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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF
REGISTERED MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number 811-4915
DNP Select Income Fund Inc.
(Exact name of registrant as specified in charter)
55 East Monroe Street, Suite 3600, Chicago, Illinois 60603
(Address of principal executive offices)
(Zip code)
| Nathan I. Partain | John R. Sagan | |||
| DNP Select Income Fund Inc. | Mayer Brown LLP | |||
| 55 East Monroe Street, Suite 3600 | 71 South Wacker Drive | |||
| Chicago, Illinois 60603 | Chicago, Illinois 60606 | |||
(Name and address of agents for service)
Registrant’s telephone number, including area code: (312) 368-5510
Date of fiscal year end: December 31
Date of reporting period: March 31, 2008
Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1 -5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
|
ITEM 1. |
SCHEDULE OF INVESTMENTS. |
| The Schedule of Investments follows. |
 |
DNP Select |
|
First Quarter
March 31, 2008 |
Fund Distributions and Managed Distribution Plan: Your Fund has been paying a regular 6.5 cent per share monthly distribution on its common stock since July 1997. In February 2007, the Board of Directors adopted a Managed Distribution Plan, which provides for the Fund to continue to make a monthly distribution on its common stock of 6.5 cents per share. Under the Managed Distribution Plan, the Fund will distribute all available investment income to shareholders, consistent with the Fund’s primary investment objective. If and when sufficient investment income is not available on a monthly basis, the Fund will distribute long-term capital gains and/or return capital to its shareholders.
To the extent that the Fund uses capital gains and/or returns of capital to supplement its investment income, you should not draw any conclusions about the Fund’s investment performance from the amount of the Fund’s distributions or from the terms of the Fund’s Managed Distribution Plan.
The Fund estimates that it has distributed more than its income and capital gains in the current year; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund’s investment performance and should not be confused with “yield” or “income”.
The amounts and sources of distributions reported in monthly statements from the Fund are only estimates and are not provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund’s investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The Fund has sent you a Form 1099-DIV for the calendar year 2007 that tells you how to report these distributions for federal income tax purposes.
The Board may amend, suspend or terminate the Managed Distribution Plan without prior notice to shareholders if it deems such action to be in the best interests of the Fund and its shareholders. For example, the Board might take such action if the Plan had the effect of shrinking the Fund’s assets to a level that was determined to be detrimental to Fund shareholders. The suspension or termination of the Plan could have the effect of creating a trading discount (if the Fund’s stock is trading at or above net asset value) or widening an existing trading discount.
The Managed Distribution Plan is described in a Question and Answer format on your Fund’s website http://www.dnpselectincome.com, and discussed in the Board of Directors section of this report.
April 28, 2008
Dear Fellow Shareholders:
Performance Review: Consistent with its primary objective of current income, the Fund declared three monthly distributions of 6.5 cents per share of common stock during the first quarter of 2008. The 6.5 cent per share monthly rate, without compounding, would be 78 cents annualized, or a 7.16% common stock dividend yield based on the March 31, 2008 closing price of $10.89 per share. That yield compares favorably with the quarter-end yields of 3.01% on the Dow Jones Utility Index and 3.06% on the S&P 500 Utilities Index. Please refer to the portion of this letter captioned “Board of Directors Meetings” for important information about the Fund’s distributions.
Your Fund had a total return (income plus change in market price) of 4.78% for the quarter ended March 31, 2008, greater than the -7.43% return of the composite of the S&P 500 Utilities Index and the Lehman Utility Bond Index, reflecting the stock and bond ratio of the Fund. In comparison, the S&P 500 Utilities Index—a stock-only index—had a total return of -9.94%.
On a longer-term basis, as of March 31, 2008, your Fund had a five-year cumulative total return of 60.4%, below that of the 108.2% return of the composite of the S&P 500 Utilities Index and the Lehman Utility Bond Index, reflecting the stock and bond ratio of the Fund. In comparison, the S&P 500 Utilities Index had a total return during that period of 146.1%. It is important to note that the composite index includes no fees or expenses. The table below compares the performance of your Fund to various market benchmarks.
