As filed with the Securities and Exchange Commission on April 30, 2001
Investment Company Act file no. 811-4915
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-2
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 43 [X]
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DUFF & PHELPS UTILITIES INCOME INC.
(Exact name of registrant as specified in charter)
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55 East Monroe Street
Chicago, Illinois 60603
(Address of principal executive offices)
Registrant's telephone number: 312/368-5510
Nathan I. Partain John R. Sagan
Duff & Phelps Utilities Income Inc. Mayer, Brown & Platt
55 East Monroe Street 190 South LaSalle Street
Chicago, Illinois 60603 Chicago, Illinois 60603
(Names and addresses of agents for service)
It is proposed that this filing will become effective:
[X] immediately upon filing.
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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PART A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Outside Front Cover
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Not applicable.
Item 2. Cover Pages; Other Offering Information
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Not applicable.
Item 3. Fee Table and Synopsis
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1.
Shareholder Transaction Expenses
Sales Load (as a percentage of offering price).........................N/A
Dividend Reinvestment and Cash Purchase Plan Fees......................(1)
Annual Expenses (as a percentage of net assets attributable to common shares)
Management Fees......................................................0.75%
Interest Payments on Borrowed Funds..................................0.66%
Other Expenses.......................................................0.38%
Total Annual Expenses...................................1.79%
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Example (2) 1 year 2 years 5 years 10 years
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You would pay the following
expenses on a $1,000 investment,
assuming a 5% annual return: $18 $37 $97 $211
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(1) Shareholders that reinvest dividends and/or capital gains
distributions will be charged only brokerage fees in the event that
shares are purchased in the open market. Investors investing
cash in addition to any cash dividends reinvested will be charged
brokerage commissions plus a service fee of $2.50 per transaction.
See Item 10.1(c).
(2) This Example should not be considered a representation of future
expenses, and actual expenses may be greater or lesser than those shown.
The purpose of the foregoing table is to assist an investor in
understanding the costs and expenses that an investor will bear directly or
indirectly, and the information contained therein is not necessarily
indicative of future performance. See Item 9.
2. Not applicable.
3. Not applicable.
Item 4. Financial Highlights
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Not applicable.
Item 5. Plan of Distribution
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Not applicable.
Item 6. Selling Shareholders
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Not applicable.
Item 7. Use of Proceeds
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Not applicable.
Item 8. General Description of the Registrant
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1. General
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(a) The Registrant, Duff & Phelps Utilities Income Inc.
(the "Fund"), is a corporation organized under the laws of the
State of Maryland on November 26, 1986.
(b) The Fund is a diversified closed-end investment company.
2. Investment Objectives and Policies
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Investment objectives
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The Fund's primary investment objectives are current income and
long-term growth of income. Capital appreciation is a secondary objective.
Principal investment strategies
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The Fund seeks to achieve its investment objectives by investing
primarily in a diversified portfolio of equity and fixed income securities
of companies in the public utilities industry. Under normal conditions,
more than 65% of the Fund's total assets will be invested in securities of
public utility companies engaged in the production, transmission or
distribution of electric energy, gas or telephone services. The Fund's
investment objectives stated in the preceding paragraph and its policy of
concentrating its investments in the utilities industry are fundamental
policies and may not be changed without the approval of the holders of
-2-
a "majority" (as defined in the Investment Company Act of 1940, as amended
(the "1940 Act")) of the outstanding shares of the common stock and the
preferred stock voting together as one class, which means the lesser of (i)
67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the outstanding
shares.
Fundamental investment restrictions
-----------------------------------
The following are fundamental investment restrictions of the Fund that
may be changed only with approval of the holders of a "majority" (as
defined in the 1940 Act) of the outstanding shares of the common stock and
the preferred stock voting together as one class:
1. The Fund may not invest more than 25% of its total assets
(valued at the time of investment) in securities of companies engaged
principally in any one industry other than the utilities industry,
which includes companies engaged in the production, transmission or
distribution of electric energy or gas or in telephone services,
except that this restriction does not apply to securities issued or
guaranteed by the United States Government or its agencies or
instrumentalities.
2. The Fund may not:
(a) invest more than 5% of its total assets (valued at
the time of the investment) in the securities of any one
issuer, except that this restriction does not apply to United
States Government securities; or
(b) acquire more than 10% of the outstanding voting
securities of any one issuer (at the time of acquisition);
except that up to 25% of the Fund's total assets (at the time of
investment) may be invested without regard to the limitations set forth
in this restriction.
3. The Fund may borrow money on a secured or unsecured basis
for any purpose of the Fund in an aggregate amount not exceeding 15% of
the value of the Fund's total assets at the time of any such borrowing
(exclusive of all obligations on amounts held as collateral for
securities loaned to other persons to the extent that such obligations
are secured by assets of at least equivalent value).
4. The Fund may not pledge, mortgage or hypothecate its
assets, except to secure indebtedness permitted by restriction 3 above.
(The deposit in escrow of securities in connection with the writing of
put and call options, collateralized loans of securities and collateral
arrangements with respect to margin requirements for futures
transactions and with respect to segregation of securities in connection
with forward contracts are not deemed to be pledges or hypothecations
for this purpose.)
5. The Fund may make loans of securities to other persons to
the extent of not more than 33 1/3% of its total assets (valued at the
time of the making of loans), and may invest without limitation in
short-term obligations and publicly distributed obligations.
-3-
6. The Fund may not underwrite the distribution of
securities of other issuers, although it may acquire securities that, in
the event of a resale, might be required to be registered under the
Securities Act of 1933, as amended, because the Fund could be regarded
as an underwriter as defined in that act with respect to the resale.
7. The Fund may not purchase or sell real estate or any
interest therein, except that the Fund may invest in securities secured
by real estate or interests therein, such as mortgage pass-throughs,
pay-throughs, collateralized mortgage obligations, and securities issued
by companies (including partnerships and real estate investment trusts)
that invest in real estate or interests therein.
8. The Fund may acquire securities of other investment
companies to the extent (at the acquisition) of (i) not more than 3% of
the outstanding voting stock of any one investment company, (ii) not
more than 5% of the assets of the Fund in any one investment company and
(iii) not more than 10% of the assets of the Fund in all investment
companies (exclusive in each case of securities received as a dividend
or as a result of a merger, consolidation or other plan of
reorganization).
9. The Fund may not invest for the purpose of exercising
control over or management of any company.
10. The Fund may not purchase securities on margin, or make
short sales of securities, except the use of short-term credit necessary
for the clearance of purchases and sales of portfolio securities, but it
may make margin deposits in connection with transactions in options,
futures and options on futures.
11. The Fund may not purchase or sell commodities or
commodity contracts, except that it may enter into (i) stock index
futures transactions, interest rate futures transactions and options
on such future transactions and (ii) forward contracts on foreign
currencies to the extent permitted by applicable law.
12. The Fund may not issue any security senior to its common
stock, except that the Fund may borrow money subject to investment
restriction 3 and except as permitted by the Fund's charter.
If a percentage restriction set forth above is adhered to at the time
a transaction is effected, later changes in percentages resulting from changes
in value or in the number of outstanding securities of an issuer will not be
considered a violation.
Other Significant Investment Policies
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Fixed Income Securities. The Fund purchases a fixed income security
only if, at the time of purchase, it is (i) rated investment grade by at
least two of the following three nationally recognized statistical rating
organizations: Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.
("S&P"), and Fitch IBCA, Inc. ("Fitch") or (ii) determined by the Fund's
investment adviser to be of investment grade and not rated below investment
grade by any of the aforementioned rating services. A fixed income security
rated investment grade has a rating of BBB- or better by Fitch, Baa3 or
better by Moody's, or BBB- or better by S&P. In making its determination
that a fixed income security is investment grade, the Fund's investment
adviser will use the standards used by a nationally recognized statistical
rating organization.
-4-
Leverage. The Fund is authorized to borrow money in amounts of up
to 15% of the value of its total assets at the time of such borrowings.
However, for so long as the Fund's preferred stock is rated by S&P, the
Fund will limit the aggregate amount of its borrowings to 10% of the value
of its total assets and will not incur any borrowings, unless advised by
S&P that such borrowings would not adversely affect S&P's then-current
rating of the preferred stock.
Lending of Portfolio Securities. In order to generate additional
income, the Fund may from time to time lend securities from its portfolio,
with a value not in excess of 33 1/3% of its total assets, to brokers,
dealers and financial institutions such as banks and trust companies for
which it will receive collateral in cash, United States Government
securities or an irrevocable letter of credit that will be maintained in an
amount equal to at least 100% of the current market value of the loaned
securities.
