As filed with the Securities and Exchange Commission on April 30, 1998
Investment Company Act file no. 811-4915
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-2
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 39 [X]
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DUFF & PHELPS UTILITIES INCOME INC.
(Exact name of registrant as specified in charter)
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55 East Monroe Street
Chicago, Illinois 60603
(Address of principal executive offices)
Registrant's telephone number: 312/368-5510
Nathan I. Partain 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.
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<PAGE>
PART A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Outside Front Cover
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Not applicable.
Item 2. Inside front and Outside Back Cover Page
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Not applicable.
Item 3. Fee Table and Synopsis
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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......................................................0.73%
Interest Payments on Borrowed Funds..................................0.32%
Other Expenses.......................................................0.40%
Total Annual Expenses...................................1.45%
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Example (2) 1 year 2 years 5 years 10 years
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You would pay the following expenses
on a $1,000 investment, assuming a 5%
annual return: $15 $30 $79 $174
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(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.
<PAGE>
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
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Not applicable.
Item 5. Plan of Distribution
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Not applicable.
Item 6. Selling Shareholders
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Not applicable.
Item 7. Use of Proceeds
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Not applicable.
Item 8. General Description of the Registrant
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1. General
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(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
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Investment objectives
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The Fund's primary investment objectives are current income and
long-term growth of income. Capital appreciation is a secondary objective.
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 together as one class.
<PAGE>
Fundamental investment restrictions
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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
together as one class, which means the lesser of (i) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares
are represented or (ii) more than 50% of the outstanding shares:
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
<PAGE>
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
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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 statistical rating
organizations: Duff & Phelps Credit Rating Co. ("DCR"), Moody's Investors
Service, Inc. ("Moody's"), and Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. ("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- or better by DCR, Baa3 or better by Moody's, or
BBB- or better by S&P. In making its
<PAGE>
determination that a fixed income security is investment grade, the Adviser
will use the standards used by a nationally recognized statistical rating
organization.
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, S&P and Fitch IBCA, Inc., nationally recognized
statistical rating 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 the foregoing rating organizations in connection with the
Fund's receipt of the highest rating for its preferred stock from at least
two of such rating organizations.
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.
<PAGE>
3. Risk Factors
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Leverage. As of December 31, 1997, the Fund has outstanding
indebtedness of $98,441,884 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 17, 1998, the
dividend rate on the five series of preferred stock averaged
4.10% and the interest rate on the Fund's outstanding
indebtedness averaged 5.49%. The Fund must experience an annual
return of 1.02% 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.
<PAGE>
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.
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Assumed return on portfolio -10.00% -5.00% 0.00% 5.00% 10.00%
(net of expenses)
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Corresponding return to common -14.49% -7.92% -1.36% 5.21% 11.77%
stockholder
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Investments in Securities of Foreign Issuers. While the Fund is
prohibited from investing 15% 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
<PAGE>
premium to net asset value. For example, in the two-year period
ended December 31, 1997, 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 100% 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
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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:
Market Premium
(Discount) to
Market Price Net Asset Value at Net Asset Value at
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Quarter Ended Market Market Market Market
High Low High Low High Low
1998 March 31 $10.7500 $10.1250 $9.79 $9.91 9.81% 2.17%
1997 December 31 10.2500 9.1875 9.71 8.92 5.56% 3.00%
September 30 9.8125 8.6875 8.93 8.65 9.88% 0.43%
June 30 9.0000 8.6250 8.21 8.06 9.62% 7.01%
March 31 9.2500 8.5000 8.38 8.34 10.38% 1.92%
1996 December 31 8.8750 8.4375 8.42 7.99 5.40% 5.60%
September 30 8.8750 8.5000 8.04 7.85 10.39% 8.28%
June 30 9.0000 8.3750 8.14 8.05 10.57% 4.04%
March 31 9.7500 8.7500 8.90 8.22 9.55% 6.45%
On April 17, 1998, the net asset value was $10.35, trading prices ranged
between $10.5625 and $10.4375 (representing a premium to net asset value of
2.05% and 0.85%, respectively) and the closing price was $10.5000
(representing a premium to net asset value of 1.45%).
6. Business Development Companies
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Not applicable.
<PAGE>
Item 9. Management
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1. General
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(a) Board of Directors
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The business and affairs of the Fund are managed
under the direction of the board of directors.
(b) Investment Adviser
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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 $10.8 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 $11 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 Corporation ("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 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. For purposes of the foregoing calculation,
"average weekly net assets" is defined as the sum of (i) the
aggregate net asset value of the Fund's common stock, (ii)
the aggregate liquidation preference of the Fund's preferred
stock and (iii) the aggregate proceeds to the Fund of
commercial paper issued by the Fund.
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
<PAGE>
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 T. Brooks Beittel
and Nathan I.Partain. See Item 18 for a description of the
position and business experience of Messrs. Beittel and Partain.
Mr. Beittel has been responsible for the management of the fixed
income investments in the Fund's portfolio since April 1994.
Mr. Partain has been responsible for the management of the
equity investments in the Fund's portfolio since January 1998.
(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 and .10% of average weekly net assets over $1.0
billion. For purposes of the foregoing calculation, "average
weekly net assets" is defined as the sum of (i) the
aggregate net asset value of the Fund's common stock, (ii)
the aggregate liquidation preference of the Fund's preferred
stock and (iii) the aggregate proceeds to the Fund of
commercial paper issued by the Fund.
(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 Schroder 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. See Item 21.2.
<PAGE>
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
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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.
<PAGE>
(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.
<PAGE>
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
<PAGE>
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.
(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:
<PAGE>
(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
<PAGE>
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.
<PAGE>
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 3/31/98 Exclusive
(1) (2) the Fund or for its of Amount Shown
Title of Class Amount Authorized Account Under (3)
-------------- ----------------- -------------------- --------------------
Common, $.001
par value 250,000,000 -0- 203,654,529
Preferred, $.001
par value 100,000,000 -0- 5,000
6. Securities Ratings.
------------------
Not applicable.
<PAGE>
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.
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. The Fund's portfolio turnover rate was 188.28% in 1995,
226.21% in 1996 and 213.57% in 1997. The increase in the portfolio turnover
rate between 1995 and 1996 was due to the Fund's proactive response to
changes in the telecommunication and electric generation business. During
calendar year 1996, the value of electric company and telecommunication
company securities was buffeted by the impact of changes in long term
interest rates and an increasingly competitive environment. In response to
these developments, the Fund shifted more investments to faster growing
companies in the telecommunication and power industries, both domestically
and internationally, and
<PAGE>
to real estate investment trusts. This activity resulted in an increase in the
Fund's portfolio turnover rate.
Item 18. Management
- ------- ----------
1.
Name, Address and Age Position(s) Held Principal Occupation(s)
With the Fund During Past 5 Years
------------- --------------------
Claire V. Hansen (1)(2) Director and Senior Advisor to the Board of
5601 Turtle Bay Drive Chairman Directors, Phoenix Duff & Phelps
Naples, Florida 34108 Corporation since November 1995;
Age: 72 Senior Advisor to the Board
of Directors, Duff & Phelps
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
323 Glen Eagle July 1989; prior thereto, Vice
Kiawah Island, Chairman, Commonwealth Edison
South Carolina 29455 Company (public utility)
Age: 72
Harry J. Bruce(3) Director Private investor; Chairman, Roman
88 Woodley Road Holdings, Inc.; former
Winnetka, Illinois 60093 Chairman and Chief Executive
Age: 66 Officer, Illinois Central
Railroad Co.; director, General
Binding Corporation
Franklin A. Cole(2) Director Chairman, Croesus Corporation
11 South LaSalle St. (private management and investment
Chicago, Illinois 60602 company); former Chairman and
Age: 71 and Chief Executive Officer,
Amerifin Corporation (formerly
named Walter E. Heller
International Corporation);
director, American National Bank
and Trust Company of Chicago,
American National Corporation,
Aon Corporation and CNA Income
Shares
Gordon B. Davidson Director Senior Counsel, Wyatt, Tarrant &
Citizens Plaza Combs (law firm) since September
Louisville, Kentucky 40202 1995 (Chairman of the Executive
Age: 71 Committee prior thereto); retired
director, BellSouth Corp.; former
Chairman of the Board and
director, Trans Financial
Advisers, Inc.
<PAGE>
Name, Address and Age Position(s) Held Principal Occupation(s)
With the Fund During Past 5 Years
------------- --------------------
Robert J. Day Director Retired Chairman and Director, USG
125 South Franklin Street Corporation (manufacturer of
Chicago, Illinois 60606 construction materials) since June
Age: 73 1990 (Chairman and Chief Executive
Officer prior thereto); former
Chairman of the Board, Federal
Reserve Bank of Chicago
Francis E. Jeffries (1)(2) Director Retired Chairman, Phoenix Duff &
6585 Nicholas Boulevard Phelps Corporation (Chairman,
Naples, Florida 34108 November 1995-December 1996);
Age: 67 Chairman and Chief Executive
Officer, Duff & Phelps
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, 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
3 Riverfront Plaza Officer, American Life and
Louisville, Kentucky 40202 Accident Insurance Company of
Age: 55 Kentucky; director, BancOne
Kentucky Corporation and Baltimore
Gas and Electric
Beryl W. Sprinkel(3)(4) Director Consulting economist since January
20140 St. Andrews Drive 1989; Chairman of the Council of
Olympia Fields, Illinois 60461 Economic Advisors under President
Age: 74 Reagan (1985-1989); member
of President Reagan's cabinet
(1987-1989); Under Secretary of
the Treasury for Monetary Affairs
(1981-1985)
<PAGE>
Name, Address and Age Position(s) Held Principal Occupation(s)
With the Fund During Past 5 Years
------------- --------------------
Calvin J. Pedersen President and President, Phoenix Duff & Phelps
55 East Monroe Street Chief Executive Corporation since November 1995;
Chicago, Illinois 60603 Officer President, Duff & Phelps
Age: 56 Corporation, 1993-November 1995
(Senior Vice President, 1986-1988
and Executive Vice President,
1989-1993); Executive Vice
President and Director, Duff &
Phelps Investment Management Co.
