<PAGE>
DEAR FELLOW SHAREHOLDERS:
Despite a very difficult fixed-income environment throughout 1999, your
Board of Directors declared 12 monthly dividends each of 9.8 cents per share.
The total dividend payment of $1.176 provided an annualized dividend yield of
10.17% based upon the December 31, 1999 closing stock price of $11.5625. As you
know, the value of the common stock declined during the year as a result of the
difficult fixed-income environment, but also perhaps because of year-end tax
loss selling. The common stock traded at a premium of 11.33% to the net asset
value in late June. However, near the end of the tax loss selling season in
December, the common stock price was trading at an 11.85% discount to NAV.
While 1999 was a good year for the U.S. economy, which was estimated to have
grown in excess of 4%, the investment-grade fixed-income markets in general
performed poorly. Despite many positives, such as the absence of worldwide
economic and financial turmoil, a significant reduction in U.S. Treasury
borrowing, the largest Federal government surplus in many years and good
productivity gains, the Federal Reserve (the "Fed") remained alert to any event
that could lead to increased inflationary pressures. Moreover, the Fed remained
concerned about the absence of factors that kept inflation in check the past
couple of years. For example, the prices of commodities are increasing (the
price of oil more than doubled), the dollar lost some of its luster against some
of our trading partners, worldwide economic growth is gaining momentum and labor
markets are as tight as they have been in decades. In addition, consumer
spending, the engine of growth, remains strong as it continues to be propped up
by a strong stock market and rising home prices. In an attempt to slow down the
economy and keep inflation in check, the Fed raised short-term interest rates
three times and yields backed up even before the Fed started tightening. For
example, yields on two-year U.S. Treasuries rose nearly 100 basis points from
4.55% to 5.52% before the Fed began tightening policy in late June. By year-end,
the two-year Treasury rose another 72 basis points and ended the year yielding
6.24%. Similarly, 30-year U.S. Treasury yields rose 85 basis points from 5.12%
to 5.97% by late June and increased another 51 basis points by year-end to yield
6.48%.
As a result of the back up in interest rates, 1999 was a difficult year for
the bond markets as prices declined and total returns were negative. For
example, 30-year U.S. Treasuries provided a negative total return of 14.4%.
Moreover, the Lehman Brothers Aggregate Index had a total return of negative
0.82% which was only the second time since 1973 that its total return was
negative. Not surprisingly, the Fund also had a negative total return for the
year. According to Lipper Analytical Services, Inc., the Fund had a total return
of negative 7.51%. The Fund's high current yield was not enough to offset the
longer duration and issue specific corporate spread widening that occurred
during the year.
As we look forward, we believe the worst of the interest rate backup is
behind us. The Fed most likely will need to raise rates once or twice more to
ensure that aggregate demand will moderate to a less worrisome pace. Also, we
feel that inflation, in concert with high productivity growth, will remain
moderate with only a slightly faster pace than in 1999. Furthermore, we believe
that by year-end 2000, interest rates will be lower than they were at the start
of the year.
1
<PAGE>
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 in the open-market through the Plan Agent.
Additional information about the Plan is available from The Bank of New York,
1-800-524-4458, or for more details, please turn to page 16. The Plan was
amended effective December 1, 1999 to permit the issuance of new 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,
<TABLE>
<S> <C>
/s/ Francis E. Jeffries /s/ Calvin J. Pedersen
Francis E. Jeffries, CFA Calvin J. Pedersen, CFA
Chairman President, Chief Executive Officer
</TABLE>
2
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
RATINGS (UNAUDITED)
---------------------------
PRINCIPAL STANDARD MARKET
AMOUNT DUFF & & VALUE
(000) DESCRIPTION PHELPS MOODY'S POOR'S (NOTE 1)
- --------- --------------------------------------- ------ ------- -------- ------------
<C> <S> <C> <C> <C> <C>
/ / LONG-TERM INVESTMENTS--137.2%
U.S. GOVERNMENT AND AGENCY OBLIGATIONS--23.2%
Government National Mortgage
Association
Pass-Through Certificates,
$ 1,791 8.00%, 7/15/23......................... AAA Aaa AAA $ 1,815,431
4,727 8.00%, 8/15/23......................... AAA Aaa AAA 4,790,858
2,179 8.00%, 5/15/24......................... AAA Aaa AAA 2,205,773
1,264 7.00%, 3/15/26......................... AAA Aaa AAA 1,223,639
2,592 7.50%, 5/15/26......................... AAA Aaa AAA 2,565,645
U.S. Treasury Bonds,
12,900 10.75%, 2/15/03........................ AAA Aaa AAA 14,439,873
40,000 10.375%, 11/15/12...................... AAA Aaa AAA 48,624,800
------------
75,666,019
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS
(cost $80,850,455).....................