Rating Agency Guidelines. The Fund's preferred stock is currently
rated by Moody's, S&P and Fitch, nationally recognized statistical rating
organizations, which issue ratings for various securities reflecting the
perceived creditworthiness of those securities. The Fund intends that, so
long as shares of its preferred stock are outstanding, the composition of
its portfolio will reflect guidelines established by the foregoing rating
organizations in connection with the Fund's receipt of the highest rating
for its preferred stock from at least two of such rating organizations.
Options and Futures Transactions. The Fund may seek to increase its
current return by writing covered options. In addition, through the writing
and purchase of options and the purchase and sale of futures contracts and
related options, the Fund may at times seek to hedge against a decline in
the value of securities owned by it or an increase in the price of
securities which it plans to purchase. However, for so long as shares of
the Fund's preferred stock are rated either by Moody's or S&P, the Fund
will not purchase or sell futures contracts or related options or engage in
other hedging transactions unless Moody's or S&P, as the case may be,
advises the Fund that such action or actions will not adversely affect its
then-current rating of the Fund's preferred stock.
Temporary Investments. For temporary defensive purposes, the Fund
may be invested primarily in money market securities. These securities
include securities issued or guaranteed by the United States Government and
its agencies and instrumentalities, commercial paper and certificates of
deposit. To the extent that the Fund engages in such defensive investments,
it may not achieve its investment objectives.
Nonfundamental Restrictions. The Fund may not (i) invest in
securities subject to legal or contractual restrictions on resale, if, as a
result of such investment, more than 10% of the Fund's total assets would
be invested in such securities, or (ii) acquire 5% or more of the
outstanding voting securities of a public utility company.
Each of the policies and restrictions described above may be
changed by the Board of Directors without the approval of the Fund's
shareholders. If a percentage restriction set forth above is adhered to at
the time a transaction is effected, later changes in percentages resulting
from changes in value or in the number of outstanding securities of an
issuer will not be considered a violation.
3. Risk Factors
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Leverage. As of December 31, 2000, the Fund has outstanding
indebtedness of $193,187,392 and five series of preferred stock with
an aggregate liquidation preference of $500 million. The dividend
rate on each series of preferred stock is reset every 49 days through
a remarketing procedure. As of April 6, 2001, the dividend rate on
the five series of preferred stock averaged 3.91% and the interest
rate on the Fund's outstanding indebtedness averaged 5.11%. The Fund
must experience an annual return of 1.11% on its portfolio in order
to cover annual interest and dividend payments on the Fund's
outstanding indebtedness and preferred stock.
-5-
Leverage creates certain risks for holders of common stock, including
higher volatility of both the net asset value and market value of the
common stock. Fluctuations in dividend rates on the preferred stock
and interest rates on the Fund's indebtedness will affect the
dividend to holders of common stock. Holders of the common stock
receive all net income from the Fund remaining after payment of
dividends on the preferred stock and interest on the Fund's
indebtedness, and generally are entitled to a pro rata share of net
realized capital gains, if any.
Upon any liquidation of the Fund, the holders of shares of preferred
stock will be entitled to liquidating distributions (equal to
$100,000 per share of preferred stock plus any accumulated and unpaid
dividends thereon) and the holders of the Fund's indebtedness will be
entitled to receive repayment of outstanding principal plus
accumulated and unpaid interest thereon before any distribution is
made to holders of common stock.
The leverage obtained through the issuance of the preferred stock and
from the Fund's presently outstanding indebtedness has provided
holders of common stock with a higher dividend than such holders
would have otherwise received. However, there can be no assurance
that the Fund will be able to continue to realize such a higher net
return on its investment portfolio. Changes in certain factors could
cause the relationship between the dividends paid on the preferred
stock and interest paid on the Fund's indebtedness to increase
relative to the dividend and interest rates on the portfolio
securities in which the Fund may be invested. Under such conditions
the benefit of leverage to holders of common stock will be reduced
and the Fund's leveraged capital structure could result in a lower
rate of return to holders of common stock than if the Fund were not
leveraged. The Fund is required by the 1940 Act to maintain an asset
coverage of 200% on outstanding preferred stock and 300% on
outstanding indebtedness. If the asset coverage declines below those
levels (as a result of market fluctuations or otherwise), the Fund
may be required to sell a portion of its investments at a time when
it may be disadvantageous to do so.
The following table illustrates the effects of leverage on a return
to common stockholders. The figures appearing in the table are
hypothetical and actual returns may be greater or less than those
appearing in the table.
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Assumed annual return on portfolio -10.00% -5.00% 0.00% 5.00% 10.00%
(net of expenses)
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Corresponding annual return to -14.71% -8.17% -1.63% 4.91% 11.45%
common stockholder
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Investments in Securities of Foreign Issuers. While the Fund is
prohibited from investing 15% or more of its assets in securities of
foreign issuers, the Fund may be exposed to certain risks as a result
of foreign investments. Investing in securities of foreign issuers
involves certain considerations not typically associated with
investing in securities of U.S. companies, including (a) controls on
foreign investment and limitations on repatriation of invested
capital and on the Fund's ability to exchange local currencies for
U.S. dollars, (b) greater price volatility, substantially less
liquidity and significantly smaller market capitalization of
securities markets, (c) currency devaluations and other currency
exchange rate fluctuations, (d) more substantial government
involvement in the economy, (e) higher rates of inflation, (f) less
government supervision and regulation of the securities markets and
participants in those markets and (g) political uncertainty and other
considerations. The Fund will treat investments in countries with
repatriation restrictions as illiquid for purposes of any applicable
limitations under the 1940 Act; however, as a closed-end fund, the
Fund is not currently limited under that Act in the amount of
-6-
illiquid securities it may acquire. Because of the limited forward
market for the purchase of U.S. dollars in most foreign countries and
the limited circumstances in which the Fund expects to hedge against
declines in the value of foreign country currencies generally, the
Fund will be adversely affected by devaluations of foreign country
currencies against the U.S. dollar to the extent the Fund is
invested in securities denominated in currencies experiencing a
devaluation. The Fund's fundamental investment policies permit the
Fund to enter into currency hedging transactions.
In addition, accounting, auditing and financial reporting standards
in foreign countries are different from U.S. standards. As a result,
certain material disclosures may not be made and less information may
be available to the Fund and other investors than would be the case
if the Fund's investments were restricted to securities of U.S.
issuers. Moreover, it may be more difficult to obtain a judgment in
a court outside the United States. Interest and dividends paid on
securities held by the Fund and gains from the disposition of such
securities may be subject to withholding taxes imposed by foreign
countries.
Anti-takeover Provisions. Certain provisions of the Fund's charter
may be regarded as "anti-takeover" provisions because they could have
the effect of limiting the ability of other entities or persons to
acquire control of the Fund. See Item 10.l(e).
Premium/Discount From Net Asset Value. Shares of closed-end
investment companies trade in the market above, at and below net
asset value. This characteristic of shares of closed-end
investment companies is a risk separate and distinct from the risk
that the Fund's net asset value may decline. Since inception, the
Fund's common stock has generally traded at a premium to net asset
value. For example, in the two-year period ended December 31, 2000,
as of the close of business of the New York Stock Exchange on the
last day in each week on which the New York Stock Exchange was open
(the date the Fund calculates its net asset value per share), the
Fund's shares were trading at a premium to net asset value 84% of the
time. The Fund usually does not calculate its net asset value per
share on any other day and does not know whether the Fund's shares
were trading at a premium to net asset value on such days. The Fund
is not able to predict whether its shares will trade above, at or
below net asset value in the future.
Dividend Captures. The Fund acts to increase its dividend income
using a strategy called "dividend capture." Under this strategy,
the Fund purchases the stock of an issuer immediately prior to
the market close on the stock's ex-dividend date and then sells
that stock on the following day. During 2000, dividend captures
accounted for approximately 37% of the Fund's investment income.
The use of dividend captures entails certain costs and risks.
Because the market price of the stock generally declines by the
amount of the dividend immediately after the ex-dividend date,
the Fund experiences a capital loss on the stock approximating
the amount of the captured dividend. In addition, the Fund incurs
transaction costs in connection with the purchase and sale of the
stock. In 2000 such transaction costs equaled approximately 0.1%
of the value of the stock. It is also possible that the issuer of
the stock could experience a material adverse event during the
period between the purchase and sale that would cause a decline
in the market value of the stock significantly in excess of the
expected decline that reflects the amount of the dividend. To
date, this has not happened to the Fund in connection with any of
its dividend captures, but there can be no assurance that it will
not occur in the future.
