<PAGE>
DEAR FELLOW SHAREHOLDERS:
During the first half of 1998, your Board of Directors declared six monthly
dividends of 9.8 cents per share of common stock. The cumulative dividend of
58.8 cents per share provided an annualized dividend yield of 8.15 percent based
upon the June 30 closing stock price of $14.4375.
Declining first half domestic interest rates, especially longer dated rates,
provided positive investment returns for our domestic fixed income markets. For
example, the Lehman Brothers Aggregate Index had a positive total rate of return
of 3.93 percent for the first six months of 1998. For the same period, the Fund
enjoyed a total rate of return of 5.85 percent as measured by Lipper Analytical
Services, Inc. The decline in longer dated interest rates had a particularly
positive impact on the Fund's longer dated portfolio. Although the price of the
common stock ended the six month period unchanged at $14.4375, the first half's
dividend of 58.8 cents provided the common stock with a total return on a market
price basis (with reinvestment of dividends) of 4.11 percent, which was slightly
ahead of the Lehman Brothers Aggregate Index. Furthermore, after beginning the
year at $14.48, the net asset value (NAV) rose 24 cents to $14.72 at the end of
the first half, and the discount of the common stock price to the NAV narrowed
to 1.92 percent. The six month range moved between a premium of 2.15 percent in
early February and a discount of 4.92 percent in late March.
As suggested above, interest rates declined across the entire U.S. Treasury
coupon yield curve; however, not all maturities declined by the same amount. For
example, two year U.S. Treasury yields declined only 16 basis points to 5.47
percent as the Federal Reserve held monetary policy unchanged during the first
half. The Fed suggested that it was prepared to ignore the current strength in
the economy and leave monetary policy unchanged rather than risk putting further
pressures on international currency markets. On the other hand, longer dated
U.S. Treasury yields declined approximately 29 basis points to 5.63 percent as
continued international uncertainty caused a flight to quality for international
investors. The safety and liquidity of our Treasury markets is favored
internationally, especially the longer dated maturities. The positive effects of
foreign purchases spread to other sectors of the fixed income markets as well.
As noted above, the decline in interest rates initially had less to do with our
domestic fundamentals than with the second wave of anxiety over Asian economies
and currencies. Despite exceptionally strong first quarter GDP growth of 5.4
percent, the Federal Reserve held short-term interest rates steady. It appeared
as though market participants agreed with Mr. Greenspan's belief that slumping
Asian economies would slow our economic growth and dampen the threat of faster
inflation. Before convincing signs of a slowing began to appear, however, the
Fed chairman was busy talking up the virtues of our current economic cycle by
suggesting that our domestic economy was the most favorable in the 50 years of
his daily economic observations. Furthermore, he went on to state that we were
currently enjoying a virtuous economic cycle in the context of subdued
inflation, strong economic growth and strong labor markets. In fact, this belief
was underscored by the fact that the first quarter's Employment Cost Index (a
measure of total labor costs) rose at a below consensus quarterly rate of 0.7
percent, even while the economy was racing ahead strongly. Further evidence that
inflation remained subdued was the first quarter CPI report that inflation rose
at a modest 1.4 percent annual rate. The market's patience with the Fed's
Asian-induced slowing scenario seems to be paying off, as second quarter data
began showing signs of a slowing economy. For example, it appears that our
merchandise trade deficit increased substantially during the second quarter,
which may end up cutting the quarter's growth rate by a couple of percentage
points. In addition, it also appears as though the massive
1
<PAGE>
inventory buildup during the first quarter borrowed heavily from the second
quarter's growth rate. Also, the National Association of Purchasing Managers
Index recently had its first reading below 50 in many months. A reading of below
50 suggests a contraction in the manufacturing sector.
The international environment kept investors on edge and provided strong demand
for domestic securities which continued to put downward pressure on our interest
rates. Not only were investors concerned about the economy and currency
uncertainties of Southeast Asia, but concern shifted to other regions as India
and Pakistan exploded nuclear devices and added yet another element of
uncertainty. Furthermore, Japan's economy, which was an engine of growth and
stability in the Asian region, continued to suffer through a recession and the
destabilizing effects of its currency trading near a seven year low against the
dollar.
Another element which added to the first half's positive performance and may
continue to help our fixed income markets was the fact that for the first time
in many years, the Federal budget will be in a surplus position. As a result of
the projected surplus, the Treasury recently announced a reduction in the number
and size of its bond auctions. The significance of this is that the Treasury
will be offering fewer securities at a time when investors seem to want more.
So, from the above observations, it seems that there may be enough supporting
events to allow domestic interest rates to remain at current levels and perhaps
to move to lower levels during the second half of 1998.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
To those of you receiving dividends in cash, we urge you to consider taking
advantage of the dividend reinvestment and cash purchase plan (the 'Plan')
available to all registered shareholders of the Fund. Under the Plan, the Fund
absorbs all administrative costs (except brokerage commissions, if any) so that
the total amount of your dividends and other distributions may be reinvested in
additional shares of the Fund. Also, the cash purchase option permits
participants to purchase shares directly from the Plan Agent. Additional
information about the Plan is available from The Bank of New York, 1-800-
524-4458, or for more details, please turn to page 16.
