As filed with the Securities and Exchange Commission on April 30, 1998
Investment Company Act file no. 811-4915
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 39 [X]
DUFF & PHELPS UTILITIES INCOME INC.
(Exact name of registrant as specified in charter)
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 pursuant to Section 8(c).
[ ] This post-effective amendment designates a new effective date for a previously filed post-effective amendment.
PART A INFORMATION REQUIRED IN A PROSPECTUS
Not applicable.
Item 2. Inside front and Outside Back Cover Page
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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......................................................0.73%
Interest Payments on Borrowed Funds..................................0.32%
Other Expenses.......................................................0.40%
Total Annual Expenses...................................1.45%
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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: $15 $30 $79 $174
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(1) Shareholders that reinvest dividends and/or capital gains
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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 $1.50 plus brokerage commissions. 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.
Not applicable.
Not applicable.
Not applicable.
Not applicable.
(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.
The Fund's primary investment objectives are current income and long-term growth of income. Capital appreciation is a secondary objective. 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 sentence 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 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.
The following are fundamental investment restrictions of the Fund that may be changed only with approval of the holders of a "majority" 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:
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.
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.
Fixed Income Securities. The Fund purchases a fixed income security only if, at time of purchase, it is (i) rated investment grade by at least two of the following three nationally recognized statistical rating organizations: Duff & Phelps Credit Rating Co. ("DCR"), Moody's Investors Service, Inc. ("Moody's"), and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), or (ii) determined by the 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 DCR, 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 Adviser will use the standards used by a nationally recognized statistical rating organization.
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 IBCA, Inc., 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.
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.
Leverage. As of December 31, 1997, the Fund has outstanding indebtedness of $98,441,884 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 17, 1998, the dividend rate on the five series of preferred stock averaged 4.10% and the interest rate on the Fund's outstanding indebtedness averaged 5.49%. The Fund must experience an annual return of 1.02% on its portfolio in order to cover annual interest and dividend payments on the Fund's outstanding indebtedness and preferred stock.
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.
-------------------------------------------------------------------------------- Assumed return on portfolio -10.00% -5.00% 0.00% 5.00% 10.00% (net of expenses) -------------------------------------------------------------------------------- Corresponding return to common -14.49% -7.92% -1.36% 5.21% 11.77% stockholder -------------------------------------------------------------------------------- |
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 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 will 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, 1997, 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 100% 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, below or at net asset value in the future.
None.
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) to
Market Price Net Asset Value at Net Asset Value at
------------ ------------------ -------------------
Quarter Ended Market Market Market Market
High Low High Low High Low
1998 March 31 $10.7500 $10.1250 $9.79 $9.91 9.81% 2.17%
1997 December 31 10.2500 9.1875 9.71 8.92 5.56% 3.00%
September 30 9.8125 8.6875 8.93 8.65 9.88% 0.43%
June 30 9.0000 8.6250 8.21 8.06 9.62% 7.01%
March 31 9.2500 8.5000 8.38 8.34 10.38% 1.92%
1996 December 31 8.8750 8.4375 8.42 7.99 5.40% 5.60%
September 30 8.8750 8.5000 8.04 7.85 10.39% 8.28%
June 30 9.0000 8.3750 8.14 8.05 10.57% 4.04%
March 31 9.7500 8.7500 8.90 8.22 9.55% 6.45%
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On April 17, 1998, the net asset value was $10.35, trading prices ranged between $10.5625 and $10.4375 (representing a premium to net asset value of 2.05% and 0.85%, respectively) and the closing price was $10.5000 (representing a premium to net asset value of 1.45%).
Not applicable.
The business and affairs of the Fund are managed under the direction of the board of directors.
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 $10.8 billion in client accounts under discretionary management. The Adviser also provides non-discretionary investment advisory and portfolio consulting services to corporate and public retirement funds and endowment funds aggregating more than $11 billion. 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 Duff & Phelps Corporation ("Phoenix Duff & Phelps"), which is an indirect, majority-owned subsidiary of Phoenix Home Life Mutual Insurance Company. Phoenix Duff & Phelps, 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, "average weekly net assets" is 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 Duff & Phelps, and the Fund (the "Service Agreement"), Phoenix Duff & Phelps 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 Duff & Phelps assumes no responsibility, except as described in the preceding sentence. The Adviser reimburses Phoenix Duff & Phelps for any costs, direct
or indirect, fairly attributable to the services performed and the facilities provided by Phoenix Duff & Phelps under the Service Agreement. The Fund does not pay any fees pursuant to the Service Agreement.
The Fund's portfolio is managed by T. Brooks Beittel and Nathan I.Partain. See Item 18 for a description of the position and business experience of Messrs. Beittel and Partain. Mr. Beittel has been responsible for the management of the fixed income investments in the Fund's portfolio since April 1994. Mr. Partain has been responsible for the management of the equity investments in the Fund's portfolio since January 1998.
The Fund's administrator (the "Administrator") is J.J.B. Hilliard, W.L. Lyons, Inc., Hilliard Lyons Center, Louisville, Kentucky 40202. 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. For purposes of the foregoing calculation, "average weekly net assets" is 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.
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 stock is The Bank of New York, Church Street Station, P.O. Box 11258, New York, New York 10286. The transfer agent and dividend disbursing agent for the Fund's preferred stock is IBJ Schroder Bank & Trust Company, One State Street, New York, New York 10004.
The Fund is responsible for all expenses not paid by the Adviser or the Administrator, including brokerage fees.
The Fund has paid, and in the future may pay, broker commissions to the Administrator. See Item 21.2.
Not applicable.
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.
(a) Common Stock. Holders of common stock, $.001 par value, 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, 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.
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.
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 $1,000, 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 $1.50 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 $2.50 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.
For more information regarding, and an authorization form for, the dividend reinvestment plan, please contact The Bank of New York at 1-800-432-8224.
(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, J.J.B. Hilliard, W.L. Lyons, Inc., the Fund's 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.
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.
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 for the full text of these provisions.
Not applicable.
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).
(4)
(3) Amount Outstanding
Amount Held by at 3/31/98 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- 203,654,529
Preferred, $.001
par value 100,000,000 -0- 5,000
|
Not applicable.
Not applicable.
There are no pending legal proceedings to which the Fund, any subsidiary of the Fund, or the Adviser is a party.
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.
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.
1. See Item 8.2.
2. See Item 8.2.
3. See Item 8.2.
4. The Fund's portfolio turnover rate was 188.28% in 1995, 226.21% in 1996 and 213.57% in 1997. The increase in the portfolio turnover rate between 1995 and 1996 was due to the Fund's proactive response to changes in the telecommunication and electric generation business. During calendar year 1996, the value of electric company and telecommunication company securities was buffeted by the impact of changes in long term interest rates and an increasingly competitive environment. In response to these developments, the Fund shifted more investments to faster growing companies in the telecommunication and power industries, both domestically and internationally, and
to real estate investment trusts. This activity resulted in an increase in the Fund's portfolio turnover rate.
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) Director and Senior Advisor to the Board of
5601 Turtle Bay Drive Chairman Directors, Phoenix Duff & Phelps
Naples, Florida 34108 Corporation since November 1995;
Age: 72 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
323 Glen Eagle July 1989; prior thereto, Vice
Kiawah Island, Chairman, Commonwealth Edison
South Carolina 29455 Company (public utility)
Age: 72
Harry J. Bruce(3) Director Private investor; Chairman, Roman
88 Woodley Road Holdings, Inc.; former
Winnetka, Illinois 60093 Chairman and Chief Executive
Age: 66 Officer, Illinois Central
Railroad Co.; director, General
Binding Corporation
Franklin A. Cole(2) Director Chairman, Croesus Corporation
11 South LaSalle St. (private management and investment
Chicago, Illinois 60602 company); former Chairman and
Age: 71 and Chief Executive Officer,
Amerifin Corporation (formerly
named Walter E. Heller
International Corporation);
director, American National Bank
and Trust Company of Chicago,
American National Corporation,
Aon Corporation and CNA Income
Shares
Gordon B. Davidson Director Senior Counsel, Wyatt, Tarrant &
Citizens Plaza Combs (law firm) since September
Louisville, Kentucky 40202 1995 (Chairman of the Executive
Age: 71 Committee prior thereto); retired
director, BellSouth Corp.; former
Chairman of the Board and
director, Trans Financial
Advisers, Inc.
|
Name, Address and Age Position(s) Held Principal Occupation(s)
With the Fund During Past 5 Years
------------- --------------------
Robert J. Day Director Retired Chairman and Director, USG
125 South Franklin Street Corporation (manufacturer of
Chicago, Illinois 60606 construction materials) since June
Age: 73 1990 (Chairman and Chief Executive
Officer prior thereto); former
Chairman of the Board, Federal
Reserve Bank of Chicago
Francis E. Jeffries (1)(2) Director Retired Chairman, Phoenix Duff &
6585 Nicholas Boulevard Phelps Corporation (Chairman,
Naples, Florida 34108 November 1995-December 1996);
Age: 67 Chairman and Chief 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
Nancy Lampton(4) Director Chairman and Chief Executive
3 Riverfront Plaza Officer, American Life and
Louisville, Kentucky 40202 Accident Insurance Company of
Age: 55 Kentucky; director, BancOne
Kentucky Corporation and Baltimore
Gas and Electric
Beryl W. Sprinkel(3)(4) Director Consulting economist since January
20140 St. Andrews Drive 1989; Chairman of the Council of
Olympia Fields, Illinois 60461 Economic Advisors under President
Age: 74 Reagan (1985-1989); member
of President Reagan's cabinet
(1987-1989); Under Secretary of
the Treasury for Monetary Affairs
(1981-1985)
|
Name, Address and Age Position(s) Held Principal Occupation(s)
With the Fund During Past 5 Years
------------- --------------------
Calvin J. Pedersen President and President, Phoenix Duff & Phelps
55 East Monroe Street Chief Executive Corporation since November 1995;
Chicago, Illinois 60603 Officer President, Duff & Phelps
Age: 56 Corporation, 1993-November 1995
(Senior Vice President, 1986-1988
and Executive Vice President,
1989-1993); Executive Vice
President and Director, Duff &
Phelps Investment Management Co.
since 1989 (Senior Vice President,
1986-1988); President and Chief
Executive Officer, Duff & Phelps
Utilities Tax-Free Income Inc.
and Duff & Phelps Utility and
Corporate Bond Trust Inc.;
director/trustee, Phoenix group
of funds
T. Brooks Beittel Secretary, Senior Vice President, Duff &
55 East Monroe Street Treasurer and Phelps Investment Management Co.
Chicago, Illinois 60603 Senior Vice since 1993 (Vice President
Age: 48 President 1987-1993)
Nathan I. Partain Executive Vice Executive Vice President, Duff &
55 East Monroe Street President, Phelps Investment Management Co.
Chicago, Illinois 60603 Chief Investment since January 1997; Director of
Age: 41 Officer and Utility Research, Phoenix
Assistant Secretary Duff & Phelps Corporation,
1989-1996 (Director of Equity
Research, 1993-1996 and Director
of Fixed Income Research, 1993)
Director, Otter Tail Power Company
Michael Schatt Senior Vice Senior Vice President, Duff &
55 East Monroe Street President Phelps Investment Management Co.
Chicago, Illinois 60603 since January 1997; Managing
Age: 51 Director, Phoenix Duff & Phelps
Corporation, 1994-1996;
Self-employed consultant, 1994;
Director of Real Estate Advisory
Practice, Coopers & Lybrand, 1990-
1994
Joseph C. Curry, Jr. Vice President Senior Vice President, J.J.B.
