<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, 1999 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
<PAGE>
SEMI-ANNUAL REPORT
JUNE 30, 1999
DUFF & PHELPS
UTILITY AND
CORPORATE
BOND TRUST
DUFF & PHELPS UTILITY AND
CORPORATE BOND TRUST
<PAGE>
DEAR FELLOW SHAREHOLDERS:
During the first half of 1999, 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 8.11% based upon
the June 30, 1999 closing stock price of $14.50. That closing stock price
represented a 8.94% premium to net asset value (NAV).
Interest rates rose steadily throughout the first half of 1999 and
adversely affected fixed income investment total returns. For example, the
Lehman Brothers Aggregate Index, a proxy for the U.S. bond market, produced a
negative 1.37% return for the first half of the year, which is only the third
time this decade a year's halfway point produced a negative return. Similarly,
the Fund also produced a first half negative return. Because of the Fund's
longer duration, the rise in interest rates resulted in a first half total
return of a negative 6.18% as measured by Lipper Analytical Services, Inc.
The first half of 1999 was characterized by steadily rising interest rates
as a series of economic indicators consistently exceeded market expectations.
For example, after ending the previous year at 5.09%, the yield on the
thirty-year U.S. Treasury bond rose approximately 88 basis points, ending the
first half of the year at 5.97%. The yield on the two-year U.S. Treasury note,
which can at times be a leading indicator of Federal Reserve policy, increased
by 1 percentage point, closing out the first half of 1999 at a yield of 5.52%. A
wide array of economic indicators, including U.S. gross domestic product (GDP),
consumer confidence and employment, were consistently being reported at levels
that exceeded most expectations. As a result, interest rates steadily rose in
anticipation of eventual Federal Reserve tightening.
Even though the first half's economic growth rate moderated from the fourth
quarter's torrid annual pace of 6%, it was believed by market participants that
GDP growth was still rising faster than the labor force could accommodate in a
non-accelerating inflation environment. The main engine of growth continued to
be consumer spending, which grew at a rate well in excess of the growth in real
wages. Despite a negative national saving rate, consumer spending, which
represents nearly two-thirds of GDP, remained ebullient. Consumers felt
comfortable spending above income levels because their primary asset, housing,
was increasing in value. In addition, consumer attitudes remained positive due
to the continued gains in the stock market and the expanding employment
opportunities. It was, perhaps, the tightness in the labor markets combined with
strong consumer spending which lay behind the majority of the first half rise in
interest rates.
During the first half of the year, the unemployment rate hovered near the
historically low rate of 4.2%. Despite the significant improvement in the
economy's productivity and subdued inflation, the chairman of the Federal
Reserve felt compelled in early May to warn the financial markets that the weak
link in the inflation outlook was the tight labor market. At the same time, Mr.
Greenspan mused aloud that perhaps the injection of financial liquidity during
the fourth quarter was no longer needed. These comments plus an unexpectedly
high Consumer Price Index report for April caused the Federal Open Market
Committee, in their May deliberations, to move to a bias of tighter monetary
policy.
As a result of the above events, the markets, in a knee-jerk reaction,
pushed the yields on the thirty-year US Treasury bond to 5.82% by the end of
May. Yields on US Treasuries were biased upward during the month of June as the
financial markets nervously awaited a much anticipated increase in the federal
funds rate. On June 30, the market's expectations were confirmed as the Federal
Reserve raised the rate on federal funds by 25 basis points to 5%. Somewhat
surprisingly, the Federal
1
<PAGE>
Reserve removed the bias to tighten rates and the bond market rallied as the
yield on the thirty-year US Treasury fell back below 6% from an intraday high of
6.19%.
As we look forward, we believe that our economy's growth rate will moderate
to the 2.0% to 3.0% range, and continued low inflation will allow U.S. interest
rates to move to lower levels during the second half of 1999.