| Cumulative Total Return*
|
|||||
| For the period indicated through March 31, 2008 |
DNP Select Income Fund Inc. |
Composite | S&P 500 | Lehman | |
| Market | NAV | Index | Utilities Index | Utility Bond Index | |
|
|
|||||
| One year | 4.3% | -6.72% | -.2% | -1.6% | 4.3% |
| Five years | 60.4% | 101.9% | 108.2% | 146.1% | 26.6% |
| * | Total return includes dividends reinvested in the Fund or index, as applicable. The Composite Index is a composite of the returns of the S&P 500 Utilities Index and the Lehman Brothers Utility Bond Index, weighted to reflect the stock and bond ratio of the Fund. Performance returns for the S&P 500 Utilities Index and Lehman Brothers Utility Bond Index were obtained from Bloomberg LLP. Fund returns were obtained from the Administrator of the Fund. Past performance is not indicative of future results. |
The Fund Receives a Lipper Long-Term Performance Achievement Certificate: Lipper, a global leader in providing mutual fund analysis and information, awards Performance Achievement Certificates to funds with net asset value total returns that topped their Lipper investment category over a variety of time periods. We are pleased to report that your Fund received an award for the five and ten-year periods ended December 31, 2007. The Fund ranks number one in the Lipper closed-end Equity Income & Preferred Stock Funds classification for those periods.
1
Board of Directors Meetings: At the regular May 2008 Board of Directors’ meeting, the Board declared the following monthly dividends:
| Cents Per Share
|
Record Date
|
Payable Date
|
| 6.5 | June 30 | July 10 |
| 6.5 | July 31 | August 11 |
| 6.5 | August 29 | September 10 |
The Fund’s management and legal counsel updated the Board at the May meeting on developments in the auction securities market. These discussions and deliberations were a follow-up to a special April 8 meeting of the combined Boards of Directors of the three closed-end mutual funds advised by Duff & Phelps Investment Management Co., and also to the discussion of developments in the auction securities market that took place at the February Board meetings. At all of these meetings, the Boards expressed concern about the frustration preferred shareholders are experiencing because of their inability to obtain liquidity for their shares through the auction and remarketing process, and charged Fund management with the task of developing and evaluating potential solutions that would be in the best interests of all of the Funds’ shareholders.
Management believes that the preferred stock auction and remarketing processes may not provide liquidity for an extended period of time, if ever, and that the best near-term solution to the liquidity crisis is for the Fund to obtain a secured credit facility from a commercial bank. Management’s recommendation to the Board at the May meeting was to redeem the Fund’s outstanding preferred stock and replace most of it with debt financed leverage. Management reported that it was in talks with a commercial bank about a secured bank facility and requested, and obtained, Board approval for the bank to begin the credit facility syndication process.
The portion of preferred stock not redeemed with a credit facility would be redeemed with the proceeds from asset sales, resulting in a reduction in the amount of leverage used by the Fund. A reduction in leverage is necessitated by a requirement under the Investment Company Act of 1940 to maintain higher asset coverage for debt than for preferred stock. Management and the Board of Directors believe that a reduction in leverage outstanding and the costs associated with securing a credit facility are necessary given market conditions, and are in the best long-term interests of the common and preferred shareholders.
In order to implement the secured credit facility, the Fund will have to amend a fundamental investment provision that has been in place since the Fund’s initial public offering in 1987. In the Fund’s original prospectus, the Fund adopted a fundamental investment restriction that limits the Fund’s aggregate borrowings to 15% of the value of the Fund’s total assets. Unless and until this limitation is modified, the Fund can utilize debt-financed leverage to replace some, but not all, of the Fund’s preferred stock. Under the Investment Company Act of 1940, any change to a fundamental investment restriction requires shareholder approval. Replacing the Fund’s preferred stock with debt-financed leverage will require approval by the Fund’s shareholders of an increase in the limit of percentage of debt. Therefore, the Board has called a special shareholders meeting for June 30, 2008 to provide the opportunity for shareholders to vote to amend this investment restriction.
In the meantime, the Fund’s strategy is to proceed with the syndication of the secured credit facility. Once the credit facility is in place, the Board has authorized management to do a partial call of the preferred stock, with the redemption process and asset sales to be completed after receiving shareholder approval to modify the fundamental investment restriction. The Fund is hopeful that it can start the redemption process in June with the goal of completion in the third quarter of this year.
2
The Board of Directors and management of the Fund remain committed to fulfilling their obligations to both preferred and common shareholders. The Board and management both believe that the Fund is in the process of implementing a solution that will create the liquidity that the Fund’s preferred shareholders desire while at the same time maintaining the benefits of leverage for the common shareholders. Although there remain many forces outside the control of the Board and management that might impact the Fund’s ability to implement the above strategy, the Board and management believe that they will ultimately succeed in achieving these goals.
About your Fund’s Distribution Policy: At the February 2007 Board of Directors meeting, the Board reaffirmed the current 6.5 cent per share monthly distribution rate and formalized the monthly distribution process by adopting a Managed Distribution Plan (MDP). The Board reviews the operation of the MDP on a quarterly basis, with the most recent review conducted in February 2008. The MDP is described in a Question and Answer format on your Fund’s web site: http://www.dnpselectincome.com.