Hilliard Lyons Center Hillard, W.L. Lyons, Inc. since
Louisville, Kentucky 40202 1994 (Vice President 1982-1994);
Age: 53 Vice President Hilliard Lyons
Trust Company; President and
Director, Hilliard-Lyons
Government Fund, Inc.; Vice
President, Hilliard Lyons Growth
Fund, Inc.
Dianna P. Wengler Assistant Vice President, J.J.B. Hilliard,
Hilliard Lyons Center Secretary W. L. Lyons, Inc. since 1990; Vice
Louisville, Kentucky 40202 President and Treasurer, Hilliard-
Age: 37 Lyons Government Fund, Inc.; Vice
President, 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. Not applicable.
The Fund has not paid an amount in excess of $60,000 during 1997 to any director, officer, any affiliated person of the Fund, any affiliated person of an affiliate or principal underwriter of the Fund.
The following table shows the compensation paid by the Fund to the Fund's current directors during 1997:
COMPENSATION TABLE (1)(2)
Aggregate
Compensation
from the
Name of Director Fund
---------------- -----------
Wallace B. Behnke................................................ $31,500
Harry J. Bruce................................................... 24,500
Franklin A. Cole................................................. 28,500
Gordon B. Davidson............................................... 26,500
Robert J. Day.................................................... 31,500
Claire V. Hansen................................................. 0
Francis E. Jeffries (2)............................................ 26,500
Nancy Lampton...................................................... 25,500
Beryl W. Sprinkel.................................................. 25,500
--------------
|
(1) During 1997, each director not affiliated with the Adviser received an annual fee of $17,500 (and an additional $3,000 if the director served as chairman of a committee of the board of directors) plus an attendance fee of $1,000 for each meeting of the board of directors or 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 1997, Mr. Jeffries received aggregate compensation of $35,000 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.
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, 1997, the officers and directors of the Fund owned in the aggregate 213,919 shares of Common Stock, representing less than 1% of the Fund's outstanding Common Stock.
1. The Adviser is a wholly-owned subsidiary of Phoenix Duff & Phelps, which is an indirect, majority-owned subsidiary of Phoenix Home Life Mutual Insurance Company. The Phoenix Duff & Phelps organization has provided investment research regarding public utility securities since its founding in 1932. Phoenix Duff & Phelps is one of the nation's largest independent investment research organizations, providing to institutional investors equity and fixed-income investment research. 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 $12,730,134 in 1997, $12,254,315 in 1996 and $11,689,418 in 1995.
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 $2,997,616 in 1997, $2,944,545 in 1996 and $2,872,728 in 1995.
5. Not applicable.
6. See Item 9.1 (e).
7. The Fund's independent public accountant is Arthur Andersen LLP.
8. Not applicable.
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 $7,462,774, $7,057,947 and $5,876,415 during 1997, 1996 and 1995, respectively, not including the gross underwriting spread on securities purchased in underwritten public offerings.
2. The Administrator received $39,022 and $74,016 or approximately 0.5% and 1.0% of total brokerage commissions in 1997 and 1996, respectively, for effecting transactions involving approximately 0.4% and 0.7% of the aggregate dollar amount of transactions in which the Fund paid brokerage commissions. Prior to ceasing operations in May, 1996, Duff & Phelps Securities Co. received $51,750 or approximately 0.7% of total brokerage commissions in 1996 for effecting transactions involving approximately 0.6% of the aggregate dollar amount of transactions in which the Fund paid brokerage commissions. No brokerage commissions were paid to Duff & Phelps Securities Co. during 1995. The differences between the respective percentages of brokerage commissions paid to the Administrator and Duff & Phelps Securities Co. 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.
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 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, 1997, the Fund had capital loss carryforwards of $149,351,791 which expire beginning on December 31, 2002.
The financial statements listed below are incorporated herein by reference from the Fund's Annual Report to Shareholders for the year ended December 31, 1997 as filed on Form N-30D with the Securities and Exchange Commission on February 27, 1998 (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 Fund toll-free at 800-680-4367.
- Report of independent public accountants
- Schedule of Investments at December 31, 1997
- Balance Sheet at December 31, 1997
- Statement of Operations for the year ended December 31, 1997
- Statement of Changes in Net Assets for the years ended December 31, 1997 and 1996
- Statement of Cash Flows for the year ended December 31,
1997
- Notes to Financial Statements
- Financial Highlights - Selected Per Share Data and Ratios
PART C OTHER INFORMATION
In Part B:
Report of independent public accountants
Schedule of Investments at December 31, 1997
Balance Sheet at December 31, 1997
Statement of Operations for the year ended December 31,
1997
Statement of Changes in Net Assets for the years ended
December 31, 1997 and 1996
Statement of Cash Flows for the year ended December 31,
1997
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)
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 April 30, 1998)
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)
e. None
f. None
g.1 Investment Advisory Agreement
g.2 Service Agreement
g.3 Administration Agreement
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
r. Financial Data Schedule
Not applicable.
Not applicable.
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, 1998
-------------- --------------
Common Stock, $.001 par value 36,328
Preferred Stock, $.001 par value 1
|
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 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.
Registrant, its directors and officers, its Adviser and persons affiliated with them are insured under a policy of insurance maintained by Registrant and its 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.
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.
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 Funds custodian and transfer agents.
Not applicable.
Not applicable.
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 30, 1998.
DUFF & PHELPS UTILITIES INCOME INC.
By /s/ Nathan I. Partain ------------------------------------ Nathan I. Partain Executive Vice President, Chief Investment Officer and Assistant Secretary |
Exhibit Sequential No. Description Page No. ------- ------------------------------------------------ ----------- b. Bylaws (as amended through April 30, 1998) g.1 Investment Advisory Agreement g.2 Service Agreement g.3 Administration Agreement r. Financial Data Schedule |
DUFF & PHELPS UTILITIES INCOME INC.
BYLAWS
(as amended through April 30, 1998)
ARTICLE I
OFFICES
Section 1.01. Principal office. The principal office of the corporation in the State of Maryland shall be located in the City of Baltimore.
Section 1.02. Other offices. The corporation may also have offices at such other places both within and without the State of Maryland as the board of directors may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 2.01. Place of meetings. All meetings of the stockholders shall be held at such place in the United States as shall be designated from time to time by the board of directors.
Section 2.02. Annual meeting. Beginning with the annual meeting of stockholders to be held in 1990, the annual meeting of stockholders shall be held on the third Wednesday of April or at such date and time within the month of April of each year as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect a board of directors and transact such other business as may properly be brought before the meeting.
Section 2.03. Special meetings. Special meetings of stockholders,
for any purpose or purposes, unless otherwise prescribed by statute or by
the charter of the corporation, may be called at any time by the chairman,
the president or the board of directors. Special meetings of stockholders
shall be called by the secretary upon the written request of stockholders
entitled to cast at least 25 percent of all the votes entitled to be cast
at such meeting, provided that (a) such request shall state the purpose or
purposes of the meeting and the matters proposed to be acted on at it; and
(b) the stockholders requesting the meeting shall have paid to the
corporation the reasonably estimated cost of preparing and mailing the
notice thereof, which the secretary shall determine and specify to such
stockholders. Upon payment of these costs to the corporation, the secretary
shall notify each stockholder entitled to notice of the meeting. Unless
requested by
stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting, a special meeting need not be called to consider any matter which is substantially the same as a matter voted on at any special meeting of stockholders held during the preceding twelve months.
Section 2.04. Stockholders entitled to vote; number of votes. If a record date has been fixed for the determination of stockholders entitled to notice of or to vote at any meeting of stockholders, each stockholder of the corporation shall be entitled to vote, in person or by proxy, each share of stock (or fraction thereof) registered in his name on the books of the corporation outstanding at the close of business on such record date, with one vote (or fraction of a vote) for each share (or fraction thereof) so outstanding.
Section 2.05. Notice of meetings. Written notice of each meeting of stockholders stating the place, date and hour of the meeting and, in the case of a special meeting or if otherwise required by law, the purpose or purposes for which the meeting is called, shall be given not less than 10 nor more than 90 days before the date of the meeting, to each stockholder entitled to vote at such meeting.
Section 2.06. Quorum; adjournment. The holders of a majority of the stock entitled to vote at a meeting of stockholders, present in person or represented by proxy, shall constitute a quorum at the meeting for the transaction of business except as otherwise provided by statute or by the charter of the corporation. If, however, such quorum shall not be present or represented at any meeting of stockholders, the stockholders entitled to vote thereat present in person or represented by proxy shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At any adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjourned meeting is more than 120 days after the original record date, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting.
Section 2.07. Voting. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy and voting on the question shall decide any question brought before such meeting, unless the question is one upon which, by express provision of any statute or the charter of the corporation or these bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question.
Section 2.08. Proxies. No proxy shall be valid more than eleven months after its date, unless it provides for a longer period.
Section 2.09. Stock ledger. The secretary of the corporation shall cause an original or duplicate stock ledger to be maintained at the office of the corporation's transfer agent.
ARTICLE III
DIRECTORS AND COMMITTEES
Section 3.01. Function and powers. The business and affairs of the corporation shall be managed under the direction of its board of directors. All powers of the corporation may be exercised by or under the authority of the board of directors except as conferred on or reserved to the stockholders by statute or the charter of the corporation or these bylaws.
Section 3.02. Number. The board of directors shall consist of 3 directors, which number may be increased or decreased by a resolution of a majority of the entire board of directors, provided that the number of directors shall not be less than 3 or more than 15.
Section 3.03. Vacancies. Any vacancy occurring in the board of directors for any cause other than by reason of an increase in the number of directors may be filled by a majority of the remaining members of the board of directors, although such majority is less than a quorum; provided, however, that no vacancy shall be so filled unless immediately thereafter at least two-thirds of the directors then holding office shall have been elected to such office by the stockholders, and provided further that if at any time (other than prior to the first annual meeting of stockholders) less than a majority of the directors holding office at that time were elected by the stockholders, a meeting of the stockholders shall be held promptly and in any event within 60 days for the purpose of electing directors to fill any existing vacancy in the board of directors, unless the Securities and Exchange Commission shall by order extend such period under the authority granted by section 16(a) of the Investment Company Act of 1940. A director elected to fill a vacancy shall be elected to hold office until the next annual meeting of stockholders or until his successor is elected and qualifies.
Section 3.04. Annual and regular meetings. The first meeting of each newly elected board of directors shall be held immediately after the adjournment of the annual meeting of stockholders, or at such other time or place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by any director who is not present at the meeting. The board of directors from time to time may provide for the holding of regular meetings of the board and fix their time and place.
