Dear Fellow Shareholders:
Performance Review: Despite periodic stock market volatility, your Fund has had
a three-year cumulative total return (market price change plus income) through
the quarter ended March 31, 2004 of 37.2%. In comparison, the S&P Utilities
Index had a total return of -30.4%. A composite of the S&P Utilities Index and
the Lehman Utility Bond Index, reflecting the stock and bond ratio of the Fund,
had a total return of -20.1%.
We are also pleased to report that your Fund had a total return of 6.0% for the
quarter ended March 31, 2004. In comparison, the S&P Utilities Index had a
total return of 5.2%. A composite of the S&P Utilities Index and the Lehman
Utility Bond Index, had a total return of 4.7%.
During the first quarter of 2004, your Fund paid three monthly 6.5 cent per
share dividends. The 6.5 cent per share monthly rate, without compounding,
would be 78 cents annualized, or a 6.84% common stock dividend yield based on
the March 31, 2004 closing price of $11.40. This compares favorably with the
quarter-end yields of 3.52% on the Dow Jones Utility Index and 3.66% on the S&P
Utilities Index.
Annual Shareholders' Meeting: The annual meeting of shareholders was held on
April 20, 2004 in Naples, Florida. Nathan Partain, the Fund's President and
Chief Executive Officer, addressed shareholders in regard to the investment
environment and outlook. The following excerpts reflect and reinforce the views
of the analytical staff presented to the Board in February and reported to you
in the annual shareholder report.
The year 2003 presented geopolitical challenges for America, but the economy
and equity markets have finally begun to recover appreciably from a multi-year
cycle of recession and stagnation. Despite the solid economic rebound,
employment has lagged prior recoveries. Productivity gains have been
significant and conservative corporate managements have been hesitant to add to
payrolls without firm conviction of an enduring expansion. The year also was
marked by continuing investigations into financial improprieties committed by
corporate executives and improper trading practices by some mutual fund
companies.
Regardless of stock market conditions, the Fund's investment management team
continues its basic fundamental analysis to identify the most appropriate
investments to meet your Fund's objectives.
Utilities continue to adapt to the stringent credit conditions that developed
in 2002, largely as a result of the Enron debacle. In general, utility
companies have shed non-core investments and devoted their energies to their
basic bread-and-butter businesses, resulting in a renewed focus on liquidity,
cash flow, balance sheet strength, dividends and dividend growth, and expense
control.
For the electric industry, 2003 was the first year since 1999 that news was not
dominated by negative headlines. The industry has endured the California energy
crisis, some scandals in energy marketing and trading, and investigations into
accounting irregularities. The path to the industry's recovery has been paved
with the shift to "back to basics" strategies--as companies return to their
core regulated utility businesses. Non-core operations, such as merchant
generating plants, international investments, marketing and trading activities,
and telecom ventures have been shut down, sold, or otherwise disposed of. We
expect that state agencies and regional issues will once again play a dominant
role in utility regulation.
One of the biggest disappointments of last year was the failure of Congress to
pass the Energy Bill. The electric component of the bill contained some
positive measures that would have spurred needed investment in the nation's
transmission system and improved its reliability. The August 14, 2003, blackout
highlighted the need for such investment. Given that 2004 is an election year,
we think it is unlikely that there will be passage of a bill containing
comprehensive energy legislation. Nonetheless, we expect to see an increased
focus on electric reliability issues by the Federal Energy Regulatory
Commission and by state regulatory agencies.
Electric companies have long been among the highest dividend-paying companies
in the S&P 500. The newly-reduced tax rate on dividends, coupled with utility
"back to basics" strategies, have resulted in renewed emphasis on dividend
payouts by electric company managements. We view this trend as good for the
sector and good for your Fund. Our electric holdings are weighted toward those
companies that are committed to dividend payments and dividend growth.
When we think of gas, the first thing that comes to mind is "premium prices."
Gasoline prices are certainly getting a lot of attention from consumers and
lawmakers, but natural gas prices are also dominant in energy headlines. Oil
prices tend to be higher when there is geopolitical uncertainty, and doubts
about the ability of natural gas supply to meet growing demand has raised
consumer concerns about future prices.
Over the longer-term, we expect new supply sources to develop--such as expanded
liquefied natural gas facilities. The derailed energy bill also included
provisions addressing increased supplies of natural gas. Nevertheless, new
sources typically take years to significantly increase total supply. In the
meantime, we expect prices to experience continued volatility, as production
from existing wells wanes and additional supply is more difficult and expensive
to come by.
