<PAGE>
DEAR FELLOW SHAREHOLDERS:
As will be discussed in more detail below, above trend economic growth
combined with incipient signs of rising inflation caused the Federal Reserve
(the "Fed") to tighten monetary policy. Over the past year, the federal funds
rate has been increased a total of 175 basis points in an attempt to slow the
economy's above trend growth. The rise in short-term interst rates greatly
increased the interest expense to the Fund by increasing the cost of leverage
through higher commercial paper rates. For example, approximately one year ago,
five-month commercial paper rates were around 4.85 percent as compared to 6.70
percent now. The increased cost is a direct reduction to net investment income,
from which dividends are paid. As a result of the reduction in net investment
income, your Board of Directors reluctantly decided that it was necessary to
better align the Fund's dividend policy with the Fund's earnings capabilities.
Therefore, the monthly dividend was reduced from 9.8 cents per share to 8.5
cents per share effective with the March 31, 2000 dividend. Based on the price
of the common stock at the end of June of $11.375, the current monthly dividend
provided an annualized distribution rate of 8.97 percent. Finally, perhaps
reflecting the fixed income market's general uneasiness concerning monetary
policy, the closing stock price represented a 6.80 percent discount to net asset
value (NAV).
As the millennium opened, the fixed income markets braced for the worst as
fourth quarter and first quarter GDP growth proved to be stronger than market
expectations. The GDP reports showed growth of 7.3 percent and 5.4 percent,
respectively. Consumer spending, the engine of growth, provided most of the
increase as spendable income continued to be lifted by wage gains, stock market
advances and housing appreciation. Since year-end, the Fed raised short-term
interest rates 100 basis points and put the fixed income markets on notice that
it will continue to boost interest rates until economic growth slows to a
non-inflationary rate. That rate is generally thought to be approximately 3.5
percent. Underscoring the Fed's concerns about rising inflation, there have been
several recent economic reports suggesting that the inflation "genie" may be out
of the bottle. The Fed worries that with foreign economies strengthening,
growing evidence that U.S. firms' pricing power has improved somewhat, higher
crude oil and other commodity prices and higher labor costs, rising pricing
pressures may be beginning to work their way through production and distribution
channels.
Given the uncertainty caused by the Fed's efforts to slow down economic
growth, it was not surprising that the fixed income markets reported less than
stellar investment returns for the first half of 2000. For example, the Lehman
Brothers Aggregate Index had a first half total return of 3.99 percent. The
Lehman Index's performance was helped by its nearly 31 percent holding of U.S.
Treasury securities whose prices were uniquely helped by some technical events.
For example, record federal budget suplus allowed the Treasury to both buyback
more and issue fewer securities. Both of these events helped U.S. Treasury
securities to generally outperform other bond market sectors. Because of the
Fund's income orientation, it had nearly 86 percent of its assets invested in
other than U.S. Treasury securities. As a result, the Fund's first half NAV
performance was 1.64 percent as reported by Lipper, Inc. However, the total
return of the common stock compared favorably to the major stock market indices.
For example, the six month total rate of return of the common stock was a
positive 3.00 percent
1
<PAGE>
(June 30, 2000 closing price of $11.375 plus accumulated first-half dividends of
53.6 cents divided by the year-end closing price of $11.563 equals 3.00
percent). In comparison, both the Standard & Poor's 500 Index and the Dow Jones
Industrial Average were down 0.42 and 8.45 percent, respectively.
Despite the impact of Fed tightening on the Fund's fixed income assets, we
are hopeful that most of the damage is behind us. We believe the Fed wants only
to slow down economic growth and not end growth altogether. Indeed, recent
economic reports suggest that economic growth may have already slowed enough to
indicate that the current tightening cycle may be close to over. For example,
recent reports suggest that consumer spending on housing, autos and retail sales
may be slowing. In addition, labor market growth appears to be slowing. These
observations give us some confidence that perhaps an August tightening may be
the last for this cycle. The implications of this would be an improved second
half fixed income market environment and lower short-term interest rates in
2001.
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 purchse 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. We appreciate your
investment in Duff & Phelps Utility and Corporate Bond Trust Inc. and look
forward to continuing our service to you.