We appreciate your investment in Duff & Phelps Utility and Corporate Bond Trust
Inc. and look forward to continuing our service to you.
Sincerely,
Francis E. Jeffries, CFA
Chairman
Calvin J. Pedersen, CFA
President and Chief Executive Officer
2
<PAGE>
PROXY RESULTS
At the May 27, 1998 annual meeting of shareholders, the Duff & Phelps Utility
and Corporate Bond Trust Inc. shareholders voted on and approved the following
proposals. The description of the proposals and number of shares voted are as
follows:
<TABLE><CAPTION>
SHARES SHARES
VOTED FOR ABSTAINING
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
1. To elect three directors to serve until the Annual Meeting in the year
indicated below or until their successors are duly elected and
qualified:
E. Virgil Conway (2001) 21,585,083 453,602
Everett L. Morris (2001) 21,644,598 394,087
Harry Dalzell-Payne (2001) 21,589,581 449,104
Directors whose term of office continued beyond this meeting are as
follows:
William W. Crawford, William N. Georgeson, Francis E. Jeffries,
Philip R. McLoughlin, Eileen A. Moran and Richard A. Pavia
- --------------------------------------------------------------------------------------------------
</TABLE>
<TABLE><CAPTION>
SHARES
SHARES VOTED SHARES BROKER
VOTED FOR AGAINST ABSTAINING NON VOTE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2. To approve the amended and restated
investment advisory agreement to change the
base amount used to determine the Adviser's
management fee: 14,315,475 891,293 596,891 6,235,026
- ------------------------------------------------------------------------------------------------------
SHARES
SHARES VOTED SHARES
VOTED FOR AGAINST ABSTAINING
- ------------------------------------------------------------------------------------------------------
3. To ratify the selection of Ernst & Young LLP
as independent auditors for the Fund's
fiscal year ending December 31, 1998: 21,546,352 136,265 356,068
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase, from time to time, shares of its
common stock in the open market at prevailing market prices.
3
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE><CAPTION>
RATINGS
PRINCIPAL --------------------------- MARKET
AMOUNT DUFF & STANDARD VALUE (NOTE
(000) DESCRIPTION PHELPS MOODY'S & POOR'S 1)
- ------- ------------------------------------- ------ ------- -------- -----------
<S> <C> <C> <C> <C> <C>
/ / LONG-TERM INVESTMENTS--133.1%
U.S. GOVERNMENT AND AGENCY OBLIGATIONS--23.2%
Government National Mortgage
Association
Pass-Through Certificates,
$ 3,200 8.00%, 7/15/23....................... AAA Aaa AAA $ 3,327,495
6,816 8.00%, 8/15/23....................... AAA Aaa AAA 7,086,226
3,248 8.00%, 5/15/24....................... AAA Aaa AAA 3,366,140
1,643 7.00%, 3/15/26....................... AAA Aaa AAA 1,669,246
4,083 7.50%, 5/15/26....................... AAA Aaa AAA 4,196,491
U.S. Treasury Bonds,
12,900 10.750%, 2/15/03..................... AAA Aaa AAA 15,594,939
40,000 10.375%, 11/15/12.................... AAA Aaa AAA 53,562,400
-----------
88,802,937
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS
(cost $87,297,004)...................
-----------
BONDS--109.9%
FINANCIAL--12.9%
10,000 American Express Co.,
8.625%, 5/15/22...................... AA- A1 A+ 11,088,800
5,000 Countrywide Credit Industries Inc.,
8.00%, 12/15/26...................... A A3 A- 5,278,000
10,000 Great Western Financial Corp.,
8.206%, 2/01/27...................... A A3 BBB- 10,922,800
10,000 KeyCorp Institution Capital B,
8.25%, 12/15/06...................... AAA A1 BBB 11,161,400
10,000 NationsBank Capital Trust IV,
8.25%, 4/15/27....................... A- Aa3 A- 11,168,500
-----------
49,619,500
-----------
FOREIGN GOVERNMENT OBLIGATIONS--2.5%
10,000 Republic of Colombia,
8.625%, 4/01/08...................... BBB- Baa3 BBB- 9,485,000
-----------
INDUSTRIAL--49.1%
15,000 Dayton Hudson Corp.,
8.50%, 12/01/22...................... A- A3 BBB+ 16,529,850
7,000 Ford Motor Co.,
8.875%, 1/15/22...................... A+ A1 A 8,824,620
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE><CAPTION>
RATINGS
PRINCIPAL --------------------------- MARKET
AMOUNT DUFF & STANDARD VALUE (NOTE
(000) DESCRIPTION PHELPS MOODY'S & POOR'S 1)
- ------- ------------------------------------- ------ ------- -------- -----------