A number of natural gas pipeline companies that had impaired their financial
strength in 2001 and 2002 as a result of their unsuccessful efforts to become
national energy merchants refocused on their basic businesses in 2003 and
enjoyed significant stock price rebounds. Many of them are still very high
risk, despite their refocus on core businesses, and have not regained the
earnings potential they had
2
before they ventured away from their core competencies. Moreover, they pay
little or no dividends, so owning their equity is not consistent with the
income objective of your Fund. Rather, your Fund continues to emphasize
low-risk companies with stable growth rates that we believe will be able to
maintain or grow their dividends annually.
Like the electric and gas sectors, the telecommunications sector has suffered
through a rough patch for the past few years, but 2003 offered a measure of
stability. Balance sheet problems caused by heavy investment in new
technologies have been largely resolved, leading to increased returns to
shareholders in the form of dividends and share buybacks. In addition,
operating fundamentals in the local wireline sector are showing stabilization.
The wireless sector of the telecommunications industry is undergoing its own
transition. Last year was a banner year for subscriber growth and market
penetration, and we expect growth to continue in 2004. Consolidation, which has
long been expected, finally arrived in 2004, with Cingular's announced
acquisition of AT&T Wireless. We believe that the sector should benefit from a
reduction in the number of competitors.
Clearly, the telecommunications industry continues to experience a major
transformation. Regulation, industry structure, competitive threats, both new
and old, and the lack of a recovery in telecom demand will make this year yet
another year of transition for the industry. We remain confident in our
holdings of financially strong incumbent local telecommunications companies and
are encouraged by their managements' actions to return value to shareholders in
the form of increased dividends.
2003 was the 10/th/ year that stocks of Real Estate Investment
Trusts--REITs--were included in the Fund's portfolio, and these holdings
continued to be a bright spot. REIT yields are currently among the highest in
the stock market. For the last ten years, more than 60% of the return from the
NAREIT Equity Index has been generated from income. We believe this trend will
continue in the future.
REITs also provide an opportunity to diversify the Fund's portfolio and reduce
risk. Studies published by Ibbotson Associates indicate that REITs can provide
meaningful diversification benefits in portfolios. Our REIT holdings are
weighted to reflect the stronger property types. We continue to like the
attributes REITs bring to the Fund's portfolio.
Again, we want to emphasize that our management team's investment philosophy
remains consistent regardless of market conditions, investigative trends,
industry evolution, what have you. Our goal is to employ sound fundamental
research to identify the best investments to achieve our primary objectives
--current income and growth in current income--for you, our shareholders.
We appreciate your support and investment in the DNP Select Income Fund Inc.
3
Also at the meeting, the Chairman of the Board expressed his appreciation to
the two retiring directors, Gordon B. Davidson and Franklin A. Cole, for many
years of outstanding service to the Fund. Mr. Davidson had served as a director
of the Fund since 1989 and was Chairman of the nominating committee. Mr. Cole
also had served as a director since 1989 and was a Member of the executive
committee and Chairman of the contracts committee.
Shareholders elected the three nominees for director. Two of the three, Robert
J. Genetski and Francis E. Jeffries, are continuing their service to the Fund.
The third director, Stewart E. Conner, is new to the Board. Mr. Conner is a
partner in the Louisville, Kentucky law firm, Wyatt Tarrant & Combs LLP, and he
also serves as Director of the Hilliard Lyons Growth Fund, Inc.
Board of Directors Meeting: At the February 2004 Board of Directors' meeting,
the Board declared the following monthly dividends:
Cents Per Share Record Date Payable Date
--------------- ----------- ------------
6.5...... June 30 July 12
6.5...... July 30 August 10
Automatic Dividend Reinvestment Plan and Direct Deposit Service--The Fund has a
dividend reinvestment plan available as a benefit to all registered
shareholders. As long as the market price of the common stock of the Fund
exceeds or is equal to the net asset value per share, new shares for the
dividend reinvestment program are issued at the greater of either 95% of the
market price or net asset value. If the market price per share of common stock
is below the net asset value per share, shares are purchased in the open market
at prevailing market prices, plus any brokerage commissions paid by The Bank of
New York.