------------
BONDS--114.0%
FINANCIAL--16.2%
10,000 American Express Co.,
8.625%, 5/15/22........................ AA- A1 A+ 10,456,899
8,000 Citicorp Capital II,
8.015%, 2/15/27........................ NR Aa3 A 7,591,000
7,000 Countrywide Capital I,
8.00%, 12/15/26........................ NR A3 BBB+ 6,379,730
10,000 Great Western Financial Trust II,
8.206%, 2/01/27........................ NR A3 BBB- 9,370,900
10,000 KeyCorp Institution Capital B,
8.25%, 12/15/26........................ A- A1 BBB 9,465,949
10,000 NationsBank Capital Trust IV,
8.25%, 4/15/27......................... NR Aa2 A- 9,612,650
------------
52,877,128
------------
INDUSTRIAL--50.3%
5,000 Archer-Daniels-Midland Company,
8.125%, 6/01/12........................ NR Aa3 AA- 5,184,900
5,000 Coca-Cola Enterprise Inc.,
8.50%, 2/01/12......................... NR A2 A 5,368,625
15,000 Dayton Hudson Corp.,
8.50%, 12/01/22........................ A- A3 A- 15,043,649
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
RATINGS (UNAUDITED)
---------------------------
PRINCIPAL STANDARD MARKET
AMOUNT DUFF & & VALUE
(000) DESCRIPTION PHELPS MOODY'S POOR'S (NOTE 1)
- --------- --------------------------------------- ------ ------- -------- ------------
<C> <S> <C> <C> <C> <C>
$ 3,450 Fort James Corporation,
9.25%, 11/15/21........................ NR Baa2 BBB $ 3,802,428
10,000 Georgia Pacific Corp.,
9.625%, 3/15/22........................ NR Baa2 BBB- 10,324,750
3,000 8.625%, 4/30/25........................ NR Baa2 BBB- 2,952,435
10,250 McDonnell Douglas Corporation,
9.75%, 4/01/12......................... NR A2 AA- 11,662,398
5,000 Nova Gas Transmissions Limited,
7.875%, 4/01/23........................ NR A2 A- 4,872,425
5,000 Occidental Petroleum Corporation,
9.25%, 8/01/19......................... BBB Baa3 BBB 5,536,100
5,000 8.75%, 1/15/23......................... BBB Baa3 BBB 5,298,150
15,000 Phillips Petroleum Company,
8.49%, 1/01/23......................... NR A3 A- 15,107,175
9,000 Ralston Purina Co.,
8.125%, 2/01/23........................ A- Baa1 A- 8,604,225
10,000 Sears Roebuck and Co.,
9.375%, 11/01/11....................... A A3 A- 10,708,700
5,000 Sun Company, Inc.,
9.00%, 11/01/24........................ NR Baa2 BBB 5,071,300
6,225 Tele-Communications, Inc.,
9.80%, 2/01/12......................... NR A2 AA- 7,286,424
5,275 10.125%, 4/15/22....................... NR A2 AA- 6,590,031
3,200 9.875%, 6/15/22........................ NR A2 AA- 3,915,232
5,000 Time Warner Entertainment Company,
L.P.,
10.15%, 5/01/12........................ BBB Baa2 BBB 5,879,625
5,000 8.875%, 10/01/12....................... BBB Baa2 BBB 5,401,100
7,000 Time Warner Inc.,