since 1989 (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.;
director/trustee, Phoenix group
of funds
T. Brooks Beittel Secretary, Senior Vice President, Duff &
55 East Monroe Street Treasurer and Phelps Investment Management Co.
Chicago, Illinois 60603 Senior Vice since 1993 (Vice President
Age: 48 President 1987-1993)
Nathan I. Partain Executive Vice Executive Vice President, Duff &
55 East Monroe Street President, Phelps Investment Management Co.
Chicago, Illinois 60603 Chief Investment since January 1997; Director of
Age: 41 Officer and Utility Research, Phoenix
Assistant Secretary Duff & Phelps Corporation,
1989-1996 (Director of Equity
Research, 1993-1996 and Director
of Fixed Income Research, 1993)
Director, Otter Tail Power Company
Michael Schatt Senior Vice Senior Vice President, Duff &
55 East Monroe Street President Phelps Investment Management Co.
Chicago, Illinois 60603 since January 1997; Managing
Age: 51 Director, Phoenix Duff & Phelps
Corporation, 1994-1996;
Self-employed consultant, 1994;
Director of Real Estate Advisory
Practice, Coopers & Lybrand, 1990-
1994
Joseph C. Curry, Jr. Vice President Senior Vice President, J.J.B.
Hilliard Lyons Center Hillard, W.L. Lyons, Inc. since
Louisville, Kentucky 40202 1994 (Vice President 1982-1994);
Age: 53 Vice President Hilliard Lyons
Trust Company; President and
Director, Hilliard-Lyons
Government Fund, Inc.; Vice
President, Hilliard Lyons Growth
Fund, Inc.
Dianna P. Wengler Assistant Vice President, J.J.B. Hilliard,
Hilliard Lyons Center Secretary W. L. Lyons, Inc. since 1990; Vice
Louisville, Kentucky 40202 President and Treasurer, Hilliard-
Age: 37 Lyons Government Fund, Inc.; Vice
President, Hilliard Lyons Growth
Fund, Inc.
<PAGE>
- --------------------------------------------------------------------------------
(1) Director who is an "interested person" of the Fund, as defined in the
1940 Act.
(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.
2. Not applicable.
The Fund has not paid an amount in excess of $60,000 during 1997 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 during 1997:
COMPENSATION TABLE (1)(2)
Aggregate
Compensation
from the
Name of Director Fund
- ---------------- -----------
Wallace B. Behnke................................................ $31,500
Harry J. Bruce................................................... 24,500
Franklin A. Cole................................................. 28,500
Gordon B. Davidson............................................... 26,500
Robert J. Day.................................................... 31,500
Claire V. Hansen................................................. 0
Francis E. Jeffries (2)............................................ 26,500
Nancy Lampton...................................................... 25,500
Beryl W. Sprinkel.................................................. 25,500
- --------------
(1) During 1997, each director not affiliated with the Adviser received
an annual fee of $17,500 (and an additional $3,000 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 or the
Administrator 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 affiliated with 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.
<PAGE>
(2) During 1997, Mr. Jeffries received aggregate compensation of
$35,000 for service as a director of the Fund and as a director
of two other investment companies in the same fund complex as the
Fund. No other director received compensation for service as a
director of any other investment company in the same fund complex
as the Fund.
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 December 31, 1997, the officers and directors of the
Fund owned in the aggregate 213,919 shares of Common Stock,
representing less than 1% 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 $12,730,134 in 1997,
$12,254,315 in 1996 and $11,689,418 in 1995.
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 totaled
$2,997,616 in 1997, $2,944,545 in 1996 and $2,872,728 in
1995.
5. Not applicable.
6. See Item 9.1 (e).
7. The Fund's independent public accountant is Arthur Andersen LLP.
<PAGE>
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 $7,462,774,
$7,057,947 and $5,876,415 during 1997, 1996 and 1995,
respectively, not including the gross underwriting spread on
securities purchased in underwritten public offerings.
2. The Administrator received $39,022 and $74,016 or
approximately 0.5% and 1.0% of total brokerage commissions in
1997 and 1996, respectively, for effecting transactions involving
approximately 0.4% and 0.7% of the aggregate dollar amount of
transactions in which the Fund paid brokerage commissions. Prior
to ceasing operations in May, 1996, Duff & Phelps Securities Co.
received $51,750 or approximately 0.7% of total brokerage
commissions in 1996 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
1995. 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.
<PAGE>
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, 1997, the Fund had capital loss carryforwards
of $149,351,791 which expire beginning on December 31, 2002.
Item 23. Financial Statements
- ------- --------------------
The financial statements listed below are incorporated herein by
reference from the Fund's Annual Report to Shareholders for the year ended
December 31, 1997 as filed on Form N-30D with the Securities and Exchange
Commission on February 27, 1998 (no. 811-4915). All other portions of the
Annual Report to Shareholders are not incorporated herein by reference and
are not part of the Registration Statement. A copy of the Annual Report to
Shareholders may be obtained without charge by writing to the Fund at its
address at 55 East Monroe Street, Chicago, Illinois 60603 or by calling the
Fund toll-free at 800-680-4367.
- Report of independent public accountants
- Schedule of Investments at December 31, 1997
- Balance Sheet at December 31, 1997
- Statement of Operations for the year ended December 31,
1997
- Statement of Changes in Net Assets for the years ended
December 31, 1997 and 1996
- Statement of Cash Flows for the year ended December 31,
1997
<PAGE>
- Notes to Financial Statements
- Financial Highlights - Selected Per Share Data and
Ratios
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, 1997
Balance Sheet at December 31, 1997
Statement of Operations for the year ended December 31,
1997
Statement of Changes in Net Assets for the years ended
December 31, 1997 and 1996
Statement of Cash Flows for the year ended December 31,
1997
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 post-effective amendment no. 38 to Registrant's
registration statement under the Investment Company Act
of 1940 on Form N-2, no. 811-4915)
a.2 Amendment to Articles of Incorporation (Incorporated by
reference from post-effective amendment no. 38 to
Registrant's registration statement on Form N-2,
no. 811-4915)
<PAGE>
a.3 Second Amendment to Articles of Incorporation (Incorporated
by reference from post-effective amendment no. 38 to
Registrant's registration statement on Form N-2, no.
811-4915)
a.4 Form of Articles Supplementary creating Remarketed
Preferred Stock, Series A, B, C, D and E (Incorporated by
reference from post-effective amendment no. 38 to
Registrant's registration statement on Form N-2, no.
811-4915)
a.5 Form of Articles Supplementary creating Remarketed
Preferred Stock, Series I (Incorporated by reference from
post-effective amendment no. 38 to Registrant's
registration statement on Form N-2, no. 811-4915)
a.6 Third Amendment to Articles of Incorporation (Incorporated
by reference from post-effective amendment no. 38 to
Registrant's registration statement on Form N-2, no.
811-4915)
a.7 Fourth Amendment to Articles of Incorporation (Incorporated
by reference from post-effective amendment no. 38 to
Registrant's registration statement on Form N-2, no.
811-4915)
a.8 Fifth Amendment to Articles of Incorporation (Incorporated
by reference from post-effective amendment no. 38 to
Registrant's registration statement on Form N-2, no.
811-4915)
b. Bylaws (as amended through April 30, 1998)
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)
<PAGE>
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 Investment 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. Not applicable
<PAGE>
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 Data 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.
Item 28. Number of Holders of Securities
- ------- -------------------------------
Number of
Record Holders
Title of Class March 31, 1998
-------------- --------------
Common Stock, $.001 par value 36,328
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
<PAGE>
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 30,
1998.
DUFF & PHELPS UTILITIES INCOME INC.
By /s/ Nathan I. Partain
------------------------------------
Nathan I. Partain
Executive Vice President, Chief Investment Officer
and Assistant Secretary
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Sequential
No. Description Page No.
- ------- ------------------------------------------------ -----------
b. Bylaws (as amended through April 30, 1998)
g.1 Investment Advisory Agreement
g.2 Service Agreement
g.3 Administration Agreement
r. Financial Data Schedule
DUFF & PHELPS UTILITIES INCOME INC.
BYLAWS
(as amended through April 30, 1998)
ARTICLE I
OFFICES
Section 1.01. Principal office. The principal office of the
corporation in the State of Maryland shall be located in the City of
Baltimore.
Section 1.02. Other offices. The corporation may also have offices
at such other places both within and without the State of Maryland as the
board of directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 2.01. Place of meetings. All meetings of the stockholders
shall be held at such place in the United States as shall be designated
from time to time by the board of directors.
Section 2.02. Annual meeting. Beginning with the annual meeting of
stockholders to be held in 1990, the annual meeting of stockholders shall
be held on the third Wednesday of April or at such date and time within the
month of April of each year as shall be designated from time to time by the
board of directors and stated in the notice of the meeting, at which they
shall elect a board of directors and transact such other business as may
properly be brought before the meeting.