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 open-market shares through the Plan Agent. Additional
information about the Plan is available from The Bank of New York,
1-800-524-4458, or for more details, please turn to page 15. The Plan is being
amended effective December 1, 1999 to permit the new issuance of Fund shares for
dividend reinvestments in certain circumstances where this is beneficial to
participants in the Plan and to make other changes. Please read the information
regarding the plan, and the amendments, carefully. 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 Calvin J. Pedersen, CFA
Chairman President, Chief Executive Officer
2
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
RATINGS
PRINCIPAL ---------------------------------------
AMOUNT DUFF & STANDARD & MARKET VALUE
(000) DESCRIPTION PHELPS MOODY'S POOR'S (NOTE 1)
- ----------- ----------------------------------------------------- ----------- ------------- ----------- ----------------
/ / LONG-TERM INVESTMENTS--136.2%
U.S. GOVERNMENT AND AGENCY OBLIGATIONS--23.0%
Government National Mortgage Association
Pass-Through Certificates,
<S> <C> <C> <C> <C>
$ 1,983 8.00%, 7/15/23....................................... AAA Aaa AAA $ 2,041,091
5,119 8.00%, 8/15/23....................................... AAA Aaa AAA 5,267,428
2,347 8.00%, 5/15/24....................................... AAA Aaa AAA 2,416,352
1,360 7.00%, 3/15/26....................................... AAA Aaa AAA 1,341,629
2,726 7.50%, 5/15/26....................................... AAA Aaa AAA 2,751,410
U.S. Treasury Bonds,
12,900 10.750%, 2/15/03..................................... AAA Aaa AAA 14,970,063
40,000 10.375%, 11/15/12.................................... AAA Aaa AAA 50,968,800
----------------
79,756,773
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(cost $81,833,729)...................................
----------------
BONDS--113.2%
FINANCIAL--13.8%
10,000 American Express Co.,
8.625%, 5/15/22...................................... AA- A1 A+ 10,645,900
7,000 Countrywide Credit Industries Inc.,
8.00%, 12/15/26...................................... A- A3 BBB+ 6,603,730
10,000 Great Western Financial Corp.,
8.206%, 2/01/27...................................... BBB- A3 BBB- 9,888,000
10,000 KeyCorp Institution Capital B,
8.25%, 12/15/26...................................... BBB A1 BBB 10,348,800
10,000 NationsBank Capital Trust IV,
8.25%, 4/15/27....................................... A- Aa2 A- 10,290,300
----------------
47,776,730
----------------
FOREIGN GOVERNMENT OBLIGATIONS--2.2%
10,000 Republic of Colombia,
8.625%, 4/01/08...................................... BBB- Baa3 BBB- 7,762,500
----------------
INDUSTRIAL--53.6%
5,000 Archer-Daniels Midland Co.,
8.125%, 6/01/12...................................... AAA Aa3 AA- 5,442,000
15,000 Dayton Hudson Corp.,
8.50%, 12/01/22...................................... A- A3 A- 16,145,100
7,000 Ford Motor Co.,
8.875%, 1/15/22...................................... A+ A1 A 8,112,510
</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, 1999
(UNAUDITED)
<TABLE>
RATINGS
PRINCIPAL ---------------------------------------
AMOUNT DUFF & STANDARD & MARKET VALUE
(000) DESCRIPTION PHELPS MOODY'S POOR'S (NOTE 1)
- ----------- ----------------------------------------------------- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$ 10,000 Georgia Pacific Corp.,
9.625%, 3/15/22...................................... BBB- Baa2 BBB- $ 10,700,800
3,000 8.625%, 4/30/25...................................... BBB- Baa2 BBB- 3,067,230
3,450 James River Corp.,
9.25%, 11/15/21...................................... BBB- Baa2 BBB- 4,395,818
10,250 McDonnell Douglas Corp.,
9.75%, 4/01/12....................................... AA- A2 AA- 12,156,090
5,000 Nova Gas Transmissions Limited,
7.875%, 4/01/23...................................... AAA A2 A- 5,113,600
5,000 Occidental Petroleum Corp.,