-7-
4. Other Policies
--------------
None.
5. Share Price Data
----------------
The Fund's common stock has been listed on the New York Stock Exchange
since January 21, 1987 (trading symbol DNP). Since the commencement of
trading, the Fund's common stock has most frequently traded at a premium to
net asset value, but has periodically traded at a slight discount. The
following table shows the range of the market prices of the Fund's common
stock, net asset value of the Fund's shares corresponding to such high and
low prices and the premium to net asset value presented by such high and
low prices:
Market Premium (Discount)
Market Price Net Asset Value at to Net Asset Value at
------------ ------------------ ---------------------
Quarter Ended Market Market Market Market
High Low High Low High Low
---- --- ---- --- ---- ---
2001 March 31 $ 10.9800 $ 9.5625 $ 9.88 $ 9.80 11.13% (2.42%)
2000 December 31 10.8125 9.5000 10.28 9.90 5.18% (4.04%)
September 30 10.0625 9.5000 9.87 8.95 1.95% 6.15%
June 30 9.6875 8.6875 9.16 8.96 5.76% (3.04%)
March 31 9.3125 8.3125 8.85 8.77 5.23% (5.22%)
1999 December 31 9.8750 8.2500 9.11 8.77 8.40% (5.93%)
September 30 10.7500 9.5000 9.82 8.95 9.47% 6.15%
June 30 11.0625 10.3750 9.98 9.47 10.85% 9.56%
March 31 11.2500 10.6250 10.24 9.70 9.86% 9.54%
On April 6, 2001, the net asset value was $9.86, trading prices ranged
between $10.50 and $10.70 (representing a premium to net asset value of
6.49% and 8.52%, respectively) and the closing price was $10.55
(representing a premium to net asset value of 7.00%).
6. Business Development Companies
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Not applicable.
Item 9. Management
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1. General
(a) Board of Directors
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The business and affairs of the Fund are managed under
the direction of the board of directors.
(b) Investment Adviser
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The Fund's investment adviser (the "Adviser") is Duff
& Phelps Investment Management Co., 55 East Monroe Street,
Chicago, Illinois 60603. The Adviser (together with its
predecessor) has been in the investment advisory business for
more than 60 years and, excluding the Fund, currently has more
than $7.9 billion in client accounts under discretionary
management. The Adviser acts as adviser to two other
closed-end investment companies registered under the 1940 Act
and as sub-adviser to six open-end investment companies
registered under the 1940 Act. The Adviser is a wholly-owned
subsidiary of Phoenix Investment Partners, Ltd.
("Phoenix Investment Partners"), which is an indirect,
-8-
wholly-owned subsidiary of Phoenix Home Life Mutual Insurance
Company. Prior to May 11, 1998, Phoenix Investment Partners
was known as Phoenix Duff & Phelps Corporation. Phoenix
Investment Partners, through its subsidiaries, provides
investment management, investment research, financial
consulting and investment banking services.
The Adviser is responsible for the management of the
Fund's investment portfolio, subject to the overall control of
the board of directors of the Fund.
Under the terms of an investment advisory agreement
between the Fund and the Adviser (the "Advisory Agreement"),
the Adviser receives from the Fund a quarterly fee at an annual
rate of .60% of the average weekly net asset value of the Fund
up to $1.5 billion and .50% of average weekly net assets in
excess of $1.5 billion. The net assets for each weekly period
are determined by averaging the net assets at the end of a week
with the net assets at the end of the prior week. For purposes
of the foregoing calculation, "net assets" are defined as the
sum of (i) the aggregate net asset value of the Fund's common
stock, (ii) the aggregate liquidation preference of the Fund's
preferred stock and (iii) the aggregate proceeds to the Fund of
commercial paper issued by the Fund.
Under the terms of a service agreement among the
Adviser, Phoenix Investment Partners, and the Fund (the "Service
Agreement"), Phoenix Investment Partners makes available to the
Adviser the services, on a part-time basis, of its employees and
various facilities to enable the Adviser to perform certain of
its obligations to the Fund. However, the obligation of
performance under the Advisory Agreement is solely that of the
Adviser, for which Phoenix Investment Partners assumes no
responsibility, except as described in the preceding sentence.
The Adviser reimburses Phoenix Investment Partners for any
costs, direct or indirect, fairly attributable to the services
performed and the facilities provided by Phoenix Investment
Partners under the Service Agreement. The Fund does not pay
any fees pursuant to the Service Agreement.
(c) Portfolio Management
--------------------
The Fund's portfolio is managed by Nathan I. Partain and
T. Brooks Beittel. Mr. Partain has been responsible for the
management of the equity investments in the Fund's portfolio
since January 1998. He has been President and Chief Executive
Officer of the Fund since February 2001 (Executive Vice
President April 1998-February 2001, Chief Investment Officer
January 1998-February 2001, Senior Vice President
January 1997-April 1998, Assistant Secretary January
1997-February 2001); Executive Vice President, Duff & Phelps
Investment Management Co. since January 1997; and Director of
Utility Research, Phoenix Investment Partners, Ltd., 1989-1996
(Director of Equity Research, 1993-1996 and Director of Fixed
Income Research, 1993). Mr. Beittel has been responsible for the
management of the fixed income investments in the Fund's
portfolio since April 1994. He has been Secretary, Treasurer
and Senior Vice President of the Fund since January 1995;
and Senior Vice President, Duff & Phelps Investment Management
Co. since 1993 (Vice President 1987-1993).
-9-
(d) Administrator
-------------
The Fund's administrator (the "Administrator") is
J.J.B. Hilliard, W.L. Lyons, Inc., Hilliard Lyons Center,
Louisville, Kentucky 40202. The Administrator is a
wholly-owned subsidiary of The PNC Financial Services Group,
Inc. Under the terms of an administration agreement (the
"Administration Agreement"), the Administrator provides all
management and administrative services required in
connection with the operation of the Fund not required to be
provided by the Adviser pursuant to the Advisory Agreement,
as well as the necessary office facilities, equipment and
personnel to perform such services. For its services, the
Administrator receives from the Fund a quarterly fee at
annual rates of .25% of the Fund's average weekly net assets
up to $100 million, .20% of the Fund's average weekly net
assets from $100 million to $1.0 billion and .10% of average
weekly net assets over $1.0 billion. The net assets for each
weekly period are determined by averaging the net assets at
the end of a week with the net assets at the end of the
prior week. For purposes of the foregoing calculation, "net
assets" are defined as the sum of (i) the aggregate net
asset value of the Fund's common stock, (ii) the aggregate
liquidation preference of the Fund's preferred stock and
(iii) the aggregate proceeds to the Fund of commercial paper
issued by the Fund.
(e) Custodian
---------
The Fund's custodian is The Bank of New York, Church
Street Station, Post Office Box 11258, New York, New York
10286. The transfer agent and dividend disbursing agent for
the Fund's common and preferred stock is The Bank of New York,
Church Street Station, P.O. Box 11258, New York, New York
10286.
(f) Expenses
--------
The Fund is responsible for all expenses not paid by
the Adviser or the Administrator, including brokerage fees.
(g) Affiliated Brokerage
--------------------
The Fund has paid, and in the future may pay, broker
commissions to the Administrator. See Item 21.2.
2. Non-resident Managers.
---------------------
Not applicable.
3. Control Persons.
---------------
The Fund does not consider that any person "controls"
the Fund within the meaning of this item. For information
concerning the Fund's officers and directors, see Item 18. No
person is known by the Fund to own of record or beneficially
five percent or more of any class of the Fund's outstanding
equity securities.
-10-
Item 10. Capital Stock, Long-Term Debt, and Other Securities
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1. Capital Stock.
-------------
(a) Common Stock. Holders of common stock, $.001 par value
per share, of the Fund are entitled to dividends when and as
declared by the Board of Directors, to one vote per share in
the election of Directors (with no right of cumulation), and
to equal rights per share in the event of liquidation. They
have no preemptive rights. There are no redemption,
conversion or sinking fund provisions. The shares are not
liable to further calls or to assessment by the Fund.