Section 3.05. Special meetings. Special meetings of the board may be called by the chairman on three days' notice to each director, either personally or by mail or by telegram. Special meetings shall be called by the chairman or secretary in like manner and on like notice on the written request of a majority of the directors or a majority of the members of the executive committee.
Section 3.06. Quorum and voting. At all meetings of the board the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or the charter of the
corporation or these bylaws. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
Section 3.07. Telephone meetings. Members of the board of directors or any committee thereof may participate in a meeting of such board or committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time, and participation by such means shall constitute presence in person at the meeting, except as may be otherwise specifically provided by statute or the charter of the corporation or these bylaws.
Section 3.08. Action without meeting. Unless otherwise restricted by statute or the charter of the corporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting if a unanimous written consent which sets forth the action is signed by each member of the board or committee, as the case may be, and filed with the minutes of proceedings of the board or committee.
Section 3.09. Committees. The board of directors may, by resolution passed by a majority of the entire board, designate an executive committee and other committees, each committee to consist of two or more directors of the corporation. In the absence of a member of a committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another member of the board of directors to act at the meeting in the place of any such absent member.
Section 3.10. Executive committee. Unless otherwise provided by resolution of the board of directors, the executive committee shall have and may exercise all powers of the board of directors in the management of the business and affairs of the corporation that may lawfully be exercised by an executive committee, except the power to: (i) declare dividends or distributions on stock; (ii) issue stock; (iii) recommend to the stockholders any action which requires stockholder approval; (iv) amend the bylaws; or (v) approve any merger or share exchange which does not require stockholder approval.
Section 3.11. Other committees. To the extent provided by resolution of the board of directors, other committees of the board shall have and may exercise any of the powers that may lawfully be granted to the executive committee.
Section 3.12. Minutes of committee meetings. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required.
Section 3.13. Expenses and compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director, or both. No such payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
Section 3.14. Retirement of directors. Effective with the elections of directors to be held at the annual meeting of stockholders in 1992, no person shall stand for election or reelection as a director of the Fund if that person would be 75 years old or older at the date of the proxy statement for the meeting of stockholders at which such election would take place.
Section 3.15. Qualification of directors. Until November 1, 1998, at least 75% of the members of the board of directors shall not be interested persons (as defined in section 2(a)(19) of the Investment Company Act of 1940) of Duff & Phelps Investment Management Co., the corporation's investment adviser.
ARTICLE IV
NOTICES
Section 4.01. Type of notice. Whenever, under the provision of any statute or the charter of the corporation or these bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram.
Section 4.02. Waiver of notice. Whenever the provisions of any statute or the charter of the corporation or these bylaws require notice of the time, place or purpose of a meeting of the board of directors or a committee of the board, or of stockholders, each person who is entitled to the notice waives notice if: (a) before or after the meeting he signs a waiver of notice which is filed with the records of the meeting; or (b) he is present at the meeting or, in the case of a stockholders' meeting, is represented by proxy.
ARTICLE V
OFFICERS
Section 5.01. Offices. The officers of the corporation shall be elected by the board of directors and shall be a chairman, a president, one or more vice presidents, a secretary and a treasurer. The board of directors may also appoint one or more assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the charter of the corporation or these bylaws otherwise provide, except that no one may serve concurrently as both president and vice president. A person who holds more than one office may not act in more
than one capacity to execute, acknowledge or verify an instrument required by law to be executed, acknowledged or verified by more than one officer.
Section 5.02. Annual election. The board of directors at its first meeting after each annual meeting of stockholders shall elect a chairman, a president, one or more vice presidents, a secretary and a treasurer.
Section 5.03. Other officers and agents. The board of directors may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board.
Section 5.04. Remuneration. The salaries or other remuneration, if any, of all officers of the corporation shall be fixed by the board of directors.
Section 5.05. Term of office; removal; vacancies. The officers of the corporation shall hold office until their respective successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors, when the board in its judgment finds that the best interests of the corporation will be served by such action. The removal of an officer or agent does not prejudice any of his contract rights. Any vacancy occurring in any office of the corporation shall be filled by the board of directors.
Section 5.06. The chairman. The chairman, who shall be chosen from among the directors of the corporation, shall preside at all meetings of the board of directors and stockholders. He shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
Section 5.07. The president and chief executive officer. The president and chief executive officer shall be the chief executive officer of the corporation, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect. In the absence of the chairman or in the event of his inability or refusal to act, the president shall preside at all meetings of the board of directors and stockholders. The president may execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation.
Section 5.08. The vice presidents. In the absence of the president or in the event of his inability or refusal to act, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting shall have all the powers of and be subject to all the restrictions upon the president. The vice
presidents shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
Section 5.09. The secretary. The secretary: (a) shall attend all meetings of the board of directors and all meetings of stockholders and record all the proceedings of the meetings in a book to be kept for that purpose and shall perform like duties for the standing committees when required; (b) shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors, the chairman or the president, under whose supervision the secretary shall be; and (c) shall have custody of the corporate seal of the corporation and shall have authority to affix the same to any instrument requiring it, and when so affixed it may be attested by his signature.
Section 5.10. The assistant secretary. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
Section 5.11. The treasurer. The treasurer: (a) shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation; (b) shall deposit with the corporation's custodian all moneys and other valuable effects in the name and to the credit of the corporation; (c) shall direct the custodian to make such disbursements of the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements; and (d) shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and financial statements of the corporation.
Section 5.12. The assistant treasurer. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
ARTICLE VI
CAPITAL STOCK
Section 6.01. Certificates of stock. Every holder of stock in the corporation shall be entitled, upon request, to have a certificate or certificates, signed by, or in the name of the corporation by the chairman, the president or a vice president and the treasurer, an assistant
treasurer, the secretary or an assistant secretary of the corporation, certifying the number of full shares owned by him in the corporation. No certificates shall be issued for fractional shares. Where a certificate is countersigned by a transfer agent other than the corporation or its employee, any other signature on the certificate may be facsimile. In case any officer or transfer agent who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer or transfer agent before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer or transfer agent at the date of issue.
Section 6.02. Lost certificates. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. The issuance of a new certificate under this section does not constitute an overissue of the shares it represents.
Section 6.03. Transfers of stock. The shares of stock of the corporation shall be transferable on the books of the corporation at the request of the record holder thereof in person or by a duly authorized attorney, upon presentation to the corporation or its transfer agent of a duly executed assignment or authority to transfer, or power evidence of succession, and, if the shares are represented by a certificate, a duly endorsed certificate or certificates of stock surrendered for cancellation, and with such proof of the authenticity of the signatures as the corporation or its transfer agent may reasonably require. The transfer shall be recorded on the books of the corporation, the old certificates, if any, shall be cancelled, and the new record holder, upon request, shall be entitled to a new certificate or certificates.
Section 6.04. Fixing of record date. The board of directors may fix in advance a date as a record date for the determination of the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, provided that such record date shall not be a date more than 90 days, and in the case of a meeting of stockholders not less than 10 days, prior to the date on which the particular action requiring such determination of stockholders is to be taken. In such case only such stockholders as shall be stockholders of record on the record date so fixed shall be entitled to such notice of, and to vote at, such meeting or adjournment, or to give such consent, or to receive payment of such dividend or other distribution, or to receive such allotment of rights, or to exercise such rights, or to take such
other action, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after any such record date.
Section 6.05. Registered stockholders. The corporation shall be entitled to treat the holder of record of shares as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by statute.
ARTICLE VII
CUSTODIAN
Section 7.01. Qualifications. The corporation shall at all times employ, pursuant to a written contract, a bank or trust company having an aggregate capital, surplus and undivided profits (as shown in its last published report) of at least $2,000,000 as custodian to hold the funds and securities of the corporation.
Section 7.02. Contract. Such contract shall be upon such terms and conditions and may provide for such compensation as the board of directors deems necessary or appropriate, provided such contract shall further provide that the custodian shall deliver securities owned by the corporation only upon sale of such securities for the account of the corporation and receipt of payment therefor by the custodian or when such securities may be called, redeemed, retired or otherwise become payable. Such limitation shall not, however, prevent:
(a) the delivery of securities for examination to the broker selling the same in accord with the "street delivery" custom whereby such securities are delivered to such broker in exchange for a delivery receipt exchanged on the same day for an uncertified check of such broker to be presented on the same day for certification;
(b) the delivery of securities of an issuer in exchange for or conversion into other securities alone or cash and other securities pursuant to any plan of merger, consolidation, reorganization, recapitalization or readjustment of the securities of such issuer;
(c) the conversion by the custodian of securities owned by the corporation pursuant to the provisions of such securities into other securities;
(d) the surrender by the custodian of warrants, rights or similar securities owned by the corporation in the exercise of such warrants, rights or similar securities, or the surrender of interim receipts or temporary securities for definitive securities;
(e) the delivery of securities as collateral on borrowing effected by the corporation;
(f) the delivery of securities owned by the corporation as a redemption in kind of securities issued by the corporation.
The custodian shall deliver funds of the corporation only upon the purchase of securities for the portfolio of the corporation and the delivery of such securities to the custodian, but such limitation shall not prevent the release of funds by the custodian for payment of interest, dividend disbursements, taxes and management fees, for payments in connection with the conversion, exchange or surrender of securities owned by the corporation as set forth in sub-paragraphs (b), (c) and (d) above and for operating expenses of the corporation.
Section 7.03. Termination of contract. The contract of employment of the custodian shall be terminable by either party on 60 days' written notice to the other party. Upon any termination, the board of directors shall use its best efforts to obtain a successor custodian, but lacking success in the appointment of a successor custodian, the question of whether the corporation shall be liquidated or shall function without a custodian shall be submitted to the stockholders before delivery of any funds or securities of the corporation to any person other than a successor custodian, including a temporary successor selected by the retiring custodian. If a successor custodian is found, the retiring custodian shall deliver funds and securities owned by the corporation directly to the successor custodian.
Section 7.04. Agents of custodian. The provisions of any other selection of these bylaws to the contrary notwithstanding, any contract of employment of a custodian to hold the funds and securities of the corporation may authorize the custodian, upon approval of the board of directors, to appoint other banks or trust companies meeting the requirements of this article, domestic and foreign (including domestic and foreign branches), to perform all or a part of the duties of the custodian under its contract with the corporation. In the case of foreign banks, no authorization or appointment providing for the holding of funds or securities of the corporation (other than in connection with the clearing of transactions or exchanges of securities) shall become effective unless permitted by an appropriate order, rule or written advice of the Securities and Exchange Commission.
Section 7.05. Negotiable instruments. Except as otherwise authorized by the board of directors, all checks and drafts for the payment of money shall be signed in the name of the corporation by the custodian, and all requisitions or orders for the payment of money by the custodian or for the issue of checks and drafts therefor, all promissory notes, all assignments of shares or securities standing in the name of the corporation, and all requisitions or orders for the assignment of shares or securities standing in the name of the custodian or its nominee, or for the execution of powers to transfer the same, shall be signed in the name of the corporation by not less than two of its officers. Promissory notes, checks or drafts payable to the corporation may be endorsed only to the order of the custodian or its agent.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.01. Dividends.
(a) The board of directors, from time to time as they may deem advisable, may declare and pay dividends in cash or other property of the corporation, out of any source available for dividends, to the stockholders according to their respective rights and interests and in accordance with the applicable provisions of the charter of the corporation.