Sincerely,
/s/ Francis E. Jeffries
Francis E. Jeffries, CFA
Chairman
2
<PAGE>
PROXY RESULTS
At the May 31, 2000 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 N. Georgeson (2003) 21,086,099 369,349
Francis E. Jeffries (2003) 21,120,397 335,051
Eileen A. Moran (2003) 21,116,289 339,159
Directors whose term of office continued beyond this meeting are as follows:
E. Virgil Conway, William W. Crawford, Philip R. McLoughlin, Everett L. Morris,
Richard A. Pavia and Harry Dalzell-Payne
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
SHARES VOTED SHARES VOTED SHARES
FOR AGAINST ABSTAINING
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------
2. To ratify the selection of Ernst & Young LLP
as independent auditors for the Fund's
fiscal year ending December 31, 2000. 21,086,625 146,958 221,865
-----------------------------------------------------------------------------------------
</TABLE>
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase, from time to time, shares of its
common stock in the open market at prevailing market prices.
3
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
RATINGS
------------------
PRINCIPAL STANDARD MARKET
AMOUNT & VALUE
(000) DESCRIPTION MOODY'S POOR'S (NOTE 1)
--------- --------------------------------------------- ------- -------- ------------
<C> <S> <C> <C> <C>
/ / LONG-TERM INVESTMENTS--138.3%
U.S. GOVERNMENT AND AGENCY OBLIGATIONS--23.7%
Government National Mortgage Association
Pass-Through Certificates,
$ 1,741 8.00%, 7/15/23............................... Aaa AAA $ 1,764,175
4,451 8.00%, 8/15/23............................... Aaa AAA 4,510,928
2,103 8.00%, 5/15/24............................... Aaa AAA 2,129,526
1,167 7.00%, 3/15/26............................... Aaa AAA 1,135,471
2,244 7.50%, 5/15/26............................... Aaa AAA 2,228,985
U.S. Treasury Bonds,
12,900 10.750%, 2/15/03............................. Aaa AAA 14,212,140
40,000 10.375%, 11/15/12............................ Aaa AAA 49,212,450
------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(cost $80,003,334)........................... 75,193,675
------------
BONDS--114.6%
AUTO & TRUCK--1.5%
5,000 General Motors Corporation,
8.10%, 6/15/24............................... A2 A 4,970,225
------------
BROADCASTING & PUBLISHING--2.2%
6,550 Continental Cablevision, Inc.,
9.50%, 8/01/13............................... A2 AA- 6,882,609
------------
FINANCIAL--15.9%
10,000 American Express Co.,
8.625%, 5/15/22.............................. A1 A+ 10,325,149
8,000 Citicorp Capital II,
8.015%, 2/15/27.............................. Aa3 A 7,412,960
7,000 Countrywide Capital I,
8.00%, 12/15/26.............................. A3 BBB+ 5,804,610
10,000 Great Western Financial Trust II,
8.206%, 2/01/27.............................. A3 BBB- 8,730,200
10,000 KeyCorp Institution Capital B,
8.25%, 12/15/26.............................. A1 BBB 8,950,100
10,000 NationsBank Capital Trust IV,
8.25%, 4/15/27............................... Aa2 A- 9,125,050
------------
50,348,069
------------
</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, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
RATINGS
------------------
PRINCIPAL STANDARD MARKET
AMOUNT & VALUE
(000) DESCRIPTION MOODY'S POOR'S (NOTE 1)
--------- --------------------------------------------- ------- -------- ------------
<C> <S> <C> <C> <C>
INDUSTRIAL--48.6%
$ 5,000 Archer-Daniels-Midland Company,
8.125%, 6/01/12.............................. A1 A+ $ 5,094,150
5,000 Coca-Cola Enterprise Inc.,
8.50%, 2/01/12............................... A2 A 5,284,075
15,000 Dayton Hudson Corp.,
8.50%, 12/01/22.............................. A2 A- 15,182,399
3,450 Fort James Corporation,
9.25%, 11/15/21.............................. Baa2 BBB 3,734,625
10,000 Georgia Pacific Corp.,
9.625%, 3/15/22.............................. Baa2 BBB- 10,486,950
3,000 8.625%, 4/30/25.............................. Baa2 BBB- 2,813,190
10,250 McDonnell Douglas Corporation,
9.75%, 4/01/12............................... A2 AA- 11,391,490
5,000 Nova Gas Transmissions Limited,
7.875%, 4/01/23.............................. A2 A- 5,137,325
5,000 Occidental Petroleum Corporation,
9.25%, 8/01/19............................... Baa3 BBB- 5,449,350
5,000 8.75%, 1/15/23............................... Baa3 BBB- 5,119,225
15,000 Phillips Petroleum Company,
8.49%, 1/01/23............................... Baa2 BBB 14,652,075
9,000 Ralston Purina Co.,
8.125%, 2/01/23.............................. A3 BBB+ 8,520,075
10,000 Sears Roebuck and Co.,
