insurance maintained by
Registrant and its Adviser, within the limits and subject to the
limitations of the policy, against certain expenses in connection with the
defense of actions, suits or proceedings and certain liabilities that might
be imposed as a result of such actions, suits or proceedings, to which they
are parties by reason of being or having been such directors or officers.
The policy expressly excludes coverage for any director or officer whose
personal dishonesty, fraudulent breach of trust, lack of good faith, or
intention to deceive or defraud has been finally adjudicated or may be
established or who willfully fails to act prudently.
Item 30. Business and Other Connections of Investment Adviser
Neither Duff & Phelps Investment Management Co., nor any of its
directors or executive officers, has at any time during the past two years
been engaged in any other business, profession, vocation or employment of a
substantial nature either for its or his own account or in the capacity of
director, officer, employee, partner or trustee, except as indicated in
this Registration Statement.
Item 31. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31 (a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder are maintained at the offices of the Fund (55 East
Monroe Street, Chicago, Illinois 60603), the Adviser, the Administrator and
the Fund's custodian and transfer agents. See Items 9.1(b), 9.1(d) and
9.1(e) for the addresses of the Adviser, the Administrator and the Funds
custodian and transfer agents.
Item 32. Management Services
Not applicable.
Item 33. Undertakings
Not applicable.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940,
the Registrant has duly caused this amendment to its registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Chicago, and State of Illinois, on April 29, 1996.
DUFF & PHELPS UTILITIES INCOME INC.
By /s/ Richard J. Spletzer
Richard J. Spletzer
Senior Vice President,
Chief Investment Officer
and Assistant Secretary
<PAGE>
EXHIBIT INDEX
Exhibit Sequential
No. Description Page No.
- ------- ----------- ----------
g.1 Advisory Agreement
g.2 Service Agreement
g.3 Administration Agreement
o. Financial statements, as of December 31, 1995
and for the years ended December 31, 1995
and 1994, required by Item 23
r. Financial Data Schedule
INVESTMENT ADVISORY AGREEMENT
DUFF & PHELPS UTILITIES INCOME INC., a Maryland corporation
registered under the Investment Company Act of 1940 ("1940 Act")
as a closed-end diversified management investment company
("Fund"), and DUFF & PHELPS INVESTMENT MANAGEMENT CO., an
Illinois corporation registered under the Investment Advisers Act
of 1940 as an investment adviser ("Manager"), agree that:
1. Engagement of Manager. Manager shall manage the
investment and reinvestment of the assets of Fund, subject
to the supervision of the board of directors of Fund, for
the period and on the terms set forth in this Advisory
Agreement. Manager shall give due consideration to the
investment policies and restrictions and the other
statements concerning Fund in Fund's charter, bylaws, and
registration statements under the 1940 Act and the
Securities Act of 1933 ("1933 Act"), and to the provisions
of the Internal Revenue Code applicable to Fund as a
regulated investment company. Manager shall be deemed for
all purposes to be an independent contractor and not an
agent of Fund, and unless otherwise expressly provided or
authorized, shall have no authority to act for or represent
Fund in any way.
Manager is authorized to make the decisions to buy and
sell securities of Fund, to place Fund's portfolio
transactions with securities broker-dealers, and to
negotiate the terms of transactions, on behalf of Fund.
Manager is authorized to exercise discretion within Fund's
policy concerning allocation of its portfolio brokerage, as
permitted by law, including but not limited to section 28(e)
of the Securities Exchange Act of 1934, and in so doing
shall not be required to make any reduction in its
investment advisory fees.
2. Expenses to be paid by Manager. Manager shall
furnish, at its own expense, office space to Fund and all
necessary office facilities, equipment and personnel for
managing the assets of Fund. Manager shall also assume and
pay all other expenses incurred by it in connection with
managing the assets of Fund, except that Manager shall not
assume and pay any expenses that J.J.B. Hilliard, W.L.
Lyons, Inc. ("Hilliard/Lyons") is obligated to pay under the
Administration Agreement ("Administration Agreement")
between Fund and Hilliard/Lyons.
3. Expenses to be paid by Fund. Fund shall pay all
charges of depositories, custodians and other agencies for
the safekeeping and servicing of its cash, securities and
other property and of its transfer agents and registrars and
its dividend disbursing, dividend reinvestment, redemption
and remarketing agents, if any, including any charges for
bookkeeping services provided by Fund's custodian; all
charges of legal counsel and of independent auditors; all
compensation of directors other than those affiliated with
Manager, Duff & Phelps Inc. or Hilliard/Lyons and all
expenses incurred in connection with their services to Fund;
all expenses of publication of notices and reports to its
shareholders; all expenses of proxy solicitations of Fund or
its board of directors; all expenses of printing of Fund's
prospectus and registration statement and mailing copies of
the prospectus; all taxes and corporate fees payable to
federal, state or other governmental agencies, domestic or
foreign; all stamp or other transfer taxes; all expenses of
printing and mailing certificates for shares of Fund; all
expenses of bond and insurance coverage required by law or
deemed advisable by Fund's board of directors; all expenses
of maintaining the registration of Fund under the 1940 Act;
all interest expenses; and all fees, dues and expenses
incurred by Fund in connection with membership in any trade
association or other investment company organization. In
addition to the payment of expenses, Fund shall also pay all
brokers' commissions and other charges relative to the
purchase and sale of portfolio securities.
4. Compensation of Manager. For the services to be
rendered and the charges and expenses to be assumed and to
be paid by Manager hereunder, Fund shall pay Manager a
quarterly fee at an annual rate of 0.60 of 1% of the average
weekly net assets of the Fund up to $1.5 billion and 0.50 of
1% of average weekly net assets in excess of $1.5 billion,
as determined by valuations made as of the last business day
of each calendar week ending during the quarter, which fee
shall be payable on the first business day of the next
quarter.
5. Services of Manager not exclusive. The services of
Manager to Fund hereunder are not to be deemed exclusive,
and Manager shall be free to render similar services to
others so long as its services under this Advisory Agreement
are not impaired by such other activities.
6. Limitation of liability of Manager. Manager shall
not be liable to Fund or its shareholders for any loss
suffered by Fund or its shareholders from or as a
consequence of any act or omission of Manager, or of any of
the directors, officers, employees or agents of Manager, in
connection with or pursuant to this Advisory Agreement,
except by reason of willful misfeasance, bad faith or gross
negligence on the part of Manager in performance of its
duties or by reason of reckless disregard by Manager of its
obligations and duties under this Advisory Agreement.