<S> <C> <C> <C> <C> <C>
$10,000 Georgia Pacific Corp.,
9.625%, 3/15/22...................... BBB Baa2 BBB- $11,446,700
3,000 8.625%, 4/30/25...................... BBB Baa2 BBB- 3,321,570
3,450 James River Corp.,
9.25%, 11/15/21...................... AAA Baa2 BBB- 4,409,549
10,250 McDonnell Douglas Corp.,
9.75%, 4/01/12....................... A- A2 AA 13,414,995
5,000 Occidental Petroleum Corp.,
8.75%, 1/15/23....................... BBB+ Baa2 BBB 5,981,150
15,000 Phillips Petroleum Co.,
8.49%, 1/01/23....................... BBB+ A3 A- 16,642,650
9,000 Ralston Purina Co.,
8.125%, 2/01/23...................... BBB+ Baa1 A- 10,467,990
10,000 Sears Roebuck and Co.,
9.375%, 11/01/11..................... A A2 A- 12,489,200
5,000 Sun Company, Inc.,
9.00%, 11/01/24...................... BBB Baa2 BBB 6,211,950
6,225 Tele-Communications, Inc.,
9.80%, 2/01/12....................... BBB- Baa3 BBB- 8,007,280
5,275 10.125%, 4/15/22..................... BBB- Baa3 BBB- 7,305,664
3,200 9.875%, 6/15/22...................... BBB- Baa3 BBB- 4,342,080
10,000 Tenneco, Inc.,
9.20%, 11/15/12...................... BBB- Baa1 BBB 12,234,900
5,000 Time Warner Entertainment Company,
L.P.,
10.15%, 5/01/12...................... BBB- Baa2 BBB- 6,555,100
5,000 8.875%, 10/01/12..................... BBB- Baa2 BBB- 5,948,200
7,000 Time Warner Inc.,
9.15%, 2/01/23....................... BBB- Baa3 BBB- 8,825,320
10,000 Trans-Canada Pipelines,
9.875%, 1/01/21...................... A- A2 A- 13,008,200
5,000 USX Corp.,
9.375%, 2/15/12...................... BBB Baa2 BBB- 6,032,450
5,000 8.50%, 3/01/23....................... BBB Baa2 BBB- 5,857,100
-----------
187,856,518
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE><CAPTION>
RATINGS
PRINCIPAL --------------------------- MARKET
AMOUNT DUFF & STANDARD VALUE (NOTE
(000) DESCRIPTION PHELPS MOODY'S & POOR'S 1)
- ------- ------------------------------------- ------ ------- -------- -----------
<S> <C> <C> <C> <C> <C>
TELEPHONE--12.6%
$ 5,000 AT&T Corp.,
8.625%, 12/01/31..................... AA+ Aa3 AA- $ 5,627,350
10,000 Bell Canada Inc.,
9.50%, 10/15/10...................... A+ A2 A+ 12,709,100
10,000 MCI Communications Corp.,
8.25%, 1/20/23....................... A Baa2 A 10,864,000
5,000 New York Telephone Co.,
8.625%, 11/15/10..................... A A2 A+ 5,998,650
10,125 Sprint Corp.,
9.25%, 4/15/22....................... A Baa1 A- 12,988,249
-----------
48,187,349
-----------
UTILITIES--ELECTRIC--32.8%
10,000 Arizona Public Service Co.,
8.00%, 2/01/25....................... BBB+ Baa1 A- 10,600,500
10,000 Boston Edison Co.,
7.80%, 3/15/23....................... BBB+ Baa2 BBB 10,715,600
5,000 Connecticut Light & Power Co.,
8.50%, 6/01/24....................... BBB+ Ba3 BB 5,234,900
5,000 Dayton Power & Light Co.,
8.40%, 12/01/22...................... AA Aa3 AA- 5,300,450
6,000 8.15%, 1/15/26....................... AA Aa3 AA- 6,612,120
3,000 Houston Lighting & Power Co.,
7.75%, 3/15/23....................... A+ A3 A- 3,159,450
15,000 Hydro-Quebec,
8.40%, 1/15/22....................... AA A2 A+ 18,314,550
5,000 Illinois Power Co.,
8.00%, 2/15/23....................... BBB+ Baa1 BBB 5,263,250
10,000 Mississippi Power & Light Co.,
8.65%, 1/15/23....................... BBB Baa2 BBB+ 10,995,400
10,000 Pacific Gas & Electric Co.,
8.25%, 11/01/22...................... A A1 AA- 11,164,100
10,000 Peco Energy Co.,
8.25%, 9/01/22....................... BBB+ Baa1 BBB+ 10,531,600
5,000 Pennsylvania Power & Light Co.,
8.50%, 5/01/22....................... A A3 A- 5,497,450
5,000 Tennessee Valley Authority,
8.625%, 11/15/29 Pound............... AAA Aaa AAA 5,526,400
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
PORTFOLIO OF INVESTMENTS (CONCLUDED)
JUNE 30, 1998
(UNAUDITED)
<TABLE><CAPTION>
RATINGS
PRINCIPAL --------------------------- MARKET
AMOUNT DUFF & STANDARD VALUE (NOTE
(000) DESCRIPTION PHELPS MOODY'S & POOR'S 1)
- ------- ------------------------------------- ------ ------- -------- -----------
<S> <C> <C> <C> <C> <C>
$ 5,000 Texas Utilities Electric Co.,
9.750%, 5/01/21...................... BBB Baa1 BBB+ $ 5,594,800
10,000 8.875%, 2/01/22...................... BBB Baa1 BBB+ 10,997,600
-----------
125,508,170
-----------
420,656,537
TOTAL BONDS (cost $389,893,131)......