8.75%, 1/15/23....................................... BBB Baa2 BBB 5,319,650
15,000 Phillips Petroleum Co.,
8.49%, 1/01/23....................................... A- A3 A- 16,210,350
9,000 Ralston Purina Co.,
8.125%, 2/01/23...................................... A- Baa1 A- 9,439,380
10,000 Sears Roebuck and Co.,
9.375%, 11/01/11..................................... A A2 A- 11,402,200
5,000 Sun Company, Inc.,
9.00%, 11/01/24...................................... BBB Baa2 BBB 5,379,200
6,225 Tele-Communications, Inc.,
9.80%, 2/01/12....................................... BBB- A2 AA- 7,605,829
5,275 10.125%, 4/15/22..................................... BBB- A2 AA- 6,869,685
3,200 9.875%, 6/15/22...................................... BBB- A2 AA- 4,081,824
10,000 Tenneco, Inc.,
9.20%, 11/15/12...................................... BBB Baa1 BBB 11,016,400
5,000 Time Warner Entertainment Company, L.P.,
10.15%, 5/01/12...................................... BBB Baa2 BBB 6,148,900
5,000 8.875%, 10/01/12..................................... BBB Baa2 BBB 5,570,000
7,000 Time Warner Inc.,
9.15%, 2/01/23....................................... BBB- Baa3 BBB 8,027,670
10,000 Trans-Canada Pipelines Limited,
9.875%, 1/01/21...................................... A A2 A- 12,365,200
5,000 USX Corp.,
9.375%, 2/15/12...................................... BBB Baa2 BBB- 5,681,750
5,000 8.50%, 3/01/23....................................... BBB Baa2 BBB- 5,310,350
----------------
185,561,536
----------------
</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, 1999
(UNAUDITED)
<TABLE>
RATINGS
PRINCIPAL ---------------------------------------
AMOUNT DUFF & STANDARD & MARKET VALUE
(000) DESCRIPTION PHELPS MOODY'S POOR'S (NOTE 1)
- ----------- ----------------------------------------------------- ----------- ------------- ----------- ----------------
TELEPHONE--14.7%
<S> <C> <C> <C> <C> <C>
$ 10,500 AT&T Corp.,
8.35%, 1/15/25....................................... AA+ Aa3 AA- $ 10,956,960
10,000 Bell Canada Inc.,
9.50%, 10/15/10...................................... A+ A2 A+ 11,873,300
10,000 MCI Communications Corp.,
8.25%, 1/20/23....................................... BBB+ A3 A- 10,456,900
5,000 New York Telephone Co.,
8.625%, 11/15/10..................................... A+ A2 A+ 5,664,300
10,125 Sprint Corp.,
9.25%, 4/15/22....................................... A Baa1 BBB+ 12,007,238
----------------
50,958,698
----------------
UTILITIES--ELECTRIC--28.9%
10,000 Arizona Public Service Co.,
8.00%, 2/01/25....................................... BBB+ Baa1 A- 10,213,000
10,000 Boston Edison Co.,
7.80%, 3/15/23....................................... A Baa1 A- 9,858,600
10,000 CalEnergy Co., Inc.,
8.48%, 9/15/28....................................... BBB- Baa3 BBB- 10,671,800
14,000 ComEd Financing II,
8.50%, 1/15/27....................................... BBB- Baa3 BBB- 14,019,180
5,000 Connecticut Light & Power Co.,
8.50%, 6/01/24....................................... BBB- Baa3 BBB- 5,217,700
6,000 Dayton Power & Light Co.,
8.15%, 1/15/26....................................... AA Aa3 AA- 6,119,160
1,500 Houston Lighting & Power Co.,
7.75%, 3/15/23....................................... A+ A3 A- 1,447,200
5,000 Hydro-Quebec,
8.40%, 1/15/22....................................... AA A2 A+ 5,588,050
10,000 Pacific Gas & Electric Co.,
8.25%, 11/01/22...................................... AA- A1 AA- 10,608,000
10,000 Pennsylvania Power & Light Co.,
8.50%, 5/01/22....................................... A- A3 A- 5,094,550
5,000 Tennessee Valley Authority,
8.625%, 11/15/29 Pound............................... AAA Aaa AAA 5,335,050
5,000 Texas Utilities Electric Co.,
9.750%, 5/01/21...................................... A- A3 BBB+ 5,460,200
10,000 8.875%, 2/01/22...................................... BBB A3 BBB+ 10,384,500
----------------
100,016,990
----------------
392,076,454
TOTAL BONDS (cost $394,325,698)......................