Those shareholders whose shares are held for them by a brokerage house or
nominee in "street-name" may not participate in the Fund's automatic dividend
reinvestment plan. For such shareholders desiring automatic dividend
reinvestment, we suggest you contact your broker or other nominee.
As an added service, without cost to the shareholder, the Fund offers direct
deposit service through electronic funds transfer to all registered
shareholders currently receiving a monthly dividend check. This service is
offered through The Bank of New York. For more information and/or an
authorization form on automatic dividend reinvestment or direct deposit, please
contact The Bank of New York (1-877-381-2537 or http://stock.bankofny.com).
Visit us on the Web--You can obtain the most recent shareholder financial
report and dividend information at our web site, http://www.dnpselectincome.com.
4
We appreciate your interest in DNP Select Income Fund Inc., and we will
continue to do our best to be of service to you.
/s/ Claire V. Hansen /s/ Nathan I. Partain
Claire V. Hansen, CFA Nathan I. Partain, CFA
Chairman President and Chief
Executive Officer
5
DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS
(UNAUDITED)
MARCH 31, 2004
COMMON STOCKS--86.3%
Market
Value
Shares Company (Note 1)
--------- ------- ------------
[_] ELECTRIC--49.0%
1,501,000 Ameren Corp.................................... $ 69,181,090
800,000 Cinergy Corp................................... 32,712,000
500,000 Consolidated Edison, Inc....................... 22,050,000
796,000 Dominion Resources Inc......................... 51,182,800
1,000,000 DTE Energy Co.................................. 41,150,000
409,000 Duquesne Light Holdings Inc.................... 7,975,500
1,100,000 Energy East Corp............................... 27,896,000
1,000,000 Exelon Corp.................................... 68,870,000
2,000,000 FirstEnergy Corp............................... 78,160,000
600,000 FPL Group Inc.................................. 40,110,000
1,080,000 Iberdrola S.A. (Spain)......................... 22,297,048
215,000 National Grid Transco PLC ADR.................. 8,649,450
770,000 National Grid Transco PLC (United Kingdom)..... 6,085,167
1,318,600 NSTAR.......................................... 66,879,392
700,000 Pinnacle West Capital Corp..................... 27,545,000
1,375,000 Progress Energy Inc............................ 64,735,000
1,000,000 Public Service Enterprise Group Inc............ 46,980,000
1,000,000 Scottish & Southern Energy ADR................. 12,635,310
850,000 Scottish & Southern Energy PLC (United Kingdom) 10,740,016
368,700 Scottish Power PLC ADR......................... 10,456,332
2,300,000 Southern Co.................................... 70,150,000
1,500,000 Vectren Corp................................... 37,005,000
581,000 WPS Resources Corp............................. 27,771,800
1,999,304 Xcel Energy Inc................................ 35,607,604
------------
886,824,509
[_] GAS--7.5%
926,000 AGL Resources Inc.............................. 26,872,520
1,000,000 Keyspan Corp................................... 38,220,000
900,000 Peoples Energy Corp............................ 40,185,000
1,000,000 WGL Holdings Inc............................... 30,100,000
------------
135,377,520
The accompanying note is an integral part of this financial statement.
6
DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS--(Continued)
(UNAUDITED)
March 31, 2004
Market
Value
Shares Company (Note 1)
--------- ------- ------------
[_] TELECOMMUNICATION--16.2%
1,000,000 Alltel Corp......................... $ 49,890,000
1,100,000 BCE Inc............................. 23,133,000
1,730,000 BellSouth Corp...................... 47,903,700
1,250,000 Chunghwa Telecom Co. Ltd............ 22,137,500
1,642,230 SBC Communications, Inc............. 40,300,324
500,000 TDC A S ADS......................... 9,200,000
856,250 Telecom Corp of New Zealand Ltd. ADR 26,774,938
1,068,400 Telstra Corp. Ltd. ADR.............. 18,686,316
1,519,000 Verizon Communications Inc.......... 55,504,260
------------
293,530,038
[_] NON-UTILITY--13.6%
39,000 Alexandria Real Estate Equities Inc. 2,457,000
181,960 Archstone Smith Trust............... 5,369,639
73,000 Arden Realty Inc.................... 2,360,090
241,300 Boston Properties Inc............... 13,105,003
85,200 Camden Property Trust............... 3,829,740
118,100 CBL & Associates Properties Inc..... 7,244,254
179,816 Centerpoint Properties Corp......... 14,834,820
255,000 Chelsea Property Group Inc.......... 16,049,700
163,479 Corporate Office Properties Trust... 4,086,975
320,300 Developers Diversified Realty Corp.. 12,940,120
160,000 Duke Realty Corp.................... 5,555,200
80,000 Equity Office Properties Trust...... 2,311,200
150,000 Equity Residential Properties Trust. 4,477,500
59,000 Essex Property Trust Inc............ 3,864,500
600,600 General Growth Properties Inc....... 21,111,090
107,200 Health Care Property Investors Inc.. 3,033,760
70,000 Health Care REIT Inc................ 2,842,000
102,344 Healthcare Realty Trust Inc......... 4,370,089
80,000 Home Properties of New York Inc..... 3,260,000
76,000 Hospitality Properties Trust........ 3,526,400
193,939 iStar Financial Inc................. 8,203,620
100,000 Keystone Property Trust............. 2,431,000
The accompanying note is an integral part of this financial statement.