7. Duration and renewal. Unless terminated as
provided in section 8, this Advisory Agreement shall
continue in effect until September 30, 1993, and thereafter
from year to year only so long as such continuance is
specifically approved at least annually (a) by a majority of
those directors who are not "interested persons" (as defined
in section 2(a)(19) of the 1940 Act) of Fund or of Manager,
voting in person at a meeting called for the purpose of
voting on such approval, and (b) by either the board of
directors of Fund or vote of the holders of a "majority of
the outstanding shares of Fund" (which term as used
throughout this Advisory Agreement shall be construed in
accordance with the definition of "vote of a majority of the
outstanding voting securities of a company" in section
2(a)(42) of the 1940 Act).
8. Termination. This Advisory Agreement may be
terminated at any time, without payment of any penalty, by
the board of directors of Fund, or by a vote of the holders
of a majority of the outstanding shares of Fund, upon 60
days' written notice to Manager. This Advisory Agreement
may be terminated by Manager at any time upon 60 days'
written notice to Fund. This Advisory Agreement shall
terminate automatically in the event of its assignment (as
defined in section 2(a)(4) of the 1940 Act).
9. Amendment. This Advisory Agreement may not be
amended without the affirmative vote (a) of a majority of
those directors who are not "interested persons" of Fund or
of Manager, voting in person at a meeting called for the
purpose of voting on such approval, and (b) of the holders
of a majority of the outstanding shares of Fund.
10. Use of Manager's name. The Fund may use the name
"Duff & Phelps Utilities Income Inc." or any other name
derived from the name "Duff & Phelps" only for so long as
this Advisory Agreement or any extension, renewal or
amendment hereof remains in effect, including any similar
agreement with any organization which shall have succeeded
to the business of the Manager as investment adviser. At
such time as this Advisory Agreement or any extension,
renewal or amendment hereof, or such other similar agreement
shall no longer be in effect, the Fund will (by corporate
action, if necessary) cease to use any name derived from the
name "Duff & Phelps," any name similar thereto or any other
name indicating that it is advised by or otherwise connected
with the Manager, or with any organization which shall have
succeeded to the Manager's business as investment adviser.
Dated as of November 1, 1995
DUFF & PHELPS UTILITIES INCOME INC.
By: /s/ Calvin J. Pedersen
Its President and Chief
Executive Officer
DUFF & PHELPS INVESTMENT
MANAGEMENT CO.
By: /s/ Calvin J. Pedersen
Its Executive Vice President
SERVICE AGREEMENT
DUFF & PHELPS UTILITIES INCOME INC., a Maryland corporation
registered under the Investment Company Act of 1940 ("1940 Act")
as a closed-end diversified management investment company
("Fund"), DUFF & PHELPS INVESTMENT MANAGEMENT CO., an Illinois
corporation registered under the Investment Advisers Act of 1940
("Advisers Act") as an investment adviser ("Manager") and Phoenix
DUFF & PHELPS CORPORATION, a Delaware corporation ("Phoenix Duff
& Phelps"), agree that:
1. Personnel and facilities. Manager shall have the
right to use, and Phoenix Duff & Phelps shall make available
for the use of Manager, (a) statistical and other factual
information, advice regarding economic factors and trends or
advice as to occasional transactions in specific securities
and shall have access to such part-time services of
employees of Phoenix Duff & Phelps engaged in investment
research and analysis, and such services of administrative
and other employees of Phoenix Duff & Phelps, for periods to
be agreed upon by Manager and Phoenix Duff & Phelps, (b)
such administrative, clerical, stenographic and other
support services and office supplies and equipment, as may
in each case be reasonably required by Manager in the
performance of its obligations as investment adviser to Fund
under its Investment Advisory Agreement with Fund and any
agreement amending or superseding such agreement, and (c)
such office space as is reasonably needed by Manager in the
performance of its obligations as investment adviser to
Fund.
2. Availability of information. In performing
services for Manager under this agreement, the employees of
Phoenix Duff & Phelps may, to the full extent that they deem
appropriate, have access to and utilize statistical and
economic data, investment research and reports and other
information prepared for or contained in the files of
Phoenix Duff & Phelps that are relevant to making investment
decisions within the investment objectives of Fund, and may
make such information available to Manager.
3. Responsibility; standard of care. Employees of
Phoenix Duff & Phelps performing services for Manager
pursuant hereto shall report and be responsible solely to
the officers and directors of Manager or persons designated
by them. Phoenix Duff & Phelps shall not have any
responsibility for investment recommendations and decisions
of Manager based upon information or advice given or
obtained by or through such employees of Phoenix Duff &
Phelps. Duff & Phelps shall not be liable to Fund or its
shareholders for any loss suffered by Fund or its
shareholders from or as a consequence of any act or omission
of Phoenix Duff & Phelps, or of any of the directors,
officers, employees or agents of Phoenix Duff & Phelps, in
connection with or pursuant to this Agreement, except by
reason of willful misfeasance, bad faith or gross negligence
on the part of Phoenix Duff & Phelps in the performance of
its duties or by reckless disregard by Phoenix Duff & Phelps
of its obligations and duties under this Agreement. The
obligation of performance of the Investment Advisory
Agreement of Manager with Fund is solely that of Manager,
for which Phoenix Duff & Phelps assumes no responsibility
except as otherwise expressly provided herein.
4. Reimbursement of expenses. In consideration of the
services to be rendered and the facilities to be provided to
Manager by Phoenix Duff & Phelps and its employees pursuant
to this agreement, Manager agrees to reimburse Phoenix Duff
& Phelps for such costs, direct and indirect, as may be
fairly attributable to the services performed and the
facilities provided for Manager. Such costs shall include,
but shall not be limited to, an appropriate portion of
salaries, employee benefits, general overhead expense, and
supplies and equipment, and a charge in the nature of rent
for the cost of space in offices of Phoenix Duff & Phelps
fairly allocable to activities of Manager under its
Investment Advisory Agreement with Fund. In the event of
disagreement between Manager and Phoenix Duff & Phelps as to
a fair basis for allocating or apportioning costs, such
basis shall be fixed by the independent public accountants
for Fund.
5. Duration and renewal. Unless terminated as
provided in section 6, this Agreement shall continue in
effect until ____________, 199_, and thereafter from year to
year only so long as such continuance is specifically
approved at least annually (a) by a majority of those
directors who are not "interested persons" (as defined in
section 2(a)(19) of the 1940 Act) of Fund or Phoenix Duff &
Phelps, voting in person at a meeting called for the purpose
of voting on such approval, and (b) by either the board of
directors of Fund or vote of the holders of a "majority of
the outstanding shares of Fund" (which term as used
throughout this Agreement shall be construed in accordance
with the definition of "vote of a majority of the
outstanding voting securities of a company" in section
2(a)(42) of the 1940 Act).