(b) Preferred Stock. Holders of preferred stock, $.001 par
value per share, of the Fund are entitled to receive
dividends before the holders of the common stock and are
entitled to receive the liquidation value of their shares
($100,000 per share) before any distributions are made to
the holders of the common stock, in the event the Fund is
ever liquidated. Each share of preferred stock is entitled
to one vote per share. The holders of the preferred stock
have the right to elect two directors of the Fund at all
times and to elect a majority of the directors if at any
time dividends on the preferred stock are unpaid for two
years. In addition to any approval by the holders of the
shares of the Fund that might otherwise be required, the
approval of the holders of a majority of the outstanding
shares of the preferred stock, voting separately as a class,
will be required under the 1940 Act to adopt any plan of
reorganization that would adversely affect the holders of
preferred stock and to approve, among other things, changes
in the Fund's sub-classification as a closed-end investment
company, changes in its investment objectives or changes in
its fundamental investment restrictions.
Subject to certain restrictions, the Fund may, and under certain
circumstances is required to, redeem shares of its preferred
stock at a price of $100,000 per share, plus accumulated but
unpaid dividends. The shares of preferred stock are not liable
to further calls or to assessment by the Fund. There are no
preemptive rights or sinking fund or conversion provisions. The
Fund, may, however, upon the occurrence of certain events,
authorize the exchange of its current preferred stock on a
share-for-share basis for a separate series of authorized but
unissued preferred stock having different dividend privileges.
(c) Dividend Reinvestment Plan. Under the Fund's dividend
reinvestment plan shareholders may elect to have all dividends
and capital gains distributions paid on their common stock
automatically reinvested by The Bank of New York, as agent for
shareholders, in additional shares of common stock of the Fund.
Registered shareholders may participate in the plan. The plan
permits a nominee, other than a depository, to participate on
behalf of those beneficial owners for whom it is holding shares
who elect to participate. However, some nominees may not permit
a beneficial owner to participate without transferring the
shares into the owner's name. Shareholders who do not elect to
participate in the plan will receive all distributions in cash
paid by check mailed directly to the shareholder (or, if the
shareholder's shares are held in street or other nominee name,
then to such shareholder's nominee) by The Bank of New York as
dividend disbursing agent. Registered shareholders may also
elect to have cash dividends deposited directly into their bank
accounts.
-11-
When a dividend or distribution is reinvested under the plan,
the number of shares of common stock equivalent to the cash
dividend or distribution is determined as follows:
(i) If shares of the common stock are trading at
net asset value or at a premium above net asset value
at the valuation date, the Fund issues new shares of
common stock at the greater of net asset value or 95%
of the then current market price.
(ii) If shares of the common stock are trading
at a discount from net asset value at the valuation
date, The Bank of New York receives the dividend or
distribution in cash and uses it to purchase shares of
common stock in the open market, on the New York Stock
Exchange or elsewhere, for the participants' accounts.
Shares are allocated to participants' accounts at the
average price per share, plus commissions, paid by The
Bank of New York for all shares purchased by it. If,
before The Bank of New York has completed its purchases,
the market price exceeds the net asset value of a share,
the average purchase price per share paid by The Bank
of New York may exceed the net asset value of the
Fund's shares, resulting in the acquisition of fewer
shares than if the dividend or distribution had been
paid in shares issued by the Fund.
The valuation date is the business day immediately preceding the
date of payment of the dividend or distribution. On that date,
the Administrator compares that day's net asset value per share
and the closing price per share on the New York Stock Exchange
and determines which of the two alternative procedures described
above will be followed.
The reinvestment shares are credited to the participant's
plan account in the Fund's stock records maintained by The Bank
of New York, including a fractional share to four decimal
places. The Bank of New York will send participants written
confirmation of all transactions in the participant's plan
account, including information participants will need for tax
records. Shares held in the participant's plan account have full
dividend and voting rights. Dividends and distributions paid on
shares held in the participant's plan account will also be
reinvested.
The cost of administering the plan is borne by the Fund. There
is no brokerage commission on shares issued directly by the
Fund. However, participants do pay a pro rata share of brokerage
commissions incurred on any open market purchases of shares by
The Bank of New York. The automatic reinvestment of dividends
and distributions does not relieve participants of any income
taxes that may be payable (or required to be withheld) on
dividends or distributions.
If the closing market price of shares of the Fund's common
stock should be equal to or greater than their net asset
value on the valuation date, the participants in the plan
would receive shares priced at the higher of net asset value
or 95% of the market price. Consequently they would receive
more shares at a lower per share price than if they had used
the cash distribution to purchase Fund shares on the payment
date in the market at the market price plus commission.
-12-
If the market price should be less than net asset value on the
valuation date, the cash distribution for the plan
participants would be used by The Bank of New York to purchase
the shares to be received by the participants, which would be at
a discount from net asset value unless the market price should
rise during the purchase period so that the average price
and commission exceeded net asset value as of the payment date.
Also, since the Fund does not redeem its shares, the price on
resale may be less or more than the net asset value.
Plan participants may purchase additional shares of common
stock through the plan by delivering to The Bank of New York
a check for at least $100, but not more than $5,000, in any
month. The Bank of New York will use such funds to purchase
shares in the open market or in private transactions. The
purchase price of such shares may be more than or less than
net asset value per share. The Fund will not issue new
shares or supply treasury shares for such voluntary
additional share investment. Purchases will be made
commencing with the time of the first 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 distribution.
Shares will be allocated to the accounts of participants
purchasing additional shares at the average price per share,
plus a service charge of $2.50 imposed by The Bank of New
York and a pro rata share of any brokerage commission (or
equivalent purchase costs) paid by The Bank of New York in
connection with such purchases. Funds sent to the bank for
voluntary additional share reinvestment may be recalled by
the participant by written notice received by The Bank of
New York not later than two business days before the next
dividend payment date. If for any reason a regular monthly
dividend is not paid by the Fund, funds for voluntary
additional share investment will be returned to the
participant, unless the participant specifically directs
that such funds continue to be held by The Bank of New York
for subsequent investment. Participants will not receive
interest on voluntary additional funds held by The Bank of
New York pending investment.
A shareholder may leave the plan at any time by written notice
to The Bank of New York. To be effective for any given
distribution, notice must be received by the Bank at least
seven business days before the record date for that
distribution. When a shareholder leaves the plan: (i) such
shareholder may request that The Bank of New York sell such
shareholder's shares held in such shareholder's plan account
and send such shareholder a check for the net proceeds
(including payment of the value of a fractional share,
valued at the closing price of the Fund's common stock on
the New York Stock Exchange on the date discontinuance is
effective) after deducting The Bank of New York's $5.00
charge and any brokerage commission (or equivalent sale
cost) or (ii) if no request is made, such shareholder will
receive a certificate for the number of full shares held in
such shareholder's plan account, along with a check for any
fractional share interest, valued at the closing price of
the Fund's common stock on the New York Stock Exchange on
the date discontinuance is effective. If and when it is
determined that the only balance remaining in a
shareholder's plan account is a fraction of a single share,
such shareholder's participation will be deemed to have
terminated, and The Bank of New York will send to such
shareholder a check for the value of such fractional share,
valued at the closing price of the Fund's common stock on
the New York Stock Exchange on the date discontinuance is
effective.
The Fund may change, suspend or terminate the plan at any
time upon mailing a notice to participants.
-13-
For more information regarding, and an authorization form
for, the dividend reinvestment plan, please contact The Bank
of New York at 1-877-381-2537.
(d) Capital Gains Distribution Reinvestment Plan. Unless
otherwise indicated by a holder of shares of common stock of
the Fund that does not participate in the Fund's dividend
reinvestment plan, all distributions in respect of capital
gains distributions on shares of common stock held by such
holder will be automatically invested by The Bank of New
York, as agent of the common shareholders participating in
the plan, in additional shares of common stock of the Fund.
Distributions in respect of capital gains distributions on
shares of common stock that participate in the Fund's
dividend reinvestment plan will be reinvested in accordance
with the terms of such plan.
In any year in which the Fund declares a capital gains
distribution, the Fund after the declaration of such
dividend and prior to its payment, will provide to each
registered holder of Fund common stock that does not
participate in the Fund's dividend reinvestment plan a cash
election card. A registered shareholder may elect to receive
cash in lieu of shares in respect of a capital gains
distribution by signing the cash election card in the
name(s) of the registered shareholder(s), and mailing the
card to The Bank of New York.