-----------
509,459,474
TOTAL LONG-TERM INVESTMENTS
(cost $477,190,135)..................
-----------
/ / SHORT-TERM INVESTMENTS--14.2%
ASSET-BACKED SECURITY--0.9%
3,485 Honda Auto Receivable - 1995 Grantor Trust, 6.22%, due
8/15/98.................................................... 3,484,549
-----------
CERTIFICATE OF DEPOSIT--1.3%
4,998 Societe Generale Yankee, 5.78%, due 3/12/99................ 4,997,811
-----------
COMMERCIAL PAPER--0.6%
2,500 Ford Motor Credit Corp., 5.50%, due 7/30/98................ 2,500,000
-----------
REPURCHASE AGREEMENTS--10.1%
4,692 Repurchase agreement with C.S. First Boston Corp., 5.85%, acquired
on 6/30/98 and due 7/01/98 (collateralized by U.S. Treasury Notes,
7.75%, 11/30/99, value $4,720,798)................................ 4,692,000
33,889 Repurchase agreement with Goldman, Sachs & Co., 5.50%, acquired on
6/30/98 and due 7/01/98 (collateralized by Federal National
Mortgage Association, 6.75%, due 7/18/28, value $33,936,141)...... 33,888,949
-------------
38,580,949
-------------
TIME DEPOSIT--1.3%
5,000 Bankers Trust Company, 5.50%, due 12/31/98.......................... 5,000,000
-------------
TOTAL SHORT-TERM INVESTMENTS
(cost $54,563,309).................................................. 54,563,309
-------------
TOTAL INVESTMENTS--147.3%
(cost $531,753,444) (Note 3)........................................ 564,022,783
Liabilities, less cash and other assets--(47.3%).................... (181,116,879)
-------------
NET ASSETS--100%.................................................... $ 382,905,904
-------------
-------------
</TABLE>
- ----------------------------
Pound This security is also a U.S. Government Agency Obligation.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $531,753,444)......................... $564,022,783
Cash.............................................................. 2,080,899
Interest receivable............................................... 10,049,411
Prepaid assets and other assets................................... 73,568
------------
Total assets.................................................. 576,226,661
------------
LIABILITIES
Commercial paper (Note 5)......................................... 140,880,243
Payable upon return of securities loaned (Note 4)................. 52,063,309
Investment advisory fee payable (Note 2).......................... 217,728
Administrative fee payable (Note 2)............................... 47,721
Accrued expenses and other liabilities............................ 111,756
------------
Total liabilities............................................. 193,320,757
------------
NET ASSETS........................................................ $382,905,904
------------
------------
CAPITAL
Common stock, $.01 par value, 600,000,000 shares authorized,
26,015,314 shares issued and outstanding (Note 6)............... $ 260,153
Additional paid-in capital........................................ 363,949,492
Distributions in excess of net investment income.................. (1,660,716)
Accumulated net realized loss on investment transactions.......... (11,912,364)
Net unrealized appreciation on investments........................ 32,269,339
------------
NET ASSETS........................................................ $382,905,904
------------
------------
Net asset value per share of common stock:
($382,905,904L26,015,314 shares of common stock issued and
outstanding).................................................... $ 14.72
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest income................................................. $ 19,503,247
Security lending fee income..................................... 43,258
------------
Total investment income....................................... 19,546,505
------------
EXPENSES
Investment advisory fee (Note 2)................................ 1,002,618
Administrative fee (Note 2)..................................... 283,188
Commercial paper fee............................................ 143,831
Directors' fees................................................. 94,729
Commissions expense--commercial paper........................... 71,897
Transfer agent fee and expenses................................. 68,807
Professional fees............................................... 39,761
Custodian fee and expenses...................................... 32,336
Reports to shareholders......................................... 22,417
Registration fee................................................ 16,029
Amortization of deferred organization expenses (Note 1)......... 771
------------
Total operating expenses (before interest expense).............. 1,776,384
Interest expense--commercial paper (Note 5)..................... 3,973,658
------------
Total expenses................................................ 5,750,042
------------
Net investment income.................................... 13,796,463
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions.................... 3,153,323
Net change in unrealized appreciation on investments............ 4,568,165
------------
Net realized and unrealized gain on investments............... 7,721,488
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $ 21,517,951
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INCREASE (DECREASE) IN CASH
Cash flows provided by (used for) operating activities:
Interest received............................................ $ 20,086,600
Expenses paid................................................ (1,759,936)
Interest expense paid........................................ (4,517,995)
Purchase of long-term portfolio investments.................. (47,369,558)
Proceeds from sale of long-term portfolio investments........ 51,135,708
Net proceeds from sales in excess of purchases of short-term
portfolio investments............................................ 47,382,104
-------------
Net cash provided by operating activities.................... 64,956,923