6. Termination. This Agreement may be terminated at
any time, without payment of any penalty, by the board of
directors of Fund, upon 60 days' written notice to Manager
and Phoenix Duff & Phelps. This Agreement may be terminated
by Phoenix Duff & Phelps or Manager at any time upon 60
days' written notice to Fund. This Agreement shall
terminate automatically in the event of its assignment (as
defined in section 2(a)(4) of the 1940 Act) unless a
majority of the Fund's board of directors including a
majority of those directors who are not "interested persons"
of Fund or Phoenix Duff & Phelps, voting in person at a
meeting called for the purpose of such vote, approves the
continuation of this Agreement.
7. Amendment. This Agreement may not be amended
without the affirmative vote of a majority of those
directors who are not "interested persons" of Fund or
Phoenix Duff & Phelps, voting in person at a meeting called
for the purpose of voting on such approval.
Dated as of November 1, 1995
DUFF & PHELPS UTILITIES DUFF & PHELPS INVESTMENT
INCOME INC. MANAGEMENT CO.
By: /s/ Calvin J. Pedersen By: /s/ Calvin J. Pedersen
Its President and Chief Its Executive Vice President
Executive Officer
PHOENIX DUFF & PHELPS CORPORATION
By: /s/ Calvin J. Pedersen
Its President
ADMINISTRATION AGREEMENT
DUFF & PHELPS UTILITIES INCOME INC., a Maryland corporation
registered under the Investment Company Act of 1940 ("1940 Act")
as a closed-end diversified management investment company
("Fund"), and J.J.B. HILLIARD, W.L. LYONS, INC.
("Hilliard/Lyons"), a Kentucky corporation, agree that:
1. Engagement of Hilliard/Lyons. Hilliard/Lyons shall
provide administrative services to Fund subject to the
supervision of the board of directors of Fund, for the
period and on the terms set forth in this Agreement.
Hilliard/Lyons shall be deemed for all purposes to be an
independent contractor and not an agent of Fund, and unless
otherwise expressly provided or authorized, shall have no
authority to act for or represent Fund in any way.
The services to be provided to Fund by Hilliard/Lyons
shall include all management and administrative services
required in connection with the operation of Fund not
required to be performed by Duff & Phelps Investment
Management Co. ("Manager") pursuant to the Investment
Advisory Agreement ("Advisory Agreement") of even date
herewith between Fund and Manager, including but not limited
to: preparation and filing of reports and returns required
by governmental bodies and to shareholders, preparation of
proxy material and prospectuses, making arrangements for
shareholder meetings, and shareholder correspondence; and
supervision of services performed by others (the cost of
which will be paid by the Fund pursuant to paragraph 3),
involving the computation of net asset value, portfolio
accounting, preparation of financial statements and
preparation and filing of shareholder income tax
information.
2. Expenses to be paid by Hilliard/Lyons.
Hilliard/Lyons shall furnish, at its own expense, office
space and all necessary office facilities, equipment and
personnel for managing the Fund other than in connection
with the management of the Fund's investments.
3. Expenses to be paid by Fund. Fund shall pay all
charges of depositories, custodians and other agencies for
the safekeeping and servicing of its cash, securities and
other property and of its transfer agents and registrars and
its dividend disbursing, dividend reinvestment and
redemption agents, if any, including any charges for
bookkeeping, accounting and tax information services
provided by Fund's custodian; all charges of legal counsel
and of independent auditors; all compensation of directors
other than those affiliated with Manager, Duff & Phelps Inc.
or Hilliard/Lyons and all expenses incurred in connection
with their services to Fund; all expenses of publication of
notices and reports to its shareholders; all expenses of
proxy solicitations of Fund or its board of directors; all
expenses of printing of Fund's prospectus and registration
statement and mailing copies of the prospectus; all taxes
and corporate fees payable to federal, state or other
governmental agencies, domestic or foreign; all stamp or
other transfer taxes; all expenses of printing and mailing
certificates for shares of Fund; all expenses of bond and
insurance coverage required by law or deemed advisable by
Fund's board of directors; all expenses of maintaining the
registration of Fund under the 1940 Act; all interest
expenses; all fees, dues and expenses incurred by Fund in
connection with membership in any trade association or other
investment company organization; all miscellaneous business
expenses and, in general, all expenses incidental to its
operations not assumed by Hilliard/Lyons or by the Manager
pursuant to the Advisory Agreement. Fund shall also bear
all of Fund's extraordinary expenses as may arise, including
expenses incurred in connection with litigation, proceedings
and claims and expenses incurred in connection with any
obligation of the Fund to indemnify any person. In addition
to the payment of expenses, Fund shall also pay all brokers'
commissions and other charges relative to the purchase and
sale of portfolio securities.
4. Compensation of Hilliard/Lyons. For the services
to be rendered and the charges and expenses to be assumed
and to be paid by Hilliard/Lyons hereunder, Fund shall pay
Hilliard/Lyons a quarterly fee at annual rates of 0.25 of 1%
of the Fund's average weekly net assets up to $100 million,
0.20 of 1% of the Fund's average weekly net assets from $100
million to $1.0 billion, 0.10 of 1% of the Fund's average
weekly net assets from $1.0 billion to $1.5 billion and 0.06
of 1% of the Fund's average weekly net assets in excess of
$1.5 billion, as determined by valuations made as of the
last business day of each calendar week ending during the
quarter, which fee shall be payable on the first business
day of the next quarter.
5. Services of Hilliard/Lyons not exclusive. The
services of Hilliard/Lyons to Fund hereunder are not to be
deemed exclusive, and Hilliard/Lyons shall be free to render
similar services to others so long as its services under
this Agreement are not impaired by such other activities.
6. Limitation of liability of Hilliard/Lyons.
Hilliard/Lyons shall not be liable to Fund or its
shareholders for any loss suffered by Fund or its
shareholders from or as a consequence of any act or omission
of Hilliard/Lyons, or of any of the directors, officers,
employees or agents of Hilliard/Lyons, in connection with or
pursuant to this Agreement, except by reason of willful
misfeasance, bad faith or gross negligence on the part of
Hilliard/Lyons in the performance of its duties or by reason
of reckless disregard by Hilliard/Lyons of its obligations
and duties under this Agreement.
7. Duration and renewal. Unless terminated as
provided in section 8, this Agreement shall continue in
effect until November 1, 1997, and thereafter from year to
year only so long as such continuance is specifically
approved at least annually (a) by a majority of those
directors who are not interested persons of Fund or of
Hilliard/Lyons voting in person at a meeting called for the
purpose of voting on such approval, and (b) by either the
board of directors of Fund or vote of the holders of a
"majority of the outstanding shares of Fund" (which term as
used throughout this Agreement shall be construed in
accordance with the definition of "vote of a majority of the
outstanding voting securities of a company" in section
2(a)(42) of the 1940 Act).
8. Termination. This Agreement may be terminated at
any time, without payment of any penalty, by the board of
directors of Fund, or by a vote of the holders of a majority
of the outstanding shares of Fund, upon 60 days' written
notice to Hilliard/Lyons. This Agreement may be terminated
by Hilliard/Lyons at any time upon 60 days' written notice
to Fund.