Longer-term interest rates remain relatively low and utility common stock dividend yields are well below their long-term average. Since 2004, the Fund has made increased use of realized gains offset by tax loss carryforwards to supplement its investment income. Until the Fund utilizes all of its tax loss carryforwards, distributions to shareholders derived from realized gains will be treated as ordinary income for tax purposes under the Internal Revenue Code (IRC). The treatment of the Fund’s realized gains as ordinary income for tax purposes has enabled the Fund to maintain its current monthly “income only” distribution rate. The Fund expects that it will exhaust the use of the tax loss carryfoward in 2008. In the absence of tax loss carryforwards, distributions from realized gains would be treated as taxable gains rather than ordinary income.
The Investment Company Act of 1940 and related rules of the Securities and Exchange Commission (SEC) generally prohibit investment companies from distributing long-term capital gains, as defined by the IRC, more often than once in a twelve–month period. However, funds that have adopted a Managed Distribution Plan often seek exemptive relief from the SEC, permitting them to distribute long-term capital gains more than once a year. In order to potentially augment the sources from which your Fund’s monthly distribution can be paid, your Fund has applied to the SEC for such exemptive relief. The Fund’s application is one of many applications for such exemptive relief currently before the SEC. While we currently anticipate that the SEC will act on the Fund’s request for relief during 2008, there can be no assurance that our request will be granted, or granted within any specific time frame.
If the granting of exemptive relief is denied or delayed by the SEC, and the Fund still needs to supplement its investment income from other sources after utilizing all of its tax loss carryforwards, the Fund’s monthly shareholder distributions may need to include a portion of return of capital in order to maintain the distribution rate. Even if the Fund receives exemptive relief from the SEC, a return of capital could occur if the Fund were to distribute more than its income and net realized capital gains. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you but does not necessarily reflect the Fund’s investment performance and should not be confused with “yield” or “income.” Any return of capital would not be taxable to shareholders in the year it is paid. Rather, shareholders would be required to reduce the cost basis of their shares by the amount of the return of capital so that, when the shares are ultimately sold, they will have properly accounted for the return of capital.
Automatic Dividend Reinvestment Plan and Direct Deposit Service—The Fund has a dividend reinvestment plan (DRP) available as a benefit to all registered shareholders and also offers direct deposit service through electronic funds transfer to all registered shareholders currently receiving a monthly distribution check. These services are offered through BNY Mellon Shareowner Services. For more information and/or an authorization
3
form on automatic dividend reinvestment or direct deposit, please contact BNY Mellon Shareowner Services (1-877-381-2537 or http://stock.bankofny.com). Information on these services is also available on the Fund’s website at the address noted below.
Visit us on the Web—You can obtain the most recent shareholder financial reports and distribution information at our website, http://www.dnpselectincome.com.
We appreciate your interest in DNP Select Income Fund Inc., and we will continue to do our best to be of service to you.
|
|
| Francis E. Jeffries, CFA Chairman of the Board |
Nathan I. Partain, CFA Director, President, and Chief Executive Officer |
4
DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS
(UNAUDITED)
March 31, 2008
| COMMON STOCKS—99.6% | |||