-------------
Cash flows provided by (used for) financing activities:
Net cash used for securities loaned.......................... (49,882,104)
Net cash provided by commercial paper........................ 635,642
Cash dividends paid to shareholders.......................... (15,809,659)
-------------
Net cash used for financing activities....................... (65,056,121)
-------------
Net decrease in cash............................................. (99,198)
Cash at beginning of period...................................... 2,180,097
-------------
Cash at end of period............................................ $ 2,080,899
-------------
-------------
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net increase in net assets resulting from operations............. $ 21,517,951
-------------
Decrease in investments...................................... 51,148,255
Net realized gain on investment transactions................. (3,153,323)
Net change in unrealized appreciation on investments......... (4,568,165)
Decrease in interest receivable.............................. 542,329
Decrease in commercial paper discount........................ (544,337)
Accretion of discount........................................ (2,235)
Amortization of deferred organization expenses............... 771
Increase in prepaid assets and other assets.................. (19,521)
Increase in investment advisory fee payable.................. 61,168
Increase in administrative fee payable....................... 753
Decrease in accrued expenses and other liabilities........... (26,723)
-------------
Total adjustments....................................... 43,438,972
-------------
Net cash provided by operating activities........................ $ 64,956,923
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE
JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
------------------- -------------------
<S> <C> <C>
OPERATIONS
Net investment income................. $ 13,796,463 $ 28,121,230
Net realized gain on investment
transactions.......................... 3,153,323 2,602,282
Net change in unrealized appreciation
on investments...................... 4,568,165 17,614,748
------------------- -------------------
Net increase in net assets resulting
from operations..................... 21,517,951 48,338,260
------------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income................. (13,636,294) (30,594,021)
Distributions in excess of net
investment income................... (1,660,716) --
------------------- -------------------
Net decrease in net assets resulting
from distributions.................. (15,297,010) (30,594,021)
------------------- -------------------
Total increase........................ 6,220,941 17,744,239
NET ASSETS
Beginning of period................... 376,684,963 358,940,724
------------------- -------------------
End of period......................... $ 382,905,904 $ 376,684,963
------------------- -------------------
------------------- -------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
FOR THE
PERIOD
FOR THE JANUARY 29,
SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31, 1993(1) TO
JUNE 30, 1998 --------------------------------------------------------- DECEMBER 31,
(UNAUDITED) 1997 1996 1995 1994 1993
----------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period........................ $ 14.48 $ 13.80 $ 14.81 $ 12.18 $ 14.78 $ 14.06(2)
----------------- ------------ ------------ ------------ ------------ ------------
Net investment income......... 0.53 1.08 1.10 1.09 1.18 1.08
Net realized and unrealized
gain (loss) on investment
transactions................ 0.30 0.78 (1.03) 2.72 (2.60) 0.76
----------------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease) from
investment operations......... 0.83 1.86 0.07 3.81 (1.42) 1.84
----------------- ------------ ------------ ------------ ------------ ------------
Distributions from net
investment income............. (0.53) (1.18) (1.08) (1.11) (1.18) (1.06)
Distributions in excess of net
investment income............. (0.06) -- -- (0.07) -- --
Distributions from realized
gains on investments.......... -- -- -- -- -- (0.06)
----------------- ------------ ------------ ------------ ------------ ------------
Total distributions............ (0.59) (1.18) (1.08) (1.18) (1.18) (1.12)
----------------- ------------ ------------ ------------ ------------ ------------
Net asset value, end of
period(3)..................... $ 14.72 $ 14.48 $ 13.80 $ 14.81 $ 12.18 $ 14.78
----------------- ------------ ------------ ------------ ------------ ------------
----------------- ------------ ------------ ------------ ------------ ------------
Per share market value, end of
period(3)..................... $ 14.4375 $ 14.4375 $ 12.875 $ 13.875 $ 11.125 $ 14.25
----------------- ------------ ------------ ------------ ------------ ------------
----------------- ------------ ------------ ------------ ------------ ------------
TOTAL INVESTMENT RETURN(4)..... 4.11% 22.21% 0.69% 36.21% (14.19)% 2.33%
RATIOS TO AVERAGE NET ASSETS(5):
Operating expenses (Note 2).... 0.83%(6)(7) 0.80%(6) 0.80%(6) 0.78%(6) 0.78%(6)
Commercial paper expenses...... 2.24%(7) 2.35% 2.30% 2.52% 1.46% --
Net investment income.......... 7.37%(7) 7.84% 8.02% 7.92% 8.87% 7.87%(7)
SUPPLEMENTAL DATA:
Portfolio turnover............. 9% 12% 13% 5% 149% 282%
Net assets, end of period (000) $ 382,906 $ 376,685 $ 358,941 $ 385,329 $ 316,842 $ 407,994
COMMERCIAL PAPER INFORMATION
Aggregate amount outstanding
(000) at end of period........ $ 143,000 $ 143,000 $ 143,000 $ 143,000 $ 143,000 --
Average daily amortized cost of
commercial paper outstanding
(000)......................... $ 140,931 $ 141,704 $ 141,322 $ 141,369 $ 133,619 --
Asset coverage per $1,000 at
end of period................. $ 3,665 $ 3,625 $ 3,501 $ 3,704 $ 3,227 --
</TABLE>
- ----------------------------
(1) Commencement of investment operations.