9.375%, 11/01/11............................. A3 A- 10,664,350
5,000 Sun Company, Inc.,
9.00%, 11/01/24.............................. Baa2 BBB 5,294,550
5,275 Tele-Communications, Inc.,
10.125%, 4/15/22............................. A2 AA- 6,386,917
3,200 9.875%, 6/15/22.............................. A2 AA- 3,794,448
5,000 Time Warner Entertainment Company, L.P.,
8.875%, 10/01/12............................. Baa2 BBB 5,237,125
12,000 Time Warner Inc.,
9.15%, 2/01/23............................... Baa3 BBB 13,062,840
10,000 Trans-Canada Pipelines Limited,
9.875%, 1/01/21.............................. A2 A- 11,297,950
5,000 USX Corporation,
9.375%, 2/15/12.............................. Baa1 BBB 5,527,725
------------
154,130,834
------------
</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, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
RATINGS
------------------
PRINCIPAL STANDARD MARKET
AMOUNT & VALUE
(000) DESCRIPTION MOODY'S POOR'S (NOTE 1)
--------- --------------------------------------------- ------- -------- ------------
<C> <S> <C> <C> <C>
TELEPHONE--18.6%
$ 10,500 AT&T Corp.,
8.35%, 1/15/25............................... A1 AA- $ 10,111,814
10,000 Bell Canada Inc.,
9.50%, 10/15/10.............................. A2 A+ 11,109,600
6,500 GTE Northwest Incorporated,
7.875%, 6/01/26.............................. AA3 A+ 6,023,160
10,000 MCI Communications Corp.,
8.25%, 1/20/23............................... A3 A- 10,180,700
5,000 New York Telephone Co.,
8.625%, 11/15/10............................. A1 A+ 5,284,875
10,125 Sprint Corp.,
9.25%, 4/15/22............................... Baa1 BBB+ 11,248,723
5,000 Worldcom Inc.,
8.25%, 5/15/10............................... A3 A- 5,137,675
------------
59,096,547
------------
UTILITIES--ELECTRIC--27.8%
10,000 Arizona Public Service Co.,
8.00%, 2/01/25............................... Baa1 A- 9,364,099
10,000 Boston Edison Co.,
7.80%, 3/15/23............................... A1 A- 9,228,100
10,000 CalEnergy Company, Inc.,
8.48%, 9/15/28............................... Baa3 BBB- 10,136,799
17,438 ComEd Financing II,
8.50%, 1/15/27............................... Baa3 BBB- 16,860,278
6,000 Dayton Power & Light Co.,
8.15%, 1/15/26............................... A2 BBB+ 5,647,530
1,500 Houston Lighting & Power Company,
7.75%, 3/15/23............................... A3 BBB+ 1,356,532
5,000 Hydro-Quebec,
9.50%, 11/15/30.............................. A2 A+ 6,056,375
10,000 Pacific Gas & Electric Co.,
8.25%, 11/01/22.............................. A1 AA- 9,972,700
5,000 Pennsylvania Power & Light Co.,
8.50%, 5/01/22............................... A3 A- 5,324,225
10,000 Texas Utilities Electric Co.,
8.875%, 2/01/22.............................. A3 BBB+ 9,773,400
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
RATINGS
------------------
PRINCIPAL STANDARD MARKET
AMOUNT & VALUE
(000) DESCRIPTION MOODY'S POOR'S (NOTE 1)
--------- --------------------------------------------- ------- -------- ------------
<C> <S> <C> <C> <C>
$ 5,000 Western Resources, Inc.,
7.125%, 8/01/09.............................. Ba2 BB- $ 4,427,900
------------
88,147,938
------------
TOTAL BONDS (cost $391,527,944).............. 363,576,222
------------
TOTAL LONG-TERM INVESTMENTS
(cost $471,531,278).......................... 438,769,897
------------
</TABLE>
<TABLE>
<C> <S> <C>
/ / SHORT-TERM INVESTMENTS--10.9%
COMMERCIAL PAPER--4.5%
General Electric Capital Corp.,
2,200 6.52%, 7/28/00............................................. 2,200,000
2,200 6.57%, 08/3/00............................................. 2,200,000
9,999 J.P. Morgan & Co.
6.6832%, 7/06/00(a)........................................ 9,999,370
------------
TOTAL COMMERCIAL PAPER..................................... 14,399,370
------------
TIME DEPOSITS--6.4%
10,000 Barclay Bank PLC London,
7.1875%, 7/03/00........................................... 10,000,000
10,181 Rabobank Nederland N.V. London,
7.00%, 7/03/00............................................. 10,181,000
------------
TOTAL TIME DEPOSITS (cost $20,181,000)..................... 20,181,000
------------
TOTAL SHORT- AND MEDIUM-TERM INVESTMENTS
(cost $34,580,370)......................................... 34,580,370
------------
TOTAL INVESTMENTS--149.2%
(cost $506,111,648) (Note 3)............................... 473,350,267
Liabilities, less cash and other assets--(49.2%)........... (156,009,514)
------------
NET ASSETS--100%........................................... $317,340,753
============
</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 June 30,
2000.