Section 2.03. Special meetings. Special meetings of stockholders,
for any purpose or purposes, unless otherwise prescribed by statute or by
the charter of the corporation, may be called at any time by the chairman,
the president or the board of directors. Special meetings of stockholders
shall be called by the secretary upon the written request of stockholders
entitled to cast at least 25 percent of all the votes entitled to be cast
at such meeting, provided that (a) such request shall state the purpose or
purposes of the meeting and the matters proposed to be acted on at it; and
(b) the stockholders requesting the meeting shall have paid to the
corporation the reasonably estimated cost of preparing and mailing the
notice thereof, which the secretary shall determine and specify to such
stockholders. Upon payment of these costs to the corporation, the secretary
shall notify each stockholder entitled to notice of the meeting. Unless
requested by
-1-
<PAGE>
stockholders entitled to cast a majority of all the votes entitled to be
cast at the meeting, a special meeting need not be called to consider any
matter which is substantially the same as a matter voted on at any special
meeting of stockholders held during the preceding twelve months.
Section 2.04. Stockholders entitled to vote; number of votes. If a
record date has been fixed for the determination of stockholders entitled
to notice of or to vote at any meeting of stockholders, each stockholder of
the corporation shall be entitled to vote, in person or by proxy, each
share of stock (or fraction thereof) registered in his name on the books of
the corporation outstanding at the close of business on such record date,
with one vote (or fraction of a vote) for each share (or fraction thereof)
so outstanding.
Section 2.05. Notice of meetings. Written notice of each meeting
of stockholders stating the place, date and hour of the meeting and, in the
case of a special meeting or if otherwise required by law, the purpose or
purposes for which the meeting is called, shall be given not less than 10
nor more than 90 days before the date of the meeting, to each stockholder
entitled to vote at such meeting.
Section 2.06. Quorum; adjournment. The holders of a majority of
the stock entitled to vote at a meeting of stockholders, present in person
or represented by proxy, shall constitute a quorum at the meeting for the
transaction of business except as otherwise provided by statute or by the
charter of the corporation. If, however, such quorum shall not be present
or represented at any meeting of stockholders, the stockholders entitled to
vote thereat present in person or represented by proxy shall have the power
to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or
represented. At any adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted
at the meeting as originally notified. If the adjourned meeting is more
than 120 days after the original record date, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given to each stockholder entitled to vote at
the meeting.
Section 2.07. Voting. When a quorum is present at any meeting, the
vote of the holders of a majority of the stock having voting power present
in person or represented by proxy and voting on the question shall decide
any question brought before such meeting, unless the question is one upon
which, by express provision of any statute or the charter of the
corporation or these bylaws, a different vote is required, in which case
such express provision shall govern and control the decision of such
question.
Section 2.08. Proxies. No proxy shall be valid more than eleven
months after its date, unless it provides for a longer period.
Section 2.09. Stock ledger. The secretary of the corporation shall
cause an original or duplicate stock ledger to be maintained at the office
of the corporation's transfer agent.
-2-
<PAGE>
ARTICLE III
DIRECTORS AND COMMITTEES
Section 3.01. Function and powers. The business and affairs of the
corporation shall be managed under the direction of its board of directors.
All powers of the corporation may be exercised by or under the authority of
the board of directors except as conferred on or reserved to the
stockholders by statute or the charter of the corporation or these bylaws.
Section 3.02. Number. The board of directors shall consist of 3
directors, which number may be increased or decreased by a resolution of a
majority of the entire board of directors, provided that the number of
directors shall not be less than 3 or more than 15.
Section 3.03. Vacancies. Any vacancy occurring in the board of
directors for any cause other than by reason of an increase in the number
of directors may be filled by a majority of the remaining members of the
board of directors, although such majority is less than a quorum; provided,
however, that no vacancy shall be so filled unless immediately thereafter
at least two-thirds of the directors then holding office shall have been
elected to such office by the stockholders, and provided further that if at
any time (other than prior to the first annual meeting of stockholders)
less than a majority of the directors holding office at that time were
elected by the stockholders, a meeting of the stockholders shall be held
promptly and in any event within 60 days for the purpose of electing
directors to fill any existing vacancy in the board of directors, unless
the Securities and Exchange Commission shall by order extend such period
under the authority granted by section 16(a) of the Investment Company Act
of 1940. A director elected to fill a vacancy shall be elected to hold
office until the next annual meeting of stockholders or until his successor
is elected and qualifies.
Section 3.04. Annual and regular meetings. The first meeting of
each newly elected board of directors shall be held immediately after the
adjournment of the annual meeting of stockholders, or at such other time or
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by any director who is not present at the meeting.
The board of directors from time to time may provide for the holding of
regular meetings of the board and fix their time and place.
Section 3.05. Special meetings. Special meetings of the board may
be called by the chairman on three days' notice to each director, either
personally or by mail or by telegram. Special meetings shall be called by
the chairman or secretary in like manner and on like notice on the written
request of a majority of the directors or a majority of the members of the
executive committee.
Section 3.06. Quorum and voting. At all meetings of the board the
act of a majority of the directors present at any meeting at which there is
a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or the charter of the
-3-
<PAGE>
corporation or these bylaws. If a quorum shall not be present at any
meeting of the board of directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 3.07. Telephone meetings. Members of the board of
directors or any committee thereof may participate in a meeting of such
board or committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time, and participation by such
means shall constitute presence in person at the meeting, except as may be
otherwise specifically provided by statute or the charter of the
corporation or these bylaws.
Section 3.08. Action without meeting. Unless otherwise restricted
by statute or the charter of the corporation or these bylaws, any action
required or permitted to be taken at any meeting of the board of directors
or of any committee thereof may be taken without a meeting if a unanimous
written consent which sets forth the action is signed by each member of the
board or committee, as the case may be, and filed with the minutes of
proceedings of the board or committee.
Section 3.09. Committees. The board of directors may, by
resolution passed by a majority of the entire board, designate an executive
committee and other committees, each committee to consist of two or more
directors of the corporation. In the absence of a member of a committee,
the members thereof present at any meeting, whether or not they constitute
a quorum, may appoint another member of the board of directors to act at
the meeting in the place of any such absent member.
Section 3.10. Executive committee. Unless otherwise provided by
resolution of the board of directors, the executive committee shall have
and may exercise all powers of the board of directors in the management of
the business and affairs of the corporation that may lawfully be exercised
by an executive committee, except the power to: (i) declare dividends or
distributions on stock; (ii) issue stock; (iii) recommend to the
stockholders any action which requires stockholder approval; (iv) amend the
bylaws; or (v) approve any merger or share exchange which does not require
stockholder approval.
Section 3.11. Other committees. To the extent provided by
resolution of the board of directors, other committees of the board shall
have and may exercise any of the powers that may lawfully be granted to the
executive committee.
Section 3.12. Minutes of committee meetings. Each committee shall
keep regular minutes of its meetings and report the same to the board of
directors when required.
Section 3.13. Expenses and compensation of directors. The
directors may be paid their expenses, if any, of attendance at each meeting
of the board of directors and may be paid a fixed sum for attendance at
each meeting of the board of directors or a stated salary as director, or
both. No such payment shall preclude any director from serving the
corporation in any other
-4-
<PAGE>
capacity and receiving compensation therefor. Members of special or
standing committees may be allowed like compensation for attending
committee meetings.
Section 3.14. Retirement of directors. Effective with the
elections of directors to be held at the annual meeting of stockholders in
1992, no person shall stand for election or reelection as a director of the
Fund if that person would be 75 years old or older at the date of the proxy
statement for the meeting of stockholders at which such election would take
place.
Section 3.15. Qualification of directors. Until November 1, 1998,
at least 75% of the members of the board of directors shall not be
interested persons (as defined in section 2(a)(19) of the Investment
Company Act of 1940) of Duff & Phelps Investment Management Co., the
corporation's investment adviser.
ARTICLE IV
NOTICES
Section 4.01. Type of notice. Whenever, under the provision of any
statute or the charter of the corporation or these bylaws, notice is
required to be given to any director or stockholder, it shall not be
construed to mean personal notice, but such notice may be given in writing,
by mail, addressed to such director or stockholder, at his address as it
appears on the records of the corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall
be deposited in the United States mail. Notice to directors may also be
given by telegram.
Section 4.02. Waiver of notice. Whenever the provisions of any
statute or the charter of the corporation or these bylaws require notice of
the time, place or purpose of a meeting of the board of directors or a
committee of the board, or of stockholders, each person who is entitled to
the notice waives notice if: (a) before or after the meeting he signs a
waiver of notice which is filed with the records of the meeting; or (b) he
is present at the meeting or, in the case of a stockholders' meeting, is
represented by proxy.
ARTICLE V
OFFICERS
Section 5.01. Offices. The officers of the corporation shall be
elected by the board of directors and shall be a chairman, a president, one
or more vice presidents, a secretary and a treasurer. The board of
directors may also appoint one or more assistant secretaries and assistant
treasurers. Any number of offices may be held by the same person, unless
the charter of the corporation or these bylaws otherwise provide, except
that no one may serve concurrently as both president and vice president. A
person who holds more than one office may not act in more
-5-
<PAGE>
than one capacity to execute, acknowledge or verify an instrument required
by law to be executed, acknowledged or verified by more than one officer.
Section 5.02. Annual election. The board of directors at its first
meeting after each annual meeting of stockholders shall elect a chairman, a
president, one or more vice presidents, a secretary and a treasurer.
Section 5.03. Other officers and agents. The board of directors
may appoint such other officers and agents as it shall deem necessary, who
shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the board.
Section 5.04. Remuneration. The salaries or other remuneration, if
any, of all officers of the corporation shall be fixed by the board of
directors.
Section 5.05. Term of office; removal; vacancies. The officers of
the corporation shall hold office until their respective successors are
chosen and qualify. Any officer elected or appointed by the board of
directors may be removed at any time by the affirmative vote of a majority
of the board of directors, when the board in its judgment finds that the
best interests of the corporation will be served by such action. The
removal of an officer or agent does not prejudice any of his contract
rights. Any vacancy occurring in any office of the corporation shall be
filled by the board of directors.