If a holder's shares of common stock, or some of them, are
registered in the name of a broker or other nominee, and the
holder wishes to receive a capital gains distribution in
cash in lieu of shares of common stock, such shareholder
must exercise that election through its nominee (including
any depositor of shares held in a securities depository).
When a distribution is reinvested under the plan, the number
of reinvestment shares is determined as follows:
(i) If, at the time of valuation, the shares are
being traded in the securities markets at net asset
value or at a premium over net asset value, the
reinvestment shares are obtained by The Bank of New
York directly from the Fund, at a price equal to the
greater of net asset value or 95% of the then current
market price, without any brokerage commissions (or
equivalent purchase costs).
(ii) If, at the time of valuation, the shares
are being traded in the securities markets at a discount
from net asset value, The Bank of New York receives the
distribution in cash, and uses it to purchase shares in
the open market, including on the New York Stock
Exchange, or in private purchases. Shares of common
stock are allocated to participants at the average
price per share, plus any brokerage commissions (or
equivalent transaction costs), paid by The Bank of New
York for all shares purchased by it in reinvestment of
the distribution(s) paid on a particular day.
The time of valuation is the close of trading on the New
York Stock Exchange on the most recent day preceding the
date of payment of the dividend or distribution on which
that exchange is open for trading. As of that time, the
Administrator compares the net asset value per share as of
the time of the close of trading on the New York Stock
Exchange on that day and the last reported sale price per
share on the New York Stock Exchange, and determines which
of the alternative procedures described above are to be
followed.
-14-
If as of any day on which the last reported sale price of
the Fund's shares on the New York Stock Exchange is required
to be determined pursuant to this plan, no sales of the
shares are reported on that exchange, the mean of the bid
prices and of the asked prices on that exchange as of the
time of the close of trading on the exchange will be
substituted.
No certificates will be issued representing fractional
shares, nor will The Bank of New York purchase fractional
shares in the market. The Bank of New York will send to all
registered holders of common stock that do not participate
in the Fund's dividend reinvestment plan certificates for
all shares of common stock purchased or issued pursuant to
the capital gains distribution plan and cash in lieu of
fractional shares of common stock.
The Fund may change, suspend or terminate the plan at any
time upon mailing a notice to
participants.
(e) Anti-takeover provisions of charter and bylaws. The
Fund's charter includes provisions that could have the
effect of limiting the ability of other entities or persons
to acquire control of the Fund or to change the composition
of its Board of Directors and could have the effect of
depriving shareholders of an opportunity to sell their
shares at a premium over prevailing market prices by
discouraging a third party from seeking to obtain control of
the Fund. The Board of Directors is divided into three
classes, each having a term of three years. At each annual
meeting of shareholders, the term of one class will expire.
This provision could delay for up to two years the
replacement of a majority of the Board of Directors. A
Director may be removed from office only by vote of the
holders of at least 75% of the shares of preferred stock or
of common stock, as the case may be, entitled to be voted on
the matter.
The Fund's charter requires the favorable vote of the
holders of at least 75% of the shares of preferred stock and
common stock of the Fund entitled to be voted on the matter,
voting together as a single class, to approve, adopt or
authorize the following:
(i) a merger or consolidation of the Fund
with another corporation,
(ii) a sale of all or substantially all of
the Fund's assets (other than in the regular course of
the Fund's investment activities), or
(iii) a liquidation or dissolution of the
Fund, unless such action has been approved, adopted or
authorized by the affirmative vote of two-thirds of the
total number of directors fixed in accordance with the
bylaws, in which case the affirmative vote of the
holders of a majority of the outstanding shares of
preferred stock and common stock entitled to be voted
on the matter, voting together as a single class, is
required.
In addition, the holders of a majority of the outstanding
shares of the preferred stock, voting separately as a class,
would be required under the 1940 Act to adopt any plan of
reorganization that would adversely affect the holders of
the preferred stock.
-15-
Finally, conversion of the Fund to an open-end investment
company would require an amendment to the charter. Such an
amendment would require the favorable vote of the holders of
a majority of the shares of preferred stock and common stock
entitled to be voted on the matter voting separately by
class. At any time, the amendment would have to be declared
advisable by the Board of Directors prior to its submission
to shareholders. Shareholders of an open-end investment
company may require the company to redeem their shares of
common stock at any time (except in certain circumstances as
authorized by or under the 1940 Act) at their net asset
value, less such redemption charge, if any, as might be in
effect at the time of a redemption. In addition, conversion
to an open-end investment company would require redemption
of all outstanding shares of the preferred stock.
The Board of Directors has determined that the 75% voting
requirements described above, which are greater than the
minimum requirements under Maryland law or the 1940 Act, are
in the best interests of shareholders generally. Reference
should be made to the charter on file with the Securities
and Exchange Commission (the "SEC") for the full text of
these provisions.
2. Long-Term Debt.
--------------
Not applicable.
3. General
-------
Not applicable.
4. Taxes. The Fund intends to continue to qualify as a
regulated investment company under the Internal Revenue Code
of 1986, as it has in each year since the inception of its
operations, so as to be relieved of Federal income tax on
net investment income and net capital gains distributed to
shareholders.
Dividends paid by the Fund from its ordinary income and
distributions of the Fund's net realized short-term capital
gains are taxable to shareholders as ordinary income.
Shareholders may be proportionately liable for taxes on income
and gains of the Fund but shareholders not subject to tax on
their income will not be required to pay tax on amounts
distributed to them. The Fund will inform shareholders of the
amount and nature of the income or gains. Dividends from ordinary
income may be eligible for the dividends-received deduction
available to corporate shareholders. Under its charter, the Fund
is required to designate dividends paid on its preferred stock as
qualifying for the dividends-received deduction to the extent
such dividends do not exceed the Fund's qualifying income. In the
event the Fund is required to allocate all of its qualifying
income to dividends on the preferred stock, dividends payable on
the common stock will not be eligible for the dividends-received
deduction. Any distributions attributable to the Fund's net
realized long-term capital gains are taxable to shareholders as
long-term capital gains, regardless of the holding period of
shares of the Fund.
The Fund intends to distribute substantially all its net investment
income and net realized capital gains in the year earned or realized.
A dividend reinvestment plan is available to all holders of
common stock of the Fund. Under the dividend reinvestment plan, all
cash distributions to participating shareholders are reinvested in
additional shares of common stock. See Item 10.1(c).
-16-
5. Outstanding Securities
----------------------
(4)
(3) Amount Outstanding
Amount Held by at 3/31/2001 Exclusive
(1) (2) the Fund or for its of Amount Shown
Title of Class Amount Authorized Account Under (3)
-------------- ----------------- --------- ----------
Common, $.001
par value 250,000,000 -0- 211,622,795
Preferred, $.001
par value 100,000,000 -0- 5,000
6. Securities Ratings.
------------------
Not applicable.
Item 11. Defaults and Arrears on Senior Securities
------- -----------------------------------------
Not applicable.
Item 12. Legal Proceedings
------- -----------------
There are no pending legal proceedings to which the Fund, any
subsidiary of the Fund, or the Adviser is a party.
Item 13. Table of Contents of the Statement of Additional Information
------- ------------------------------------------------------------
Not applicable.
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 14. Cover Page
------- ----------
Not applicable.
Item 15. Table of Contents
------- -----------------
Not applicable.
-17-
Item 16. General Information and History
------- -------------------------------
During the past five years, the Fund has not engaged in any business
other than that of an investment company and has not been the subject of
any bankruptcy, receivership or similar proceedings, or any other material
reorganization, readjustment or succession. The Fund's name was changed
from Duff & Phelps Selected Utilities Inc. on November 1, 1990.
Item 17. Investment Objective and Policies
------- ---------------------------------
1. See Item 8.2.
2. See Item 8.2.
3. See Item 8.2.
4. The Fund's portfolio turnover rate was 229.70% in 2000, 223.78%
in 1999 and 251.19% in 1998. During the last two fiscal years, the Fund's
portfolio turnover rate has been influenced by a number of factors: (i) the
Fund's proactive response to changes in the telecommunications, gas and
electric industries, which response includes the use of dividend captures;
and (ii) changes in the Fund's international portfolio designed to benefit
from capital gain opportunities that were able to be offset by available
loss carryovers.
Item 18. Management
------- ----------
1.