9.15%, 2/01/23......................... BBB- Baa3 BBB 7,841,610
10,000 Trans-Canada Pipelines Limited,
9.875%, 1/01/21........................ NR A2 A- 11,903,650
5,000 USX Corporation,
9.375%, 2/15/12........................ BBB Baa2 BBB- 5,551,600
------------
163,906,532
------------
TELEPHONE--17.0%
10,500 AT&T Corp.,
8.35%, 1/15/25......................... AA- A1 AA- 10,440,989
10,000 Bell Canada Inc.,
9.50%, 10/15/10........................ NR A2 A+ 11,407,100
</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)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
RATINGS (UNAUDITED)
---------------------------
PRINCIPAL STANDARD MARKET
AMOUNT DUFF & & VALUE
(000) DESCRIPTION PHELPS MOODY'S POOR'S (NOTE 1)
- --------- --------------------------------------- ------ ------- -------- ------------
<C> <S> <C> <C> <C> <C>
$ 6,500 GTE Northwest Incorporated,
7.875%, 6/01/26........................ AA- A2 AA- $ 6,235,547
10,000 MCI Communications Corp.,
8.25%, 1/20/23......................... A- A3 A- 10,364,350
5,000 New York Telephone Co.,
8.625%, 11/15/10....................... A- A2 A+ 5,406,150
10,125 Sprint Corp.,
9.25%, 4/15/22......................... BB+ Baa1 BBB+ 11,610,894
------------
55,465,030
------------
UTILITIES--ELECTRIC--30.5%
10,000 Arizona Public Service Co.,
8.00%, 2/01/25......................... A- Baa1 A- 9,665,049
10,000 Boston Edison Co.,
7.80%, 3/15/23......................... A A1 A- 9,468,399
10,000 CalEnergy Company, Inc.,
8.48%, 9/15/28......................... NR Baa3 BBB- 10,369,050
17,438 ComEd Financing II,
8.50%, 1/15/27......................... BBB- Baa3 BBB- 16,954,619
5,000 Connecticut Light & Power Co.,
8.50%, 6/01/24......................... NR Baa3 BBB- 4,861,525
6,000 Dayton Power & Light Co.,
8.15%, 1/15/26......................... AA Aa3 AA- 5,835,690
1,500 Houston Lighting & Power Company,
7.75%, 3/15/23......................... BBB+ A3 A- 1,394,317
5,000 Hydro-Quebec,
8.40%, 1/15/22......................... AA- A2 A+ 5,318,175
10,000 Pacific Gas & Electric Co.,
8.25%, 11/01/22........................ NR A1 AA- 10,390,650
5,000 Pennsylvania Power & Light Co.,
8.50%, 5/01/22......................... NR A3 A- 5,372,200
5,000 Texas Utilities Electric Co.,
9.75%, 5/01/21......................... BBB A3 BBB+ 5,380,600
10,000 8.875%, 2/01/22........................ BBB A3 BBB+ 10,053,750
5,000 Western Resources, Inc.,
7.125%, 8/01/09........................ BB+ Baa1 BBB 4,417,050
------------
99,481,074
------------
371,729,764
TOTAL BONDS (cost $390,054,194)........
------------
447,395,783
TOTAL LONG-TERM INVESTMENTS
(cost $470,904,649)....................