Section 5.06. The chairman. The chairman, who shall be chosen from
among the directors of the corporation, shall preside at all meetings of
the board of directors and stockholders. He shall perform such other duties
and have such other powers as the board of directors may from time to time
prescribe.
Section 5.07. The president and chief executive officer. The
president and chief executive officer shall be the chief executive officer
of the corporation, shall have general and active management of the
business of the corporation and shall see that all orders and resolutions
of the board of directors are carried into effect. In the absence of the
chairman or in the event of his inability or refusal to act, the president
shall preside at all meetings of the board of directors and stockholders.
The president may execute bonds, mortgages and other contracts requiring a
seal, under the seal of the corporation, except where required or permitted
by law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to
some other officer or agent of the corporation.
Section 5.08. The vice presidents. In the absence of the president
or in the event of his inability or refusal to act, the vice president (or
in the event there be more than one vice president, the vice presidents in
the order designated, or in the absence of any designation, then in the
order of their election) shall perform the duties of the president, and
when so acting shall have all the powers of and be subject to all the
restrictions upon the president. The vice
-6-
<PAGE>
presidents shall perform such other duties and have such other powers as
the board of directors may from time to time prescribe.
Section 5.09. The secretary. The secretary: (a) shall attend all
meetings of the board of directors and all meetings of stockholders and
record all the proceedings of the meetings in a book to be kept for that
purpose and shall perform like duties for the standing committees when
required; (b) shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors,
the chairman or the president, under whose supervision the secretary shall
be; and (c) shall have custody of the corporate seal of the corporation and
shall have authority to affix the same to any instrument requiring it, and
when so affixed it may be attested by his signature.
Section 5.10. The assistant secretary. The assistant secretary, or
if there be more than one, the assistant secretaries in the order
determined by the board of directors (or if there be no such determination,
then in the order of their election), shall, in the absence of the
secretary or in the event of his inability or refusal to act, perform the
duties and exercise the powers of the secretary and shall perform such
other duties and have such other powers as the board of directors may from
time to time prescribe.
Section 5.11. The treasurer. The treasurer: (a) shall keep full
and accurate accounts of receipts and disbursements in books belonging to
the corporation; (b) shall deposit with the corporation's custodian all
moneys and other valuable effects in the name and to the credit of the
corporation; (c) shall direct the custodian to make such disbursements of
the funds of the corporation as may be ordered by the board of directors,
taking proper vouchers for such disbursements; and (d) shall render to the
president and the board of directors, at its regular meetings, or when the
board of directors so requires, an account of all his transactions as
treasurer and financial statements of the corporation.
Section 5.12. The assistant treasurer. The assistant treasurer, or
if there shall be more than one, the assistant treasurers in the order
determined by the board of directors (or if there be no such determination,
then in the order of their election), shall, in the absence of the
treasurer or in the event of his inability or refusal to act, perform the
duties and exercise the powers of the treasurer and shall perform such
other duties and have such other powers as the board of directors may from
time to time prescribe.
ARTICLE VI
CAPITAL STOCK
Section 6.01. Certificates of stock. Every holder of stock in the
corporation shall be entitled, upon request, to have a certificate or
certificates, signed by, or in the name of the corporation by the chairman,
the president or a vice president and the treasurer, an assistant
-7-
<PAGE>
treasurer, the secretary or an assistant secretary of the corporation,
certifying the number of full shares owned by him in the corporation. No
certificates shall be issued for fractional shares. Where a certificate is
countersigned by a transfer agent other than the corporation or its
employee, any other signature on the certificate may be facsimile. In case
any officer or transfer agent who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer or
transfer agent before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer or transfer
agent at the date of issue.
Section 6.02. Lost certificates. The board of directors may direct
a new certificate or certificates to be issued in place of any certificate
or certificates theretofore issued by the corporation alleged to have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or
certificates, the board of directors may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
The issuance of a new certificate under this section does not constitute an
overissue of the shares it represents.
Section 6.03. Transfers of stock. The shares of stock of the
corporation shall be transferable on the books of the corporation at the
request of the record holder thereof in person or by a duly authorized
attorney, upon presentation to the corporation or its transfer agent of a
duly executed assignment or authority to transfer, or power evidence of
succession, and, if the shares are represented by a certificate, a duly
endorsed certificate or certificates of stock surrendered for cancellation,
and with such proof of the authenticity of the signatures as the
corporation or its transfer agent may reasonably require. The transfer
shall be recorded on the books of the corporation, the old certificates, if
any, shall be cancelled, and the new record holder, upon request, shall be
entitled to a new certificate or certificates.
Section 6.04. Fixing of record date. The board of directors may
fix in advance a date as a record date for the determination of the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or to receive payment of any dividend
or other distribution or allotment of any rights, or to exercise any rights
in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, provided that such record date shall
not be a date more than 90 days, and in the case of a meeting of
stockholders not less than 10 days, prior to the date on which the
particular action requiring such determination of stockholders is to be
taken. In such case only such stockholders as shall be stockholders of
record on the record date so fixed shall be entitled to such notice of, and
to vote at, such meeting or adjournment, or to give such consent, or to
receive payment of such dividend or other distribution, or to receive such
allotment of rights, or to exercise such rights, or to take such
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other action, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after any such record date.
Section 6.05. Registered stockholders. The corporation shall be
entitled to treat the holder of record of shares as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by statute.
ARTICLE VII
CUSTODIAN
Section 7.01. Qualifications. The corporation shall at all times
employ, pursuant to a written contract, a bank or trust company having an
aggregate capital, surplus and undivided profits (as shown in its last
published report) of at least $2,000,000 as custodian to hold the funds and
securities of the corporation.
Section 7.02. Contract. Such contract shall be upon such terms and
conditions and may provide for such compensation as the board of directors
deems necessary or appropriate, provided such contract shall further
provide that the custodian shall deliver securities owned by the
corporation only upon sale of such securities for the account of the
corporation and receipt of payment therefor by the custodian or when such
securities may be called, redeemed, retired or otherwise become payable.
Such limitation shall not, however, prevent:
(a) the delivery of securities for examination to the
broker selling the same in accord with the "street delivery"
custom whereby such securities are delivered to such broker in
exchange for a delivery receipt exchanged on the same day for an
uncertified check of such broker to be presented on the same day
for certification;
(b) the delivery of securities of an issuer in exchange
for or conversion into other securities alone or cash and other
securities pursuant to any plan of merger, consolidation,
reorganization, recapitalization or readjustment of the securities
of such issuer;
(c) the conversion by the custodian of securities owned
by the corporation pursuant to the provisions of such securities
into other securities;
(d) the surrender by the custodian of warrants, rights or
similar securities owned by the corporation in the exercise of
such warrants, rights or similar securities, or the surrender of
interim receipts or temporary securities for definitive
securities;
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(e) the delivery of securities as collateral on
borrowing effected by the corporation;
(f) the delivery of securities owned by the corporation
as a redemption in kind of securities issued by the corporation.
The custodian shall deliver funds of the corporation only upon the purchase
of securities for the portfolio of the corporation and the delivery of such
securities to the custodian, but such limitation shall not prevent the
release of funds by the custodian for payment of interest, dividend
disbursements, taxes and management fees, for payments in connection with
the conversion, exchange or surrender of securities owned by the
corporation as set forth in sub-paragraphs (b), (c) and (d) above and for
operating expenses of the corporation.
Section 7.03. Termination of contract. The contract of employment
of the custodian shall be terminable by either party on 60 days' written
notice to the other party. Upon any termination, the board of directors
shall use its best efforts to obtain a successor custodian, but lacking
success in the appointment of a successor custodian, the question of
whether the corporation shall be liquidated or shall function without a
custodian shall be submitted to the stockholders before delivery of any
funds or securities of the corporation to any person other than a successor
custodian, including a temporary successor selected by the retiring
custodian. If a successor custodian is found, the retiring custodian shall
deliver funds and securities owned by the corporation directly to the
successor custodian.
Section 7.04. Agents of custodian. The provisions of any other
selection of these bylaws to the contrary notwithstanding, any contract of
employment of a custodian to hold the funds and securities of the
corporation may authorize the custodian, upon approval of the board of
directors, to appoint other banks or trust companies meeting the
requirements of this article, domestic and foreign (including domestic and
foreign branches), to perform all or a part of the duties of the custodian
under its contract with the corporation. In the case of foreign banks, no
authorization or appointment providing for the holding of funds or
securities of the corporation (other than in connection with the clearing
of transactions or exchanges of securities) shall become effective unless
permitted by an appropriate order, rule or written advice of the Securities
and Exchange Commission.
Section 7.05. Negotiable instruments. Except as otherwise
authorized by the board of directors, all checks and drafts for the payment
of money shall be signed in the name of the corporation by the custodian,
and all requisitions or orders for the payment of money by the custodian or
for the issue of checks and drafts therefor, all promissory notes, all
assignments of shares or securities standing in the name of the
corporation, and all requisitions or orders for the assignment of shares or
securities standing in the name of the custodian or its nominee, or for the
execution of powers to transfer the same, shall be signed in the name of
the corporation by not less than two of its officers. Promissory notes,
checks or drafts payable to the corporation may be endorsed only to the
order of the custodian or its agent.
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ARTICLE VIII
GENERAL PROVISIONS
Section 8.01. Dividends.
(a) The board of directors, from time to time as they may
deem advisable, may declare and pay dividends in cash or other property of
the corporation, out of any source available for dividends, to the
stockholders according to their respective rights and interests and in
accordance with the applicable provisions of the charter of the
corporation.
(b) The board of directors may prescribe from time to
time that dividends declared are payable at the election of any of the
stockholders, either in cash or in shares of the corporation.