| Shares
|
Description
|
Value (Note 1) |
|
| n ELECTRIC AND GAS—72.7% | |||
| 600,000 | American Electric Power Inc. | $ 24,978,000 | |
| 1,000,000 | Atmos Energy Corp. | 25,500,000 | |
| 3,071,300 | CenterPoint Energy Inc. | 43,827,451 | |
| 1,125,000 | Consolidated Edison Inc. | 44,662,500 | |
| 1,400,000 | Dominion Resources, Inc. | 57,176,000 | |
| 3,530,000 | Duke Energy Corp. | 63,010,500 | |
| 1,464,000 | Exelon Corp. | 118,979,280 | |
| 1,735,000 | FPL Group Inc. | 108,853,900 | |
| 1,335,000 | FirstEnergy Corp. | 91,607,700 | |
| 500,000 | Great Plains Energy Inc. | 12,325,000 | |
| 188,673 | National Grid PLC ADR (United Kingdom) | 13,193,903 | |
| 675,714 | National Grid PLC (United Kingdom) | 9,286,711 | |
| 800,000 | Nicor Inc. | 26,808,000 | |
| 1,000,000 | Northeast Utilities Inc. | 24,540,000 | |
| 2,237,200 | NSTAR | 68,077,996 | |
| 1,350,000 | PG&E Corp. | 49,707,000 | |
| 1,200,000 | PPL Corp. | 55,104,000 | |
| 2,000,000 | Pepco Holdings Inc. | 49,440,000 | |
| 1,500,000 | Pinnacle West Capital Corp. | 52,620,000 | |
| 1,375,000 | Progress Energy Inc. | 57,337,500 | |
| 1,800,000 | Public Service Enterprise Group Inc. | 72,342,000 | |
| 500,000 | Red Electrica de Espana, S.A. (Spain) | 30,724,424 | |
| 1,000,000 | Scottish & Southern Energy ADR (United Kingdom) | 27,904,800 | |
| 850,000 | Scottish & Southern Energy PLC (United Kingdom) | 23,718,809 | |
| 800,000 | Sempra Energy | 42,624,000 | |
| 2,000,000 | Southern Co. | 71,220,000 | |
| 1,015,000 | Spectra Energy Corp. | 23,091,250 | |
| 2,200,000 | Teco Energy Inc. | 35,090,000 | |
| 1,500,000 | Vectren Corp. | 40,245,000 | |
| 1,000,000 | WGL Holdings Inc. | 32,060,000 | |
| 1,000,000 | Westar Energy Inc. | 22,770,000 | |
| 3,499,304 | Xcel Energy Inc. | 69,811,115 | |
|
|
|||
| 1,488,636,839 | |||
The accompanying notes are an integral part of these financial statements.
5
DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS—(Continued)
(UNAUDITED)
March 31, 2008
| Shares
|
Description
|
Value (Note 1) |
|
| n TELECOMMUNICATION—21.0% | |||
| 2,376,410 | AT&T Inc. | $ 91,016,503 | |
| 1,377,000 | Chunghwa Telecom Co. Ltd. ADR (Taiwan) | 35,829,540 | |
| 3,000,000 | Citizens Communications Co. | 31,470,000 | |
| 1,000,000 | France Telecom SA (France) | 33,750,915 | |
| 1,313,300 | Koninklijke KPN NV (Netherlands) | 22,266,588 | |
| 4,855,000 | TeliaSonera AB (Sweden) | 39,053,196 | |
| 757,900 | Telus Corp. (Canada) | 33,018,011 | |
| 2,019,492 | Verizon Communications Inc. | 73,610,483 | |
| 1,121,640 | Vodafone Group PLC ADR (United Kingdom) | 33,099,597 | |
| 3,128,360 | Windstream Corp. | 37,383,902 | |
|
|
|||
| 430,498,735 | |||
| n NON-UTILITY—5.9% | |||
| 35,423 | AMB Property Corp. | 1,927,720 | |
| 46,289 | Alexandria Real Estate Equities Inc. | 4,291,916 | |
| 34,744 | AvalonBay Communities Inc. | 3,353,491 | |
| 37,403 | BRE Properties, Inc. | 1,704,081 | |
| 50,595 | Boston Properties Inc. | 4,658,282 | |
| 17,250 | CBL & Associates Properties Inc. | 405,893 | |
| 108,504 | Corporate Office Properties Trust | 3,646,819 | |
| 44,955 | DCT Industrial Trust Inc. | 447,752 | |
| 75,702 | Developers Diversified Realty Corp. | 3,170,400 | |
| 123,336 | Diamondrock Hospitality Co. | 1,562,667 | |
| 134,314 | Digital Realty Trust Inc. | 4,768,147 | |
| 34,019 | Douglas Emmett Inc. | 750,459 | |
| 19,066 | Entertainment Properties Trust | 940,526 | |
| 80,642 | Equity Residential | 3,345,837 | |
| 33,788 | Essex Property Trust Inc. | 3,851,156 | |
| 134,580 | Extra Space Storage Inc. | 2,178,850 | |
| 31,623 | Federal Realty Investment Trust | 2,465,013 | |
| 146,854 | General Growth Properties Inc. | 5,605,417 | |
| 138,640 | Health Care Property Investors Inc. | 4,687,418 | |
| 84,745 | Health Care REIT Inc. | 3,824,542 | |
| 26,968 | Hospitality Properties Trust | 917,451 | |
| 259,534 | Host Hotels & Resorts Inc. | 4,131,781 |
The accompanying notes are an integral part of these financial statements.