7
DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS--(Continued)
(UNAUDITED)
March 31, 2004
Market
Value
Shares Company (Note 1)
--------- ------- --------------
62,001 Kimco Realty Corp.......................... $ 3,160,811
200,200 The Macerich Co............................ 10,790,780
146,460 Maguire Properties Inc..................... 3,749,376
188,390 Pan Pacific Retail Properties Inc.......... 9,815,119
291,480 ProLogis................................... 10,455,388
50,000 Realty Income Corp......................... 2,232,500
60,499 Shurgard Storage Centers Inc. Class A...... 2,413,910
281,736 Simon Property Group Inc................... 16,464,652
205,800 S.L. Green Realty Corp..................... 9,816,660
278,240 United Dominion Realty Trust Inc........... 5,459,069
252,000 Vornado Realty Trust....................... 15,240,960
253,071 Weingarten Realty Investors................ 8,756,256
--------------
245,619,181
--------------
Total Common Stocks (Cost--$1,367,136,146). 1,561,351,248
--------------
PREFERRED STOCKS--16.5%
[_] UTILITY--16.5%
200,000 Alltel Corp. 7 3/4% due 5/17/05............ $ 10,144,000
750,000 Ameren Corp. 9 3/4% due 5/15/05............ 20,962,500
1,200,000 Centurytel Inc. 6 7/8% due 5/15/05......... 28,776,000
626,200 Cinergy Corp. 9 1/2% due 2/16/05........... 40,483,830
450,000 Dominion Resources Inc. 9 1/2% due 11/16/04 25,272,000
986,700 DTE Energy Co. 8 3/4% due 8/16/05.......... 25,506,195
550,000 Duke Energy Corp. 8 1/4% due 5/18/04....... 8,140,000
223,500 EIX Trust II Series B 8.60% due 10/29/29... 5,755,125
500,000 FPL Group Inc. 8 1/2% due 2/16/05.......... 28,860,000
412,000 Keyspan Corp. 8 3/4% due 5/16/05........... 22,042,000
775,000 Oneok Inc. 8 1/2% due 2/16/06.............. 24,288,500
500,000 Sempra Energy 8 1/2% due 5/17/05........... 14,600,000
172,700 Southern Union Co. 5 3/4% due 8/16/05...... 10,325,733
400,000 TXU Corp. 8 3/4% due 11/16/05.............. 14,648,000
500,000 TXU Corp. 8 1/8% due 5/16/06............... 18,975,000
--------------
Total Preferred Stocks (Cost--$290,141,593) 298,778,883
--------------
The accompanying note is an integral part of this financial statement.
8
DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS--(Continued)
(UNAUDITED)
March 31, 2004
BONDS--39.2%
Ratings
--------------------------
Standard Market
and Value
Par Value Company Fitch Moody's Poor's (Note 1)
--------- ------- --------- ------- -------- ------------
[_] ELECTRIC--11.0%
$18,050,000 Comed Financing II
8 1/2%, due 1/15/27............. Not Rated Baa2 BBB $ 20,886,251
7,500,000 Commonwealth Edison Co.
9 7/8%, due 6/15/20............. A- A3 A- 8,308,718
24,000,000 Dominion Resources Capital Trust
7.83%, due 12/01/27............. Not Rated Baa2 BBB- 27,047,328
5,000,000 El Paso Electric Co., Series E
9.40%, due 5/01/11.............. Not Rated Baa3 BBB- 5,858,240
5,000,000 Illinois Power Co.