(c) The board of directors shall cause any dividend
payment to be accompanied by a written statement if paid wholly or partly
from any source other than:
(i) the corporation's accumulated undistributed
net income (determined in accordance with generally accepted accounting
principles and the rules and regulations of the Securities and Exchange
Commission then in effect) and not including profits or losses realized upon
the sale of securities or other properties; or
(ii) the corporation's net income so determined
for the current or preceding fiscal year.
Such statement shall adequately disclose the source or sources of such
payment and the basis of calculation, and shall be in such form as the
Securities and Exchange Commission may prescribe.
Section 8.02. Fiscal year. The fiscal year of the corporation shall
end on December 31.
Section 8.03. Seal. The corporate seal shall have inscribed
thereon the name of the corporation and the words "Corporate Seal,
Maryland". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or by placing the word "seal" adjacent
to the signature of the authorized officer of the corporation. Any officer
or director of the corporation shall have authority to affix the corporate
seal of the corporation to any document requiring the same.
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ARTICLE IX
AMENDMENTS
Section 9.01. General. Except as provided in section 9.02, these
bylaws may be altered, amended or repealed, and new bylaws may be adopted
solely by the board of directors, at any meeting of the board of directors.
Section 9.02. Amended by stockholders only. Sections 2.06 and 2.07
of article II, sections 3.04 and 3.15 of article III, article VII, and
sub-section 8.01(c) of article VIII of these bylaws may be altered, amended
or repealed only with the approval of the holders of a "majority of the
outstanding voting securities" of the corporation, as that term is defined
in section 2(a)(40) of the Investment Company Act of 1940.
ARTICLE X
CERTAIN PROVISIONS RELATING TO FITCH IBCA, INC.
Section 10.01. General Definitions. Capitalized terms used in this
Article X but not specifically defined herein shall have the respective
meanings assigned to them in the Articles Supplementary creating Remarketed
Preferred Stock Series A, Series B, Series C, Series D and Series E, as
amended (the "Articles Supplementary"), which definitions are hereby
incorporated by reference herein. The following terms shall have the
meanings set forth below for purposes of this Article X:
"Corporate Bonds" means debt securities issued by a business
entity.
"Discount Factor" means Discount Factor Supplied by Fitch.
"Discount Factor Supplied by Fitch" means, initially, for
any asset held by the corporation, the number set forth opposite
such type of asset in the following table (it being understood
that any asset held by the corporation and not listed in the
following table or in an amendment or supplement thereto shall
have a Discounted Value of zero):
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Discount
Factor (1)
----------
Type I Corporate Bonds with a remaining term to maturity
of less than or equal to 2 years...........................1.16
Type I Corporate Bonds with a remaining term to maturity of
more than 2 years, but less than or equal to 4 years.......1.26
Type I Corporate Bonds with a remaining term to maturity of
more than 4 years, but less than 7 years...................1.40
Type I Corporate Bonds with a remaining term to maturity of
more than 7 years, but less than or equal to 12 years......1.44
Type I Corporate Bonds with a remaining term to maturity of
more than 12 years, but less than or equal to 25 years......1.48
Type I Corporate Bonds with a remaining term to maturity of
more than 25 years, but less than or equal to 30 years.....1.52
Type I Corporate Bonds with a remaining term to maturity of
more than 30 years, but less than or equal to 50 years.....1.60
Type II Corporate Bonds with a remaining term to maturity
of less than or equal to 2 years..........................1.25
Type II Corporate Bonds with a remaining term to maturity of
more than 2 years, but less than or equal to 4 years......1.26
Type II Corporate Bonds with a remaining term to maturity of
more than 4 years, but less than or equal to 7 years......1.43
Type II Corporate Bonds with a remaining term to maturity of
more than 7 years, but less than or equal to 12 years.....1.44
Type II Corporate Bonds with a remaining term to maturity of
more than 12 years, but less than or equal to 25 years....1.51
Type II Corporate Bonds with a remaining term to maturity of
more than 25 years, but less than or equal to 30 years....1.56
Type II Corporate Bonds with a remaining term to maturity of
more than 30 years, but less than or equal to 50 years....1.65
Type III Corporate Bonds with a remaining term to maturity of
more than or equal to 2 years............................1.25
Type III Corporate Bonds with a remaining term to maturity of
more than 2 years, but
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less than or equal to 4 years............................1.29
Type III Corporate Bonds with a remaining term to maturity of
more than 4 years, but less than or equal to 7 years.....1.46
Type III Corporate Bonds with a remaining term to maturity of
more than 7 years, but less than or equal to 12 years....1.50
Type III Corporate Bonds with a remaining term to maturity of
more than 12 years, but less than or equal to 25 years...1.55
Type III Corporate Bonds with a remaining term to maturity of
more than 25 years, but less than or equal to 30 years...1.60
Type III Corporate Bonds with a remaining term to maturity of
more than 30 years, but less than or equal to 50 years...1.70
Type IV Corporate Bonds with a remaining term to maturity of
less than or equal to 2 years.............................1.27
Type IV Corporate Bonds with a remaining term to maturity of
more than 2 years, but less than or equal to 4 years......1.32
Type IV Corporate Bonds with a remaining term to maturity of
more than 4 years, but less than or equal to 7 years......1.52
Type IV Corporate Bonds with a remaining term to maturity of
more than 7 years, but less than or equal to 12 years.....1.57
Type IV Corporate Bonds with a remaining term to maturity of
more than 12 years, but less than or equal to 25 years....1.63
Type IV Corporate Bonds with a remaining term to maturity of
more than 25 years, but less than or equal to 30 years....1.69
Type IV Corporate Bonds with a remaining term to maturity of
more than 30 years, but less than or equal to 50 years....1.80
Stocks
------
Utility Stock.....................................................2.00
Utility Stocks (ADRs).............................................2.50
Investment Grade REIT Stock.......................................2.15
Below Investment Grade or Unrated REIT Stock, capitalization
greater than $500,000,000................................ 2.50
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Below Investment Grade or Unrated REIT Stock, capitalization less
than $500,000,000........................................3.00
Preferred Stock rated AAA by Fitch................................1.66
Preferred Stock rated AA by Fitch.................................1.68
Preferred Stock rated A by Fitch..................................1.71
Preferred Stock rated BBB by Fitch................................1.77
FNMA, FHLMC or GNMA Certificates
FNMA or FHLMC with 6.0% interest rate.............................1.70
FNMA or FHLMC with 7.0% interest rate.............................1.65
FNMA or FHLMC with 8.0% interest rate.............................1.59
FNMA or FHLMC with 9.0% interest rate.............................1.52
FNMA or FHLMC with 10.0% interest rate............................1.40
GNMA with 6% interest rate........................................1.80
GNMA with 7% interest rate........................................1.70
GNMA with 8% interest rate........................................1.64
GNMA with 9% interest rate........................................1.57
GNMA with 10.0% interest..........................................1.45
U. S. Government Obligations having a remaining term to
maturity of up to one year ...............................1.06
U. S. Government Obligations having a remaining term to
maturity of more than one year but not more
than two years............................................1.11
U. S. Government Obligations having a remaining term to
maturity of more than two years but not more than
five years................................................1.20
U. S. Government Obligations having a remaining term to
maturity of more than five years but not more than
fifteen years.............................................1.45
U. S. Government Obligations having a remaining term to
maturity of more than fifteen years but not more
than twenty-five years....................................1.65
U. S. Government Obligations having a remaining term to
maturity of more than twenty-five years but not
more than forty years.....................................1.80
Cash held in segregated custody account at an
F-1 + Institution.........................................1.00
Cash held in segregated custody account at an F-1 Institution.....1.00
---------------
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(1) In the case of Eligible Portfolio Property rated by
Moody's or S&P, but not rated by Fitch, the Discount
Factor Supplied by Fitch shall be the Discount Factor
determined therefor in writing by Fitch. Absent such
written notification, the asset shall have a Discounted
Value of zero.
Notwithstanding the foregoing, for so long as is
required by Fitch to maintain its then-current credit
rating of the Original RP or Serial RP, the Discount
Factor Supplied by Fitch with respect to Eligible
Portfolio Property sold pursuant to a reverse repurchase
agreement with a remaining term to maturity of more than
25 days on the date of determination of the Discounted
Value of such Eligible Portfolio Property shall be the
current Discount Factor provided by Fitch to the
corporation in writing for the purpose of such
determination.
"Discounted Value," with respect to any asset held by the
corporation as of any date, means the quotient of the Market Value
of such asset divided by the applicable Discount Factor Supplied
by Fitch, provided that in no event shall the Discounted Value of
any asset constituting Eligible Portfolio Property as of any date
exceed the unpaid principal balance or face amount of such asset
as of that date. With respect to the calculation of the Discounted
Value of any Utility Bond included in the corporation's Eligible
Portfolio Property, such calculation shall be made using the
criteria set forth in the definitions of Utility Bonds and Market
Value. With respect to the calculation of the Discounted Value of
any Utility Stock included in the corporation's Eligible Portfolio
Property such calculation shall be made using the criteria set
forth in the definitions of Utility Stocks and Market Value. When
calculating the aggregate Discounted Value of the corporation's
Eligible Portfolio Property for comparison with the Fitch RP Basic
Maintenance Amount, the Discount Factors Supplied by Fitch shall
be used. Notwithstanding any other provision of the Articles
Supplementary or these bylaws, any Utility Bond that has a
remaining maturity of more than 30 years, and any asset as to
which there is no Discount Factor Supplied by Fitch either in the
Articles Supplementary, in an amendment or supplement thereof or
in this Article X, shall have a Discounted Value for purposes of
determining the aggregate Discounted Value of the corporation's
Eligible Portfolio Property calculated using the Discount Factor
Supplied by Fitch of zero.
"F-1+ Institution" means a financial institution that has
a debt rating of F-1+ by Fitch.