----------------
471,833,227
TOTAL LONG-TERM INVESTMENTS
(cost $476,159,427)..................................
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES (CONCLUDED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
PRINCIPAL MARKET
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
- ----------- ------------------------------------------------------------------------------------- ----------------
/ / SHORT-AND MEDIUM-TERM INVESTMENTS--20.4%
COMMERCIAL PAPER--1.5%
<S> <C> <C> <C> <C> <C>
$ 2,500 Ford Motor Credit Company, 5.02%, due 8/30/99........................................ $ 2,500,000
2,500 General Electric Capital Corp., 4.87%, due 7/29/99................................... 2,500,000
----------------
TOTAL COMMERCIAL PAPER (cost $5,000,000)............................................. 5,000,000
----------------
MEDIUM-TERM NOTE--2.9%
9,992 J.P. Morgan & Co., Medium Term Note, Series A, 4.9825%, due
7/06/00(a)........................................................................... 9,991,707
----------------
REPURCHASE AGREEMENT--3.8%
13,310 Repurchase agreement with Goldman, Sachs & Co., 4.85%, acquired on
6/01/99 and due 7/01/99 (collateralized by Federal Home Loan
Mortgage Corp., 6.50% with maturities to 12/15/14, value $13,576,408) 13,310,000
----------------
TIME DEPOSITS--12.2%
22,670 Barclays Bank PLC, 5.8125%, due 7/01/99.............................................. 22,670,000
19,676 Huntingdon National Bank, 4.75%, due 7/01/99......................................... 19,676,000
----------------
TOTAL TIME DEPOSITS (cost $42,346,000)............................................... 42,346,000
----------------
TOTAL SHORT-AND MEDIUM-TERM INVESTMENTS
(cost $70,647,707)................................................................... 70,647,707
----------------
TOTAL INVESTMENTS--156.6%
(cost $546,807,134) (Note 3)......................................................... 542,480,934
Liabilities, less cash and other assets--(56.6%)..................................... (196,169,203)
----------------
NET ASSETS--100%..................................................................... $ 346,311,731
----------------
----------------
</TABLE>
- ------------------------------------
Pound This security is also a U.S. Government Agency Obligation.
(a) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at June 30,
1999.
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, 1999
(UNAUDITED)
<TABLE>
ASSETS
<S> <C>
Investments, at value (cost $546,807,134)..................................................... $ 542,480,934
Cash.......................................................................................... 1,077,217
Interest receivable........................................................................... 10,048,406
Prepaid assets and other assets............................................................... 48,742
------------------
Total assets............................................................................. 553,655,299
------------------
LIABILITIES
Commercial paper (Note 5)..................................................................... 141,345,774
Payable upon return of securities loaned (Note 4)............................................. 65,647,707
Investment advisory fee payable (Note 2)...................................................... 202,855
Administrative fee payable (Note 2)........................................................... 43,183
Accrued expenses and other liabilities........................................................ 104,049
------------------
Total liabilities........................................................................ 207,343,568
------------------
NET ASSETS.................................................................................... $ 346,311,731
------------------
------------------
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.................................................................... 360,780,849
Distributions in excess of net investment income.............................................. (1,661,577)
Accumulated net realized loss on investment transactions...................................... (8,741,494)
Net unrealized depreciation on investments.................................................... (4,326,200)
------------------
NET ASSETS.................................................................................... $ 346,311,731
------------------
------------------
Net asset value per share of common stock:
($346,311,731L26,015,314 shares of common stock issued and outstanding)..................... $ 13.31
------------------
------------------
</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, 1999
(UNAUDITED)
<TABLE>
INVESTMENT INCOME
<S> <C>
Interest income.............................................................................. $ 19,333,625
Security lending fee income.................................................................. 52,427
-----------------
Total investment income................................................................... 19,386,052
-----------------
EXPENSES
Investment advisory fee (Note 2)............................................................. 1,270,462
Administrative fee (Note 2).................................................................. 275,076
Commercial paper fee......................................................................... 138,351
Directors' fees.............................................................................. 95,631
Commissions expense--commercial paper........................................................ 71,896