Name, Address and Age Position(s) Held Principal Occupation(s)
--------------------- With the Fund During Past 5 Years
------------- -------------------
Claire V. Hansen (1)(2) Chairman and Director Senior Advisor to the Board of Directors,
55 East Monroe Street Phoenix Investment Partners, Ltd. since
Chicago, Illinois 60603 November 1995; President and Chief Executive
Age: 75 Officer of the Fund, January 2000-February
2001; Senior Advisor to the Board of Directors,
Duff & Phelps Corporation, 1988-November
1995 (Chairman of the Board, 1987-1988;
Chairman of the Board and Chief Executive
Officer prior thereto); Chairman of the Board,
Duff Research Inc. and Duff & Phelps
Investment Management Co., 1985-1987
Wallace B. Behnke(3) Director Consulting engineer since July 1989; prior
323 Glen Eagle thereto, Vice Chairman, Commonwealth Edison
Kiawah Island, Company (public utility)
South Carolina 29455
Age: 75
-18-
Name, Address and Age Position(s) Held Principal Occupation(s)
--------------------- With the Fund During Past 5 Years
------------- -------------------
Harry J. Bruce(3) Director Private investor; former Chairman and Chief
1630 Sheridan Road Executive Officer, Illinois Central Railroad Co.
Wilmette, Illinois 60091
Age: 69
Franklin A. Cole(2) Director Chairman, Croesus Corporation (private
54 West Hubbard Street management and investment company); former
Chicago, Illinois 60610. Chairman and Chief Executive Officer,
Age: 74 Amerifin Corporation (formerly named Walter
E. Heller International Corporation); director,
Aon Corporation and CNA Income Shares
Gordon B. Davidson Director Of Counsel, Wyatt, Tarrant & Combs (law firm)
Citizens Plaza since September 1995 (Chairman of the
Louisville, Kentucky 40202 Executive Committee prior thereto); retired
Age: 74 director, BellSouth Corp.; former Chairman of
the Board and director, Trans Financial
Advisers, Inc.
Robert J. Genetski (4) Director President, Robert J. Genetski & Associates, Inc.
195 North Harbor Drive (economic and financial consulting firm) since
Chicago, Illinois 60601 1991; former Senior Vice President and Chief
Age: 58 Economist, Harris Trust & Savings Bank; author
of several books; regular contributor to the
Nikkei Financial Daily
Francis E. Jeffries (1)(2) Director Retired Chairman, Phoenix Investment Partners,
8477 Bay Colony Drive Ltd. since May 1997 (Chairman, November
Naples, Florida 34108 1995-May 1997); Chairman and Chief
Age: 70 Executive Officer, Duff & Phelps Corporation,
June 1993-November 1995 (President and Chief
Executive Officer, January 1992-June 1993);
President and Chief Executive Officer, Duff &
Phelps Illinois Inc. since 1987 (President and
Chief Operating Officer, 1984-1987) and
Chairman of the Board, Duff & Phelps
Investment Management Co. (1988-1993);
director, The Empire District Electric Company,
Duff & Phelps Utilities Tax-Free Income Inc.
and Duff & Phelps Utility and Corporate Bond
Trust Inc.; director/trustee, Phoenix Funds
-19-
Name, Address and Age Position(s) Held Principal Occupation(s)
--------------------- With the Fund During Past 5 Years
------------- -------------------
Nancy Lampton(4) Director Chairman and Chief Executive Officer,
3 Riverfront Plaza Hardscuffle Inc. (insurance holding company)
Louisville, Kentucky 40202 and Chairman and Chief Executive Officer,
Age: 58 American Life and Accident Insurance
Company of Kentucky; director, Constellation
Energy Group, Inc.
David J. Vitale(3) Director President and Chief Executive Officer, Board of
141 West Jackson Boulevard Trade of the City of Chicago, Inc. since March
Chicago, Illinois 60604 2001; Retired bank executive 1999-2001; Vice
Age: 54 Chairman and Director, Bank One Corporation
1998-1999; Vice Chairman and Director, First
Chicago NBD Corporation, and President, The
First National Bank of Chicago, 1995-1998;
Vice Chairman, First Chicago Corporation and
The First National Bank of Chicago 1993-1998
(Director 1992-1998, Executive Vice President
1986-1993); Director, CNA Income Shares, Inc.,
Ariel Capital Management, Inc.; Ark Investment
Management, Wheels Inc.
Nathan I. Partain President and Chief President and Chief Executive Officer of the
55 East Monroe Street Executive Officer Fund since February 2001 (Executive Vice
Chicago, Illinois 60603 President April 1998-February 2001, Chief
Age: 44 Investment Officer January 1998-February
2001, Senior Vice President January 1997-April
1998, Assistant Secretary January 1997-
February 2001); Executive Vice President, Duff
& Phelps Investment Management Co. since
January 1997; Director of Utility Research,
Phoenix Investment Partners, Ltd., 1989-1996
(Director of Equity Research, 1993-1996 and
Director of Fixed Income Research, 1993);
director, Otter Tail Power Company
T. Brooks Beittel Secretary, Treasurer Secretary, Treasurer and Senior Vice President
55 East Monroe Street and Senior Vice of the Fund since January 1995; Senior Vice
Chicago, Illinois 60603 President President, Duff & Phelps Investment
Age: 51 Management Co. since 1993 (Vice President
1987-1993)
-20-
Name, Address and Age Position(s) Held Principal Occupation(s)
--------------------- With the Fund During Past 5 Years
------------- -------------------
Michael Schatt Senior Vice President Senior Vice President of the Fund since April
55 East Monroe Street 1998 (Vice President January 1997-April 1998);
Chicago, Illinois 60603 Senior Vice President, Duff & Phelps
Age: 54 Investment Management Co. since January
1997; Managing Director, Phoenix Investment
Partners, Ltd., 1994-1996; Self-employed
consultant, 1994; Director of Real Estate
Advisory Practice, Coopers & Lybrand,
1990-1994
Joseph C. Curry, Jr. Vice President Vice President of the Fund since 1988; Senior
Hilliard Lyons Center Vice President, J.J.B. Hilliard, W.L. Lyons, Inc.
Louisville, Kentucky 40202 since 1994 (Vice President 1982-1994); Vice
Age: 56 President Hilliard Lyons Trust Company;
President, Hilliard-Lyons Government Fund,
Inc.; Treasurer and Secretary, Hilliard Lyons
Growth Fund, Inc.; Treasurer, Senbanc Fund
Dianna P. Wengler Assistant Secretary Assistant Secretary of the Fund since April
Hilliard Lyons Center 1988; Vice President, J.J.B. Hilliard, W.L.
Louisville, Kentucky 40202 Lyons, Inc. since 1990; Vice President,
Age: 40 Hilliard-Lyons Government Fund, Inc.;
Assistant Secretary, Hilliard Lyons Growth
Fund, Inc.
(1) Director who is an "interested person" of the Fund, as defined in
the 1940 Act.
(2) Member of Executive Committee of the Board of Directors, which has
authority, with certain exceptions, to exercise the powers of the
Board between Board meetings.
(3) Member of the Audit Committee of the Board of Directors.
(4) Director elected by holders of preferred stock.
2. Included in Item 18.1.
3. Not applicable.
4. The Fund has not paid an amount in excess of $60,000 during
2000 to any director, officer, any affiliated person of the
Fund, any affiliated person of an affiliate or principal
underwriter of the Fund.
-21-
The following table shows the compensation paid by the Fund to the
Fund's current directors during 2000:
COMPENSATION TABLE (1)(2)
Aggregate
Compensation
from the
Name of Director Fund
---------------- -------------
Wallace B. Behnke................................. $31,000
Harry J. Bruce.................................... 28,000
Franklin A. Cole.................................. 32,000
Gordon B. Davidson................................ 36,000
Robert J. Genetski (3)........................... 0
Claire V. Hansen.................................. 0
Francis E. Jeffries (2)........................... 29,500
Nancy Lampton..................................... 31,000
David J. Vitale................................... 23,625
--------------
(1) Each director not affiliated with the Adviser receives an annual
fee of $22,500 (and an additional $3,000 if the director serves
as chairman of a committee of the board of directors) plus an
attendance fee of $1,500 for each meeting of the board of
directors and $1,000 for each meeting of a committee of the board
of directors attended in person or by telephone. Directors and
officers affiliated with the Adviser or the Administrator receive
no compensation from the Fund for their services as such. In
addition to the amounts shown in the table above, all directors
and officers who are not affiliated with the Adviser or the
Administrator are reimbursed for the expenses incurred by them in
connection with their attendance at a meeting of the board of
directors or a committee of the board of directors. The Fund does
not have a pension or retirement plan applicable to directors or
officers of the Fund.