"Fitch" means Fitch IBCA, Inc.
"Fitch RP Basic Maintenance Amount" means, initially, as
of any date, the sum of (i) the aggregate liquidation preference
of the shares of RP outstanding and shares of Other RP
outstanding, (ii) to the extent not covered in (i), the aggregate
amount of accumulated but unpaid cash dividends with respect to
the shares of RP outstanding and shares of Other RP outstanding,
(iii) the aggregate principal amount of, and an amount
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equal to accrued but unpaid interest on any Notes outstanding, (iv)
the aggregate Projected Dividend Amount, and (v) an amount equal
to the projected expenses of the corporation (including, without
limitation, fee and indemnification obligations of the corporation
incurred in connection with any commercial paper program
undertaken by the corporation or with any credit facility related
thereto) for the next three month period. The Board of Directors
shall have the authority to adjust, modify, alter or change from
time to time the initial elements comprising the Fitch RP Basic
Maintenance Amount if the Board of Directors determines and Fitch
advises the corporation in writing that such adjustment,
modification, alteration or change will not adversely affect its
then-current rating on the RP.
"RP Basic Maintenance Amount" means the Fitch RP Basic
Maintenance Amount.
Section 10.02. Eligible Assets. The following assets, specifically
Preferred Stock, Type I Corporate Bonds, Type II Corporate Bonds, Type III
Corporate Bonds, and Type IV Corporate Bonds, having met the requirements
set forth in the definition of "Other Permitted Securities" in the Articles
Supplementary, shall be included as Other Permitted Securities for purposes
of determining maintenance of the Fitch RP Basic Maintenance Amount.
"Below Investment Grade REIT Stock" means an equity
security issued by a REIT rated BB+ or lower by Fitch.
"Preferred Stock" means securities of an issuer senior in
preference to the common equity of the issuer.
"Type I Corporate Bonds" as of any date means Corporate
Bonds rated AAA by Fitch.
"Type II Corporate Bonds" as of any date means Corporate
Bonds rated AA- to AA+ by Fitch.
"Type III Corporate Bonds" as of any date means Corporate
Bonds rated A- to A+ by Fitch.
"Type IV Corporate Bonds" as of any date means Corporate
Bonds rated BBB- to BBB+ by Fitch.
"Unrated REIT Stock" shall mean an equity security issued
by a REIT that is not rated by the Ratings Agencies or by Fitch.
Section 10.03. RP Basic Maintenance Amount. (a) The corporation
shall maintain, on each Valuation Date, Eligible Portfolio Property having
an aggregate Discounted Value at least equal to the RP Basic Maintenance
Amount.
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(b) On or before 5:00 p.m., New York City time, on the
third Business Day after each Valuation Date, the corporation
shall complete and deliver to the Remarketing Agent and the Paying
Agent an RP Basic Maintenance Report, which will be deemed to have
been delivered to the Remarketing Agent and the Paying Agent if
the Remarketing Agent and the Paying Agent receive a copy or
telecopy, telex or other electronic transcription thereof and on
the same day the corporation mails to the Remarketing Agent and
the Paying Agent for delivery on the next Business Day the full RP
Basic Maintenance Report. A failure by the corporation to deliver
an RP Basic Maintenance Report under this paragraph 10.03(b)
without the prior consent of the Remarketing Agent and the Paying
Agent shall be deemed to be delivery of an RP Basic Maintenance
Report indicating the Discounted Value for all assets of the
corporation is less than the RP Basic Maintenance Amount, as of
the relevant Valuation Date.
(c) Within ten Business Days after the date of delivery
to the Remarketing Agent and the Paying Agent of an RP Basic
Maintenance Report in accordance with paragraph 10.03(b) above
relating to a Quarterly Valuation Date, the Independent Accountant
will confirm in writing to the Remarketing Agent and the Paying
Agent (A) the mathematical accuracy of the calculations reflected
in such Report, (B) that, in such Report, the corporation
determined in accordance with the Articles Supplementary the
assets of the corporation which constitute Eligible Portfolio
Property at such Quarterly Valuation Date, (C) that, in such
Report, the corporation determined in accordance with the Articles
Supplementary whether the corporation had, at such Quarterly
Valuation Date, Eligible Portfolio Property of an aggregate
Discounted Value at least equal to the RP Basic Maintenance
Amount, (D) with respect to the Fitch rating on Utility Bonds and
Senior Debt obligations, issuer name, issue size and coupon rate
listed in such Report, that information has been traced and agrees
with the information listed in the Fitch IBCA Ratings Book (in the
event such information does not agree or such information is not
listed in the Fitch IBCA Ratings Book, the Independent Accountant
will inquire of Fitch what such information is and provide a
listing in their letter of such difference), and (E) with respect
to the lower of two bid prices (or alternative permissible factors
used in calculating the Market Value) provided by the custodian of
the corporation's assets to the corporation for purposes of
valuing securities in the corporation's portfolio, the Independent
Accountant has traced the price used in such Report to the lower
of the two bid prices listed in the Report provided by such
custodian and verified that such information agrees (in the event
such information does not agree, the Independent Accountant will
provide a listing in its letter of such differences) (such
confirmation is herein called the "Accountant's Confirmation"). If
any Accountant's Confirmation delivered pursuant to this paragraph
10.03(c) shows that an error was made in the RP Basic Maintenance
Report for a Quarterly Valuation Date, or shows that a lower
aggregate Discounted Value for the aggregate of all Eligible
Portfolio Property of the corporation was determined by the
Independent Accountant, the calculation or determination made by
such Independent Accountant shall be final and conclusive and
shall be binding on the corporation, and the corporation shall
accordingly amend the RP Basic Maintenance Report to the
Remarketing Agent and Paying Agent promptly
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following receipt by the Remarketing Agent and the Paying Agent of
such Accountant's Confirmation.
ARTICLE XI
CERTAIN PROVISIONS RELATING TO RATINGS ORGANIZATIONS
Section 11.01 General Definitions. Capitalized terms used in this
Article XI but not specifically defined herein shall have the respective
meanings assigned them in the Articles Supplementary, which definitions are
hereby incorporated by reference herein. The following capitalized terms
shall have the following meanings for purposes of this Article XI, whether
used in the singular or plural.
"REIT" means an entity qualifying as a real estate
investment trust under the United States Internal Revenue Code of
1986, as amended.
"NYSE" means the New York Stock Exchange.
"AMEX" means the American Stock Exchange.
"ADR" means American Depository Receipts.
"National Securities Exchange" means the NYSE, AMEX, Midwest
Stock Exchange, Philadelphia Stock Exchange, Boston Stock Exchange,
NASDAQ System or any other national securities exchange.
"Market Value" means, as to any S&P Eligible REIT Share,
S&P Eligible Utility ADR, S&P Eligible Preferred Stock and S&P
Eligible Corporate Bond, the value calculated by reference to the
highest closing price on a National Securities Exchange on the
date preceding any relevant date of determination.
"MTNP" means, initially, a medium term note program.
"Yankee Bond" means, initially, a debt security which is
issued by a foreign government, province, supranational agency or
foreign corporation.
Section 11.02. S&P Eligible Asset Definitions. The following
assets, specifically S&P Eligible REIT Shares, S&P Eligible Preferred
Stock, S&P Eligible Corporate Bonds and S&P Eligible Utility ADRs, having
met the requirements set forth in the definition of "Other Permitted
Securities" in the Articles Supplementary, shall be included as "Other
Permitted Securities" for purposes of determining maintenance of the "S&P
RP Basic Maintenance Amount".
"S&P Eligible REIT Share" means, initially, an equity
security issued by a REIT. So long as the shares of RP are rated AAA
or higher by S&P, no equity
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security held by the Corporation shall be deemed an S&P Eligible
REIT Share unless (i) such equity security has been listed or
traded for more than 15 months on a National Securities Exchange
and (ii) the aggregate Market Value of all such equity securities
outstanding is equal to or exceeds $100,000,000. So long as the
shares of RP are rated AAA or higher by S&P, no equity security
held by the Corporation shall be deemed an S&P Eligible REIT Share
to the extent (but only to the proportionate extent) (i) the
amount thereof held by the Corporation exceeds the lesser of (x)
5% of the issued and outstanding equity securities of the REIT
issuing such S&P Eligible REIT Shares and (y) the average weekly
trading volume for the past month preceding any relevant date of
determination; and (ii) the aggregate Market Value of the amount
thereof held by the Corporation exceeds 5% of the aggregate Market
Value of the issued and outstanding equity securities of the REIT
issuing such equity security.
"S&P Eligible Utility ADRs" means, initially, ADRs issued
by public utility companies, which ADRs have been listed or traded
for more than 15 months on a National Securities Exchange. So long
as the shares of the RP are rated AAA or higher by S&P, no ADR
held by the Corporation shall be deemed an S&P Eligible Utility
ADR unless the aggregate Market Value of all such ADRs outstanding
is equal to or exceeds $100,000,000. So long as the shares of RP
are rated AAA or higher by S&P, no ADR held by the Corporation
shall be deemed an S&P Eligible Utility ADR to the extent (but
only to the proportionate extent) (i) the amount thereof held by
the Corporation exceeds the lesser of (x) 5% of the issued and
outstanding S&P Eligible Utility ADRs of the public utility
company issuing such S&P Eligible Utility ADRs and (y) the average
weekly trading volume for the past month preceding any relevant
date of determination; and (ii) the aggregate Market Value of the
amount thereof held by the Corporation does not exceeds 5% of the
aggregate Market Value of the issued and outstanding equity
securities of the public utility company issuing such equity
security.