Transfer agent fee and expenses.............................................................. 68,205
Professional fees............................................................................ 48,150
Custodian fee and expenses................................................................... 29,756
Reports to shareholders...................................................................... 21,373
Registration fee............................................................................. 16,037
Other........................................................................................ 5,643
-----------------
Total operating expenses (before interest expense)........................................... 2,040,580
Interest expense--commercial paper (Note 5).................................................. 3,549,872
-----------------
Total expenses............................................................................ 5,590,452
-----------------
Net investment income............................................................... 13,795,600
-----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment transactions................................................. 2,785,600
Net change in unrealized depreciation on investments......................................... (39,779,478)
-----------------
Net realized and unrealized loss on investments........................................... (36,993,878)
-----------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........................................... $ (23,198,278)
-----------------
-----------------
</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, 1999
(UNAUDITED)
<TABLE>
INCREASE (DECREASE) IN CASH
<S> <C>
Cash flows provided by (used for) operating activities:
Interest received........................................................................ $ 19,152,149
Expenses paid............................................................................ (2,178,190)
Interest expense paid.................................................................... (4,064,954)
Purchase of long-term portfolio investments.............................................. (50,437,845)
Proceeds from sale of long-term portfolio investments.................................... 41,820,838
Net proceeds from sales in excess of purchases of short-term
portfolio investments......................................................................... 8,450,008
------------------
Net cash provided by operating activities................................................ 12,742,006
------------------
Cash flows provided by (used for) financing activities:
Net cash used for securities loaned...................................................... (9,450,008)
Net cash provided by commercial paper.................................................... 402,900
Cash dividends paid to shareholders...................................................... (15,297,008)
------------------
Net cash used for financing activities................................................... (24,344,116)
------------------
Net decrease in cash.......................................................................... (11,602,110)
Cash at beginning of period................................................................... 12,679,327
------------------
Cash at end of period......................................................................... $ 1,077,217
------------------
------------------
RECONCILIATION OF NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Net decrease in net assets resulting from operations.......................................... $ (23,198,278)
------------------
Increase in investments.................................................................. (166,999)
Net realized gain on investment transactions............................................. (2,785,600)
Net change in unrealized depreciation on investments..................................... 39,779,478
Increase in interest receivable.......................................................... (220,168)
Decrease in commercial paper discount.................................................... (515,082)
Accretion of discount.................................................................... (13,735)
Increase in prepaid assets and other assets.............................................. (3,039)
Decrease in investment advisory fee payable.............................................. (14,457)
Decrease in administrative fee payable................................................... (4,367)
Decrease in accrued expenses and other liabilities....................................... (115,747)
------------------
Total adjustments.................................................................. 35,940,284
------------------
Net cash provided by operating activities..................................................... $ 12,742,006
------------------
------------------
</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>
FOR THE
SIX MONTHS ENDED FOR THE
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------------- -------------------------
OPERATIONS
<S> <C> <C>
Net investment income.................................... $ 13,795,600 $ 27,425,378
Net realized gain on investment transactions............. 2,785,600 3,538,593
Net change in unrealized depreciation on investments..... (39,779,478) 7,752,104
------------------------- -------------------------
Net increase (decrease) in net assets resulting from
operations............................................ (23,198,278) 38,716,075