6
DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS—(Continued)
(UNAUDITED)
March 31, 2008
| Shares
|
Description
|
Value (Note 1) |
|
| 5,731 | Kilroy Realty Corp. | $ 281,449 | |
| 123,186 | Kimco Realty Corp. | 4,825,196 | |
| 29,860 | LaSalle Hotel Properties | 857,878 | |
| 71,514 | The Macerich Co. | 5,025,289 | |
| 30,088 | Nationwide Health Properties, Inc. | 1,015,470 | |
| 122,594 | ProLogis | 7,215,883 | |
| 45,881 | Public Storage Inc. | 4,065,974 | |
| 41,977 | Regency Centers Corp. | 2,718,430 | |
| 42,620 | SL Green Realty Corp. | 3,472,251 | |
| 123,839 | Simon Property Group Inc. | 11,505,881 | |
| 49,311 | Sunstone Hotel Investors Inc. | 789,469 | |
| 60,246 | Tanger Factory Outlet Centers, Inc. | 2,317,664 | |
| 97,855 | UDR, Inc. | 2,399,405 | |
| 119,131 | Ventas Inc. | 5,350,173 | |
| 66,011 | Vornado Realty Trust | 5,690,808 | |
|
|
|||
| 120,166,838 | |||
|
|
|||
| Total Common Stocks (Cost—$1,689,575,892) | 2,039,302,412 | ||
|
|
|||
| PREFERRED STOCKS—10.5% | |||
| n UTILITY—3.3% | |||
| 700,000 | Entergy Corp. 75/8% due 2/17/09 | 45,762,500 | |
| 220,000 | Southern California Edison 61/8% Perpetual | 21,800,636 | |
|
|
|||
| 67,563,136 | |||
| n NON-UTILITY—7.2% | |||
| 710,432 | AMB Property Corp. 7% Series O Perpetual | 16,983,801 | |
| 17,300 | AvalonBay Communities Inc. 8.70% Series H Perpetual | 440,804 | |
| 650,000 | Duke Realty Corp. 6.95% Series M Perpetual | 14,605,500 | |
| 800,000 | Federal National Mortgage Association 81/4% Perpetual | 19,240,000 | |
| 300,000 | Federal National Mortgage Association 7% Perpetual | 13,593,750 | |
| 605,000 | Kimco Realty Corp. 73/4% Series G Perpetual | 14,459,500 | |
| 900,000 | Public Storage Inc. 71/4% Series I Perpetual | 21,519,000 | |
| 600,000 | Realty Income Corp. 73/8% Series D Perpetual | 14,256,000 | |
| 660,000 | UDR, Inc. 63/4% Series G Perpetual | 15,716,250 | |
| 200,000 | Vornado Realty Trust 7% Series E Perpetual | 4,570,000 | |
| 234,900 | Vornado Realty Trust 65/8% Series G Perpetual | 4,897,665 | |
| 350,000 | Vornado Realty Trust 65/8% Series I Perpetual | 7,437,500 | |
|
|
|||
| 147,719,770 | |||
|
|
|||
| Total Preferred Stocks (Cost—$216,668,393) | 215,282,906 | ||
|
|
|||
The accompanying notes are an integral part of these financial statements.
7
DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS—(Continued)
(UNAUDITED)
March 31, 2008
|
BONDS—37.3%
|
|||||
| Ratings
|
|||||
| Par Value
|
Description
|
Moody’s
|
Standard and Poor’s |
Value (Note 1) |
|
| n ELECTRIC AND GAS—13.5% | |||||
| $ 10,000,000 | AGL Capital Corp. | ||||
| 71/8%, due 1/14/11 | Baa1 | BBB+ | $10,758,790 | ||
| 22,000,000 | Arizona Public Service Company | ||||
| 67/8%, due 8/01/36 | Baa2 | BBB– | 20,990,090 | ||
| 9,304,000 | Commonwealth Edison Co. | ||||
| 8%, due 5/15/08 | Baa2 | BBB | 9,346,659 | ||
| 24,000,000 | Dominion Resources Capital Trust I | ||||
| 7.83%, due 12/01/27 | Baa3 | BBB | 25,112,784 | ||
| 25,000,000 | Duke Capital Corp. | ||||
| 71/2%, due 10/01/09 | Baa1 | BBB | 26,125,150 | ||
| 20,000,000 | Duke Energy Corp., Series D | ||||
| 73/8%, due 3/01/10 | A3 | A– | 21,381,040 | ||
| 5,000,000 | Entergy Corp. | ||||
| 6.30%, due 9/01/35 | Baa1 | A– | 4,726,015 | ||
| 10,000,000 | FPL Group Capital Inc. | ||||
| 73/8%, due 6/01/09 | A2 | A– | 10,445,690 | ||
| 5,000,000 | FirstEnergy Corp. | ||||
| 73/8%, due 11/15/31 | Baa3 | BBB– | 5,454,825 | ||
| 24,340,000 | Illinois Power Co. | ||||
| 71/2%, due 6/15/09 | Baa3 | BBB– | 25,267,914 | ||
| 21,000,000 | Keyspan Corp. | ||||
| 75/8%, due 11/15/10 | Baa1 | A– | 22,817,109 | ||
| 10,000,000 | Northern Border Partners LP | ||||
| 87/8%, due 6/15/10 | Baa2 | BBB | 11,004,590 | ||
| 5,000,000 | NSTAR | ||||
| 8%, due 2/15/10 | A2 | A | 5,412,180 | ||
| 9,101,000 | PSEG Power LLC | ||||
| 73/4%, due 4/15/11 | Baa1 | BBB | 9,812,243 | ||
The accompanying notes are an integral part of these financial statements.