9. Amendment. This Agreement may not be amended
without the affirmative vote of a majority of those
directors who are not "interested persons" (as defined in
section 2(a)(19) of the 1940 Act) of Fund or of
Hilliard/Lyons, voting in person at a meeting called for the
purpose of voting on such approval.
Dated as of November 1, 1995
DUFF & PHELPS UTILITIES INCOME INC.
By: /s/ Calvin J. Pedersen
Its President and Chief
Executive Officer
J.J.B. HILLIARD, W.L. LYONS, INC.
By: /s/ W. Allen Northcutt III
Its Senior Vice President
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Duff & Phelps Utilities Income Inc.:
We have audited the accompanying balance sheet of DUFF & PHELPS
UTILITIES INCOME, INC. (a Maryland corporation), including the schedule of
investments, as of December 31, 1995, and the related statements of
operations and cash flows for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended, and the
financial highlights for the years indicated thereon. 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 generally accepted
auditing standards. 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 examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence
with the custodian and brokers. As to securities purchased but not
received, we requested confirmation from brokers and, when replies were not
received, we carried out alternative auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. 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 Utilities Income Inc. as of December 31, 1995,
the results of its operations and 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 the years indicated thereon, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
January 29, 1996
<PAGE>
<TABLE>
<CAPTION>
DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS
December 31, 1995
COMMON STOCKS--69.7%
Market
Value
Shares Company (Note 1)
<S> <C> <C>
ELECTRIC-48.5%
874,700 Baltimore Gas & Electric Co................... $ 24,928,950
1,818,600 Boston Edison Co............................... 53,648,700
1,315,000 Carolina Power & Light Co...................... 45,367,500
2,036,000 Central and South West Corp.................... 56,753,500
235,000 CINergy Corp.................................. 7,196,875
705,000 CIPSCO Inc..................................... 27,495,000
1,300,000 CMS Energy Corp................................ 38,837,500
1,265,000 DQE Incorporated............................... 38,898,750
780,000 Duke Power Co.................................. 36,952,500
829,879 Eastern Utilities Associates................... 19,605,891
470,000 Empresa Nacional De Electricidad ADR........... 26,907,500
762,000 Entergy Corp................................... 22,288,500
950,000 Florida Progress Corp.......................... 33,606,250
300,000 FPL Group Inc.................................. 13,912,500
2,050,000 General Public Utilities Corp.................. 69,700,000
250,000 Houston Industries Inc........................ 6,062,500
1,865,400 Illinova Corp.................................. 55,962,000
1,067,200 IPALCO Enterprises Inc......................... 40,687,000
570,900 LG&E Energy Corp............................... 24,120,525
500,000 National Power PLC ADR........................ 4,625,000
1,918,300 New England Electric System.................... 76,012,637
707,000 Northeast Utilities............................ 17,233,125
1,278,300 NIPSCO Industries Inc.......................... 48,894,975
350,000 Ohio Edison Co................................ 8,225,000
1,600,000 PECO Energy Co................................. 48,200,000
339,000 Pinnacle West Capital Corp.................... 9,746,250
500,000 Portland General Corp.......................... 14,562,500
227,500 Powergen PLC ADR.............................. 2,957,500
1,250,000 Public Service Enterprise Group, Inc........... 38,281,250
1,151,200 Rochester Gas & Electric Corp.................. 26,045,900
3,191,700 Southern Co.................................... 78,595,612
945,000 TECO Energy Inc................................ 24,215,625
700,000 Unicom Corp.................................... 22,925,000
690,000 Western Resources Inc.......................... 23,028,750
--------------
1,086,481,065
The accompanying notes are an integral part of the financial statements.
<PAGE>
<CAPTION>
DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS - (Continued)
December 31, 1995
Shares Company Market
Value
(Note 1)
<S> <C> <C>
GAS-1.0%
661,600 Brooklyn Union Gas Co............................19,351,800
225,000 CMS Energy Corp. Class G......................... 4,246,875
----------
23,598,675
TELECOMMUNICATION-15.0%
1,443,100 Ameritech Corp...................................85,142,900
1,100,094 AT&T Corp........................................71,231,087
165,000 Bellsouth Corp...................................7,177,500
789,100 Frontier Corp....................................23,673,000
558,200 Nynex Corp.......................................30,142,800
400,000 Royal PTT Nederland ADS..........................14,500,000
1,318,615 SBC Communications Inc...........................75,820,363
664,400 Telefonica De Espana ADS.........................27,821,750
600 Telefonos De Chile ADR........................... 49,725
------------
335,559,125
NON-UTILITY-5.2%
253,800 CBL & Associates Properties Inc..................5,520,150
120,000 Chelsea GCA Realty Inc...........................3,600,000
100,000 Colonial Properties Trust........................2,550,000
105,500 Cousins Properties Inc...........................2,136,375
300,000 Crescent Real Estate Equities Inc................10,237,500
150,000 Developers Diversified Realty Corp...............4,500,000
150,000 Equity Residential Properties Trust..............4,593,750
478,100 First Industrial Realty Trust....................10,757,250
301,300 Gables Residential Trust.........................6,892,237
200,000 Highwoods Properties Inc.........................5,650,000
334,300 Liberty Property Trust...........................6,936,725
100,000 Meditrust........................................3,487,500
412,100 Merry Land & Investment Inc......................9,735,863
295,000 Nationwide Health Properties.....................12,390,000
290,000 Oasis Residential Inc............................6,597,500
250,000 SouthWest Property Trust Inc.....................3,375,000
273,400 TriNet Corporate Realty Trust....................7,450,150
The accompanying notes are an integral part of the financial statements.
<PAGE>
<CAPTION>
DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS-(Continued)
December 31, 1995
Shares Company Market
Value
(Note 1)
<S> <C> <C>
160,600 Vornado Realty Trust.............................6,022,500
75,000 Weeks Corp.......................................1,884,375
41,137 Weingarten Realty Investment.....................1,563,206
---------
115,880,081
-----------
Total Common Stocks (Cost-$1,419,682,438) 1,561,518,946
-------------
CONVERTIBLE PREFERRED STOCKS-0.1%
NON-UTILITY-0.1%
47,000 Tanger Factory Outlet Centers Inc. Series A......1,063,375
----------
Total Convertible Preferred Stocks
(Cost-$989,350) 1,063,375
----------
BONDS-26.5%
<PAGE>
<CAPTION>
Ratings
------------------------------------------------------
Standard
and Market Value
Par Value Company Duff & Phelps Moody's Poor's (Note 1)
<S> <C> <C> <C> <C> <C>
ELECTRIC--14.8%
$24,920,000 Alabama Power Co.