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, 2000
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $506,111,648)................... $473,350,267
Cash........................................................ 10,711,094
Interest receivable......................................... 10,087,456
Prepaid assets and other assets............................. 44,304
------------
Total assets............................................ 494,193,121
------------
LIABILITIES
Commercial paper (Note 5)................................... 141,016,774
Payable upon return of securities loaned (Note 4)........... 30,180,370
Payable for securities purchased............................ 5,155,879
Investment advisory fee payable (Note 2).................... 188,925
Administrative fee payable (Note 2)......................... 39,058
Accrued expenses and other liabilities...................... 271,362
------------
Total liabilities....................................... 176,852,368
------------
NET ASSETS.................................................. $317,340,753
============
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............ (1,109,511)
Accumulated net realized loss on investment transactions.... (6,816,843)
Net unrealized depreciation on investments.................. (32,761,381)
------------
NET ASSETS.................................................. $317,340,753
============
Net asset value per share of common stock:
($317,340,753 DIVIDED BY 26,015,314 shares of common stock
issued and outstanding)................................... $ 12.20
============
</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, 2000
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest income........................................... $ 19,166,306
Security lending fee income............................... 25,035
------------
Total investment income................................. 19,191,341
------------
EXPENSES
Investment advisory fee (Note 2).......................... 1,151,629
Administrative fee (Note 2)............................... 239,578
Commercial paper fee...................................... 137,223
Directors' fees........................................... 110,520
Commissions expense--commercial paper..................... 72,294
Transfer agent fee and expenses........................... 59,655
Professional fees......................................... 33,880
Custodian fee and expenses................................ 26,224
Reports to shareholders................................... 17,501
Registration fee.......................................... 16,082
Other..................................................... 4,547
------------
Total operating expenses (before interest expense)........ 1,869,133
Interest expense--commercial paper (Note 5)............... 4,327,336
------------
Total expenses.......................................... 6,196,469
------------
Net investment income.............................. 12,994,872
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment transactions.............. 1,366,999
Net change in unrealized depreciation on investments...... (9,252,515)
------------
Net realized and unrealized loss on investments......... (7,885,516)
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $ 5,109,356
============
</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, 2000
(UNAUDITED)
<TABLE>
<S> <C>
INCREASE (DECREASE) IN CASH
Cash flows provided from (used for) operating activities:
Interest received....................................... $ 19,310,146
Expenses paid........................................... (1,844,632)
Interest expense paid................................... (4,433,907)
Purchase of long-term portfolio investments............. (29,086,663)
Proceeds from sale of long-term portfolio investments... 34,995,765
Net proceeds from sales in excess of purchases of
short-term portfolio investments........................ 998,158
-------------
Net cash provided from operating activities............. 19,938,867
-------------
Cash flows provided from (used for) financing activities:
Net cash used for securities loaned..................... (2,898,158)
Net cash provided from commercial paper................. 402,526
Cash dividends paid to shareholders..................... (13,944,214)
-------------
Net cash used for financing activities.................. (16,439,846)
-------------
Net increase in cash........................................ 3,499,021
Cash at beginning of period............................. 7,212,073
-------------
Cash at end of period................................... $ 10,711,094
=============
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH PROVIDED FROM OPERATING ACTIVITIES
Net increase in net assets resulting from operations........ $ 5,109,356
-------------
Decrease in investments................................. 1,738,529
Net realized gain on investment transactions............ (1,366,999)
Net change in unrealized depreciation on investments.... 9,252,515
Decrease in interest receivable......................... 131,657
Decrease in commercial paper discount................... (106,571)
Decrease in prepaid assets and other assets............. 12,800
Increase in payable for investments purchased........... 5,155,879
Decrease in investment advisory fee payable............. (7,655)
Decrease in administrative fee payable.................. (2,371)
Increase in accrued expenses and other liabilities...... 21,727
-------------
Total adjustments.................................. 14,829,511
-------------
Net cash provided from operating activities................. $ 19,938,867
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------------ ------------------
<S> <C> <C>