"S&P Eligible Preferred Stock" means, initially,
preferred stock (i) rated BBB or higher by S&P or (ii) issued by
an entity having debt obligations outstanding with senior
unsecured or subordinated unsecured debt ratings of BBB or higher
by S&P; provided, however, that no share of Yankee Preferred Stock
(as such term is defined by S&P from time to time) will be
considered an S&P Eligible Preferred Stock unless such Yankee
Preferred Stock is (x) rated A or higher by S&P or (y) issued by
an entity having debt obligations outstanding with senior
unsecured or subordinated unsecured debt ratings of A or higher by
S&P. So long as the shares of RP are rated AAA or higher by S&P,
no preferred stock owned by the Corporation shall be deemed an S&P
Eligible Preferred Stock to the extent (but only to the
proportionate extent) (i) the aggregate of preferred stock owned
by the Corporation of an issuer having debt obligations
outstanding with a senior debt rating of A or higher by S&P
exceed 5% of the aggregate Market Value of Eligible Portfolio
Property owned by the Corporation; (ii) the aggregate Market Value
of preferred stock owned by the Corporation of an issuer having
debt obligations outstanding with a senior debt rating of BBB by
S&P exceeds 2.5% of the aggregate Market Value of Eligible
Portfolio Property owned by the Corporation; and (iii) the
aggregate Market Value of preferred stock owned by the
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Corporation in any one industry (as defined by S&P from time to
time) exceeds 20% of the aggregate Market Value of the securities
owned by the Corporation. In addition, so long as the shares of RP
are rated AAA or higher by S&P, no preferred stock held by the
Corporation shall be deemed an S&P Eligible Preferred Stock unless
such Preferred Stock meets the following conditions:
(i) shares of the issuer (or if the issuer is a special
purpose corporation, the parent of the issuer) of such
preferred stock are traded on the NYSE or the AMEX;
(ii) except in the case of Yankee Preferred Stock, such
preferred stock is cumulative;
(iii) such preferred stock is nonconvertible;
(iv) such preferred stock has no attached warrants;
(v) the aggregate Market Value of all outstanding equity
securities of the issues of such preferred stock is at
least $500,000;
(vi) such preferred stock (x) has an initial issue size
of at least $50 million or (y) is issued by an entity
with preferred stock outstanding with an aggregate Market
Value of at least $50 million;
(vii) the issuer of such preferred stock pays cash
dividends in U.S. denominated dollars and has paid cash
dividends consistently over the previous three years
(unless the issuer of the preferred stock has no relevant
history of issuing dividends, in which case the issuer
has received an A or higher debt or preferred stock
rating from S&P);
(viii) the aggregate Market Value of all equity
securities outstanding of the issuer of the preferred
stock is equal to or greater than $50 million;
(ix) the aggregate Market Value of such preferred stock
(calculated by reference to the closing price on the
Securities Exchanges for such preferred stock on the day
preceding any relevant date of determination) owned by
the Corporation is no less than $500,000 and no more than
$5,000,000, unless such preferred stock is floating rate
preferred stock where an auction restricts the
Corporation's ownership of such floating rate preferred
stock;
(x) if such preferred stock is floating rate preferred
stock, (x) such floating rate preferred stock has a
dividend period of less than or equal to 49 days, unless
such preferred stock is a new issue, in which case, the
first dividend period of such new issue is up to 64 days;
and (y) such floating rate preferred stock has not been
subject to a failed auction;
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<PAGE>
(xi) if such preferred stock is adjustable rate preferred
stock, the aggregate Market Value of all adjustable rate
preferred stock owned by the Corporation does not exceed
10% of the Other Permitted Securities owned by the
Corporation.
"S&P Eligible Corporate Bonds" means, initially, debt
securities issued by a corporation having a maturity of thirty
years or less. So long as the shares of RP are rated AAA or higher
by S&P, no debt security held by the Corporation shall be deemed
an S&P Eligible Corporate Bond unless (i) in the case of a debt
security rated CCC or lower by S&P, such debt security is a
subordinated debt security with an implied senior rating by S&P of
B- or higher and (ii) at least two dealers registered with the
National Association of Securities Dealers offer bids on such debt
security. In addition, so long as the shares of RP are rated AAA
or higher by S&P, no debt security held by the Corporation shall
be deemed an S&P Eligible Corporate Bond unless the following
conditions are met:
(i) at least 80% of the aggregate Market Value of debt
securities owned by the Corporation which are rated BBB
or lower have an original issue size of $100 million or
higher and the remaining 20% have an original issue size
no lower than $50 million;
(ii) in the case of a debt security issued under a MTNP
such debt security is (x) rated BBB or higher by S&P and
has an original issue size equal to the maximum number of
medium term notes authorized by the issuer pursuant to
such MTNP and (y) part of a series of medium term notes
which exceeds $5 million in aggregate Market Value;
(iii) in the case of a Yankee Bond, such Yankee Bond is
rated A or higher by S&P and the aggregate of such Yankee
Bonds owned by the Corporation does not exceed 25% of the
aggregate Market Value of securities owned by the
Corporation;
(iv) financial statements are publicly available for the
issuer of such debt securities and such debt securities
are registered under the Securities Act of 1933;
(v) the terms of such debt securities provide for
periodic interest payments in cash over the life of the
security;
(vi) such debt securities are not convertible or
exchangeable into capital of the issuer at any time;
provided that 10% of such debt securities outstanding may
be subject to exchange or tender offer; and
(vii) in the case of Type IV S&P Eligible Corporate
Bonds, the aggregate Market Value of such debt securities
issued by companies engaged principally
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<PAGE>
in any one industry (as defined by S&P) does not exceed
20% of the aggregate Market Value of all securities owned
by the Corporation.
"Type I S&P Eligible Corporate Bonds" means, initially,
S&P Eligible Corporate Bonds rated AAA by S&P.
"Type II S&P Eligible Corporate Bonds" means, initially,
S&P Eligible Corporate Bonds rated AA by S&P.
"Type III S&P Eligible Corporate Bonds" means, initially,
S&P Eligible Corporate Bonds rated A by S&P.
"Type IV S&P Eligible Corporate Bonds" means, initially,
S&P Eligible Corporate Bonds rated BBB by S&P.
Section 11.03. Discount Factors Supplied by S&P. The following
Discount Factors, having been supplied by S&P, shall be "Discount Factors
Supplied by S&P" as defined in the Articles Supplementary for purposes of
calculating the "Discounted Value" of the assets for purposes of
determining maintenance of the S&P RP Basic Maintenance Amount".
S&P Eligible REIT Shares which have been outstanding
for more than eighteen (18) months 2.52
S&P Eligible REIT Shares which have been outstanding for
eighteen (18) or fewer months 3.25
S&P Eligible Utility ADRs which have been outstanding
for more than eighteen (18) months 2.52
S&P Eligible Utility ADRs which have been outstanding
for eighteen (18) or fewer months 3.25
Type I S&P Eligible Corporate Bonds 1.50
Type II S&P Eligible Corporate Bonds 1.55
Type III S&P Eligible Corporate Bonds 1.60
Type IV S&P Eligible Corporate Bonds 1.65
Type V S&P Eligible Corporate Bonds 1.70
Type VI S&P Eligible Corporate Bonds 1.80
Type VII S&P Eligible Corporate Bonds 1.90
Type VIII S&P Eligible Corporate Bonds 2.05
Type IX S&P Eligible Corporate Bonds 2.20
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S&P Eligible Preferred Stock (Sinking Fund, Fixed Rate,
Perpetual or Floating Rate) 2.40
S&P Eligible Preferred Stock (Adjustable or Auction Rate) 4.00
Section 11.04. Moody's Eligible Asset Definitions. The following
assets, specifically Auction Rate Preferred Stock, Hybrid Securities,
Preferred Stock, Type I REIT Shares, Type I Utility ADRs, Industrial Bonds
and Utility Preferred Stock, having met the requirements set forth in the
definition of "Other Permitted Securities" in the Articles Supplementary,
shall be included as "Other Permitted Securities" for purposes of
determining maintenance of the "Moody's RP Basic Maintenance Amount".
"Auction Rate Preferred Stock" means, initially,
preferred stock rated a3 or higher which is issued by a company
which has paid dividends during the preceding three year period.
"Convertible Preferred Stock" means, initially, Utility
Preferred Stock which is mandatorily convertible into common
equity of the company issuing such securities.
"Hybrid Preferred Stock" means monthly income Preferred
Stock, quarterly income Preferred Stock and other nonstandard
Preferred Stock rated a3 or higher which is issued by a company
which has paid dividends during the preceding three years.
"Industrial Bond" means, initially, industrial revenue
bonds and industrial development bonds.
"Preferred Stock" means, initially, preferred stock rated
a3 or higher which is (i) not convertible into common equity and
(ii) issued by a non-utility company which has paid dividends
during the preceding 3 years.
"Type I Industrial Bonds" as of any date means Industrial
Bonds rated Aaa by Moody's.
"Type II Industrial Bonds" as of any date means
Industrial Bonds rated Aa3 by Moody's.
"Type III Industrial Bonds" as of any date means
Industrial Bonds rated A3 by Moody's.
"Type IV Industrial Bonds" as of any date means
Industrial Bonds rated Baa3 by Moody's.
"Type I REIT Shares" means, initially, equity securities
issued by REITs having debt obligations outstanding with senior
unsecured or subordinated unsecured debt ratings of Baa3 or higher
from Moody's. So long as the shares of RP are rated
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<PAGE>
Baa3 or higher by Moody's, no equity security held by the
Corporation shall be deemed a REIT Share unless (i) such equity
security is traded on the NYSE or the AMEX, (ii) the aggregate
value of all such equity securities outstanding (calculated based
upon the highest of the closing prices on the NYSE or the AMEX as
applicable, for such equity security on the day preceding any
relevant date of determination) is equal to or exceeds
$500,000,000 and (iii) the REIT which issues such equity security
has paid dividends for all periods since it first qualified as a
REIT. In addition, so long as the shares of RP are rated Baa3 or
higher by Moody's, no equity security held by the Corporation
shall be deemed a Type I REIT Share to the extent (but only to the
proportionate extent) the amount thereof held by the Corporation
exceeds the lesser of (i) 5% of the issued and outstanding equity
securities of the REIT issuing such equity security and (ii) the
average weekly trading volume thereof for the 26 week period
immediately preceding any relevant date of determination.