(b) The board of directors may prescribe from time to time that dividends declared are payable at the election of any of the stockholders, either in cash or in shares of the corporation.
(c) The board of directors shall cause any dividend payment to be accompanied by a written statement if paid wholly or partly from any source other than:
(i) the corporation's accumulated undistributed net income (determined in accordance with generally accepted accounting principles and the rules and regulations of the Securities and Exchange Commission then in effect) and not including profits or losses realized upon the sale of securities or other properties; or
(ii) the corporation's net income so determined for the current or preceding fiscal year.
Such statement shall adequately disclose the source or sources of such payment and the basis of calculation, and shall be in such form as the Securities and Exchange Commission may prescribe.
Section 8.02. Fiscal year. The fiscal year of the corporation shall end on December 31.
Section 8.03. Seal. The corporate seal shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Maryland". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or by placing the word "seal" adjacent to the signature of the authorized officer of the corporation. Any officer or director of the corporation shall have authority to affix the corporate seal of the corporation to any document requiring the same.
ARTICLE IX
AMENDMENTS
Section 9.01. General. Except as provided in section 9.02, these bylaws may be altered, amended or repealed, and new bylaws may be adopted solely by the board of directors, at any meeting of the board of directors.
Section 9.02. Amended by stockholders only. Sections 2.06 and 2.07 of article II, sections 3.04 and 3.15 of article III, article VII, and sub-section 8.01(c) of article VIII of these bylaws may be altered, amended or repealed only with the approval of the holders of a "majority of the outstanding voting securities" of the corporation, as that term is defined in section 2(a)(40) of the Investment Company Act of 1940.
ARTICLE X
CERTAIN PROVISIONS RELATING TO FITCH IBCA, INC.
Section 10.01. General Definitions. Capitalized terms used in this Article X but not specifically defined herein shall have the respective meanings assigned to them in the Articles Supplementary creating Remarketed Preferred Stock Series A, Series B, Series C, Series D and Series E, as amended (the "Articles Supplementary"), which definitions are hereby incorporated by reference herein. The following terms shall have the meanings set forth below for purposes of this Article X:
"Corporate Bonds" means debt securities issued by a business entity.
"Discount Factor" means Discount Factor Supplied by Fitch.
"Discount Factor Supplied by Fitch" means, initially, for any asset held by the corporation, the number set forth opposite such type of asset in the following table (it being understood that any asset held by the corporation and not listed in the following table or in an amendment or supplement thereto shall have a Discounted Value of zero):
Type I Corporate Bonds with a remaining term to maturity of more than 2 years, but less than or equal to 4 years.......1.26
Type I Corporate Bonds with a remaining term to maturity of more than 4 years, but less than 7 years...................1.40
Type I Corporate Bonds with a remaining term to maturity of more than 7 years, but less than or equal to 12 years......1.44
Type I Corporate Bonds with a remaining term to maturity of more than 12 years, but less than or equal to 25 years......1.48
Type I Corporate Bonds with a remaining term to maturity of more than 25 years, but less than or equal to 30 years.....1.52
Type I Corporate Bonds with a remaining term to maturity of more than 30 years, but less than or equal to 50 years.....1.60
Type II Corporate Bonds with a remaining term to maturity of less than or equal to 2 years..........................1.25
Type II Corporate Bonds with a remaining term to maturity of more than 2 years, but less than or equal to 4 years......1.26
Type II Corporate Bonds with a remaining term to maturity of more than 4 years, but less than or equal to 7 years......1.43
Type II Corporate Bonds with a remaining term to maturity of more than 7 years, but less than or equal to 12 years.....1.44
Type II Corporate Bonds with a remaining term to maturity of more than 12 years, but less than or equal to 25 years....1.51
Type II Corporate Bonds with a remaining term to maturity of more than 25 years, but less than or equal to 30 years....1.56
Type II Corporate Bonds with a remaining term to maturity of more than 30 years, but less than or equal to 50 years....1.65
Type III Corporate Bonds with a remaining term to maturity of more than or equal to 2 years............................1.25
Type III Corporate Bonds with a remaining term to maturity of more than 2 years, but
less than or equal to 4 years............................1.29
Type III Corporate Bonds with a remaining term to maturity of
more than 4 years, but less than or equal to 7 years.....1.46
Type III Corporate Bonds with a remaining term to maturity of
more than 7 years, but less than or equal to 12 years....1.50
Type III Corporate Bonds with a remaining term to maturity of
more than 12 years, but less than or equal to 25 years...1.55
Type III Corporate Bonds with a remaining term to maturity of
more than 25 years, but less than or equal to 30 years...1.60
Type III Corporate Bonds with a remaining term to maturity of
more than 30 years, but less than or equal to 50 years...1.70
Type IV Corporate Bonds with a remaining term to maturity of
less than or equal to 2 years.............................1.27
Type IV Corporate Bonds with a remaining term to maturity of
more than 2 years, but less than or equal to 4 years......1.32
Type IV Corporate Bonds with a remaining term to maturity of
more than 4 years, but less than or equal to 7 years......1.52
Type IV Corporate Bonds with a remaining term to maturity of
more than 7 years, but less than or equal to 12 years.....1.57
Type IV Corporate Bonds with a remaining term to maturity of
more than 12 years, but less than or equal to 25 years....1.63
Type IV Corporate Bonds with a remaining term to maturity of
more than 25 years, but less than or equal to 30 years....1.69
Type IV Corporate Bonds with a remaining term to maturity of
more than 30 years, but less than or equal to 50 years....1.80
Stocks
------
Utility Stock.....................................................2.00
Utility Stocks (ADRs).............................................2.50
Investment Grade REIT Stock.......................................2.15
Below Investment Grade or Unrated REIT Stock, capitalization
greater than $500,000,000................................ 2.50
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Below Investment Grade or Unrated REIT Stock, capitalization less
than $500,000,000........................................3.00
Preferred Stock rated AAA by Fitch................................1.66
Preferred Stock rated AA by Fitch.................................1.68
Preferred Stock rated A by Fitch..................................1.71
Preferred Stock rated BBB by Fitch................................1.77
FNMA, FHLMC or GNMA Certificates
FNMA or FHLMC with 6.0% interest rate.............................1.70
FNMA or FHLMC with 7.0% interest rate.............................1.65
FNMA or FHLMC with 8.0% interest rate.............................1.59
FNMA or FHLMC with 9.0% interest rate.............................1.52
FNMA or FHLMC with 10.0% interest rate............................1.40
GNMA with 6% interest rate........................................1.80
GNMA with 7% interest rate........................................1.70
GNMA with 8% interest rate........................................1.64
GNMA with 9% interest rate........................................1.57
GNMA with 10.0% interest..........................................1.45
U. S. Government Obligations having a remaining term to
maturity of up to one year ...............................1.06
U. S. Government Obligations having a remaining term to
maturity of more than one year but not more
than two years............................................1.11
U. S. Government Obligations having a remaining term to
maturity of more than two years but not more than
five years................................................1.20
U. S. Government Obligations having a remaining term to
maturity of more than five years but not more than
fifteen years.............................................1.45
U. S. Government Obligations having a remaining term to
maturity of more than fifteen years but not more
than twenty-five years....................................1.65
U. S. Government Obligations having a remaining term to
maturity of more than twenty-five years but not
more than forty years.....................................1.80
Cash held in segregated custody account at an
F-1 + Institution.........................................1.00
Cash held in segregated custody account at an F-1 Institution.....1.00
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(1) In the case of Eligible Portfolio Property rated by Moody's or S&P, but not rated by Fitch, the Discount Factor Supplied by Fitch shall be the Discount Factor determined therefor in writing by Fitch. Absent such written notification, the asset shall have a Discounted Value of zero.
Notwithstanding the foregoing, for so long as is required by Fitch to maintain its then-current credit rating of the Original RP or Serial RP, the Discount Factor Supplied by Fitch with respect to Eligible Portfolio Property sold pursuant to a reverse repurchase agreement with a remaining term to maturity of more than 25 days on the date of determination of the Discounted Value of such Eligible Portfolio Property shall be the current Discount Factor provided by Fitch to the corporation in writing for the purpose of such determination.
"Discounted Value," with respect to any asset held by the corporation as of any date, means the quotient of the Market Value of such asset divided by the applicable Discount Factor Supplied by Fitch, provided that in no event shall the Discounted Value of any asset constituting Eligible Portfolio Property as of any date exceed the unpaid principal balance or face amount of such asset as of that date. With respect to the calculation of the Discounted Value of any Utility Bond included in the corporation's Eligible Portfolio Property, such calculation shall be made using the criteria set forth in the definitions of Utility Bonds and Market Value. With respect to the calculation of the Discounted Value of any Utility Stock included in the corporation's Eligible Portfolio Property such calculation shall be made using the criteria set forth in the definitions of Utility Stocks and Market Value. When calculating the aggregate Discounted Value of the corporation's Eligible Portfolio Property for comparison with the Fitch RP Basic Maintenance Amount, the Discount Factors Supplied by Fitch shall be used. Notwithstanding any other provision of the Articles Supplementary or these bylaws, any Utility Bond that has a remaining maturity of more than 30 years, and any asset as to which there is no Discount Factor Supplied by Fitch either in the Articles Supplementary, in an amendment or supplement thereof or in this Article X, shall have a Discounted Value for purposes of determining the aggregate Discounted Value of the corporation's Eligible Portfolio Property calculated using the Discount Factor Supplied by Fitch of zero.
"F-1+ Institution" means a financial institution that has a debt rating of F-1+ by Fitch.
"Fitch" means Fitch IBCA, Inc.
"Fitch RP Basic Maintenance Amount" means, initially, as
of any date, the sum of (i) the aggregate liquidation preference
of the shares of RP outstanding and shares of Other RP
outstanding, (ii) to the extent not covered in (i), the aggregate
amount of accumulated but unpaid cash dividends with respect to
the shares of RP outstanding and shares of Other RP outstanding,
(iii) the aggregate principal amount of, and an amount
equal to accrued but unpaid interest on any Notes outstanding, (iv) the aggregate Projected Dividend Amount, and (v) an amount equal to the projected expenses of the corporation (including, without limitation, fee and indemnification obligations of the corporation incurred in connection with any commercial paper program undertaken by the corporation or with any credit facility related thereto) for the next three month period. The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the initial elements comprising the Fitch RP Basic Maintenance Amount if the Board of Directors determines and Fitch advises the corporation in writing that such adjustment, modification, alteration or change will not adversely affect its then-current rating on the RP.
"RP Basic Maintenance Amount" means the Fitch RP Basic Maintenance Amount.
Section 10.02. Eligible Assets. The following assets, specifically Preferred Stock, Type I Corporate Bonds, Type II Corporate Bonds, Type III Corporate Bonds, and Type IV Corporate Bonds, having met the requirements set forth in the definition of "Other Permitted Securities" in the Articles Supplementary, shall be included as Other Permitted Securities for purposes of determining maintenance of the Fitch RP Basic Maintenance Amount.
"Below Investment Grade REIT Stock" means an equity security issued by a REIT rated BB+ or lower by Fitch.