(2) Net of offering costs of $(0.04) and underwriting discount of $(0.90).
(3) Net asset value and market value are published in The Wall Street Journal
each Monday.
(4) Total investment return is calculated assuming a purchase of common stock on
the opening of the first day and a sale on the closing of the last day of
each period reported. Dividends and distributions are assumed, for purposes
of this calculation, to be reinvested at prices obtained under the Fund's
dividend reinvestment plan. Brokerage commissions are not reflected. Total
investment returns for periods of less than one full year are not
annualized.
(5) As a percentage of average weekly net assets which includes any liabilities
or senior securities constituting indebtedness in connection with financial
leverage.
(6) Exclusive of commercial paper expenses.
(7) Annualized.
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (UNAUDITED)
Duff & Phelps Utility and Corporate Bond Trust Inc. (the 'Fund') was
organized in Maryland on November 23, 1992 as a diversified, closed-end
management investment company. The Fund had no operations until December 15,
1992 when it sold 8,000 shares of common stock for $112,800 to Phoenix
Investment Partners Ltd. Operations commenced on January 29, 1993.
The Fund's investment objective is to seek high current income consistent
with investing in securities of investment grade quality. The Fund seeks to
achieve its investment objective by
investing substantially all of its assets in a diversified portfolio of Utility
Income Securities, Corporate Income Securities, Mortgage-Backed Securities and
Asset-Backed Securities. The ability of the issuers of the securities held by
the Fund to meet their obligations may be affected by economic developments in a
specific state, industry or region.
On June 14, 1995, Duff & Phelps Investment Management Co. (the 'Adviser')
entered into a merger agreement with PM Holdings, Inc. A successor investment
advisory agreement was submitted to and approved by Fund shareholders at a
special meeting held on September 7, 1995. The merger closed on November 1,
1995.
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
SECURITY VALUATION: The Fund values its fixed-income securities by using market
quotations, prices provided by market makers or esti-
mates of market values obtained from yield
data relating to instruments with similar characteristics in accordance with
procedures established by the Board of Directors of the Fund. Exchange-traded
options are valued at the last reported sale price, or if no sales are reported,
at the mean between last reported bid and asked prices. Non-exchange traded
options are valued using a mathematical model. The relative illiquidity of some
securities in the Fund's portfolio may adversely affect the ability of the Fund
to accurately value such securities. Any securities or other assets for which
such current market quotations are not readily available are valued at fair
value as determined in good faith under procedures established by and under the
general supervision and responsibility of the Fund's Board of Directors.
Debt securities having a remaining maturity of sixty days or less are valued
at cost adjusted for amortization of premiums and accretion of discounts.
OPTION SELLING/PURCHASING: When the Fund sells or purchases an option, an amount
equal to the premium received or paid by the Fund is recorded as a liability or
an asset and is subsequently adjusted to the current market value of the option
written or purchased. Premiums received or paid from writing or purchasing
options which expire unexercised are treated by the Fund on the expiration date
as realized gains or losses. The difference between the premium and the amount
paid or received on effecting a closing purchase or sale transaction, including
brok-erage commissions, is also treated as a realized gain or loss. If an option
is exercised, the premium paid or received is added to the proceeds from the
sale or cost of the purchase in determining whether the Fund has realized a gain
or loss on investment transactions. The Fund, as writer of an option, may have
no control over whether the underlying securities may be sold (called) or
purchased (put) and as a result bears the market risk of an unfavorable change
in the price of the security underlying the written option.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of securities are
calculated on the identified cost basis. Interest income is recorded on the
accrual
13
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
basis. The Fund accretes original issue discount on securities using the
effective interest method.
FEDERAL INCOME TAXES: It is the Fund's intention to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute sufficient net income and capital gains, if any, to shareholders to
qualify as a regulated investment company. For this reason, no Federal income
tax provision is required. For Federal income tax purposes, the Fund had a
capital loss carryforward of $15,065,687 at December 31, 1997, of which
$10,283,275 expires in 2002 and $4,782,412 expires in 2003, if not offset by
subsequent capital gains.
DIVIDENDS AND DISTRIBUTIONS: The Fund will declare and pay dividends to
shareholders on a monthly basis. The dividends are recorded by the Fund on the
ex-dividend date.
DEFERRED ORGANIZATION COSTS: A total of $50,000 was incurred in connection with
the organization of the Fund. All costs have been amortized ratably over a
period of sixty months from the date the Fund commenced investment operations.
REPURCHASE AGREEMENTS: Repurchase agree-
ments are fully collateralized by U.S. Treasury or Government Agency securities.
All collateral is held through the Fund's custodian and is monitored daily so
that its market value exceeds the carrying value of the repurchase agreement.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally ac-cepted accounting principles requires man-agement to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts for income and expenses during the reporting
period. Actual results could differ from those estimates.
NOTE 2. AGREEMENTS
The Fund has an Advisory Agreement with the Adviser, a subsidiary of Phoenix
Investment Partners Ltd. and an Administration Agreement with Princeton
Administrators, L.P. (the 'Administrator').