9%, due 12/01/24................ A+ A1 A+ 28,224,940
10,000,000 Carolina Power & Light Co.
9%, due 4/01/22................. A+ A2 A 10,692,590
14,500,000 Commonwealth Edison Co.
9-3/4%, due 2/15/20............. BBB Baa2 BBB 16,547,531
7,500,000 Commonwealth Edison Co.
9-7/8%, due 6/15/20............. BBB Baa2 BBB 8,893,170
10,000,000 Commonwealth Edison Co.
8-3/8%, due 2/15/23............. BBB Baa2 BBB 10,877,230
35,000,000 CTC Mansfield Funding Corp.
10-5/8%, due 9/30/16.......... Not Rated Aaa AAA 37,556,960
8,000,000 Duquesne Light Co.
7.55%, due 6/15/25.............. A- Baa1 BBB+ 8,100,720
11,500,000 Georgia Power Co.
7.95%, due 2/01/23.............. AA- A1 A+ 12,116,688
The accompanying notes are an integral part of the financial statements.
<PAGE>
<CAPTION>
DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS-(Continued)
December 31, 1995
Ratings
------------------------------------------------
Standard Market
and Value
Par Value Company Duff & Phelps Moody's Poor's (Note 1)
<S> <C> <C> <C> <C> <C>
5,000,000 Gulf States Utilities
8.94%, due 1/01/22..................... Not Rated Baa3 BBB- 5,588,300
22,000,000 Illinois Power Co.
8%, due 2/15/23........................ Not Rated Baa2 BBB 23,144,220
15,000,000 New York State Electric & Gas Corp.
9-7/8%, due 11/01/20................... Not Rated Baa1 BBB+ 17,400,930
4,000,000 New York State Electric & Gas Corp.
8-7/8% due 11/01/21.................... Not Rated Baa1 BBB+ 4,548,344
6,500,000 Ohio Edison Co.
8-3/4%, due 2/15/98.................... BBB+ Baa2 BBB- 6,833,580
14,105,000 Pennsylvania Power & Light Co.
9-1/4%, due 10/01/19................... Not Rated A3 A- 15,846,460
16,850,000 Pennsylvania Power & Light Co.
9-3/8%, due 7/01/21.................... Not Rated A3 A- 19,938,184
18,100,000 Potomac Electric Power Co.
9%, due 6/01/21........................ AA- A1 A 21,346,633
8,000,000 Potomac Electric Power Co.
7-3/8%, due 9/15/25.................... AA- A1 A 8,311,320
979,000 Public Service Electric & Gas Co.
8-3/4%, due 11/01/21................... A A2 A- 1,066,656
8,001,000 Southern California Edison
9-1/4%, due 12/22/22................... A+ A2 A+ 8,338,578
18,000,000 Texas Utilities Electric Co.
9-3/4%, due 5/01/21.................... Not Rated Baa2 BBB+ 21,573,468
10,000,000 Texas Utilities Electric Co.
8-3/4%, due 11/01/23................... Not Rated Baa2 BBB+ 11,418,850
10,000,000 Texas Utilities Electric Co.
7-3/8%, due 10/01/25................... Not Rated Baa2 BBB 10,187,500
12,000,000 UtiliCorp United Inc.
8%, due 3/01/23........................ BBB Baa3 BBB 12,731,532
8,530,000 Virginia Electric & Power Co.
9-3/8%, due 6/01/98.................... A A2 A 9,193,796
-----------
330,478,180
The accompanying notes are an integral part of the financial statements.
<CAPTION>
DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS-(Continued)
December 31, 1995
Ratings
------------------------------------------------
Standard Market
and Value
Par Value Company Duff & Phelps Moody's Poor's (Note 1)
<S> <C> <C> <C> <C> <C>
GAS-2.4%
6,000,000 Northwest Pipeline Corp.
10.65%, due 11/15/18................ BBB Baa1 BBB 6,442,196
10,000,000 Phillips Petroleum Co.
9.18%, due 9/15/21.................. Not Rated Baa1 BBB 11,739,330
9,500,000 Transco Energy
9-1/8%, due 5/01/98................. BBB- Baa2 BBB- 10,195,789
14,500,000 Transcontinental Gas Pipe Line Corp.
9-1/8%, due 2/01/17................. BBB Baa1 BBB 15,282,145
7,000,000 Williams Co.
10-1/4%, due 7/15/20................ BBB- Baa2 BBB- 9,690,317
-----------
53,329,777
TELECOMMUNICATION-8.1%
13,500,000 Bellsouth Capital Funding Corp.
9-1/4%, due 1/15/98................. AA+ Aa1 AAA 14,449,062
47,500,000 GTE Corp.
8.85%, due 3/01/98.................. A- Baa1 BBB+ 50,375,412
14,991,000 GTE Corp.
9-3/8%, due 12/01/00................ A- Baa1 BBB+ 17,003,932
5,000,000 GTE Corp.
10-1/4%, due 11/01/20............... A- Baa1 BBB+ 6,053,855
11,995,000 Mountain States Telephone
9-1/2%, due 5/01/00................. AA Aa3 AA- 13,641,074
13,750,000 New England Telephone & Telegraph
9%, due 8/01/31..................... AA Aa2 AA- 16,762,639
30,000,000 New York Telephone Co.
7%, due 8/15/25..................... A A2 A 29,925,000
24,000,000 Pacific Bell
8-1/2%, due 8/15/31................. AA- Aa3 AA- 26,780,352
5,000,000 US West Communications
8-7/8%, due 6/01/31................. AA Aa3 AA- 5,809,560
-----------
180,800,886
The accompanying notes are an integral part of the financial statements.
<PAGE>
<CAPTION>
DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS-(Continued)
December 31, 1995
Ratings
----------------------------------------------
Standard Market
Par Value Company and Value
Duff & Phelps Moody's Poor's (Note 1)
<S> <C> <C> <C> <C> <C>
NON-UTILITY-1.2%
15,700,000 American General Corp.
9-5/8%, due 2/01/18................ AA- A1 AA- 17,265,431
8,000,000 Dayton Hudson Corp.
9-7/8%, due 7/01/20................ A+ A3 A 10,705,552
------------
27,970,983
------------
Total Bonds (Cost-$557,038,050)................................................ 592,579,826
<CAPTION>
U.S. TREASURY OBLIGATIONS-3.5%
<S> <C> <C>
40,500,000 U.S. Treasury Notes
9-3/8%, due 4/15/96............................................................ 40,980,938
29,000,000 U.S. Treasury Bonds
11-3/4%, due 2/15/01........................................................... 37,120,000
------------
Total U.S. Treasury Obligations (Cost-$76,756,367)............................. 78,100,938
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS-0.1%
2,185,416 Federal National Mortgage Association
8%, due 5/01/05................................................................ 2,262,588
------------
Total U.S. Government Agency Obligations (Cost-$2,258,491)..................... 2,262,588
------------
<PAGE>
COMMERCIAL PAPER-0.4%
10,000,000 American General Finance
5.63%, due 1/03/96............................................................. 9,997,096
------------
Total Commercial Paper (Amortized cost-$9,997,096)............................. 9,997,096
------------
TOTAL INVESTMENTS (Cost-$2,066,721,792) (100.3%)............................... $2,245,522,769
=============
The percentage shown for each investment category is the total value of that category as a percentage of the total net assets
of the Fund.