7 1/2%, due 7/15/25............. CCC+ B1 B 5,125,000
15,825,000 Niagara Mohawk Power Corp.
8 7/8%, due 5/15/07............. Not Rated Baa3 A- 18,634,254
5,000,000 Progress Energy Inc.
7 3/4%, due 3/01/31............. BBB- Baa2 BBB- 6,062,890
9,000,000 PSEG Power LLC
8 5/8%, due 4/15/31............. BBB+ Baa1 BBB 11,921,463
22,750,000 Puget Capital Trust
8.231%, due 6/01/27............. Not Rated Ba1 BB 22,227,182
25,000,000 Southern California Edison Co.
8.00%, due 2/15/07.............. BBB+ Baa2 BBB 28,702,400
13,000,000 Southern Co. Capital Trust II
8.14%, due 2/15/27.............. Not Rated Baa1 BBB+ 15,144,129
10,000,000 Virginia Electric & Power Co.
8 5/8%, due 10/01/24............ Not Rated A2 A- 10,702,250
17,700,000 Virginia Electric & Power Co.
8 1/4%, due 3/01/25............. Not Rated A2 A- 19,251,688
------------
199,871,793
[_] GAS--4.5%
5,000,000 KN Energy Inc.
7 1/4%, due 3/01/28............. BBB Baa2 BBB 5,720,150
The accompanying note is an integral part of this financial statement.
9
DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS--(Continued)
(UNAUDITED)
March 31, 2004
Ratings
--------------------------
Standard Market
and Value
Par Value Company Fitch Moody's Poor's (Note 1)
--------- ------- --------- ------- -------- -----------
$10,000,000 Northern Border Partners LP
8 7/8%, due 6/15/10........ BBB+ Baa2 BBB+ $12,243,720
15,000,000 Panhandle Eastern
8 5/8%, due 4/15/25........ BBB- Baa3 BBB- 16,298,340
6,488,000 Southern Union Co.
7.60%, due 2/01/24......... BBB Baa3 BBB 7,430,395
8,850,000 Southern Union Co.
8 1/4%, due 11/15/29....... BBB Baa3 BBB 11,022,294
10,000,000 TE Products Pipeline Co.
7.51%, due 1/15/28......... Not Rated Baa3 BBB 10,957,090
15,500,000 Trans-Canada Pipeline
9 1/8%, due 4/20/06........ Not Rated A3 BBB+ 17,614,526
-----------
81,286,515
[_] TELECOMMUNICATION--8.2%
15,000,000 AT&T Corporation
8.35%, due 1/15/25......... BBB Baa2 BBB 15,983,895
22,000,000 British Telecom PLC
8 3/8%, due 12/15/10....... A Baa1 A- 27,229,928
5,000,000 Centurytel Inc.
6 7/8%, due 1/15/28........ BBB+ Baa2 BBB+ 5,353,210
10,000,000 Centurytel Inc.
8 3/8%, due 10/15/10....... BBB+ Baa2 BBB+ 12,117,130
10,000,000 France Telecom
7 3/4%, due 3/01/11........ BBB+ Baa2 BBB+ 12,232,880
13,250,000 GTE California Inc.
8.07%, due 4/15/24......... AA A1 A+ 13,821,804
17,625,000 GTE Corp.
7.90%, due 2/01/27......... A+ A3 A+ 19,878,339
5,000,000 GTE North Inc., Series C
7 5/8%, due 5/15/26........ AA A1 A+ 5,458,045
12,243,000 TCI Communications Inc.
8.65%, due 9/15/04......... BBB Baa3 BBB 12,671,003
4,314,000 Tritel PCS Inc.
10 3/8%, due 1/15/11....... BBB Baa2 BBB 5,137,292
The accompanying note is an integral part of this financial statement.
10
DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS--(Continued)
(UNAUDITED)
March 31, 2004
Ratings
----------------------------
Standard Market
and Value
Par Value Company Fitch Moody's Poor's (Note 1)
--------- ------- --------- --------- -------- ------------
$10,500,000 Verizon Global Funding Corp.
7 3/4%, due 12/01/30................... A+ A2 A+ $ 12,803,238
5,000,000 Vodaphone Group PLC
7 7/8%, due 2/15/30.................... A A2 A 6,358,885
------------
149,045,649
[_] NON-UTILITY--15.5%
#15,000,000 American General Finance Corp.