"Preferred Stock" means securities of an issuer senior in preference to the common equity of the issuer.
"Type I Corporate Bonds" as of any date means Corporate Bonds rated AAA by Fitch.
"Type II Corporate Bonds" as of any date means Corporate Bonds rated AA- to AA+ by Fitch.
"Type III Corporate Bonds" as of any date means Corporate Bonds rated A- to A+ by Fitch.
"Type IV Corporate Bonds" as of any date means Corporate Bonds rated BBB- to BBB+ by Fitch.
"Unrated REIT Stock" shall mean an equity security issued by a REIT that is not rated by the Ratings Agencies or by Fitch.
Section 10.03. RP Basic Maintenance Amount. (a) The corporation shall maintain, on each Valuation Date, Eligible Portfolio Property having an aggregate Discounted Value at least equal to the RP Basic Maintenance Amount.
(b) On or before 5:00 p.m., New York City time, on the third Business Day after each Valuation Date, the corporation shall complete and deliver to the Remarketing Agent and the Paying Agent an RP Basic Maintenance Report, which will be deemed to have been delivered to the Remarketing Agent and the Paying Agent if the Remarketing Agent and the Paying Agent receive a copy or telecopy, telex or other electronic transcription thereof and on the same day the corporation mails to the Remarketing Agent and the Paying Agent for delivery on the next Business Day the full RP Basic Maintenance Report. A failure by the corporation to deliver an RP Basic Maintenance Report under this paragraph 10.03(b) without the prior consent of the Remarketing Agent and the Paying Agent shall be deemed to be delivery of an RP Basic Maintenance Report indicating the Discounted Value for all assets of the corporation is less than the RP Basic Maintenance Amount, as of the relevant Valuation Date.
(c) Within ten Business Days after the date of delivery to the Remarketing Agent and the Paying Agent of an RP Basic Maintenance Report in accordance with paragraph 10.03(b) above relating to a Quarterly Valuation Date, the Independent Accountant will confirm in writing to the Remarketing Agent and the Paying Agent (A) the mathematical accuracy of the calculations reflected in such Report, (B) that, in such Report, the corporation determined in accordance with the Articles Supplementary the assets of the corporation which constitute Eligible Portfolio Property at such Quarterly Valuation Date, (C) that, in such Report, the corporation determined in accordance with the Articles Supplementary whether the corporation had, at such Quarterly Valuation Date, Eligible Portfolio Property of an aggregate Discounted Value at least equal to the RP Basic Maintenance Amount, (D) with respect to the Fitch rating on Utility Bonds and Senior Debt obligations, issuer name, issue size and coupon rate listed in such Report, that information has been traced and agrees with the information listed in the Fitch IBCA Ratings Book (in the event such information does not agree or such information is not listed in the Fitch IBCA Ratings Book, the Independent Accountant will inquire of Fitch what such information is and provide a listing in their letter of such difference), and (E) with respect to the lower of two bid prices (or alternative permissible factors used in calculating the Market Value) provided by the custodian of the corporation's assets to the corporation for purposes of valuing securities in the corporation's portfolio, the Independent Accountant has traced the price used in such Report to the lower of the two bid prices listed in the Report provided by such custodian and verified that such information agrees (in the event such information does not agree, the Independent Accountant will provide a listing in its letter of such differences) (such confirmation is herein called the "Accountant's Confirmation"). If any Accountant's Confirmation delivered pursuant to this paragraph 10.03(c) shows that an error was made in the RP Basic Maintenance Report for a Quarterly Valuation Date, or shows that a lower aggregate Discounted Value for the aggregate of all Eligible Portfolio Property of the corporation was determined by the Independent Accountant, the calculation or determination made by such Independent Accountant shall be final and conclusive and shall be binding on the corporation, and the corporation shall accordingly amend the RP Basic Maintenance Report to the Remarketing Agent and Paying Agent promptly
following receipt by the Remarketing Agent and the Paying Agent of such Accountant's Confirmation.
ARTICLE XI
CERTAIN PROVISIONS RELATING TO RATINGS ORGANIZATIONS
Section 11.01 General Definitions. Capitalized terms used in this Article XI but not specifically defined herein shall have the respective meanings assigned them in the Articles Supplementary, which definitions are hereby incorporated by reference herein. The following capitalized terms shall have the following meanings for purposes of this Article XI, whether used in the singular or plural.
"REIT" means an entity qualifying as a real estate investment trust under the United States Internal Revenue Code of 1986, as amended.
"NYSE" means the New York Stock Exchange.
"AMEX" means the American Stock Exchange.
"ADR" means American Depository Receipts.
"National Securities Exchange" means the NYSE, AMEX, Midwest Stock Exchange, Philadelphia Stock Exchange, Boston Stock Exchange, NASDAQ System or any other national securities exchange.
"Market Value" means, as to any S&P Eligible REIT Share, S&P Eligible Utility ADR, S&P Eligible Preferred Stock and S&P Eligible Corporate Bond, the value calculated by reference to the highest closing price on a National Securities Exchange on the date preceding any relevant date of determination.
"MTNP" means, initially, a medium term note program.
"Yankee Bond" means, initially, a debt security which is issued by a foreign government, province, supranational agency or foreign corporation.
Section 11.02. S&P Eligible Asset Definitions. The following assets, specifically S&P Eligible REIT Shares, S&P Eligible Preferred Stock, S&P Eligible Corporate Bonds and S&P Eligible Utility ADRs, having met the requirements set forth in the definition of "Other Permitted Securities" in the Articles Supplementary, shall be included as "Other Permitted Securities" for purposes of determining maintenance of the "S&P RP Basic Maintenance Amount".
"S&P Eligible REIT Share" means, initially, an equity security issued by a REIT. So long as the shares of RP are rated AAA or higher by S&P, no equity
security held by the Corporation shall be deemed an S&P Eligible REIT Share unless (i) such equity security has been listed or traded for more than 15 months on a National Securities Exchange and (ii) the aggregate Market Value of all such equity securities outstanding is equal to or exceeds $100,000,000. So long as the shares of RP are rated AAA or higher by S&P, no equity security held by the Corporation shall be deemed an S&P Eligible REIT Share to the extent (but only to the proportionate extent) (i) the amount thereof held by the Corporation exceeds the lesser of (x) 5% of the issued and outstanding equity securities of the REIT issuing such S&P Eligible REIT Shares and (y) the average weekly trading volume for the past month preceding any relevant date of determination; and (ii) the aggregate Market Value of the amount thereof held by the Corporation exceeds 5% of the aggregate Market Value of the issued and outstanding equity securities of the REIT issuing such equity security.
"S&P Eligible Utility ADRs" means, initially, ADRs issued by public utility companies, which ADRs have been listed or traded for more than 15 months on a National Securities Exchange. So long as the shares of the RP are rated AAA or higher by S&P, no ADR held by the Corporation shall be deemed an S&P Eligible Utility ADR unless the aggregate Market Value of all such ADRs outstanding is equal to or exceeds $100,000,000. So long as the shares of RP are rated AAA or higher by S&P, no ADR held by the Corporation shall be deemed an S&P Eligible Utility ADR to the extent (but only to the proportionate extent) (i) the amount thereof held by the Corporation exceeds the lesser of (x) 5% of the issued and outstanding S&P Eligible Utility ADRs of the public utility company issuing such S&P Eligible Utility ADRs and (y) the average weekly trading volume for the past month preceding any relevant date of determination; and (ii) the aggregate Market Value of the amount thereof held by the Corporation does not exceeds 5% of the aggregate Market Value of the issued and outstanding equity securities of the public utility company issuing such equity security.
"S&P Eligible Preferred Stock" means, initially, preferred stock (i) rated BBB or higher by S&P or (ii) issued by an entity having debt obligations outstanding with senior unsecured or subordinated unsecured debt ratings of BBB or higher by S&P; provided, however, that no share of Yankee Preferred Stock (as such term is defined by S&P from time to time) will be considered an S&P Eligible Preferred Stock unless such Yankee Preferred Stock is (x) rated A or higher by S&P or (y) issued by an entity having debt obligations outstanding with senior unsecured or subordinated unsecured debt ratings of A or higher by S&P. So long as the shares of RP are rated AAA or higher by S&P, no preferred stock owned by the Corporation shall be deemed an S&P Eligible Preferred Stock to the extent (but only to the proportionate extent) (i) the aggregate of preferred stock owned by the Corporation of an issuer having debt obligations outstanding with a senior debt rating of A or higher by S&P exceed 5% of the aggregate Market Value of Eligible Portfolio Property owned by the Corporation; (ii) the aggregate Market Value of preferred stock owned by the Corporation of an issuer having debt obligations outstanding with a senior debt rating of BBB by S&P exceeds 2.5% of the aggregate Market Value of Eligible Portfolio Property owned by the Corporation; and (iii) the aggregate Market Value of preferred stock owned by the
Corporation in any one industry (as defined by S&P from time to time) exceeds 20% of the aggregate Market Value of the securities owned by the Corporation. In addition, so long as the shares of RP are rated AAA or higher by S&P, no preferred stock held by the Corporation shall be deemed an S&P Eligible Preferred Stock unless such Preferred Stock meets the following conditions:
(i) shares of the issuer (or if the issuer is a special purpose corporation, the parent of the issuer) of such preferred stock are traded on the NYSE or the AMEX;
(ii) except in the case of Yankee Preferred Stock, such preferred stock is cumulative;
(iii) such preferred stock is nonconvertible;
(iv) such preferred stock has no attached warrants;
(v) the aggregate Market Value of all outstanding equity securities of the issues of such preferred stock is at least $500,000;
(vi) such preferred stock (x) has an initial issue size of at least $50 million or (y) is issued by an entity with preferred stock outstanding with an aggregate Market Value of at least $50 million;
(vii) the issuer of such preferred stock pays cash dividends in U.S. denominated dollars and has paid cash dividends consistently over the previous three years (unless the issuer of the preferred stock has no relevant history of issuing dividends, in which case the issuer has received an A or higher debt or preferred stock rating from S&P);
(viii) the aggregate Market Value of all equity securities outstanding of the issuer of the preferred stock is equal to or greater than $50 million;
(ix) the aggregate Market Value of such preferred stock (calculated by reference to the closing price on the Securities Exchanges for such preferred stock on the day preceding any relevant date of determination) owned by the Corporation is no less than $500,000 and no more than $5,000,000, unless such preferred stock is floating rate preferred stock where an auction restricts the Corporation's ownership of such floating rate preferred stock;
(x) if such preferred stock is floating rate preferred stock, (x) such floating rate preferred stock has a dividend period of less than or equal to 49 days, unless such preferred stock is a new issue, in which case, the first dividend period of such new issue is up to 64 days; and (y) such floating rate preferred stock has not been subject to a failed auction;
(xi) if such preferred stock is adjustable rate preferred stock, the aggregate Market Value of all adjustable rate preferred stock owned by the Corporation does not exceed 10% of the Other Permitted Securities owned by the Corporation.