The accompanying notes are an integral part of the financial statements.
<PAGE>
<CAPTION>
DUFF & PHELPS UTILITIES INCOME INC.
BALANCE SHEET
December 31, 1995
ASSETS:
<S> <C>
Investments at market value:
Common stocks (cost $1,419,682,438)....................$1,561,518,946
Convertible preferred stock (cost $989,350)............ 1,063,375
Bonds (cost $557,038,050).............................. 592,579,826
U.S. Treasury obligations (cost $76,756,367)........... 78,100,938
U.S. Government agency obligations (cost $2,258,491)... 2,262,588
Commercial paper (amortized cost $9,997,096)........... 9,997,096
Interest-bearing deposits with custodian.................. 28,159,874
Receivables:
Securities sold........................................ 72,696,895
Interest............................................... 15,939,449
Dividends.............................................. 10,666,109
Pre-paid expenses......................................... 133,924
-------------
Total Assets........................................$2,373,119,020
=============
LIABILITIES:
Due to Adviser (Note 2)...................................$ 3,110,454
Due to Administrator (Note 2)............................. 743,773
Dividends payable on common stock......................... 13,755,157
Dividends payable on remarketed preferred stock........... 1,873,844
Accrued expenses.......................................... 994,246
Commercial paper outstanding (Note 6)..................... 113,310,612
-----------
Total Liabilities................................... 133,788,086
===========
<CAPTION>
CAPITAL:
<S> <C>
Remarketed preferred stock ($.001 par value; 100,000,000 shares authorized and 5,000
shares issued and outstanding, liquidation preference $100,000 per share) (Note 5)......... 500,000,000
-------------
Common stock ($.001 par value; 250,000,000 shares authorized and 196,502,240 shares
issued and outstanding) (Note 4)........................................................... 196,502
Paid-in surplus (Note 4)..................................................................... 1,750,316,882
Accumulated net realized loss on investments................................................. (190,497,161)
Undistributed net investment income.......................................................... 513,734
Net unrealized appreciation on investments................................................... 178,800,977
--------------
Net assets applicable to common stock (equivalent to $8.85 per share based on
196,502,240 shares outstanding)....................................................... 1,739,330,934
--------------
Total Capital (Net Assets).............................................................. 2,239,330,934
-------------
Total Liabilities and Capital........................................................... $2,373,119,020
=============
The accompanying notes are an integral part of the financial statements
<PAGE>
DUFF & PHELPS UTILITIES INCOME INC.
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
INVESTMENT INCOME:
Interest.................................................................................... $ 60,933,681
Dividends (less withholding tax of $351,675)................................................ 128,607,561
-----------
Total investment income.............................................................. 189,541,242
EXPENSES:
Commercial paper interest expense (Note 6).................................................. 6,896,479
Management fees (Note 2).................................................................... 11,689,418
Administrative fees (Note 2)................................................................ 2,872,728
Transfer agent fees......................................................................... 703,400
Custodian fees.............................................................................. 255,500
Remarketing agent fees...................................................................... 1,267,360
Shareholder reports......................................................................... 511,400
Legal and audit fees........................................................................ 141,500
Directors' fees (Note 2).................................................................... 164,500
Other expenses.............................................................................. 552,894
-----------
Total expenses........................................................................... 25,055,179
-----------
Net investment income.................................................................... 164,486,063
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments............................................................ 11,609,834
Net change in unrealized appreciation on investments........................................ 305,307,239
-----------
Net gain on investments.................................................................. 316,917,073
-----------
Net increase in net assets resulting from operations..................................... $481,403,136
===========
The accompanying notes are an integral part of the financial statements
<PAGE>
<CAPTION>
DUFF & PHELPS UTILITIES INCOME INC.
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31
1995 1994
<S> <C> <C>
FROM OPERATIONS:
Net investment income................................................... $ 164,486,063 $ 149,966,073
Net realized gain (loss) on investments................................. 11,609,834 ( 198,760,234)
Net change in unrealized appreciation (depreciation) on investments..... 305,307,239 ( 206,109,651)
------------ -------------
Net increase (decrease) in net assets resulting from operations...... 481,403,136 ( 254,903,812)
DISTRIBUTIONS TO STOCKHOLDERS FROM:
Net investment income-preferred stock (Note 5).......................... ( 22,621,518) ( 17,049,118)
Net investment income-common stock (Note 3)............................. ( 142,377,331) ( 134,229,742)
Net long-term capital gains-common stock................................ 0 ( 54)
------------ -------------
Total distributions.................................................. ( 164,998,849) ( 151,278,914)
FROM CAPITAL STOCK TRANSACTIONS (Note 4):
Shares issued to common stockholders from dividend reinvestment......... 26,836,422 36,083,718
Shares issued to common stockholders through rights offering............ 0 248,355,802
------------ -------------
Net increase in net assets derived from capital share transactions...... 26,836,422 284,439,520
------------ -------------
Total increase (decrease)............................................ 343,240,709 ( 121,743,206)
TOTAL NET ASSETS:
Beginning of year....................................................... 1,896,090,255 2,017,833,431
------------ -------------
End of year (including undistributed net investment income of
$513,734 and $446,243 respectively)................................... $2,239,330,934 $1,896,090,225
============ =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
DUFF & PHELPS UTILITIES INCOME INC.
STATEMENT OF CASH FLOWS
For the year ended December 31, 1995
Cash Flows From (For):
OPERATING ACTIVITIES
Interest received......................................................... $ 62,009,456
Dividends received........................................................ 130,570,943
Operating expenses paid (excluding interest).............................. ( 18,032,117)
Interest paid on commercial paper......................................... ( 6,647,699)
--------------
Net cash provided by operating activities.......................................................... $167,900,583
INVESTING ACTIVITIES
Purchase of investment securities......................................... (4,297,263,608)
Proceeds from sale/redemption of investment securities.................... 4,271,105,207
Return of capital on investments.......................................... 1,621,654
Long-term capital gains dividends received................................ 173,507
--------------
Net cash used in investing activities.............................................................. ( 24,363,240)
FINANCING ACTIVITIES
Dividends paid............................................................ ( 162,721,126)
Proceeds from issuance of common stock under dividend reinvestment
plan.................................................................... 26,836,422
Change in net proceeds from issuance of commercial paper.................. ( 570,123)
--------------
Net cash used in financing activities............................................................. ( 136,454,827)
--------------
Net increase in cash and cash equivalents................................................................. 7,082,516
Cash and cash equivalents-beginning of year............................................................... 21,077,358
--------------
Cash and cash equivalents-end of year...................................................................... $ 28,159,874
==============
Reconciliation of net investment income to net cash provided by operating
activities:
Net investment income................................................................................ $164,486,063
Adjustments to reconcile net investment income to net cash provided by
operating activities:
Decrease in interest receivable....................................... 1,075,775
Decrease in dividends receivable...................................... 1,963,382
Increase in accrued expenses.......................................... 375,363
----------
Total adjustments............................................................................ 3,414,520
----------
Net cash provided by operating activities.............................................................. $ 167,900,583
===========
The accompanying notes are an integral part of the financial statements.