1.36%, due 5/28/04..................... A+ A1 A+ 15,000,000
#50,000,000 Bear Stearns Companies Inc. Master Note
1.212%, due 4/01/04.................... A+ A1 A 50,000,000
#25,000,000 Belford U.S. Capital Co. LLC
1.07%, due 3/08/05..................... AAA Not Rated AAA 25,001,450
#25,000,000 CIT Group Inc.
1.90%, due 4/08/04..................... A A2 A 25,001,625
#25,000,000 Countrywide Home Loans Inc.
1.19%, Series L, due 1/18/05........... A A3 A 25,003,925
7,361,000 Continental Cablevision Inc.
9.50%, due 8/01/13..................... Not Rated Baa3 BBB 8,386,431
8,000,000 Dayton Hudson Corp.
9 7/8%, due 7/01/20.................... A A2 A+ 11,670,104
#20,000,000 General Electric Capital Corp.
1.313%, due 5/14/04.................... Not Rated Aaa AAA 20,005,540
#25,000,000 Household Finance Corp.
1.47%, due 5/28/04..................... A A1 A 25,016,750
#10,000,000 Liberty Lighthouse U.S. Capital Co. LLC
1.16%, due 7/15/04..................... AAA Not Rated AAA 10,003,350
#25,000,000 Morgan Stanley Dean Witter & Co.
1.45%, Series C, due 5/18/04........... AA- Aa3 A+ 25,014,900
#25,000,000 Salomon Smith Barney Holdings Inc.
1.45%, Series K, due 5/07/04........... AA+ Aa1 AA- 25,007,200
#15,000,000 Sigma Finance Inc.
1.20%, due 1/28/05..................... AAA AAA AAA 15,000,000
------------
280,111,275
------------
Total Bonds (Cost--$688,397,913).................................... 710,315,232
------------
The accompanying note is an integral part of this financial statement.
11
DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS--(Continued)
(UNAUDITED)
March 31, 2004
Market
Par Value/ Value
Shares (Note 1)
----------- - ------------
U.S. TREASURY OBLIGATION--0.1%
$2,000,000 U.S. Treasury Bond
10 3/4%, due 8/15/05......................................... $ 2,257,580
------------
Total U.S. Treasury Obligation (Cost--$2,394,375)............ 2,257,580
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--11.5%
25,000,000 Federal Home Loan Mortgage Corp.
9%, due 11/15/13............................................. 26,132,125
120,000,000 Federal National Mortgage Assn.
8 1/2%, due 5/26/05.......................................... 125,690,880
#13,223,842 Overseas Private Investment Corp., Series A
1 1/2%, due 12/16/06......................................... 13,223,842
#8,408,828 Overseas Private Investment Corp., Series B
1 1/2%, due 12/16/06......................................... 8,408,828
#2,206,105 Overseas Private Investment Corp., Series C
1 1/2%, due 12/16/06......................................... 2,206,105
#910,147 Overseas Private Investment Corp., Series D
1 1/2%, due 12/16/06......................................... 910,147
#8,910,723 Overseas Private Investment Corp., Series E
1 1/2%, due 12/16/06......................................... 8,910,723
#4,418,734 Overseas Private Investment Corp., Series F
1 1/2%, due 12/16/06......................................... 4,418,734
#4,030,911 Overseas Private Investment Corp., Series G
1 1/2%, due 12/16/06......................................... 4,030,911
#2,904,433 Overseas Private Investment Corp., Series H
1 1/2%, due 12/16/06......................................... 2,904,433
#6,705,421 Overseas Private Investment Corp., Series I
1 1/2%, due 12/16/06......................................... 6,705,421
#2,903,447 Overseas Private Investment Corp., Series J
1 1/2%, due 12/16/06......................................... 2,903,447
#1,279,885 Overseas Private Investment Corp., Series K
1 1/2%, due 12/16/06......................................... 1,279,885
------------
Total U.S. Government Agency Obligations (Cost--$210,480,726) 207,725,481
------------
MONEY MARKET INSTRUMENTS--14.2%
#13,849,679 AIM STIC Liquid Assets Portfolio............................. 13,849,679
#34,090,000 Alpine Securitization Corp.