------------
</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 (CONCLUDED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
- --------- ----------------------------------------------------------- ------------
<C> <S> <C>
/ / SHORT- AND MEDIUM-TERM INVESTMENTS--10.9%
COMMERCIAL PAPER--0.8%
$ 2,500 General Electric Capital Corp.,
5.87%, 1/28/00
(cost $2,500,000).......................................... $ 2,500,000
------------
MEDIUM-TERM NOTE--3.0%
9,995 J.P. Morgan & Co., Medium-Term Note, Series A,
6.5087%, 7/06/00(a)
(cost $9,995,528).......................................... 9,995,528
------------
TIME DEPOSITS--7.1%
10,000 Banque Nationale De Paris,
7.00%, 1/04/00............................................. 10,000,000
13,083 Credit Commercial De France Paris,
10.50%, 1/03/00............................................ 13,083,000
------------
TOTAL TIME DEPOSITS (cost $23,083,000)..................... 23,083,000
------------
TOTAL SHORT- AND MEDIUM-TERM INVESTMENTS
(cost $35,578,528)......................................... 35,578,528
------------
TOTAL INVESTMENTS--148.1%
(cost $506,483,177) (Note 3)............................... 482,974,311
Liabilities, less cash and other assets--(48.1%)........... (156,798,700)
------------
NET ASSETS--100%........................................... $326,175,611
============
</TABLE>
- ----------------------------
(a) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at December 31,
1999.
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
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $506,483,177)................... $482,974,311
Cash........................................................ 7,212,073
Interest receivable......................................... 10,219,113
Prepaid assets and other assets............................. 57,105
------------
Total assets............................................ 500,462,602
------------
LIABILITIES
Commercial paper (Note 5)................................... 140,720,819
Payable upon return of securities loaned (Note 4)........... 33,078,528
Investment advisory fee payable (Note 2).................... 196,580
Administrative fee payable (Note 2)......................... 41,429
Accrued expenses and other liabilities...................... 249,635
------------
Total liabilities....................................... 174,286,991
------------
NET ASSETS.................................................. $326,175,611
============
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.................................. 357,768,335
Distributions in excess of net investment income............ (160,169)
Accumulated net realized loss on investment transactions.... (8,183,842)
Net unrealized depreciation on investments.................. (23,508,866)
------------
NET ASSETS.................................................. $326,175,611
============
Net asset value per share of common stock:
($326,175,611 DIVIDED BY 26,015,314 shares of common stock
issued and outstanding)................................... $ 12.54
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest income........................................... $ 38,976,758
Security lending fee income............................... 74,416
------------
Total investment income................................. 39,051,174
------------
EXPENSES
Investment advisory fee (Note 2).......................... 2,466,968
Administrative fee (Note 2)............................... 528,424
Commercial paper fee...................................... 279,066
Directors' fees........................................... 199,027
Commissions expense--commercial paper..................... 144,985
Transfer agent fee and expenses........................... 138,142
Professional fees......................................... 103,430
Custodian fee and expenses................................ 57,315
Registration fee.......................................... 32,340
Reports to shareholders................................... 27,980
Other..................................................... 11,449
------------
Total operating expenses (before interest expense)........ 3,989,126
Interest expense--commercial paper (Note 5)............... 7,480,549
------------
Total expenses.......................................... 11,469,675
------------
Net investment income.............................. 27,581,499
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment transactions.............. 3,343,252
Net change in unrealized depreciation on investments...... (58,962,144)
------------
Net realized and unrealized loss on investments......... (55,618,892)
------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $(28,037,393)
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
INCREASE (DECREASE) IN CASH
Cash flows provided by (used in) operating activities:
Interest received....................................... $ 38,632,149
Expenses paid........................................... (3,997,542)
Interest expense paid................................... (7,303,728)
Purchase of long-term portfolio investments............. (84,166,762)
Proceeds from sale of long-term portfolio investments... 81,376,600
Net proceeds from sales in excess of purchases of
short-term portfolio investments............................ 43,519,187