For the period from January 1, 1998 to May 31, 1998, the investment advisory
fee paid to the Adviser was computed weekly and payable monthly at an annual
rate of .50% of the Fund's average weekly net assets.
On May 27, 1998, shareholders approved an amended and restated investment
advisory agreement (the 'Amended Advisory Agreement'). Under the terms of the
Amended Advisory Agreement, effective June 1, 1998, the investment advisory fee
paid to the Adviser is computed weekly and payable monthly at an annual rate of
.50% of the Fund's average weekly managed assets which is defined as the average
weekly value of the total assets of the Fund minus the sum of all accrued
liabilities of the Fund (other than the aggregate amount of any outstanding
borrowings or other indebtedness constituting financial leverage).
The administrative fee paid to the Administrator is also computed weekly and
payable monthly at an annual rate of .15% of the Fund's average weekly net
assets, (which includes any liabilities or senior securities constituting
indebtedness in connection with financial leverage) subject to a monthly minimum
of $12,500.
Pursuant to the agreements, the Adviser provides continuous supervision of
the investment portfolio and pays the compensation of directors and officers of
the Fund who are full-time employees of the Adviser. The Administrator pays
certain occupancy, clerical and accounting costs of the Fund. The Fund bears all
other costs and expenses.
NOTE 3. PORTFOLIO SECURITIES
For the six months ended June 30, 1998, the Fund had purchases of
$47,369,558 and sales of $51,135,708 of investment securities, other than
short-term investments. For the six months ended June 30, 1998, the Fund had no
purchases or sales of U.S. Government securities.
14
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
The Federal income tax basis of the Fund's investments at June 30, 1998 was
$531,753,444, and accordingly, net unrealized appreciation aggregated
$32,269,339, of which $32,762,657 related to appreciated securities and $493,318
related to depreciated securities.
NOTE 4. SECURITY LENDING
The Fund may lend its portfolio securities to qualified institutions. The
loans are secured by collateral at least equal, at all times, to the market
value of the securities loaned. The Fund may bear the risk of delay in recovery
of, or even loss of rights in, the securities loaned should the borrower of the
securities fail financially. The Fund receives compensation for lending its
securities in the form of fee income. The Fund also continues to receive
interest on the securities loaned, and any gain or loss in the market price of
the securities loaned that may occur during the term of the loan will be for the
account of the Fund.
As of June 30, 1998, the Fund's custodian held cash and short-term
investments having an aggregate value of $71,737,711 as collateral for portfolio
securities loaned having a market value of $69,088,726.
NOTE 5. COMMERCIAL PAPER
As of June 30, 1998, $143,000,000 of commercial paper was outstanding with
an amortized cost of $140,880,243. The average discount rate of commercial paper
outstanding at June 30, 1998 was 5.59%. The average daily balance of commercial
paper outstanding for the six months ended June 30, 1998 was $143,000,000 at a
weighted average discount rate of 5.64%. The maximum amount of commercial paper
outstanding at any time during the six months was $143,000,000. In conjunction
with the issuance of the commercial paper, the Fund entered into a line of
credit arrangement with a bank for $75,000,000. During the six months ended June
30, 1998, there were no borrowings under this arrangement.
NOTE 6. CAPITAL
There are 600,000,000 shares of $.01 par value common stock authorized. Of
the 26,015,314 shares of common stock outstanding at June 30, 1998, Phoenix
Investment Partners Ltd. owned 12,648 shares.
15
<PAGE>
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Common shareholders are automatically enrolled in the Fund's Dividend
Reinvestment and Cash Purchase Plan (the 'Plan'). Under the Plan, all
distributions to common shareholders of dividends and capital gains will
automatically be reinvested by The Bank of New York (the 'Plan Agent'), in
additional shares of common stock of the Fund unless an election is made to
receive distributions in cash. The Plan Agent will effect purchases of shares of
common stock under the Plan in the open market. Shareholders who elect not to
participate in the Plan will receive all distributions in cash paid by check in
U.S. dollars mailed directly to the shareholder of record (or if the shares are
held in street or other nominee name, then to the nominee) by the Plan Agent.
The Plan Agent serves as agent for the Common shareholders in administering
the Plan. After the Fund declares a dividend or determines to make a capital
gains distribution, the Plan Agent will, as agent for the participants, receive
the cash payment and use it to buy shares of common stock in the open market, on
the New York Stock Exchange or elsewhere, for the participants' accounts. The
Fund will not issue any new shares in connection with the Plan. If, before the
Plan Agent has completed its purchases, the market price exceeds the net asset
value per share of the common stock, the average per share purchase price paid
by the Plan Agent may exceed the net asset value of the Fund's common stock,
resulting in the acquisition of fewer shares of common stock than if the
dividend or distribution had been paid in common stock issued by the Fund.
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Fund. However, each participant will pay a pro
rata share of brokerage commissions (or equivalent purchase costs) incurred with
respect to the Plan Agent's open market purchases in connection with the
reinvestment of dividends and distributions and with voluntary additional share
investments. There are no other charges to participants for reinvesting
dividends or capital gains distributions, except for certain brokerage
commissions (or equivalent purchase costs) as described above.