8
DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS—(Continued)
(UNAUDITED)
March 31, 2008
| Ratings
|
|||||
| Par Value
|
Description
|
Moody’s
|
Standard and Poor’s |
Value (Note 1) |
|
| n ELECTRIC AND GAS (Continued) | |||||
| $ 9,000,000 | PSEG Power LLC | ||||
| 85/8%, due 4/15/31 | Baa1 | BBB | $ 11,070,297 | ||
| 25,000,000 | Reliant Energy Resources Corp. | ||||
| 73/4%, due 2/15/11 | Baa3 | BBB | 27,025,500 | ||
| 12,915,000 | Sempra Energy | ||||
| 7.95%, due 3/01/10 | Baa1 | BBB+ | 13,880,732 | ||
| 6,488,000 | Southern Union Co. | ||||
| 7.60%, due 2/01/24 | Baa3 | BBB– | 6,571,747 | ||
| 8,850,000 | Southern Union Co. | ||||
| 81/4%, due 11/15/29 | Baa3 | BBB– | 9,496,085 | ||
|
|
|||||
| 276,699,440 | |||||
| n TELECOMMUNICATION—17.5% | |||||
| 8,000,000 | AT&T Wireless Services Inc. | ||||
| 81/8%, due 5/01/12 | A2 | A | 8,960,576 | ||
| 11,500,000 | Alltel Corp. | ||||
| 77/8%, due 7/01/32 | Caa1 | B– | 7,647,500 | ||
| 15,098,000 | BellSouth Capital Funding Corp. | ||||
| 73/4%, due 2/15/10 | A2 | A | 16,077,226 | ||
| 10,000,000 | BellSouth Capital Funding Corp. | ||||
| 77/8%, due 2/15/30 | A2 | A | 11,081,470 | ||
| 22,000,000 | British Telecom PLC (United Kingdom) | ||||
| 83/8%, due 12/15/10 | Baa1 | BBB+ | 24,209,482 | ||
| 15,000,000 | Centurytel Inc. | ||||
| 83/8%, due 10/15/10 | Baa2 | BBB | 16,338,780 | ||
| 15,000,000 | Centurytel Inc. | ||||
| 67/8%, due 1/15/28 | Baa2 | BBB | 13,669,080 | ||
| 8,900,000 | Comcast Corp. | ||||
| 7.05%, due 3/15/33 | Baa2 | BBB+ | 9,102,368 | ||
| 13,000,000 | Deutsche Telekom Int’l Finance B.V. (Germany) | ||||
| 8%, due 6/15/10 | A3 | A– | 13,913,159 | ||
| 23,140,000 | France Telecom SA (France) | ||||
| 73/4%, due 3/01/11 | A3 | A– | 25,108,057 | ||
The accompanying notes are an integral part of these financial statements.