-------------
Net cash provided by operating activities............... 68,059,904
-------------
Cash flows used in financing activities:
Net cash used for securities loaned..................... (42,019,187)
Net cash used for commercial paper...................... (913,958)
Cash dividends paid to shareholders..................... (30,594,013)
-------------
Net cash used in financing activities................... (73,527,158)
-------------
Net decrease in cash........................................ (5,467,254)
Cash at beginning of year............................... 12,679,327
-------------
Cash at end of year..................................... $ 7,212,073
=============
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........ $ (28,037,393)
-------------
Decrease in investments................................. 40,729,025
Net realized gain on investment transactions............ (3,343,252)
Net change in unrealized depreciation on investments.... 58,962,144
Increase in interest receivable......................... (390,875)
Increase in commercial paper discount................... 176,821
Accretion of discount................................... (28,150)
Increase in prepaid assets and other assets............. (11,402)
Decrease in investment advisory fee payable............. (20,732)
Decrease in administrative fee payable.................. (6,121)
Increase in accrued expenses and other liabilities...... 29,839
-------------
Total adjustments.................................. 96,097,297
-------------
Net cash provided by operating activities................... $ 68,059,904
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------ ------------------
<S> <C> <C>
OPERATIONS
Net investment income....................... $ 27,581,499 $ 27,425,378
Net realized gain on investment
transactions.............................. 3,343,252 3,538,593
Net change in unrealized appreciation
(depreciation) on investments............. (58,962,144) 7,752,104
------------ ------------
Net increase (decrease) in net assets
resulting from operations................. (28,037,393) 38,716,075
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income....................... (30,594,013) (30,594,021)
------------ ------------
Total increase (decrease)................... (58,631,406) 8,122,054
NET ASSETS
Beginning of year........................... 384,807,017 376,684,963
------------ ------------
End of year................................. $326,175,611 $384,807,017
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year............. $ 14.79 $ 14.48 $ 13.80 $ 14.81 $ 12.18
-------- ------- -------- ------- -------
Net investment income........................ 1.06 1.06 1.08 1.10 1.09
Net realized and unrealized gain (loss) on
investment transactions.................... (2.13) 0.43 0.78 (1.03) 2.72
-------- ------- -------- ------- -------
Net increase (decrease) from investment
operations................................... (1.07) 1.49 1.86 0.07 3.81
-------- ------- -------- ------- -------
Distributions from net investment income....... (1.18) (1.18) (1.18) (1.08) (1.11)
Distributions in excess of net investment
income....................................... -- -- -- -- (0.07)
-------- ------- -------- ------- -------
Total distributions............................ (1.18) (1.18) (1.18) (1.08) (1.18)
-------- ------- -------- ------- -------
Net asset value, end of year(1)................ $ 12.54 $ 14.79 $ 14.48 $ 13.80 $ 14.81
======== ======= ======== ======= =======
Per share market value, end of year(1)......... $11.5625 $15.375 $14.4375 $12.875 $13.875
======== ======= ======== ======= =======
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
TOTAL INVESTMENT RETURN(2)..................... (18.32)% 15.24% 22.21% 0.69% 36.21%
RATIOS TO AVERAGE NET ASSETS(3)
Operating expenses(4).......................... 1.01% 0.91% 0.80% 0.80% 0.78%
Commercial paper expenses...................... 2.25% 2.22% 2.35% 2.30% 2.52%
Net investment income.......................... 7.84% 7.26% 7.84% 8.02% 7.92%
SUPPLEMENTAL DATA
Portfolio turnover............................. 17% 10% 12% 13% 5%
Net assets, end of year (000).................. $326,176 $384,807 $376,685 $358,941 $385,329
COMMERCIAL PAPER INFORMATION
Aggregate amount outstanding at end of year
(000)........................................ $143,000 $143,000 $143,000 $143,000 $143,000
Average daily amortized cost of commercial
paper outstanding (000)...................... $141,157 $141,063 $141,704 $141,322 $141,369
Asset coverage per $1,000 at end of year....... $ 3,268 $ 3,684 $ 3,625 $ 3,501 $ 3,704
</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 year reported. Dividends and distributions are assumed, for purposes of
this calculation, to be reinvested at prices obtained under the Fund's
dividend reinvestment plan. Brokerage commissions are not reflected.
(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.
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
NOTES TO FINANCIAL STATEMENTS
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.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security 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 $8,183,842 at December 31, 1999, of which
$3,401,429 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.