(2) During 2000, Mr. Jeffries received aggregate compensation of
$76,500 for service as a director of the Fund and as a director
of two other investment companies in the same fund complex as the
Fund. No other director received compensation for service as a
director of any other investment company in the same fund complex
as the Fund.
(3) Mr. Genetski was elected a director of the Fund on April 24, 2001
and consequently received no compensation from the Fund during 2000.
5. Codes of Ethics. Each of the Fund and the Adviser has adopted
an Amended and Restated Code of Ethics (collectively, the
"Codes") under Rule 17j-1 of the 1940 Act. The Codes impose
significant restrictions on the ability of personnel subject
to the Codes to engage in personal securities transactions.
Among other things, the Codes generally prohibit covered
personnel from knowingly buying or selling securities (except
for mutual funds, U.S. government securities and money market
instruments) that are being purchased, sold or considered for
purchase or sale by the Fund unless the proposed purchases
are approved in advance by the Adviser's compliance officer.
The Codes also contain certain reporting requirements and
compliance procedures. The Codes can be reviewed and copied
-22-
at the Public Reference Room of the SEC in Washington, D.C.
Information on the operation of the Public Reference Room may
be obtained by calling the SEC at 1-202-942-8090. The Codes
are also available at the EDGAR Database on the SEC's
Internet site at http://www.sec.gov. Copies of the Codes may
also be obtained, after paying a duplicating fee, by
electronic request at the following E-mail address:
publicinfo@sec.gov, or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-0102. The SEC file number for
documents filed by the Fund under the 1940 Act is 811-4915.
Item 19. Control Persons and Principal Holders of Securities
------- ---------------------------------------------------
1. The Fund does not consider that any person "controls" the
Fund within the meaning of this item. For information
concerning the Fund's officers and directors, see Item 18.
2. No person is known by the Fund to own of record or
beneficially five percent or more of any class of the Fund's
outstanding equity securities.
3. As of December 31, 2000, the officers and directors of the
Fund owned in the aggregate 245,748 shares of Common Stock,
representing less than 1% of the Fund's outstanding Common Stock.
Item 20. Investment Advisory and Other Services
------- --------------------------------------
1. The Adviser is a wholly-owned subsidiary of Phoenix Investment
Partners, which is an indirect, majority-owned subsidiary of
Phoenix Home Life Mutual Insurance Company. The Phoenix
Investment Partners organization has provided investment research
regarding public utility securities since its founding in 1932.
Phoenix Investment Partners is one of the nation's largest
independent investment research organizations, providing equity
and fixed-income investment research to institutional investors.
Through other subsidiaries it provides financial consulting and
investment banking services. See Item 18 for the names and
capacities of affiliated persons of the Fund who are also
affiliated persons of the Adviser.
For a discussion of the method of calculating the advisory fee
under the Advisory Agreement, see Item 9.1(b). The investment
advisory fees paid by the Fund totaled $14,719,244 in 2000,
$14,839,366 in 1999 and $14,713,237 in 1998.
2. See Item 9.1(b) for a discussion of the Service Agreement.
3. No fees, expenses or costs of the Fund were paid by persons
other than the Adviser or the Fund.
4. See Item 9.1 (d) for a discussion of the Administration
Agreement. The administrative fees paid by the Fund totaled
$3,693,849 in 2000, $3,717,873 in 1999 and $3,692,647 in 1998.
5. Not applicable.
6. See Item 9.1 (e).
7. The Fund's independent public accountant is Arthur Andersen LLP.
8. Not applicable.
-23-
Item 21. Brokerage Allocation and Other Practices
------- ----------------------------------------
1. The Adviser has discretion to select brokers and dealers to
execute portfolio transactions initiated by the Adviser. The Fund
paid brokerage commissions in the aggregate amount of $7,158,821,
$8,510,655 and $9,040,180 during 2000, 1999 and 1998,
respectively, not including the gross underwriting spread on
securities purchased in underwritten public offerings.
2. The Administrator received $0, $0 and $5,750 or approximately
0%, 0% and 0.06% of total brokerage commissions in 2000, 1999 and
1998, respectively, for effecting transactions involving
approximately 0.0%, 0.0% and 0.04% of the aggregate dollar amount
of transactions in which the Fund paid brokerage commissions. The
differences between the respective percentages of brokerage
commissions paid to the Administrator and the corresponding
percentages of aggregate dollar amount of transactions in which
the Fund paid brokerage commissions resulted from the fact that
the Fund generally pays a fixed commission per share of common
stock, regardless of the price paid for a particular share.
3. In selecting brokers or dealers to execute portfolio
transactions and in evaluating the best net price and execution
available, the Adviser is authorized to consider "brokerage and
research services" (as those terms are defined in Section 28(e)
of the Securities Exchange Act of 1934), statistical quotations,
specifically the quotations necessary to determine the Fund's net
asset value, and other information provided to the Fund and/or to
the Adviser (or their affiliates). The Adviser is also authorized
to cause the Fund to pay to a broker or dealer who provides such
brokerage and research services a commission for executing a
portfolio transaction which is in excess of the amount of
commission another broker or dealer would have charged for
effecting that transaction. The Adviser must determine in good
faith, however, that such commission was reasonable in relation
to the value of the brokerage and research services provided,
viewed in terms of that particular transaction or in terms of all
the accounts over which the Adviser exercises investment
discretion. It is possible that certain of the services received
by the Adviser attributable to a particular transaction will
benefit one or more other accounts for which investment
discretion is exercised by the Adviser.
4. Neither the Fund nor the Adviser, during the last fiscal year,
pursuant to an agreement or understanding with a broker or
otherwise through an internal allocation procedure, directed the
Fund's brokerage transactions to a broker or brokers because of
research services.
5. The Fund has not acquired during its most recent fiscal year
securities of its regular brokers or dealers as defined in Rule
10b-1 under the 1940 Act, or their parents.
Item 22. Tax Status
------- ----------
The Fund intends to continue to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as it has in each year
since the inception of its operations, so as to be relieved of Federal
income tax on net investment income and net capital gains distributed to
shareholders.
Dividends paid by the Fund from its ordinary income and
distributions of the Fund's net realized short-term capital gains are
taxable to shareholders as ordinary income. Dividends from ordinary income
-24-
may be eligible for the dividends-received deduction available to corporate
shareholders. Under its charter, the Fund is required to designate
dividends paid on its preferred stock as qualifying for the
dividends-received deduction to the extent such dividends do not exceed the
Fund's qualifying income. In the event the Fund is required to allocate all
of its qualifying income to dividends on the preferred stock, dividends
payable on the common stock will not be eligible for the dividends-received
deduction. Any distributions attributable to the Fund's net realized
long-term capital gains are taxable to shareholders as long-term capital
gains, regardless of the holding period of shares of the Fund.
The Fund intends to distribute substantially all its net
investment income and net realized capital gains in the year earned or
realized. A dividend reinvestment plan is available to all holders of
common stock of the Fund. Under the dividend reinvestment plan, all cash
distributions to participating shareholders are reinvested in additional
shares of common stock. See Item 10.1(c).
As of December 31, 2000, the Fund had tax capital loss
carryforwards of $79,152,839 which expire beginning on December 31, 2003.
Item 23. Financial Statements
------- --------------------
The financial statements listed below are incorporated herein by
reference from the Fund's Annual Report to Shareholders for the year ended
December 31, 2000 as filed on Form N-30D with the Securities and Exchange
Commission on February 28, 2001 (no. 811-4915). All other portions of the
Annual Report to Shareholders are not incorporated herein by reference and
are not part of the Registration Statement. A copy of the Annual Report to
Shareholders may be obtained without charge by writing to the Fund at its
address at 55 East Monroe Street, Chicago, Illinois 60603 or by calling the
Administrator toll-free at 888-878-7845.