/TABLE
<PAGE>
DUFF & PHELPS UTILITIES INCOME INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
(1) SIGNIFICANT ACCOUNTING POLICIES:
Duff & Phelps Utilities Income Inc. (the "Fund") was incorporated
under the laws of the State of Maryland on November 26, 1986. The Fund
commenced operations on January 21, 1987, as a closed-end diversified
management investment company registered under the Investment Company Act
of 1940. The primary investment objectives of the Fund are current income
and long-term growth of income. Capital appreciation is a secondary
objective.
The following are the significant accounting policies of the Fund:
(a) The market values for securities are determined as follows:
Securities traded on a national securities exchange or traded
over-the-counter and quoted on the NASDAQ System are valued at last
sales prices. Securities so traded for which there were no sales and
other securities are valued at the mean of the most recent bid-asked
quotations. Bonds not traded on a securities exchange nor quoted on
the NASDAQ System are valued at a fair value using a procedure
determined in good faith by the Board of Directors which includes the
use of a pricing service. Each money market instrument having a
maturity of 60 days or less is valued on an amortized cost basis,
which approximates market value. Other assets and securities are
valued at a fair value, as determined in good faith by the Board of
Directors.
(b) No provision is made for Federal income taxes since the
Fund has elected to be taxed as a "regulated investment company" and
has made such distributions to its shareholders deemed necessary to
be relieved of all Federal income taxes under provisions of current
Federal tax law. The Fund intends to utilize provisions of Federal
income tax laws which allow a realized capital loss to be carried
forward for eight years following the year of loss and offset such
losses against any future realized gains. At December 31, 1995, the
Fund had tax capital loss carryforwards of $201,770,357 which expire
beginning on December 31, 2002.
In 1993, the Fund adopted the American Institute of Certified
Public Accountants' Statement of Position 93-2, "Determination,
Disclosure and Financial Statement Presentation of Income, Capital
Gain and Return of Capital Distributions by Investment Companies".
In conformance with this statement, the Fund changed the
classification of distributions to shareholders to better disclose
the differences between financial statement amounts and distributions
determined in accordance with federal income tax regulations. As a
result, the accumulated net realized loss and undistributed net
investment income captions on the balance sheet reflect book/tax
temporary differences. These differences are a result of the
deferral of wash sale losses, the accretion of market discount and
the cash basis recognition of preferred dividends for tax purposes.
(c) The accounts of the Fund are kept on the accrual basis of
accounting. Security transactions are recorded on the trade date.
Realized gains or losses from sales of securities are determined on
the specific identified cost basis. Dividend income is recognized on
the ex-dividend date. Interest income and expense are recognized on
the accrual basis.
(d) The preparation of financial statements in conformity with
generally accepted accounting principles 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 of
increases and decreases in net assets from operations during the
reporting period. Actual results could differ from those estimates.
(2) MANAGEMENT ARRANGEMENTS:
The Fund has engaged Duff & Phelps Investment Management Co. (the
"Adviser") to provide professional investment management services for the
Fund and has engaged J. J. B. Hilliard, W. L. Lyons, Inc. (the
"Administrator") to provide administrative and management services for the
Fund. The Adviser receives a quarterly fee at an annual rate of .60% of
the average weekly net assets of the Fund up to $1.5 billion and .50% of
average weekly net assets in excess thereof. The Administrator receives a
quarterly fee at annual rates of .25% of average weekly net assets up to
$100 million, .20% of average weekly net assets from $100 million to $1
billion, .10% of average weekly net assets from $1 billion to $1.5 billion,
and .06% of average weekly net assets in excess thereof. Directors of the
Fund not affiliated with the Adviser receive a fee of $15,000 per year plus
$1,000 per board or committee meeting attended. Committee Chairmen receive
an additional fee of $2,500 per year. Transfer agent and custodian fees
are paid to The Bank of New York.
(3) DIVIDENDS:
The Board of Directors has authorized the following distributions to common
stockholders from investment income in 1995:
<TABLE>
<CAPTION>
Record Payable Dividend Record Payable Dividend
Date Date Per Share Date Date Per Share
<S> <C> <C> <C> <C> <C>
01-31-95 02-10-95 $.06 07-31-95 08-10-95 $.06
02-28-95 03-10-95 .06 08-31-95 09-11-95 .06
03-31-95 04-10-95 .06 09-29-95 10-10-95 .06
04-28-95 05-10-95 .06 10-31-95 11-10-95 .06
05-31-95 06-12-95 .06 11-30-95 12-11-95 .06
06-30-95 07-10-95 .06 12-29-95 01-10-96 .07
</TABLE>
(4) CAPITAL STOCK TRANSACTIONS:
The Fund may purchase shares of its own stock in open market or private
transactions, from time to time and in such amounts and at such prices (not
exceeding $100,000 plus accumulated and unpaid dividends in the case of the
Fund's remarketed preferred stock and less than net asset value in the case
of the Fund's common stock) as management may deem advisable. Since any
such purchases by the Fund of its common stock would be made at prices
below net asset value, they would increase the net asset value per share of
the remaining shares of common stock outstanding. The Fund has not
purchased any shares of its common stock.
<PAGE>
Transactions in common stock and paid-in surplus during 1994 and 1995 were
as follows:
<TABLE>
<CAPTION>
For the year ended December 31
1994 1995
--------------------------------- ---------------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Beginning capitalization............... 157,286,747 $1,437,634,991 193,221,697 $1,723,676,962
Dividend reinvestment.................. 4,237,618 36,083,718 3,280,543 26,836,422
Shares issued through rights offering.. 31,697,332 248,355,802 -- --
Accounting change (Note 1)............. -- 1,602,451 -- --
------------- ------------- ------------- -------------
Total capitalization.......... 193,221,697 $1,723,676,962 196,502,240 $1,750,513,384
============= ============= ============ =============
</TABLE>
In 1994, the Fund issued 31,697,332 shares of common stock through a rights
offering for net proceeds of $248,355,802. The expenses incurred in
connection with the issuance of the Rights were recorded as a reduction of
paid-in surplus on common stock.