Dividends and distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
Accordingly, certain amounts have been reclassified within capital to reflect
Fund distributions. On the statement of assets and liabilities, $3,012,514 has
been reclassed from distributions in excess of net investment income to
additional paid-in-capital. This reclassification has no effect on net asset
value per share.
12
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
REPURCHASE AGREEMENTS: Repurchase agreements are fully collateralized by U.S.
Treasury or Government Agency securities. All collateral is held through the
Fund's custodian and is monitored daily so that its market value exceeds the
carrying value of the repurchase agreement.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts 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 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 year ended December 31, 1999, the Fund made purchases of $84,166,762
and sales of $81,376,600 of investment securities, other than short-term
investments. For the year ended December 31, 1999, the Fund had no purchases or
sales of U.S. Government securities.
The Federal income tax basis of the Fund's investments at December 31, 1999
was $506,483,177 and, accordingly, net unrealized depreciation aggregated
$23,508,866 of which $2,451,566 related to appreciated securities and
$25,960,432 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 December 31, 1999, the Fund's custodian held cash and short-term
investments having an aggregate value of $33,078,528 as collateral for portfolio
securities loaned having a market value of $31,634,437.
13
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
NOTE 5. COMMERCIAL PAPER
As of December 31, 1999, $143,000,000 of commercial paper was outstanding
with an amortized cost of $140,720,819. The average discount rate of commercial
paper outstanding at December 31, 1999 was 5.90%. The average daily balance of
commercial paper outstanding for the year ended December 31, 1999 was
$141,157,368 at a weighted average discount rate of 5.3715%. The maximum amount
of commercial paper outstanding at any time during the year was $143,000,000. In
conjunction with the issuance of the commercial paper, the Fund entered into a
line of credit arrangement with a bank for $75,000,000. Interest on borrowing is
based on market rates in effect at the time of borrowing. The commitment fee is
computed at the rate of 0.18% per annum on the unused balance. During the year
ended December 31, 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 December 31, 1999, Phoenix
Investment Partners Ltd. owned 14,382 shares.
14
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Duff & Phelps Utility and Corporate Bond Trust Inc.
We have audited the accompanying statement of assets and liabilities of Duff
& Phelps Utility and Corporate Bond Trust Inc., the "Fund," including the
portfolio of investments, as of December 31, 1999, and the related statements of
operations and cash flows for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended and financial
highlights for each of the periods indicated therein. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1999, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Duff & Phelps Utility and Corporate Bond Trust Inc. at December 31, 1999, and
the results of its operations and its cash flows for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
financial highlights for each of the periods indicated therein, in conformity
with accounting principles generally accepted in the United States.
Chicago, Illinois
January 27, 2000
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. Shareholders who elect not to participate in the
Plan will receive all distributions in cash paid by check in U.S. dollars mailed
directly to the shareholder of record (or if the shares are held in street or
other nominee name, then to the nominee) by the Plan Agent.
The Plan Agent serves as agent for the common shareholders in administering
the Plan. After the Fund declares a dividend or determines to make a capital
gains distribution, if (1) the market price of shares on the valuation date
equals or exceeds the net asset value of these shares, the Fund will issue new
shares 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; or if
(2) the market price is lower than the net asset value, or if dividends or
capital gains distributions are declared and payable only in cash, then the Plan
Agent will, as agent for the participants, receive the cash payment and use it
to buy shares of common stock in the open market, on the New York Stock Exchange
or elsewhere, for the participants' accounts. If, before the Plan Agent has
completed its purchases, the market price exceeds the net asset value per share
of the common stock, the average per share purchase price paid by the Plan Agent
may exceed the net asset value of the Fund's common stock, resulting in the
acquisition of fewer shares of common stock than if the dividend or distribution
had been paid in common stock issued by the Fund. As described below, the Plan
was amended, effective December 1, 1999, whereby the Fund will issue new shares
in circumstances in which it will be beneficial to 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.