- Report of independent public accountants
- Schedule of Investments at December 31, 2000
- Balance Sheet at December 31, 2000
- Statement of Operations for the year ended December 31, 2000
- Statement of Changes in Net Assets for the years ended
December 31, 2000 and 1999
- Statement of Cash Flows for the year ended December 31, 2000
- Notes to Financial Statements
- Financial Highlights - Selected Per Share Data and Ratios
-25-
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
------- ---------------------------------
1. Financial Statements
In Part B:
Report of independent public accountants
Schedule of Investments at December 31, 2000
Balance Sheet at December 31, 2000
Statement of Operations for the year ended December 31,
2000
Statement of Changes in Net Assets for the years ended
December 31, 2000 and 1999
Statement of Cash Flows for the year ended December 31,
2000
Notes to Financial Statements
Financial Highlights - Selected Per Share Data and Ratios
In Part C:
None
2. Exhibits
a.1 Articles of Incorporation (Incorporated by reference from
post-effective amendment no. 38 to Registrant's
registration statement under the Investment Company Act
of 1940 on Form N-2, no. 811-4915)
a.2 Amendment to Articles of Incorporation (Incorporated by
reference from post-effective amendment no. 38 to
Registrant's registration statement on Form N-2, no.
811-4915)
a.3 Second Amendment to Articles of Incorporation
(Incorporated by reference from post-effective amendment
no. 38 to Registrant's registration statement on Form N-2,
no. 811-4915)
a.4 Form of Articles Supplementary creating Remarketed
Preferred Stock, Series A, B, C, D and E
(Incorporated by reference from post-effective
amendment no. 38 to Registrant's registration
statement on Form N-2, no. 811-4915)
-26-
a.5 Form of Articles Supplementary creating Remarketed
Preferred Stock, Series I (Incorporated by reference
from post-effective amendment no. 38 to Registrant's
registration statement on Form N-2, no. 811-4915)
a.6 Third Amendment to Articles of Incorporation (Incorporated
by reference from post-effective amendment no. 38 to
Registrant's registration statement on Form N-2,
no. 811-4915)
a.7 Fourth Amendment to Articles of Incorporation
(Incorporated by reference from post-effective amendment
no. 38 to Registrant's registration statement on Form N-2,
no. 811-4915)
a.8 Fifth Amendment to Articles of Incorporation
(Incorporated by reference from post-effective amendment
no. 38 to Registrant's registration statement on
Form N-2, no. 811-4915)
b. Bylaws (as amended through July 29, 1998) (Incorporated
by reference from post-effective amendment no. 40 to
Registrant's registration statement on Form N-2, no.
811-4915)
c. None
d.1 Specimen common stock certificate (Incorporated by
reference from Registrant's registration statement on
Form N-2, no. 33-10421)
d.2 Form of certificate of Remarketed Preferred Stock,
Series A (Incorporated by reference from pre-effective
amendment no. 2 to Registrant's registration statement
on Form N-2, no. 33-22933)
d.3 Form of certificate of Remarketed Preferred Stock,
Series B (Incorporated by reference from pre-effective
amendment no. 1 to Registrant's registration statement
on Form N-2, no. 33-24101)
d.4 Form of certificate of Remarketed Preferred Stock,
Series C (Incorporated by reference from pre-effective
amendment no. 1 to Registrant's registration statement
on Form N-2, no. 33-24100)
d.5 Form of certificate of Remarketed Preferred Stock,
Series D (Incorporated by reference from pre-effective
amendment no. 1 to Registrant's registration statement
on Form N-2, no. 33-24102)
d.6 Form of certificate of Remarketed Preferred Stock,
Series E (Incorporated by reference from pre-effective
amendment no. 1 to Registrant's registration statement
on Form N-2, no. 33-24099)
d.7 Form of certificate of Remarketed Preferred Stock,
Series I (Incorporated by reference from pre-effective
amendment no. 2 to Registrant's registration statement
on Form N-2, no. 33-22933)
-27-
e. None
f. None
g.1 Investment Advisory Agreement (Incorporated by reference
from post-effective amendment no. 39 to Registrant's
registration statement under the Investment
Company Act of 1940 on Form N-2, no. 811-4915)
g.2 Service Agreement (Incorporated by reference from
post-effective amendment no.39 to Registrant's
registration statement under the Investment Company Act
of 1940 on Form N-2, no. 811-4915)
g.3 Administration Agreement (Incorporated by reference from
post-effective amendment no. 39 to Registrant's
registration statement under the Investment
Company Act of 1940 on Form N-2, no. 811-4915)
h. Not applicable
i. Not applicable
j. Custodian agreement (Incorporated by reference from
Registrant's registration statement on Form N-2,
no. 33-10421)
k.1 Loan agreement (Incorporated by reference from
Registrant's registration statement on Form N-2,
no. 33-10421)
k.2 Amendment dated November 15, 1988 to Loan Agreement
(Incorporated by reference from post-effective
amendment no. 1 to Registrant's registration statement
on Form N-2, no. 33-20433)
k.3 Form of Remarketing Agreement (Incorporated by reference
from pre-effective amendment no. 3 to Registrant's
registration statement on Form N-2, no. 33-22933)
k.4 Form of Paying Agent Agreement (Incorporated by reference
from pre-effective amendment no. 3 to Registrant's
registration statement on Form N-2, no. 33-22933)
l. Not applicable
m. Not applicable
n. Not applicable
o. Not applicable
p. Subscription Agreement for initial capital (Incorporated
by reference from Registrant's registration statement
on Form N-2, no. 33-10421)
q. Not applicable
-28-
r.1 Amended and Restated Code of Ethics of Registrant
(Incorporated by reference from post-effective
amendment no. 41 to Registrant's registration statement
on Form N-2, no. 811-4915)
r.2 Amended and Restated Code of Ethics of Duff & Phelps
Investment Management Co. (investment adviser to
Registrant) (Incorporated by reference from post-
effective amendment no. 41 to Registrant's registration
statement on Form N-2, no. 811-4915)
Item 25. Marketing Arrangements
------- ----------------------
Not applicable.
Item 26. Other Expenses of Issuance and Distribution
------- -------------------------------------------
Not applicable.
Item 27. Persons Controlled by or Under Common Control
------- ---------------------------------------------
The Fund does not consider that it is controlled, directly or
indirectly, by any person. The information on Item 20 is incorporated by
reference.
Item 28. Number of Holders of Securities
------- -------------------------------
Number of
Record Holders
Title of Class March 31, 2001
-------------- --------------
Common Stock, $.001 par value 30,027
Preferred Stock, $.001 par value 1
Item 29. Indemnification
------- ---------------
Section 2-418 of the General Corporation Law of Maryland
authorizes the indemnification of directors and officers of Maryland
corporations under specified circumstances.
Article Ninth of the Articles of Incorporation (Exhibit 1.1 to
the Registrant's registration statement no. 33-10421, which is incorporated
by reference) provides that the Registrant shall indemnify its directors
and officers under specified circumstances; the provision contains the
exclusion required by section 17(h) of the Investment Company Act of 1940.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "1933 Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
-29-
or paid by a director, officer or controlling person in connection with the
securities being registered), the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
The Registrant, its directors and officers, the Adviser and
persons affiliated with them are insured under a policy of insurance
maintained by the Registrant and the Adviser, within the limits and subject
to the limitations of the policy, against certain expenses in connection
with the defense of actions, suits or proceedings and certain liabilities
that might be imposed as a result of such actions, suits or proceedings, to
which they are parties by reason of being or having been such directors or
officers. The policy expressly excludes coverage for any director or
officer whose personal dishonesty, fraudulent breach of trust, lack of good
faith, or intention to deceive or defraud has been finally adjudicated or
may be established or who willfully fails to act prudently.
Item 30. Business and Other Connections of Investment Adviser
------- ----------------------------------------------------
Neither Duff & Phelps Investment Management Co., nor any of its
directors or executive officers, has at any time during the past two years
been engaged in any other business, profession, vocation or employment of a
substantial nature either for its or his own account or in the capacity of
director, officer, employee, partner or trustee, except as indicated in
this Registration Statement.
Item 31. Location of Accounts and Records
------- --------------------------------
All accounts, books and other documents required to be maintained
by Section 31 (a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder are maintained at the offices of the Fund (55 East
Monroe Street, Chicago, Illinois 60603), the Adviser, the Administrator and
the Fund's custodian and transfer agents. See Items 9.1(b), 9.1(d) and
9.1(e) for the addresses of the Adviser, the Administrator and the Fund's
custodian and transfer agents.
Item 32. Management Services
------- -------------------
Not applicable.
Item 33. Undertakings
------- ------------
Not applicable.
-30-
SIGNATURE
Pursuant to the requirements of the Investment Company Act of
1940, the Registrant has duly caused this amendment to its registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, and State of Illinois, on April 27,
2001.
DUFF & PHELPS UTILITIES INCOME INC.
By /s/ Nathan I. Partain
------------------------------------------
Nathan I. Partain
President and Chief Executive Officer
-31-