The Plan also permits Plan participants to periodically purchase additional
shares of common stock through the Plan by delivering to the Plan Agent a check
for at least $100, but not more than $5,000 in any month. The Plan Agent will
use the funds to purchase shares in the open market or in private transactions
as described above with respect to reinvestment of dividends and distributions.
Purchases made pursuant to the Plan will be made commencing at the time of the
first dividend or distribution payment following the second business day after
receipt of the funds for additional purchases, and may be aggregated with
purchases of shares for reinvestment of the dividends and distributions. Shares
will be allocated to the accounts of participants purchasing additional shares
at the average price per share, plus a service charge imposed by the Plan Agent
and brokerage commissions (or equivalent purchase costs) paid by
16
<PAGE>
the Plan Agent for all shares purchased by it, including for reinvestment of
dividends and distributions. Checks drawn on a foreign bank are subject to
collection and collection fees, and will be invested at the time of the next
distribution after funds are collected by the Plan Agent.
The Plan Agent will make every effort to invest funds promptly, and in no
event more than 30 days after the Plan Agent receives a dividend or
distribution, except where postponement is deemed necessary to comply with
applicable provisions of the federal securities laws.
Funds sent to the Plan Agent for voluntary additional share investment may
be recalled by the participant by written notice received by the Plan Agent not
later than two business days before the next distribution payment date. If for
any reason a regular monthly distribution is not paid by the Fund, funds for
voluntary additional share investment will be returned to the participant,
unless the participant specifically directs that they continue to be held by the
Plan Agent for subsequent investment.
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent. When a participant withdraws from the Plan or upon termination
of the Plan as provided below, certificates for whole shares credited to his or
her account under the Plan will be issued and a cash payment will be made for
any fraction of a share credited to such account. An election to withdraw from
the Plan will, until such election is changed, be deemed to be an election by a
common shareholder to take all subsequent dividends and distributions in cash.
Elections will only be effective for dividends and distributions declared after,
and with a record date of at least ten days after, such elections are received
by the Plan Agent. There is no penalty for non-participation in or withdrawal
from the Plan, and shareholders who have withdrawn from the Plan may rejoin it
at any time.
The Plan Agent maintains each shareholder's account in the Plan and
furnishes monthly written confirmations of all transactions in the accounts,
including information needed by shareholders for personal and tax records.
Shares in the account of each Plan participant will be held by the Plan Agent in
non-certificated form in the name of the participant, and each shareholder's
proxy will include those shares purchased pursuant to the Plan.
Common shareholders whose common stock is held in the name of a broker or
nominee should contact such broker or nominee to determine whether or how they
may participate in the Plan.
In the case of shareholders, such as banks, brokers or nominees, that hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
record shareholder as representing the total amount registered in the record
shareholder's name and held for the account of beneficial owners who are
participants in the Plan.
17
<PAGE>
The automatic reinvestment of dividends and distributions will not relieve
participants of any federal income tax that may be payable or required to be
withheld on such dividends or distributions.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
change sent to all participants in the Plan at least 90 days before the record
date for the dividend or distribution. The Plan may also be amended or
terminated by the Plan Agent by at least 90 days' written notice to all
participants in the Plan. All questions concerning the Plan should be directed
to the Plan Agent by calling 1-800-524-4458.
18
<PAGE>
DIRECTORS
Francis E. Jeffries, Chairman
E. Virgil Conway
William W. Crawford
William N. Georgeson
Philip R. McLoughlin
Eileen A. Moran
Everett L. Morris
Richard A. Pavia
Harry Dalzell-Payne
OFFICERS
Calvin J. Pedersen
President & Chief Executive Officer
Dennis A. Cavanaugh
Senior Vice President, Chief Investment Officer & Assistant Treasurer
James W. Rosenberger
Treasurer & Assistant Secretary
Thomas N. Steenburg
Secretary
INVESTMENT ADVISER
Duff & Phelps Investment Management Co.
55 East Monroe Street
Chicago, IL 60603
(312) 541-5555
ADMINISTRATOR
Princeton Administrators, L.P.
P.O. Box 9095
Princeton, NJ 08543-9095
(800) 543-6217
CUSTODIAN AND TRANSFER AGENT
The Bank of New York
P.O. Box 11258
Church Street Station
New York, NY 10286
(800) 524-4458
INDEPENDENT AUDITORS
Ernst & Young LLP
233 South Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, IL 60606
The accompanying financial statements as of
June 30, 1998 were not audited and, accordingly,
no opinion is expressed on them.
This report is for stockholder information.
This is not a prospectus intended for use in the
purchase or sale of Fund shares.
Duff & Phelps Utility and Corporate Bond Trust Inc.
55 East Monroe Street
Chicago, IL 60603
SEMI-ANNUAL REPORT
JUNE 30, 1998
DUFF & PHELPS
UTILITY AND
CORPORATE
BOND TRUST
DUFF & PHELPS UTILITY AND
CORPORATE BOND TRUST