The Fund will not issue any new shares in connection with voluntary additional
share investments. Purchases made pursuant to the Plan will be made commencing
at the time of the first dividend or distribution payment following the second
business day after receipt of the funds for additional purchases, and may be
aggregated with purchases of shares for reinvestment of the dividends and
distributions. Shares will be allocated to the accounts of participants
purchasing additional shares at the average price per share, plus a service
charge imposed by the Plan Agent and brokerage commissions (or equivalent
purchase costs) paid by the Plan Agent for all shares purchased by it, including
for reinvestment of dividends and distributions. Checks drawn on a foreign bank
are subject to collection and collection fees, and will be invested at the time
of the next distribution after funds are collected by the Plan Agent.
16
<PAGE>
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 imposes charges on participants for selling
participants shares on termination of participation (currently $5.00 plus $.10
per share). The Fund reserves the right to amend the Plan to institute a service
charge to participants.
The Plan Agent maintains each shareholder's account in the Plan and
furnishes monthly written confirmations of all transactions in the accounts,
including information needed by shareholders for personal and tax records.
Shares in the account of each Plan participant will be held by the Plan Agent in
non-certificated form in the name of the participant, and each shareholder's
proxy will include those shares purchased pursuant to the Plan.
Common shareholders whose common stock is held in the name of a broker or
nominee should contact such broker or nominee to determine whether or how they
may participate in the Plan.
In the case of shareholders, such as banks, brokers or nominees, that hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
record shareholder as representing the total amount registered in the record
shareholder's name and held for the account of beneficial owners who are
participants in the Plan.
The automatic reinvestment of dividends and distributions will not relieve
participants of any federal income tax that may be payable or required to be
withheld on such dividends or distributions.
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>
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
None of the ordinary income distributions paid by the Fund during the fiscal
year ended December 31, 1999, qualifies for the dividends received deduction for
corporations. Additionally, there were no long-term capital gain distributions
paid by the Fund during the year.
The law varies in each state as to whether and what percentage of dividend
income attributable to Federal obligations is exempt from state income tax. We
recommend that you consult your tax advisor to determine if any portion of the
dividends you received is exempt from state income tax.
Listed below are the percentages of total assets of the Fund invested in
Federal obligations as of the end of each quarter of the fiscal year.
<TABLE>
<CAPTION>
PERCENTAGE OF
QUARTER ENDED FEDERAL OBLIGATIONS*
------------- --------------------
<S> <C>
March 31, 1999 11.57%
June 30, 1999 11.91%
September 30, 1999 12.66%
December 31, 1999 12.60%
</TABLE>
Of the Fund's distributions paid to shareholders from ordinary income during the
calendar year ended December 31, 1999, 12.78% was attributable to Federal
obligations. In calculating the foregoing percentage, expenses of the Fund have
been allocated on a pro-rata basis.
- ----------------------------
* For purposes of this calculation, Federal obligations include U.S. Treasury
Notes, U.S. Treasury Bills, and U.S. Treasury Bonds. Also included are
obligations issued by the following agencies: Banks for Cooperatives, Federal
Intermediate Credit Banks, Federal Land Banks, Federal Home Loan Banks, and
the Student Loan Marketing Association. Repurchase agreements are not included
in this calculation.
18
<PAGE>
ADDITIONAL INFORMATION (UNAUDITED)
During the period, there have been no material changes in the Fund's
investment objective or fundamental policies that have not been approved by the
shareholders. There have been no changes in the Fund's charter or By-Laws that
would delay or prevent a change in control of the Fund which have not been
approved by the shareholders. There have been no changes in the principal risk
factors associated with investment in the Fund. There have been no changes in
the persons who are primarily responsible for the day-to-day management of the
Fund's portfolio.
The Board of Directors has adopted a stock compensation program utilizing
shares of the Fund. Notice is hereby given in accordance with Section 23(c) of
the Investment Company Act of 1940 that the Fund may from time to time purchase
its shares of common stock in the open market.
19
<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
Nancy J. Engberg
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
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
Duff & Phelps Utility
and Corporate Bond Trust
[LOGO]
ANNUAL REPORT
DECEMBER 31, 1999