"S&P Eligible Corporate Bonds" means, initially, debt securities issued by a corporation having a maturity of thirty years or less. So long as the shares of RP are rated AAA or higher by S&P, no debt security held by the Corporation shall be deemed an S&P Eligible Corporate Bond unless (i) in the case of a debt security rated CCC or lower by S&P, such debt security is a subordinated debt security with an implied senior rating by S&P of B- or higher and (ii) at least two dealers registered with the National Association of Securities Dealers offer bids on such debt security. In addition, so long as the shares of RP are rated AAA or higher by S&P, no debt security held by the Corporation shall be deemed an S&P Eligible Corporate Bond unless the following conditions are met:
(i) at least 80% of the aggregate Market Value of debt securities owned by the Corporation which are rated BBB or lower have an original issue size of $100 million or higher and the remaining 20% have an original issue size no lower than $50 million;
(ii) in the case of a debt security issued under a MTNP such debt security is (x) rated BBB or higher by S&P and has an original issue size equal to the maximum number of medium term notes authorized by the issuer pursuant to such MTNP and (y) part of a series of medium term notes which exceeds $5 million in aggregate Market Value;
(iii) in the case of a Yankee Bond, such Yankee Bond is rated A or higher by S&P and the aggregate of such Yankee Bonds owned by the Corporation does not exceed 25% of the aggregate Market Value of securities owned by the Corporation;
(iv) financial statements are publicly available for the issuer of such debt securities and such debt securities are registered under the Securities Act of 1933;
(v) the terms of such debt securities provide for periodic interest payments in cash over the life of the security;
(vi) such debt securities are not convertible or exchangeable into capital of the issuer at any time; provided that 10% of such debt securities outstanding may be subject to exchange or tender offer; and
(vii) in the case of Type IV S&P Eligible Corporate Bonds, the aggregate Market Value of such debt securities issued by companies engaged principally
in any one industry (as defined by S&P) does not exceed 20% of the aggregate Market Value of all securities owned by the Corporation.
"Type I S&P Eligible Corporate Bonds" means, initially, S&P Eligible Corporate Bonds rated AAA by S&P.
"Type II S&P Eligible Corporate Bonds" means, initially, S&P Eligible Corporate Bonds rated AA by S&P.
"Type III S&P Eligible Corporate Bonds" means, initially, S&P Eligible Corporate Bonds rated A by S&P.
"Type IV S&P Eligible Corporate Bonds" means, initially, S&P Eligible Corporate Bonds rated BBB by S&P.
Section 11.03. Discount Factors Supplied by S&P. The following Discount Factors, having been supplied by S&P, shall be "Discount Factors Supplied by S&P" as defined in the Articles Supplementary for purposes of calculating the "Discounted Value" of the assets for purposes of determining maintenance of the S&P RP Basic Maintenance Amount".
S&P Eligible REIT Shares which have been outstanding for more than eighteen (18) months 2.52
S&P Eligible REIT Shares which have been outstanding for eighteen (18) or fewer months 3.25
S&P Eligible Utility ADRs which have been outstanding for more than eighteen (18) months 2.52
S&P Eligible Utility ADRs which have been outstanding
for eighteen (18) or fewer months 3.25 Type I S&P Eligible Corporate Bonds 1.50 Type II S&P Eligible Corporate Bonds 1.55 Type III S&P Eligible Corporate Bonds 1.60 Type IV S&P Eligible Corporate Bonds 1.65 Type V S&P Eligible Corporate Bonds 1.70 Type VI S&P Eligible Corporate Bonds 1.80 Type VII S&P Eligible Corporate Bonds 1.90 Type VIII S&P Eligible Corporate Bonds 2.05 Type IX S&P Eligible Corporate Bonds 2.20 |
S&P Eligible Preferred Stock (Sinking Fund, Fixed Rate, Perpetual or Floating Rate) 2.40
S&P Eligible Preferred Stock (Adjustable or Auction Rate) 4.00
Section 11.04. Moody's Eligible Asset Definitions. The following assets, specifically Auction Rate Preferred Stock, Hybrid Securities, Preferred Stock, Type I REIT Shares, Type I Utility ADRs, Industrial Bonds and Utility Preferred Stock, having met the requirements set forth in the definition of "Other Permitted Securities" in the Articles Supplementary, shall be included as "Other Permitted Securities" for purposes of determining maintenance of the "Moody's RP Basic Maintenance Amount".
"Auction Rate Preferred Stock" means, initially, preferred stock rated a3 or higher which is issued by a company which has paid dividends during the preceding three year period.
"Convertible Preferred Stock" means, initially, Utility Preferred Stock which is mandatorily convertible into common equity of the company issuing such securities.
"Hybrid Preferred Stock" means monthly income Preferred Stock, quarterly income Preferred Stock and other nonstandard Preferred Stock rated a3 or higher which is issued by a company which has paid dividends during the preceding three years.
"Industrial Bond" means, initially, industrial revenue bonds and industrial development bonds.
"Preferred Stock" means, initially, preferred stock rated
a3 or higher which is (i) not convertible into common equity and
(ii) issued by a non-utility company which has paid dividends
during the preceding 3 years.
"Type I Industrial Bonds" as of any date means Industrial Bonds rated Aaa by Moody's.
"Type II Industrial Bonds" as of any date means Industrial Bonds rated Aa3 by Moody's.
"Type III Industrial Bonds" as of any date means Industrial Bonds rated A3 by Moody's.
"Type IV Industrial Bonds" as of any date means Industrial Bonds rated Baa3 by Moody's.
"Type I REIT Shares" means, initially, equity securities issued by REITs having debt obligations outstanding with senior unsecured or subordinated unsecured debt ratings of Baa3 or higher from Moody's. So long as the shares of RP are rated
Baa3 or higher by Moody's, no equity security held by the Corporation shall be deemed a REIT Share unless (i) such equity security is traded on the NYSE or the AMEX, (ii) the aggregate value of all such equity securities outstanding (calculated based upon the highest of the closing prices on the NYSE or the AMEX as applicable, for such equity security on the day preceding any relevant date of determination) is equal to or exceeds $500,000,000 and (iii) the REIT which issues such equity security has paid dividends for all periods since it first qualified as a REIT. In addition, so long as the shares of RP are rated Baa3 or higher by Moody's, no equity security held by the Corporation shall be deemed a Type I REIT Share to the extent (but only to the proportionate extent) the amount thereof held by the Corporation exceeds the lesser of (i) 5% of the issued and outstanding equity securities of the REIT issuing such equity security and (ii) the average weekly trading volume thereof for the 26 week period immediately preceding any relevant date of determination.
"Type I Utility ADRs" means, initially, ADRs, which are
traded on the NYSE or the AMEX with respect to equity securities
issued by public utility companies having U.S. dollar denominated
debt obligations outstanding with senior unsecured or subordinated
unsecured debt ratings of Baa3 or higher from Moody's. In
addition, so long as the shares of RP are rated Baa3 or higher by
Moody's, no equity security held by the Corporation shall be
deemed a Type I Utility ADR to the extent (but only to the
proportionate extent) the amount thereof held by the Corporation
exceeds the lesser of (i) 5% of the issued and outstanding equity
securities of the utility company issuing such equity security and
(ii) the average weekly trading volume thereof for the 26 week
period immediately preceding any relevant date of determination.
"Utility Preferred Stock" means, initially, preferred stock rated a3 or higher which is issued by a public utility company which had paid dividends during the preceding three years.
Section 11.05. Discount Factors Supplied by Moody's. The following Discount Factors, having been supplied by Moody's, shall be "Discount Factors Supplied by Moody's" as defined in the Articles Supplementary for purposes of calculating the "Discounted Value" of the assets for purposes of determining maintenance of the "Moody's RP Basic Maintenance Amount".
Discount Factor(1)
------------------
Auction Rate Preferred Stock 3.50
Convertible Preferred Stock 2.00
Hybrid Preferred Stock 3.50
Preferred Stock 2.35
Type I Industrial Bonds having a remaining
term to maturity of one year or less: 1.20
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Type I Industrial Bonds having a remaining term to maturity of more than one year but not more than two years: 1.27 Type I Industrial Bonds having a remaining term to maturity of more than two years but not more than three years: 1.32 Type I Industrial Bonds having a remaining term to maturity of more than three years but not more than four years: 1.38 Type I Industrial Bonds having a remaining term to maturity of more than four years but not more than five years: 1.44 Type I Industrial Bonds having a remaining term to maturity of more than five years but not more than seven years: 1.53 Type I Industrial Bonds having a remaining term to maturity of more than seven years but not more than ten years: 1.61 Type I Industrial Bonds having a remaining term to maturity of more than ten years but not more than 15 years: 1.69 Type I Industrial Bonds having a remaining term to maturity of more than 15 years but not more than 20 years: 1.76 Type I Industrial Bonds having a remaining term to maturity of more than 20 years but less than 30 years: 1.79 Type II Industrial Bonds having a remaining term to maturity of one year or less: 1.24 Type II Industrial Bonds having a remaining term to maturity of more than one year but not more than two years: 1.31 Type II Industrial Bonds having a remaining term to maturity of more than two years but not more than three years: 1.38 Type II Industrial Bonds having a remaining term to maturity of more than three years but not more than four years: 1.44 |
Type II Industrial Bonds having a remaining term to maturity of more than four years but not more than five years: 1.50 Type II Industrial Bonds having a remaining term to maturity of more than five years but not more than seven years: 1.60 Type II Industrial Bonds having a remaining term to maturity of more than seven years but not more than ten years: 1.70 Type II Industrial Bonds having a remaining term to maturity of more than ten years but not more than 15 years: 1.76 Type II Industrial Bonds having a remaining term to maturity of more than 15 years but not more than 20 years: 1.84 Type II Industrial Bonds having a remaining term to maturity of more than 20 years but not more than 30 years: 1.87 Type III Industrial Bonds having a remaining term to maturity of one year or less: 1.29 Type III Industrial Bonds having a remaining term to maturity of more than one year but not more than two years: 1.38 Type III Industrial Bonds having a remaining term to maturity of more than two years but not more than three years: 1.44 Type III Industrial Bonds having a remaining term to maturity of more than three years but not more than four years: 1.51 Type III Industrial Bonds having a remaining term to maturity of more than four years but not more than five years: 1.57 Type III Industrial Bonds having a remaining term to maturity of more than five years but not more than seven years: 1.67 Type III Industrial Bonds having a remaining term to maturity of more than seven years but not more than ten years: 1.77 |
Type III Industrial Bonds having a remaining term to maturity of more than ten years but not more than 15 years: 1.84 Type III Industrial Bonds having a remaining term to maturity of more than 15 years but not more than 20 years: 1.92 Type III Industrial Bonds having a remaining term to maturity of more than 20 years but not more than 30 years: 1.95 Type IV Industrial Bonds having a remaining term to maturity of one year or less: 1.36 Type IV Industrial Bonds having a remaining term to maturity of more than one year but not more than two years: 1.44 Type IV Industrial Bonds having a remaining term to maturity of more than two years but not more than three years: 1.50 Type IV Industrial Bonds having a remaining term to maturity of more than three years but not more than four years: 1.57 Type IV Industrial Bonds having a remaining term to maturity of more than four years but not more than five years: 1.63 Type IV Industrial Bonds having a remaining term to maturity of more than five years but not more than seven years: 1.74 Type IV Industrial Bonds having a remaining term to maturity of more than seven years but not more than ten years: 1.83 Type IV Industrial Bonds having a remaining term to maturity of more than ten years but not more than 15 years: 1.92 Type IV Industrial Bonds having a remaining term to maturity of more than 15 years but not more than 20 years: 2.02 Type IV Industrial Bonds having a remaining term to maturity of more than 20 years but not more than 30 years: 2.03 Type I REIT Shares: 3.00 |
Type I Utility ADRs issued by an entity organized under the laws of Argentina or any political subdivision thereof: 5.00 Type I Utility ADRs issued by an entity organized under the laws of Australia or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of Belgium or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of Brazil or any political subdivision thereof: 4.20 Type I Utility ADRs issued by an entity organized under the laws of Canada or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of Chile or any political subdivision thereof: 3.00 Type I Utility ADRs issued by an entity organized under the laws of Denmark or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of France or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of Germany or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of Greece or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of Italy or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of Mexico or any political subdivision thereof: 4.00 Type I Utility ADRs issued by an entity organized under the laws of Netherlands or any political subdivision thereof: 2.00 |
Type I Utility ADRs issued by an entity organized under the laws of Peru or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of Portugal or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of Spain or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of the United Kingdom or any political subdivision thereof: 2.00 Utility Preferred Stock 1.60 |
Section 11.06. Revised Definitions. The definitions of "Utility Bonds" and "Utility Stocks" set forth in the Articles Supplementary are hereby modified to delete the requirement that the issuers of such securities be "state regulated".