OPERATIONS
Net investment income....................... $ 12,994,872 $ 27,581,499
Net realized gain on investment
transactions.............................. 1,366,999 3,343,252
Net change in unrealized
appreciation/depreciation on
investments............................... (9,252,515) (58,962,144)
------------ ------------
Net increase (decrease) in net assets
resulting from operations................. 5,109,356 (28,037,393)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income....................... (13,944,214) (30,594,013)
------------ ------------
Total decrease.............................. (8,834,858) (58,631,406)
NET ASSETS
Beginning of period......................... 326,175,611 384,807,017
------------ ------------
End of period............................... $317,340,753 $326,175,611
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, 2000 ------------------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
---------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period............................ $ 12.54 $ 14.79 $ 14.48 $ 13.80 $ 14.81 $ 12.18
-------- -------- -------- -------- -------- --------
Net investment income............. 0.50 1.06 1.06 1.08 1.10 1.09
Net realized and unrealized
gain (loss) on investment
transactions.................... (0.30) (2.13) 0.43 0.78 (1.03) 2.72
-------- -------- -------- -------- -------- --------
Net increase (decrease) from
investment operations............. 0.20 (1.07) 1.49 1.86 0.07 3.81
-------- -------- -------- -------- -------- --------
Distributions from net investment
income............................ (0.54) (1.18) (1.18) (1.18) (1.08) (1.11)
Distributions in excess of net
investment income................. -- -- -- -- -- (0.07)
-------- -------- -------- -------- -------- --------
Total distributions................. (0.54) (1.18) (1.18) (1.18) (1.08) (1.18)
-------- -------- -------- -------- -------- --------
Net asset value, end of period(1)... $ 12.20 $ 12.54 $ 14.79 $ 14.48 $ 13.80 $ 14.81
======== ======== ======== ======== ======== ========
Per share market value, end of
period(1)......................... $ 11.25 $11.5625 $ 15.375 $14.4375 $ 12.875 $ 13.875
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
TOTAL INVESTMENT
RETURN(2)......................... 3.01% -18.32% 15.24% 22.21% 0.69% 36.21%
RATIOS TO AVERAGE
NET ASSETS(3)
Operating expenses(4)................. 1.04%(5) 1.01% 0.91% 0.80% 0.80% 0.78%
Commercial paper expenses............. 2.85%(5) 2.25% 2.22% 2.35% 2.30% 2.52%
Net investment income................. 8.16%(5) 7.84% 7.26% 7.84% 8.02% 7.92%
SUPPLEMENTAL DATA
Portfolio turnover.................... 8% 17% 10% 12% 13% 5%
Net assets, end of period (000)....... $317,341 $326,176 $384,807 $376,685 $358,941 $385,329
COMMERCIAL PAPER INFORMATION
Aggregate amount outstanding at end of
period (000)........................ $143,000 $143,000 $143,000 $143,000 $143,000 $143,000
Average daily amortized cost
of commercial paper
outstanding (000)................. $141,229 $141,157 $141,063 $141,704 $141,322 $141,369
Asset coverage per $1,000 at end of
period.............................. $ 3,209 $ 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.
(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
(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 $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.
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.
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DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 six months ended June 30, 2000, the Fund had purchases of
$34,242,542 and sales of $34,995,765 of investment securities, other than
short-term investments. For the six months ended June 30, 2000, 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, 2000 was
$506,111,648, and accordingly, net unrealized depreciation aggregated
$32,761,381 of which $519,050 related to appreciated securities and $33,280,430
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, 2000, the Fund's custodian held cash and short-term
investments having an aggregate value of $30,180,370 as collateral for portfolio
securities loaned having a market value of $28,976,239.
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<PAGE>
DUFF & PHELPS UTILITY AND CORPORATE BOND TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
NOTE 5. COMMERCIAL PAPER
As of June 30, 2000, $143,000,000 of commercial paper was outstanding with
an amortized cost of $141,016,774. The average discount rate of commercial paper
outstanding at June 30, 2000 was 6.44%. The average daily balance of commercial
paper outstanding for the six months ended June 30, 2000 was $141,228,503 at a
weighted average discount rate of 6.1663%. The maximum amount of commercial
paper outstanding at any time during the six months was $143,000,000. In
conjunction with the issuance of the commercial paper, the Fund entered into a
line of credit arrangement with a bank for $75,000,000. 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 six
months ended June 30, 2000, 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, 2000, Phoenix
Investment Partners Ltd. owned 14,948 shares.
15
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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.
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 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
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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
Francis E. Jeffries
PRESIDENT & CHIEF EXECUTIVE OFFICER
Dennis A. Cavanaugh
SENIOR VICE PRESIDENT, CHIEF INVESTMENT OFFICER & ASSISTANT TREASURER
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]
SEMI-ANNUAL REPORT
JUNE 30, 2000