9
DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS—(Continued)
(UNAUDITED)
March 31, 2008
| Ratings
|
|||||
| Par Value
|
Description
|
Moody’s
|
Standard and Poor’s |
Value (Note 1) |
|
| n TELECOMMUNICATION (Continued) | |||||
| $ 17,000,000 | Koninklijke KPN NV (Netherlands) | ||||
| 8%, due 10/01/10 | Baa2 | BBB+ | $ 18,264,154 | ||
| 15,000,000 | Koninklijke KPN NV (Netherlands) | ||||
| 83/8%, due 10/01/30 | Baa2 | BBB+ | 17,210,835 | ||
| 24,104,000 | Nextel Communications Corp. | ||||
| 73/8%, due 8/01/15 | Baa3 | BBB– | 18,572,783 | ||
| 10,000,000 | Sprint Capital Corp. | ||||
| 83/8%, due 3/15/12 | Baa3 | BBB– | 9,257,520 | ||
| 10,000,000 | TCI Communications Inc. | ||||
| 83/4%, due 8/01/15 | Baa2 | BBB+ | 11,327,420 | ||
| 5,000,000 | TCI Communications Inc. | ||||
| 71/8%, due 2/15/28 | Baa2 | BBB+ | 5,047,170 | ||
| 5,500,000 | Tele-Communications Inc. | ||||
| 77/8%, due 8/01/13 | Baa2 | BBB+ | 6,036,547 | ||
| 32,000,000 | Telecom Italia Capital (Italy) | ||||
| 7.20%, due 7/18/36 | Baa2 | BBB | 30,309,248 | ||
| 15,000,000 | Telefonica Emisiones SAU (Spain) | ||||
| 7.045%, due 6/20/36 | Baa1 | BBB+ | 15,732,375 | ||
| 11,500,000 | Telefonica Europe BV (Spain) | ||||
| 73/4%, due 9/15/10 | Baa1 | BBB+ | 12,343,399 | ||
| 5,000,000 | Telefonica Europe BV (Spain) | ||||
| 81/4%, due 9/15/30 | Baa1 | BBB+ | 5,855,310 | ||
| 17,000,000 | Telus Corp. (Canada) | ||||
| 8%, due 6/01/11 | Baa1 | BBB+ | 18,501,967 | ||
| 15,500,000 | Verizon Global Funding Corp. | ||||
| 73/4%, due 12/01/30 | A3 | A | 16,887,560 | ||
| 20,000,000 | Vodafone Group PLC (United Kingdom) | ||||
| 73/4%, due 2/15/10 | Baa1 | A– | 21,204,620 | ||
| 5,000,000 | Vodafone Group PLC (United Kingdom) | ||||
| 77/8%, due 2/15/30 | Baa1 | A– | 5,510,620 | ||
|
|
|||||
| 358,169,226 | |||||
The accompanying notes are an integral part of these financial statements.
10
DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS—(Continued)
(UNAUDITED)
March 31, 2008
| Ratings
|
|||||
| Par Value
|
Description
|
Moody’s
|
Standard and Poor’s |
Value (Note 1) |
|
| n NON-UTILITY—1.8% | |||||
| $ 14,790,000 | CPG Partners LP | ||||
| 81/4%, due 2/01/11 | A3 | A– | $ 16,244,508 | ||
| 8,000,000 | Dayton Hudson Corp. | ||||
| 97/8%, due 7/01/20 | A2 | A+ | 10,950,416 | ||
| 9,600,000 | Duke Realty LP | ||||
| 6.80%, due 2/12/09 | Baa2 | BBB | 9,715,968 | ||
|
|
|||||
| 36,910,892 | |||||
|
|
|||||
| n U.S. GOVERNMENT SPONSORED ENTERPRISES—4.5% | |||||
| 90,000,000 | Federal Home Loan Banks | ||||
| 71/8%, due 1/15/10 | Aaa | AAA | 93,519,180 | ||
|
|
|||||
| 93,519,180 | |||||
|
|
|||||
| Total Bonds (Cost—$795,062,274) | 765,298,738 | ||||
|
|
|||||
| SHORT-TERM INSTRUMENTS—14.5% | |||||
| Par Value/ Shares |
Description
|
Value (Note 1) |
|||
| #$115,810,000 | Banc of America Securities LLC Repurchase Agreement, 3.070%, dated 3/31/08, due 4/01/08, with a repurchase price of $115,819,876 and collateralized by $118,126,200 market value of corporate bonds having an average coupon rate of 6.19% and an original weighted average maturity of 2/19/19 |
$115,810,000 | |||
| # 10,000,000 | Bank of Ireland (Stamford, Conn., USA) Certificate of Deposit | ||||
| 3.165%, due 4/30/08 | 10,001,131 | ||||
| # 17,000,000 | Bank of Nova Scotia (Houston, Texas, USA) Certificate of Deposit | ||||
| 3.046%, due 1/05/09 | 16,972,919 | ||||
| # 38,632,658 | BlackRock Liquidity Funds TempFund Portfolio | ||||
| 3.249%, due 4/01/08 | 38,632,658 | ||||
| # 115,000,000 | Goldman Sachs Financial Square Funds—Government Fund | ||||
| 2.851%, due 4/01/08 | 115,000,000 | ||||
|
|
|||||
| Total Short-Term Instruments (Cost—$296,409,180) | 296,416,708 | ||||
|
|
|||||
The accompanying notes are an integral part of these financial statements.