Exhibit g.1
INVESTMENT ADVISORY AGREEMENT
DUFF & PHELPS UTILITIES INCOME INC., a Maryland corporation registered under the Investment Company Act of 1940 ("1940 Act") as a closed-end diversified management investment company ("Fund"), and DUFF & PHELPS INVESTMENT MANAGEMENT CO., an Illinois corporation registered under the Investment Advisers Act of 1940 as an investment adviser ("Manager"), agree that:
1. Engagement of Manager. Manager shall manage the investment and reinvestment of the assets of Fund, subject to the supervision of the board of directors of Fund, for the period and on the terms set forth in this Advisory Agreement. Manager shall give due consideration to the investment policies and restrictions and the other statements concerning Fund in Fund's charter, bylaws, and registration statements under the 1940 Act and the Securities Act of 1933 ("1933 Act"), and to the provisions of the Internal Revenue Code applicable to Fund as a regulated investment company. Manager shall be deemed for all purposes to be an independent contractor and not an agent of Fund, and unless otherwise expressly provided or authorized, shall have no authority to act for or represent Fund in any way.
Manager is authorized to make the decisions to buy and sell securities of Fund, to place Fund's portfolio transactions with securities broker-dealers, and to negotiate the terms of transactions, on behalf of Fund. Manager is authorized to exercise discretion within Fund's policy concerning allocation of its portfolio brokerage, as permitted by law, including but not limited to section 28(e) of the Securities Exchange Act of 1934, and in so doing shall not be required to make any reduction in its investment advisory fees.
2. Expenses to be paid by Manager. Manager shall furnish, at its own expense, office space to Fund and all necessary office facilities, equipment and personnel for managing the assets of Fund. Manager shall also assume and pay all other expenses incurred by it in connection with managing the assets of Fund, except that Manager shall not assume and pay any expenses that J.J.B. Hilliard, W.L. Lyons, Inc. ("Hilliard/Lyons") is obligated to pay under the Administration Agreement ("Administration Agreement") between Fund and Hilliard/Lyons.
3. Expenses to be paid by Fund. Fund shall pay all charges of depositories, custodians and other agencies for the safekeeping and servicing of its cash, securities and other property and of its transfer agents and registrars and its dividend disbursing, dividend reinvestment, redemption and remarketing agents, if any, including any charges for bookkeeping services provided by Fund's custodian; all charges of legal counsel and of independent auditors; all compensation of directors other than those affiliated with Manager, Duff & Phelps Inc. or Hilliard/Lyons and all expenses incurred in connection with their services to Fund; all expenses of publication of notices and reports to its shareholders; all expenses of proxy solicitations of Fund or its board of directors; all expenses of printing of Fund's prospectus and registration statement and mailing copies of the prospectus; all taxes and corporate fees payable to federal, state or other governmental agencies, domestic or foreign; all stamp or other transfer taxes; all expenses of printing and mailing certificates for shares of Fund; all expenses of bond and insurance coverage required by law or deemed advisable by Fund's board of directors; all expenses of maintaining the registration of Fund under the 1940 Act; all interest expenses; and all fees, dues and expenses incurred by Fund in connection with membership in any trade association or other investment company organization. In addition to the payment of expenses, Fund shall also pay all brokers' commissions and other charges relative to the purchase and sale of portfolio securities.
4. Compensation of Manager. For the services to be
rendered and the charges and expenses to be assumed and to be paid
by Manager hereunder, Fund shall pay Manager a quarterly fee at an
annual rate of 0.60 of 1% of the Average Weekly Net Assets of the
Fund which does not exceed $1.5 billion and 0.50 of 1% of Average
Weekly Net Assets in excess of $1.5 billion, as determined by
valuations made as of the last business day of each calendar week
ending during the quarter, which fee shall be payable on the first
business day of the next quarter. For purposes of the foregoing
calculation, Average Weekly Net Assets shall be equal to 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.
5. Services of Manager not exclusive. The services of Manager to Fund hereunder are not to be deemed exclusive, and Manager shall be free to render similar services to others so long as its services under this Advisory Agreement are not impaired by such other activities.
6. Limitation of liability of Manager. Manager shall not be liable to Fund or its shareholders for any loss suffered by Fund or its shareholders from or as a consequence of any act or omission of Manager, or of any of the directors, officers, employees or agents of Manager, in connection with or pursuant to this Advisory Agreement, except by reason of willful misfeasance, bad faith or gross negligence on the part of Manager in performance of its duties or by reason of reckless disregard by Manager of its obligations and duties under this Advisory Agreement.
7. Duration and renewal. Unless terminated as provided in section 8, this Advisory Agreement shall continue in effect until April 30, 2000, and thereafter from year to year only so long as such continuance is specifically approved at least annually (a) by a majority of those directors who are not "interested persons" (as defined in section 2(a)(19) of the 1940 Act) of Fund or of Manager, voting in person at a meeting called for the purpose of voting on such approval, and (b) by either the board of directors of Fund or vote of the holders of a "majority of the outstanding shares of Fund" (which term as used throughout this Advisory Agreement shall be construed in accordance with the definition of "vote of a majority of the outstanding voting securities of a company" in section 2(a)(42) of the 1940 Act).
8. Termination. This Advisory Agreement may be terminated at any time, without payment of any penalty, by the board of directors of Fund, or by a vote of the holders of a majority of the outstanding shares of Fund, upon 60 days' written notice to Manager. This Advisory Agreement may be terminated by Manager at any time upon 60 days' written notice to Fund. This Advisory Agreement shall terminate automatically in the event of its assignment (as defined in section 2(a)(4) of the 1940 Act).
9. Amendment. This Advisory Agreement may not be amended without the affirmative vote (a) of a majority of those directors who are not "interested persons" of Fund or of Manager, voting in person at a meeting called for the purpose of voting on such approval, and (b) of the holders of a majority of the outstanding shares of Fund.
10. Use of Manager's name. The Fund may use the name "Duff & Phelps Utilities Income Inc." or any other name derived from the name "Duff & Phelps" only for so long as this Advisory Agreement or any extension, renewal or amendment hereof remains in effect, including any similar agreement with any organization which shall have succeeded to the business of the Manager as investment adviser. At
such time as this Advisory Agreement or any extension, renewal or amendment hereof, or such other similar agreement shall no longer be in effect, the Fund will (by corporate action, if necessary) cease to use any name derived from the name "Duff & Phelps," any name similar thereto or any other name indicating that it is advised by or otherwise connected with the Manager, or with any organization which shall have succeeded to the Manager's business as investment adviser.
Dated as of May 1, 1998
DUFF & PHELPS UTILITIES INCOME INC.
By: /s/ Calvin J. Pedersen
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Its President and Chief
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Executive Officer
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DUFF & PHELPS INVESTMENT
MANAGEMENT CO.
By: /s/ Calvin J. Pedersen
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Its Executive Vice President
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Exhibit g.2
SERVICE AGREEMENT
DUFF & PHELPS UTILITIES INCOME INC., a Maryland corporation registered under the Investment Company Act of 1940 ("1940 Act") as a closed-end diversified management investment company ("Fund"), DUFF & PHELPS INVESTMENT MANAGEMENT CO., an Illinois corporation registered under the Investment Advisers Act of 1940 ("Advisers Act") as an investment adviser ("Manager") and Phoenix DUFF & PHELPS CORPORATION, a Delaware corporation ("Phoenix Duff & Phelps"), agree that:
1. Personnel and facilities. Manager shall have the right
to use, and Phoenix Duff & Phelps shall make available for the use
of Manager, (a) statistical and other factual information, advice
regarding economic factors and trends or advice as to occasional
transactions in specific securities and shall have access to such
part-time services of employees of Phoenix Duff & Phelps engaged
in investment research and analysis, and such services of
administrative and other employees of Phoenix Duff & Phelps, for
periods to be agreed upon by Manager and Phoenix Duff & Phelps,
(b) such administrative, clerical, stenographic and other support
services and office supplies and equipment, as may in each case be
reasonably required by Manager in the performance of its
obligations as investment adviser to Fund under its Investment
Advisory Agreement with Fund and any agreement amending or
superseding such agreement, and (c) such office space as is
reasonably needed by Manager in the performance of its obligations
as investment adviser to Fund.
2. Availability of information. In performing services for Manager under this agreement, the employees of Phoenix Duff & Phelps may, to the full extent that they deem appropriate, have access to and utilize statistical and economic data, investment research and reports and other information prepared for or contained in the files of Phoenix Duff & Phelps that are relevant to making investment decisions within the investment objectives of Fund, and may make such information available to Manager.
3. Responsibility; standard of care. Employees of Phoenix Duff & Phelps performing services for Manager pursuant hereto shall report and be responsible solely to the officers and directors of Manager or persons designated by them. Phoenix Duff & Phelps shall not have any responsibility for investment recommendations and decisions
of Manager based upon information or advice given or obtained by or through such employees of Phoenix Duff & Phelps. Duff & Phelps shall not be liable to Fund or its shareholders for any loss suffered by Fund or its shareholders from or as a consequence of any act or omission of Phoenix Duff & Phelps, or of any of the directors, officers, employees or agents of Phoenix Duff & Phelps, in connection with or pursuant to this Agreement, except by reason of willful misfeasance, bad faith or gross negligence on the part of Phoenix Duff & Phelps in the performance of its duties or by reckless disregard by Phoenix Duff & Phelps of its obligations and duties under this Agreement. The obligation of performance of the Investment Advisory Agreement of Manager with Fund is solely that of Manager, for which Phoenix Duff & Phelps assumes no responsibility except as otherwise expressly provided herein.