"Type I Utility ADRs" means, initially, ADRs, which are
traded on the NYSE or the AMEX with respect to equity securities
issued by public utility companies having U.S. dollar denominated
debt obligations outstanding with senior unsecured or subordinated
unsecured debt ratings of Baa3 or higher from Moody's. In
addition, so long as the shares of RP are rated Baa3 or higher by
Moody's, no equity security held by the Corporation shall be
deemed a Type I Utility ADR to the extent (but only to the
proportionate extent) the amount thereof held by the Corporation
exceeds the lesser of (i) 5% of the issued and outstanding equity
securities of the utility company issuing such equity security and
(ii) the average weekly trading volume thereof for the 26 week
period immediately preceding any relevant date of determination.
"Utility Preferred Stock" means, initially, preferred
stock rated a3 or higher which is issued by a public utility
company which had paid dividends during the preceding three years.
Section 11.05. Discount Factors Supplied by Moody's. The following
Discount Factors, having been supplied by Moody's, shall be "Discount
Factors Supplied by Moody's" as defined in the Articles Supplementary for
purposes of calculating the "Discounted Value" of the assets for purposes
of determining maintenance of the "Moody's RP Basic Maintenance Amount".
Discount Factor(1)
------------------
Auction Rate Preferred Stock 3.50
Convertible Preferred Stock 2.00
Hybrid Preferred Stock 3.50
Preferred Stock 2.35
Type I Industrial Bonds having a remaining
term to maturity of one year or less: 1.20
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Type I Industrial Bonds having a remaining
term to maturity of more than one year
but not more than two years: 1.27
Type I Industrial Bonds having a remaining
term to maturity of more than two years
but not more than three years: 1.32
Type I Industrial Bonds having a remaining
term to maturity of more than three
years but not more than four years: 1.38
Type I Industrial Bonds having a remaining
term to maturity of more than four
years but not more than five years: 1.44
Type I Industrial Bonds having a remaining
term to maturity of more than five
years but not more than seven years: 1.53
Type I Industrial Bonds having a remaining
term to maturity of more than seven
years but not more than ten years: 1.61
Type I Industrial Bonds having a remaining
term to maturity of more than ten
years but not more than 15 years: 1.69
Type I Industrial Bonds having a remaining
term to maturity of more than 15
years but not more than 20 years: 1.76
Type I Industrial Bonds having a remaining
term to maturity of more than 20
years but less than 30 years: 1.79
Type II Industrial Bonds having a remaining
term to maturity of one year or less: 1.24
Type II Industrial Bonds having a remaining
term to maturity of more than one year
but not more than two years: 1.31
Type II Industrial Bonds having a remaining
term to maturity of more than two years
but not more than three years: 1.38
Type II Industrial Bonds having a remaining
term to maturity of more than three
years but not more than four years: 1.44
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Type II Industrial Bonds having a remaining
term to maturity of more than four
years but not more than five years: 1.50
Type II Industrial Bonds having a remaining
term to maturity of more than five
years but not more than seven years: 1.60
Type II Industrial Bonds having a remaining
term to maturity of more than seven
years but not more than ten years: 1.70
Type II Industrial Bonds having a remaining
term to maturity of more than ten
years but not more than 15 years: 1.76
Type II Industrial Bonds having a remaining
term to maturity of more than 15 years
but not more than 20 years: 1.84
Type II Industrial Bonds having a remaining
term to maturity of more than 20 years
but not more than 30 years: 1.87
Type III Industrial Bonds having a remaining
term to maturity of one year or less: 1.29
Type III Industrial Bonds having a remaining
term to maturity of more than one year
but not more than two years: 1.38
Type III Industrial Bonds having a remaining
term to maturity of more than two
years but not more than three years: 1.44
Type III Industrial Bonds having a remaining
term to maturity of more than three
years but not more than four years: 1.51
Type III Industrial Bonds having a remaining
term to maturity of more than four
years but not more than five years: 1.57
Type III Industrial Bonds having a remaining
term to maturity of more than five
years but not more than seven years: 1.67
Type III Industrial Bonds having a remaining
term to maturity of more than seven
years but not more than ten years: 1.77
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Type III Industrial Bonds having a remaining
term to maturity of more than ten
years but not more than 15 years: 1.84
Type III Industrial Bonds having a remaining
term to maturity of more than 15
years but not more than 20 years: 1.92
Type III Industrial Bonds having a remaining
term to maturity of more than 20
years but not more than 30 years: 1.95
Type IV Industrial Bonds having a remaining
term to maturity of one year or less: 1.36
Type IV Industrial Bonds having a remaining
term to maturity of more than one year
but not more than two years: 1.44
Type IV Industrial Bonds having a remaining
term to maturity of more than two years
but not more than three years: 1.50
Type IV Industrial Bonds having a remaining
term to maturity of more than three years
but not more than four years: 1.57
Type IV Industrial Bonds having a remaining
term to maturity of more than four years
but not more than five years: 1.63
Type IV Industrial Bonds having a remaining
term to maturity of more than five
years but not more than seven years: 1.74
Type IV Industrial Bonds having a remaining
term to maturity of more than seven
years but not more than ten years: 1.83
Type IV Industrial Bonds having a remaining
term to maturity of more than ten
years but not more than 15 years: 1.92
Type IV Industrial Bonds having a remaining
term to maturity of more than 15
years but not more than 20 years: 2.02
Type IV Industrial Bonds having a remaining
term to maturity of more than 20
years but not more than 30 years: 2.03
Type I REIT Shares: 3.00
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<PAGE>
Type I Utility ADRs issued by an entity organized
under the laws of Argentina or any political
subdivision thereof: 5.00
Type I Utility ADRs issued by an entity
organized under the laws of Australia
or any political subdivision thereof: 2.00
Type I Utility ADRs issued by an entity
organized under the laws of Belgium
or any political subdivision thereof: 2.00
Type I Utility ADRs issued by an entity
organized under the laws of Brazil
or any political subdivision thereof: 4.20
Type I Utility ADRs issued by an entity
organized under the laws of Canada
or any political subdivision thereof: 2.00
Type I Utility ADRs issued by an entity
organized under the laws of Chile or
any political subdivision thereof: 3.00
Type I Utility ADRs issued by an entity
organized under the laws of Denmark
or any political subdivision thereof: 2.00
Type I Utility ADRs issued by an entity
organized under the laws of France or
any political subdivision thereof: 2.00
Type I Utility ADRs issued by an entity
organized under the laws of Germany
or any political subdivision thereof: 2.00
Type I Utility ADRs issued by an entity
organized under the laws of Greece
or any political subdivision thereof: 2.00
Type I Utility ADRs issued by an entity
organized under the laws of Italy
or any political subdivision thereof: 2.00
Type I Utility ADRs issued by an entity
organized under the laws of Mexico
or any political subdivision thereof: 4.00
Type I Utility ADRs issued by an entity
organized under the laws of Netherlands
or any political subdivision thereof: 2.00
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<PAGE>
Type I Utility ADRs issued by an entity
organized under the laws of Peru or
any political subdivision thereof: 2.00
Type I Utility ADRs issued by an entity
organized under the laws of Portugal
or any political subdivision thereof: 2.00
Type I Utility ADRs issued by an entity
organized under the laws of Spain
or any political subdivision thereof: 2.00
Type I Utility ADRs issued by an entity
organized under the laws of the United Kingdom
or any political subdivision thereof: 2.00
Utility Preferred Stock 1.60
Section 11.06. Revised Definitions. The definitions of "Utility
Bonds" and "Utility Stocks" set forth in the Articles Supplementary are
hereby modified to delete the requirement that the issuers of such
securities be "state regulated".
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Exhibit g.1
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.
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<PAGE>
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 which does not exceed $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. For purposes of the foregoing
calculation, Average Weekly Net Assets shall be equal to the sum
of (i) the aggregate net asset value of the Fund's common stock,
(ii) the aggregate liquidation preference of the Fund's preferred
stock and (iii) the aggregate proceeds to the Fund of commercial
paper issued by the Fund.
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.
-2-
<PAGE>
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
April 30, 2000, 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
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<PAGE>
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 May 1, 1998
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
-------------------------
-4-
Exhibit g.2
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
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<PAGE>
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 April 30,
2000, 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).
-2-
<PAGE>
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 May 1, 1998
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
-----------------------------
-3-
Exhibit g.3
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
-1-
<PAGE>
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 which does not exceed $100 million, 0.20 of 1%
of the Fund's Average Weekly Net Assets from $100 million to $1.0
billion and 0.10 of 1% of the Fund's Average Weekly Net Assets in
excess of $1.0 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. For purposes of the foregoing calculation, Average Weekly
Net Assets shall be equal to the sum of (i) the aggregate net
asset value of the Fund's common stock, (ii) the aggregate
liquidation preference of the Fund's preferred stock and (iii) the
aggregate proceeds to the Fund of commercial paper issued by the
Fund.
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
-2-
<PAGE>
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 April 30,
2000, 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 May 1, 1998
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/ Joseph C. Curry, Jr.
-------------------------------
Its Senior Vice President
-------------------------------
-3-
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 2,189,835,785
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<DISTRIBUTIONS-OF-INCOME> 171,532,060
<DISTRIBUTIONS-OF-GAINS> 0
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