1.03%, due 4/02/04........................................... 34,089,025
#50,000,000 Deutsche Bank Securities Inc. Repurchase Agreement,
1.123%, dated 3/31/04, due 4/01/04, collateralized by
$51,000,000 AHM 2003-1 A 1.49% CMO due 2/25/34............... 50,000,000
The accompanying note is an integral part of this financial statement.
12
DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS--(Continued)
(UNAUDITED)
March 31, 2004
Market
Par Value/ Value
Shares (Note 1)
---------- -----------
$30,000,000 General Electric Co.
0.95%, due 4/01/04........................................ $30,000,000
#50,000,000 Greenwich Capital Markets Inc. Repurchase Agreement,
1.143%, dated 3/31/04, due 4/01/04, collateralized by
$527,805 BCF 1997-R1 WAC 144A CMO 1.943% due 3/25/37;
$1,395,003 CCMSC 2000-FL1A F 144A CMO 3.55% due 12/12/13;
$10,626,724 GSR 2003-1 A11 CMO 4.279% due 3/25/33;
$6,106,635 HVMLT 2003-2 3A CMO 5.204% due 10/19/33;
$3,687,745 RALI 2004-QS1 A2 CMO 1.64% due 1/25/34; and
$28,489,411 SASC 2004-3 2A1 CMO 4.50% due 3/25/19......... 50,000,000
#19,191,254 Janus Institutional Cash Reserves Fund.................... 19,191,254
#50,000,000 Nomura Securities International Inc. Repurchase Agreement,
1.113%, dated 3/31/04, due 4/01/04, collateralized by
$493,737 AMAC 2002-9 A2 CMO 5.75% due 12/25/32;
$64,778 AMAC 2002-6 AX CMO 6.50% due 8/25/32;
$246,051 AMAC 2003-5 A30 CMO 13.64% due 4/25/33;
$788,205 ASC 1997-D4 PS1 1.305% due 4/14/29;
$4,101,833 BOAA 2003-2 CB6 CMO 6.91% due 4/25/33;
$225,972 CWHL 2002-16 1A14 CMO 6.50% due 9/25/32;
$566,428 CWHL 2003-J3 1A2 CMO 6.36% due 5/25/33;
$1,562,519 CWALT 2002-17 A6 CMO 6.96% due 1/25/33;
$876,553 CWHL 2002-31 A11 CMO 6.00% due 1/25/33;
$82,982 CWHL 2002-36 A1 CMO 6.00% due 1/25/33;
$832,999 CSFB 2002-22 4X CMO 7.50% due 7/25/32;
$3,329,111 CSFB 2003-27 4A23 CMO 2.85% due 11/25/33;
$160,549 FNT 1999-2 4X CMO 6.50% due 4/25/29;
$3,598,354 FHASI 2003-9 1A9 CMO 6.51% due 11/25/33;
$163,784 GSR 2002-8F 3ABX CMO 6.50% due 9/25/32;
$27,402 GSR 2002-6F 2A2 CMO 7.01% due 7/25/32;
$111,029 GSR 2002-6F 2A8 CMO 6.71% due 7/25/32;
$836,007 JPMCC 2003-C1 A1 CMO 4.275% due 1/12/37;
$3,812,134 MASTR 2003-7 4A36 CMO 6.01% due 9/25/33;
$2,966,537 MASTR 2003-2 2A7 CMO 7.01% due 3/25/18;
$920,809 MASTR 2003-4 PO CMO 0% due 5/25/33;
$1,182,100 MALT 2002-2 PO1 CMO 0% due 10/25/32;
$1,142,221 MALT 2003-2 30PO CMO 0% due 3/25/33;
$1,103,321 MALT 2003-3 2PO CMO 0% due 5/25/33;
$2,124,902 MALT 2003-5 30PO CMO 0% due 8/25/33;
$1,118,955 MSC 1999-WF1 A2 CMO 6.21% due 11/15/31;
$385,051 MSDWC 2001-IQAA3 CMO 5.72% due 12/18/32;
The accompanying note is an integral part of this financial statement.