11
DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS—(Continued)
(UNAUDITED)
March 31, 2008
| Value (Note 1) |
||
| TOTAL INVESTMENTS—161.9% (Cost—$2,997,715,739) | $3,316,300,764 | |
|
|
||
| OTHER ASSETS LESS LIABILITIES—(37.5%) | (768,082,775 | ) |
|
|
||
| AUCTION PREFERRED STOCK—(24.4%) | (500,000,000 | ) |
|
|
||
| NET ASSETS APPLICABLE TO COMMON STOCK—100.0% | ||
| (equivalent to $8.92 per share of common stock based on 229,550,009 | ||
| shares of common stock outstanding; authorized 250,000,000 shares) | $2,048,217,989 | |
|
|
# This security was purchased with the cash proceeds from securities loaned.
The percentage shown for each investment category is the total value of that category as a percentage of the net assets applicable to common stock of the Fund.
The accompanying notes are an integral part of these financial statements.
12
| (1) |
Equity securities traded on a national or foreign securities exchange or traded over-the-counter and quoted on the NASDAQ System are valued at the last reported sale price or, if there was no sale on the pricing date, then the security is valued at the mean of the bid and ask prices as obtained on that day from one or more dealers regularly making a market in that security. Fixed income securities are valued at the mean of bid and ask prices provided by an independent pricing service when such prices are believed to reflect the fair market value of such securities. Such bid and ask prices are determined taking into account securities prices, yields, maturities, call features, ratings, and institutional size trading in similar securities and developments related to specific securities. Any securities for which it is determined that market prices are unavailable or inappropriate are valued at a fair value using a procedure determined in good faith by the Board of Directors. Short-term instruments having a maturity of 60 days or less are valued on an amortized cost basis, which approximates market value. The Fund implemented Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“FAS 157”), effective January 1, 2008. In accordance with FAS 157, fair value is defined as the price that the Fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. FAS 157 establishes a three-tier hierarchy to classify fair value measurements for disclosure purposes. The three tier hierarchy of inputs is summarized in the three broad levels listed below. Level 1 – quoted prices in active markets for identical securities The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in these securities. The following is a summary of the inputs used to value each of the Fund’s investments as of March 31, 2008. |
| Level 1 – | $2,408,217,976 | |
| Level 2 – | 908,082,788 | |
|
|
||
| Total – | $3,316,300,764 |
| The Fund has not held any Level 3 securities (valued using unobservable inputs) or other financial instruments at any time during the three month period ended March 31, 2008. | |
| (2) | At December 31, 2007, the Fund’s most recent fiscal tax year end, based on a tax cost of investments of $3,281,874,899, the Fund had gross unrealized appreciation of $655,947,619 and gross unrealized depreciation of $40,668,062. |
13
|
Board of Directors FRANCIS E. JEFFRIES, CFA NANCY LAMPTON STEWART E. CONNER CONNIE K. DUCKWORTH ROBERT J. GENETSKI EILEEN A. MORAN NATHAN I. PARTAIN, CFA CHRISTIAN H. POINDEXTER CARL F. POLLARD DAVID J. VITALE |
DNP Select Common stock listed on the New York 55 East Monroe Street, Suite 3600 Shareholder inquiries please contact: Transfer Agent, BNY Mellon Investment Adviser Duff & Phelps Investment Administrator J.J.B. Hilliard, W.L. Lyons, LLC Legal Counsel Mayer Brown LLP Independent Registered Public Accounting Firm Ernst & Young LLP |
|
Officers NATHAN I. PARTAIN, CFA T. BROOKS BEITTEL, CFA Senior Vice President and Treasurer JOYCE B. RIEGEL DIANNA P. WENGLER |
| ITEM 2. | CONTROLS AND PROCEDURES. | |||
(a) The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “1940 Act”)) are effective, based on an evaluation of those controls and procedures made as of a date within 90 days of the filing date of this report as required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Exchange Act.
(b) There has been no change in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
| ITEM 3. | EXHIBITS. | |||
| Exhibit 99.CERT | Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (Registrant) | DNP SELECT INCOME FUND INC. |
|
By (Signature and Title) |
/s/ NATHAN I. PARTAIN
Nathan I. Partain President and Chief Executive Officer |
|
Date |
May 28, 2008 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
By (Signature and Title) |
/s/ NATHAN I. PARTAIN Nathan I. Partain President and Chief Executive Officer |
|
Date By (Signature and Title) |
May 28, 2008 /s/ JOSEPH C. CURRY, JR.Joseph C. Curry, Jr. Senior Vice President and Treasurer |
|
Date |
May 28, 2008 |