4. Reimbursement of expenses. In consideration of the services to be rendered and the facilities to be provided to Manager by Phoenix Duff & Phelps and its employees pursuant to this agreement, Manager agrees to reimburse Phoenix Duff & Phelps for such costs, direct and indirect, as may be fairly attributable to the services performed and the facilities provided for Manager. Such costs shall include, but shall not be limited to, an appropriate portion of salaries, employee benefits, general overhead expense, and supplies and equipment, and a charge in the nature of rent for the cost of space in offices of Phoenix Duff & Phelps fairly allocable to activities of Manager under its Investment Advisory Agreement with Fund. In the event of disagreement between Manager and Phoenix Duff & Phelps as to a fair basis for allocating or apportioning costs, such basis shall be fixed by the independent public accountants for Fund.
5. Duration and renewal. Unless terminated as provided in section 6, this Agreement shall continue in effect until April 30, 2000, and thereafter from year to year only so long as such continuance is specifically approved at least annually (a) by a majority of those directors who are not "interested persons" (as defined in section 2(a)(19) of the 1940 Act) of Fund or Phoenix Duff & Phelps, voting in person at a meeting called for the purpose of voting on such approval, and (b) by either the board of directors of Fund or vote of the holders of a "majority of the outstanding shares of Fund" (which term as used throughout this Agreement shall be construed in accordance with the definition of "vote of a majority of the outstanding voting securities of a company" in section 2(a)(42) of the 1940 Act).
6. Termination. This Agreement may be terminated at any time, without payment of any penalty, by the board of directors of Fund, upon 60 days' written notice to Manager and Phoenix Duff & Phelps. This Agreement may be terminated by Phoenix Duff & Phelps or Manager at any time upon 60 days' written notice to Fund. This Agreement shall terminate automatically in the event of its assignment (as defined in section 2(a)(4) of the 1940 Act) unless a majority of the Fund's board of directors including a majority of those directors who are not "interested persons" of Fund or Phoenix Duff & Phelps, voting in person at a meeting called for the purpose of such vote, approves the continuation of this Agreement.
7. Amendment. This Agreement may not be amended without the affirmative vote of a majority of those directors who are not "interested persons" of Fund or Phoenix Duff & Phelps, voting in person at a meeting called for the purpose of voting on such approval.
Dated as of May 1, 1998
DUFF & PHELPS UTILITIES DUFF & PHELPS INVESTMENT
INCOME INC. MANAGEMENT CO.
By: /s/ Calvin J. Pedersen By: /s/ Calvin J. Pedersen
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Its President and Chief Its Executive Vice President
Executive Officer ---------------------------
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PHOENIX DUFF & PHELPS CORPORATION
By: /s/ Calvin J. Pedersen
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Its President
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Exhibit g.3
ADMINISTRATION AGREEMENT
DUFF & PHELPS UTILITIES INCOME INC., a Maryland corporation registered under the Investment Company Act of 1940 ("1940 Act") as a closed-end diversified management investment company ("Fund"), and J.J.B. HILLIARD, W.L. LYONS, INC. ("Hilliard/Lyons"), a Kentucky corporation, agree that:
1. Engagement of Hilliard/Lyons. Hilliard/Lyons shall provide administrative services to Fund subject to the supervision of the board of directors of Fund, for the period and on the terms set forth in this Agreement. Hilliard/Lyons shall be deemed for all purposes to be an independent contractor and not an agent of Fund, and unless otherwise expressly provided or authorized, shall have no authority to act for or represent Fund in any way.
The services to be provided to Fund by Hilliard/Lyons
shall include all management and administrative services required
in connection with the operation of Fund not required to be
performed by Duff & Phelps Investment Management Co. ("Manager")
pursuant to the Investment Advisory Agreement ("Advisory
Agreement") of even date herewith between Fund and Manager,
including but not limited to: preparation and filing of reports
and returns required by governmental bodies and to shareholders,
preparation of proxy material and prospectuses, making
arrangements for shareholder meetings, and shareholder
correspondence; and supervision of services performed by others
(the cost of which will be paid by the Fund pursuant to paragraph
3), involving the computation of net asset value, portfolio
accounting, preparation of financial statements and preparation
and filing of shareholder income tax information.
2. Expenses to be paid by Hilliard/Lyons. Hilliard/Lyons shall furnish, at its own expense, office space and all necessary office facilities, equipment and personnel for managing the Fund other than in connection with the management of the Fund's investments.
3. Expenses to be paid by Fund. Fund shall pay all charges of depositories, custodians and other agencies for the safekeeping and servicing of its cash, securities and other property and of its transfer agents and registrars and its dividend disbursing, dividend reinvestment and redemption agents, if any, including any charges for bookkeeping, accounting and tax information services provided by Fund's custodian; all charges of legal counsel and of independent auditors; all compensation of directors other than those affiliated with Manager, Duff & Phelps Inc. or Hilliard/Lyons and all expenses incurred in connection
with their services to Fund; all expenses of publication of notices and reports to its shareholders; all expenses of proxy solicitations of Fund or its board of directors; all expenses of printing of Fund's prospectus and registration statement and mailing copies of the prospectus; all taxes and corporate fees payable to federal, state or other governmental agencies, domestic or foreign; all stamp or other transfer taxes; all expenses of printing and mailing certificates for shares of Fund; all expenses of bond and insurance coverage required by law or deemed advisable by Fund's board of directors; all expenses of maintaining the registration of Fund under the 1940 Act; all interest expenses; all fees, dues and expenses incurred by Fund in connection with membership in any trade association or other investment company organization; all miscellaneous business expenses and, in general, all expenses incidental to its operations not assumed by Hilliard/Lyons or by the Manager pursuant to the Advisory Agreement. Fund shall also bear all of Fund's extraordinary expenses as may arise, including expenses incurred in connection with litigation, proceedings and claims and expenses incurred in connection with any obligation of the Fund to indemnify any person. In addition to the payment of expenses, Fund shall also pay all brokers' commissions and other charges relative to the purchase and sale of portfolio securities.
4. Compensation of Hilliard/Lyons. For the services to be rendered and the charges and expenses to be assumed and to be paid by Hilliard/Lyons hereunder, Fund shall pay Hilliard/Lyons a quarterly fee at annual rates of 0.25 of 1% of the Fund's Average Weekly Net Assets which does not exceed $100 million, 0.20 of 1% of the Fund's Average Weekly Net Assets from $100 million to $1.0 billion and 0.10 of 1% of the Fund's Average Weekly Net Assets in excess of $1.0 billion, as determined by valuations made as of the last business day of each calendar week ending during the quarter, which fee shall be payable on the first business day of the next quarter. For purposes of the foregoing calculation, Average Weekly Net Assets shall be equal to 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.
5. Services of Hilliard/Lyons not exclusive. The services of Hilliard/Lyons to Fund hereunder are not to be deemed exclusive, and Hilliard/Lyons shall be free to render similar services to others so long as its services under this Agreement are not impaired by such other activities.
6. Limitation of liability of Hilliard/Lyons. Hilliard/Lyons shall not be liable to Fund or its shareholders for any loss suffered by Fund or its shareholders from or as a consequence of any act or omission
of Hilliard/Lyons, or of any of the directors, officers, employees or agents of Hilliard/Lyons, in connection with or pursuant to this Agreement, except by reason of willful misfeasance, bad faith or gross negligence on the part of Hilliard/Lyons in the performance of its duties or by reason of reckless disregard by Hilliard/Lyons of its obligations and duties under this Agreement.
7. Duration and renewal. Unless terminated as provided in section 8, this Agreement shall continue in effect until April 30, 2000, and thereafter from year to year only so long as such continuance is specifically approved at least annually (a) by a majority of those directors who are not interested persons of Fund or of Hilliard/Lyons voting in person at a meeting called for the purpose of voting on such approval, and (b) by either the board of directors of Fund or vote of the holders of a "majority of the outstanding shares of Fund" (which term as used throughout this Agreement shall be construed in accordance with the definition of "vote of a majority of the outstanding voting securities of a company" in section 2(a)(42) of the 1940 Act).
8. Termination. This Agreement may be terminated at any time, without payment of any penalty, by the board of directors of Fund, or by a vote of the holders of a majority of the outstanding shares of Fund, upon 60 days' written notice to Hilliard/Lyons. This Agreement may be terminated by Hilliard/Lyons at any time upon 60 days' written notice to Fund.
9. Amendment. This Agreement may not be amended without the affirmative vote of a majority of those directors who are not "interested persons" (as defined in section 2(a)(19) of the 1940 Act) of Fund or of Hilliard/Lyons, voting in person at a meeting called for the purpose of voting on such approval.
Dated as of May 1, 1998
DUFF & PHELPS UTILITIES INCOME INC.
By: /s/ Calvin J. Pedersen
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Its President and Chief
Executive Officer
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J.J.B. HILLIARD, W.L. LYONS, INC.
By: /s/ Joseph C. Curry, Jr.
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Its Senior Vice President
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| ARTICLE 6 |
| PERIOD TYPE | 12 MOS |
| FISCAL YEAR END | DEC 31 1997 |
| PERIOD END | DEC 31 1997 |
| INVESTMENTS AT COST | 2,189,835,785 |
| INVESTMENTS AT VALUE | 2,528,183,611 |
| RECEIVABLES | 56,728,435 |
| ASSETS OTHER | 44,182,956 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 2,629,095,002 |
| PAYABLE FOR SECURITIES | 0 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 119,060,310 |
| TOTAL LIABILITIES | 119,060,310 |
| SENIOR EQUITY | 500,000,000 |
| PAID IN CAPITAL COMMON | 1,805,521,585 |
| SHARES COMMON STOCK | 202,936,881 |
| SHARES COMMON PRIOR | 199,741,443 |
| ACCUMULATED NII CURRENT | 2,315,375 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | (136,353,031) |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 338,347,826 |
| NET ASSETS | 2,510,034,692 |
| DIVIDEND INCOME | 140,018,188 |
| INTEREST INCOME | 58,321,357 |
| OTHER INCOME | 328,236 |
| EXPENSES NET | 25,429,630 |
| NET INVESTMENT INCOME | 173,238,151 |
| REALIZED GAINS CURRENT | 43,757,905 |
| APPREC INCREASE CURRENT | 250,102,364 |
| NET CHANGE FROM OPS | 467,098,420 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 171,532,060 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 0 |
| NUMBER OF SHARES REDEEMED | 0 |
| SHARES REINVESTED | 3,195,438 |
| NET CHANGE IN ASSETS | 323,591,434 |
| ACCUMULATED NII PRIOR | 609,284 |
| ACCUMULATED GAINS PRIOR | (180,110,936) |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 12,730,134 |
| INTEREST EXPENSE | 5,606,847 |
| GROSS EXPENSE | 24,429,630 |
| AVERAGE NET ASSETS | 2,255,163,362 |
| PER SHARE NAV BEGIN | 8.44 |
| PER SHARE NII | 0.85 |
| PER SHARE GAIN APPREC | 1.46 |
| PER SHARE DIVIDEND | 0.85 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 9.90 |
| EXPENSE RATIO | .011 |
| AVG DEBT OUTSTANDING | 100,000,000 |
| AVG DEBT PER SHARE | 0.50 |