------------------------- -------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income.................................... (13,635,431) (30,594,021)
Distributions in excess of net investment income......... (1,661,577) --
------------------------- -------------------------
Net decrease in net assets resulting from
distributions......................................... (15,297,008) (30,594,021)
------------------------- -------------------------
Total increase (decrease)................................ (38,495,286) 8,122,054
NET ASSETS
Beginning of period...................................... 384,807,017 376,684,963
------------------------- -------------------------
End of period............................................ $ 346,311,731 $ 384,807,017
------------------------- -------------------------
------------------------- -------------------------
</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>
FOR THE
SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, 1999 -------------------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
------------------ ------------- ------------- ------------- ------------- -------------
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 14.79 $ 14.48 $ 13.80 $ 14.81 $ 12.18 $ 14.78
------------------ ------------- ------------- ------------- ------------- -------------
Net investment income.......... 0.53 1.06 1.08 1.10 1.09 1.18
Net realized and unrealized
gain (loss) on investment
transactions................. (1.42) 0.43 0.78 (1.03) 2.72 (2.60)
------------------ ------------- ------------- ------------- ------------- -------------
Net increase (decrease) from
investment operations.......... (0.89) 1.49 1.86 0.07 3.81 (1.42)
------------------ ------------- ------------- ------------- ------------- -------------
Distributions from net investment
income......................... (0.53) (1.18) (1.18) (1.08) (1.11) (1.18)
Distributions in excess of net
investment income.............. (0.06) -- -- -- (0.07) --
------------------ ------------- ------------- ------------- ------------- -------------
Total distributions.............. (0.59) (1.18) (1.18) (1.08) (1.18) (1.18)
------------------ ------------- ------------- ------------- ------------- -------------
Net asset value, end of
period(1)...................... $ 13.31 $ 14.79 $ 14.48 $ 13.80 $ 14.81 $ 12.18
------------------ ------------- ------------- ------------- ------------- -------------
------------------ ------------- ------------- ------------- ------------- -------------
Per share market value, end of
period(1)...................... $ 14.50 $ 15.375 $ 14.4375 $ 12.875 $ 13.875 $ 11.125
------------------ ------------- ------------- ------------- ------------- -------------
------------------ ------------- ------------- ------------- ------------- -------------
TOTAL INVESTMENT RETURN(2)....... (1.93)% 15.24% 22.21% 0.69% 36.21% (14.19)%
RATIOS TO AVERAGE NET ASSETS(3):
Operating expenses(4)............ 1.00%(5) 0.91% 0.80% 0.80% 0.78% 0.78%
Commercial paper expenses........ 2.07%(5) 2.22% 2.35% 2.30% 2.52% 1.46%
Net investment income............ 7.59%(5) 7.26% 7.84% 8.02% 7.92% 8.87%
SUPPLEMENTAL DATA:
Portfolio turnover............... 8% 10% 12% 13% 5% 149%
Net assets, end of period (000) $ 346,312 $ 384,807 $ 376,685 $ 358,941 $ 385,329 $ 316,842
COMMERCIAL PAPER INFORMATION:
Aggregate amount outstanding
(000) at end of period......... $ 143,000 $ 143,000 $ 143,000 $ 143,000 $ 143,000 $ 143,000
Average daily amortized cost of
commercial paper outstanding
(000).......................... $ 141,456 $ 141,063 $ 141,704 $ 141,322 $ 141,369 $ 133,619
Asset coverage per $1,000 at end
of period...................... $ 3,413 $ 3,684 $ 3,625 $ 3,501 $ 3,704 $ 3,227
</TABLE>
- ------------------------------------
(1) Net asset value and market value are published in The Wall Street Journal
each Monday.
(2) 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
returns for periods of less than one full year are not annualized.
(3) As a percentage of average weekly net assets which includes any liabilities
or senior securities constituting indebtedness in connection with financial
leverage.
(4) Exclusive of commercial paper expenses.
(5) 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, 1999 (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 with operations commencing on January 29, 1993.
The Fund's investment objective is to seek high current income consistent
with investing in securities of investment grade quality. The Fund seeks to
achieve its investment objective by investing substantially all of its assets in
a diversified portfolio of Utility Income Securities, Corporate Income
Securities, Mortgage-Backed Securities and Asset-Backed Securities. The ability
of the issuers of the securities held by the Fund to meet their obligations may
be affected by economic developments in a specific state, industry or region.
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
SECURITY VALUATION: The Fund values its fixed-income securities by using market
quotations, prices provided by market makers or estimates of market values
obtained from yield data relating to instruments with similar characteristics in
accordance with procedures established by the Board of Directors of the Fund.
The 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.
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 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 $11,527,094 at December 31, 1998, of which
$6,744,681 expires in 2002 and $4,782,413 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.