13
DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS--(Continued)
(UNAUDITED)
March 31, 2004
Market
Par Value/ Value
Shares (Note 1)
---------- --------------
$1,206,319 NAA 2003-A1 APO CMO 0% due 5/25/33;
$77,993 PNCMS 1999-5 2X CMO 6.75% due 7/25/29;
$1,847,585 PRIME 2003-1 A9 CMO 6.84% due 6/25/33;
$2,189,239 PHMS 1993-61 A14 CMO 20.765% due 12/25/08;
$762,801 RALI 2002-QS12 A3 CMO 6.91% due 9/25/32;
$64,278 RALI 2002-QS3 A11A CMO 6.96% due 3/25/32;
$3,130,714 RALI 2003-QS15 A5 CMO 5.50% due 8/25/33;
$186,959 RFMSI 2002-S19 A9 CMO 6.86% due 12/25/32;
$2,737,492 RFMSI 2003-S4 A11 CMO 6.46% due 3/25/33;
$837,547 SASC 2002-26 1A17 CMO 5.60% due 1/25/33;
$1,452,512 SASC 2003-1 1A7 CMO 5.25% due 2/25/18;
$349,318 WAMU 2002-S8 2A3 CMO 5.25% due 1/25/18;
$164,881 WAMU 2002-S7 4A2 CMO 6.00% due 11/25/32;
$2,440,328 WAMMS 2003-MS5 1A5 CMO 6.41% due 3/25/18;
$166,034 WFMBS 2002-18 1A6 CMO 6.00% due 12/25/32; and
$548,559 WFMBS 2002-18 2AIO CMO 0.639% due 12/25/32................. $ 50,000,000
#$10,190,000........ Waterfront Funding Corp.
1.08%, due 4/01/04.................................................. 10,190,000
--------------
Total Money Market Instruments (Amortized Cost--$257,305,206)....... 257,319,958
--------------
CASH AND OTHER ASSETS LESS LIABILITIES (40.1%)........................................... (726,922,073)
--------------
REMARKETED PREFERRED STOCK
($.001 par value per share; 100,000,000 shares authorized and 5,000 shares issued and
outstanding; liquidation preference $100,000 per share).............................. (500,000,000)
--------------
NET ASSETS APPLICABLE TO COMMON STOCK
(equivalent to $8.25 per share of common stock based on 219,454,216 shares of common
stock outstanding; authorized 250,000,000 shares).................................... $1,810,826,309
==============
# This security was purchased with the cash proceeds from securities loans.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets applicable to common shares of the
Fund.
--------
(1)The market values for securities are determined as follows: Equity
securities traded on a national securities exchange or traded
over-the-counter and quoted on the NASDAQ System are valued at last sales
prices. Fixed income securities and any other securities for which it is
determined that market prices are unavailable or inappropriate are valued at
a fair value using a procedure determined in good faith by the Board of
Directors which includes the use of a pricing service. Each money market
instrument having a maturity of 60 days or less is valued on an amortized
cost basis, which approximates market value.
14
Board of Directors
STEWART E. CONNER
CONNIE K. DUCKWORTH
ROBERT J. GENETSKI
CLAIRE V. HANSEN, CFA
FRANCIS E. JEFFRIES, CFA
NANCY LAMPTON
CHRISTIAN H. POINDEXTER
CARL F. POLLARD
DAVID J. VITALE
Officers
CLAIRE V. HANSEN, CFA
Chairman
NATHAN I. PARTAIN, CFA
President and Chief Executive Officer
T. BROOKS BEITTEL, CFA
Senior Vice President, and Secretary
MICHAEL SCHATT
Senior Vice President
JOSEPH C. CURRY, JR.
Vice President and Treasurer
DIANNA P. WENGLER
Assistant Vice President and
Assistant Secretary
DNP Select
Income Fund Inc.
Common stock listed on the New York Stock Exchange under the symbol DNP
55 East Monroe Street
Chicago, Illinois 60603
(312) 368-5510
Shareholder inquiries please contact
Transfer Agent
Dividend Disbursing
Agent and Custodian
The Bank of New York
Shareholder Relations
Church Street Station
P.O. Box 11258
New York, New York 10286-1258
(877) 381-2537
Investment Adviser
Duff & Phelps
Investment Management Co.
55 East Monroe Street
Chicago, Illinois 60603
Administrator
J.J.B. Hilliard, W.L. Lyons, Inc.
Hilliard Lyons Center
Louisville, Kentucky 40202
(888) 878-7845
Legal Counsel
Mayer, Brown, Rowe & Maw
190 South LaSalle Street
Chicago, Illinois 60603
Independent Auditors
Ernst & Young LLP
233 South Wacker Drive
Chicago, Illinois 60606
15
DNP Select
Income Fund Inc.
First Quarter Report
March 31, 2004
[Artwork]