(5)REMARKETED PREFERRED STOCK:
In 1988, the Fund issued 5,000 shares of Remarketed Preferred Stock ("RP")
in five series of 1,000 shares each at a public offering price of $100,000
per share. The underwriting discount and other expenses incurred in
connection with the issuance of the RP were recorded as a reduction of
paid-in surplus on common stock. Dividends on the RP are cumulative at a
rate which was initially established for each series at its offering.
Since the initial offering of each series, the dividend rate on each series
has been reset every 49 days by a remarketing process. Dividend rates
ranged from 4.24% to 4.75% during the year ended December 31, 1995.
The RP is redeemable at the option of the Fund on any dividend
payment date at a redemption price equal to $100,000 per share, plus
accumulated and unpaid dividends. The Fund is required to maintain certain
asset coverage with respect to the RP, and the RP is subject to mandatory
redemption if that asset coverage is not maintained. Each series of RP is
also subject to mandatory redemption on a date certain as follows: Series
A -- November 28, 2012; Series B -- November 18, 2015; Series C -- November
7, 2018; Series D -- December 22, 2021; and Series E -- December 11, 2024.
In general, the holders of the RP and of the Common Stock have equal
voting rights of one vote per share, except that the holders of the RP, as
a class, vote to elect two members of the Board of Directors, and separate
class votes are required on certain matters that affect the respective
interests of the RP and the Common Stock. The RP has a liquidation
preference of $100,000 per share plus accumulated and unpaid dividends.
(6) COMMERCIAL PAPER:
The Board of Directors has authorized the Fund to issue up to
$200,000,000 of Commercial Paper Notes (the "Notes") in minimum
denominations of $100,000 with maturities up to 270 days. The Notes
generally will be sold on a discount basis, but may be sold on an
interest-bearing basis. The Notes are not redeemable by the Fund nor are
they subject to voluntary prepayment prior to maturity. The aggregate
amount of Notes outstanding changes from time to time. The Notes are
unsecured, general obligations of the Fund. The Fund has entered into a
credit agreement to provide liquidity. The Fund is able to request loans
under the credit agreement of up to $100,000,000 at any one time, subject
to certain restrictions. Interest rates on the Notes ranged from 5.48% to
6.14% during the year ended December 31, 1995. At December 31, 1995, the
Fund had Notes outstanding of $113,310,612.
(7) INVESTMENT TRANSACTIONS:
For the year ended December 31, 1995, purchases and sales of
investment securities (excluding short-term securities) were $3,908,909,340
and $3,950,012,855, respectively. For federal income tax purposes, at
December 31, 1995, the gross unrealized depreciation on investments was
$10,661,789 and gross unrealized appreciation was $177,765,502. The cost
of investments for financial reporting and Federal income tax purposes was
$2,066,721,792 and $2,078,419,056, respectively.
<PAGE>
FINANCIAL HIGHLIGHTS -- SELECTED 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:
<TABLE>
<CAPTION>
For the year ended December 31
-----------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value:
Beginning of year........................ $ 7.23 $ 9.65 $ 9.67 $ 9.55 $ 8.29
-------- -------- -------- -------- ---------
Net investment income....................... 0.85 0.82 0.81 0.89 0.95
Net realized gain (loss) and change in
unrealized appreciation/depreciation on
investments.............................. 1.62 ( 2.42) 0.09 0.11 1.25
-------- -------- -------- -------- ---------
Total from investment operations............ 2.47 (1.60) 0.90 1.00 2.20
Dividends on preferred stock from net
investments income....................... ( 0.12) (0.10) ( 0.08) ( 0.10) ( 0.17)
Dividends on common stock from net
investment income........................ ( 0.73) ( 0.72) ( 0.74) ( 0.78) ( 0.77)
Dividends on common stock from net
realized capital gains................... ( 0.00) ( 0.00) ( 0.10) ( 0.00) ( 0.00)
-------- -------- -------- --------- --------
Total distributions...................... ( 0.85) ( 0.82) ( 0.92) ( 0.88) ( 0.94)
-------- -------- -------- -------- --------
Net asset value:
End of year.............................. $ 8.85 $ 7.23 $ 9.65 $ 9.67 $ 9.55
======= ====== ====== ====== =======
Per share market value:
End of year.............................. $ 9.00 $ 7.88 $10.50 $10.50 $10.00
Ratio of expenses to average net assets..... 1.23% 1.18% 1.04% 1.04% 1.17%
Total investment return..................... 24.77% (18.04%) 8.43% 13.81% 24.56%
Ratio of net investment income to average
net assets............................... 8.13% 7.66% 6.09% 6.99% 7.75%
Portfolio turnover rate..................... 188.28% 129.56% 56.11% 43.30% 41.09%
Net assets, end of year (000s omitted)...... $2,239,331 $1,896,090 $2,017,833 $1,997,984 $1,863,427
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000806628
<NAME> DUFF & PHELPS UTILITIES INCOME INC
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 2066721792
<INVESTMENTS-AT-VALUE> 2245522769
<RECEIVABLES> 99302453
<ASSETS-OTHER> 28293798
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2373119020
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 133788086
<TOTAL-LIABILITIES> 133788086
<SENIOR-EQUITY> 500000000
<PAID-IN-CAPITAL-COMMON> 1750316882
<SHARES-COMMON-STOCK> 196502240
<SHARES-COMMON-PRIOR> 193221697
<ACCUMULATED-NII-CURRENT> 513734
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (190497161)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 178800977
<NET-ASSETS> 2239330934
<DIVIDEND-INCOME> 128607561
<INTEREST-INCOME> 60933681
<OTHER-INCOME> 0
<EXPENSES-NET> 25055179
<NET-INVESTMENT-INCOME> 164486063
<REALIZED-GAINS-CURRENT> 11609834
<APPREC-INCREASE-CURRENT> 305307239
<NET-CHANGE-FROM-OPS> 31617073
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 164998849
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 26836422
<NET-CHANGE-IN-ASSETS> 343240709
<ACCUMULATED-NII-PRIOR> 446243
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11689418
<INTEREST-EXPENSE> 6896479
<GROSS-EXPENSE> 25055179
<AVERAGE-NET-ASSETS> 2044423365
<PER-SHARE-NAV-BEGIN> 7.23
<PER-SHARE-NII> .85
<PER-SHARE-GAIN-APPREC> 1.62
<PER-SHARE-DIVIDEND> .85
<PER-SHARE-DISTRIBUTIONS> .85
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.85
<EXPENSE-RATIO> .012
<AVG-DEBT-OUTSTANDING> 115000000
<AVG-DEBT-PER-SHARE> 0.59
</TABLE>