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 accepted accounting principles requires management to make estimates
and assumptions that
13
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 Duff & Phelps Investment Management
Co. (the 'Adviser'), a subsidiary of Phoenix Investment Partners Ltd. and an
Administration Agreement with Princeton Administrators, L.P. (the
'Administrator').
The amended 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, 1999, the Fund had purchases of
$50,437,845 and sales of $41,820,838 of investment securities, other than
short-term investments. For the six months ended June 30, 1999, the Fund had no
purchases or sales of U.S. Government securities.
The Federal income tax basis of the Fund's investments at June 30, 1999 was
$546,807,134, and accordingly, net unrealized depreciation aggregated $4,326,200
of which $8,468,777 related to appreciated securities and $12,794,977 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, 1999, the Fund's custodian held cash and short-term
investments having an aggregate value of $66,984,113 as collateral for portfolio
securities loaned having a market value of $66,350,500.
NOTE 5. COMMERCIAL PAPER
As of June 30, 1999, $143,000,000 of commercial paper was outstanding with
an amortized cost of $141,345,744. The average discount rate of commercial paper
outstanding at June 30, 1999 was 5.00%. The average daily balance of commercial
paper outstanding for the six months ended June 30, 1999 was $143,000,000 at a
weighted average discount rate of 5.14%. The maximum amount of commercial paper
outstanding at any time during
14
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
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, 1999, 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, 1999, Phoenix
Investment Partners Ltd. owned 13,763 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. As
described below, the Plan is being amended, effective December 1, 1999, whereby
the Fund would issue new shares in circumstances in which it would be beneficial
to shareholders.
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 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.
16
<PAGE>
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.
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.
17
<PAGE>
AMENDMENT TO THE DIVIDEND REINVESTMENT PLAN
Effective December 1, 1999, if the Fund declares a dividend or capital
gains distribution payable either in cash or in stock of the Fund, and the
market price of shares on the valuation date equals or exceeds the net asset
value of these shares, the Fund will issue new shares to you at net asset value,
provided that the Fund will not issue new shares at a discount of more than 5%
from the then current market price. If the market price is lower than net asset
value, or if dividends or capital gains distributions are declared to be payable
only in cash, then you will receive shares purchased on the New York Stock
Exchange or otherwise on the open market. This amendment to the Dividend
Reinvestment Plan will not affect shareholders electing to make purchases of
additional shares of common stock in the Cash Purchase Plan; all such shares
will be purchased in the open market on behalf of such participants by the Plan
Agent.
YEAR 2000 RISKS (UNAUDITED)
Like other business organizations and individuals around the world, the
Fund could be adversely affected if the computer systems used by the Fund and
its service providers do not properly process and calculate date-related
information from and after January 1, 2000. The Fund is taking steps that it
believes are reasonably designed to address the Year 2000 problem with respect
to the computer systems it uses and to obtain satisfactory assurances that
comparable steps are being taken by each of the Fund's other major service
providers. The Fund does not expect to incur any significant costs in order to
address the Year 2000 problem however, at this time, there can be no assurance
that these steps will be sufficient to avoid any adverse impact on the Fund.
18
<PAGE>
PROXY RESULTS
At the May 26, 1999 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 VOTED SHARES
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:
William W. Crawford (2002) 23,923,747 245,875
Philip R. McLoughlin (2002) 23,926,442 243,180
Richard A. Pavia (2002) 23,954,973 214,649
Directors whose term of office continued beyond this meeting are as follows:
E. Virgil Conway, William N. Georgeson, Francis E. Jeffries, Eileen A. Moran,
Everett L. Morris and Harry Dalzell-Payne
- -----------------------------------------------------------------------------------------------------------------
SHARES VOTED SHARES VOTED SHARES
FOR AGAINST ABSTAINING
- -----------------------------------------------------------------------------------------------------------------
2. To ratify the selection of Ernst & Young LLP as independent
auditors for the Fund's fiscal year ending December 31,
1999. 23,917,694 86,587 165,341
- -----------------------------------------------------------------------------------------------------------------
</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
