DUFF & PHELPS UTILITIES INCOME INC, N-30D, 1996-08-13

DUFF & PHELPS UTILITIES INCOME INC
N-30D, 1996-08-13

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<PAGE>

DEAR FELLOW SHAREHOLDERS:

PERFORMANCE REVIEW: During the second quarter of 1996, the total return on
utility equities was very good--exceeding that of the broad stock market
indexes. As measured by the Dow Jones Utilities Index and the S&P Utilities
Index, the group experienced total returns of 4.95% and 5.01% respectively.
This compares favorably with a 4.49% total return on the S&P 500. On the other
hand, utility bond prices fell during the quarter as concerns about inflation
and the increased level of economic growth pushed interest rates higher. The
Lehman Utility Bond Index experienced a total return of only 0.54% for the
quarter.

All of the second quarter total returns cited above were higher than in the
first quarter. For the first six months of 1996, the total returns were a
negative 0.01% for the S&P Utilities Index, 0.6% for the Dow Jones Utilities
Index and a negative 2.4% for the Lehman Utility Bond Index. Your Fund
experienced a more favorable total return of 1.5% as shown below.

TOTAL RETURNS
FIRST SIX MONTHS OF 1996

[CHART APPEARS HERE]

DNP Dow Jones Lehman Brothers
Market Value* Utilities Index Utility Bond Index Composite**
------------- --------------- ------------------ -----------
<S> <C> <C> <C>
1.5% 0.6% (2.4)% (0.3)%
</TABLE>

* Total Return of a Fund shareholder in the Fund's Automatic Dividend
Reinvestment Plan.
** Weighted average of Dow Jones Utility Index and Lehman Brothers Utility Bond
Index.

The return for the Fund's shareholders shown in the chart above is net of
expenses and assumes that all distributions were reinvested in accordance with
the terms of the Fund's dividend reinvestment plan. During this period, the
Fund continued to pay its regular six cent monthly dividend as it has every
month since July 1987. Our six cent monthly rate, without compounding, would
be seventy-two cents annualized or an 8.23% common stock dividend yield based
on the June 28, 1996 closing price of $8.75 per share.
<PAGE>

Throughout the first six months of 1996, the Fund's market price remained
above its net asset value. The premium at the close of the second quarter was
4.0%.

IMPLICATIONS OF THE INCREASED UTILITY COMPETITIVE ENVIRONMENT: On a long-
term basis, electric utility security valuation will be impacted by the
uncertainties facing the industry as it moves into a more competitive
environment. The basic concern is that as consumer access to a variety of
electricity suppliers increases, the price for electricity will fall. Already
many utilities are discounting prices to large customers in return for long-
term contracts. Also, many large industrial users have threatened to build
their own generation in conjunction with other needs (i.e. co-generation where
both steam and electricity is generated) or to leave their existing provider
unless they receive lower rates.

In a regulated environment, a "stranded asset" can be created when the
implied contract between the electricity provider and user is broken. How does
that happen? A utility makes an investment in electric generating equipment
based on the expectation that it will be required to serve its customers at
rates approved by the regulatory body having jurisdiction. If customers
receive lower rates by a different provider, it is possible the imbedded costs
of the initial provider will not be recovered, must less a return on the
investment. This problem is most severe for utilities that built large nuclear
facilities in the 1980's or were legally forced into signing high cost, long-
term contracts with independent power producers.

The national utility watchdog agency, the Federal Energy Regulatory
Commission (FERC), regulates wholesale and interstate electricity sales. To
date, FERC's policy has been to allow some form of stranded asset recovery. On
the other hand, the states, which regulate the intra-state aspects of public
utilities, are torn between maintaining the financial health of the public
utility sector and providing lower cost electricity to consumers. The primary
risk to utility shareholders is potential write-offs by utilities of stranded
assets and a reduction of utility company earning power. The primary risks to
utility bond holders are a decline in credit quality as the assets backing
bonds shrink and that bonds get called by their issuers at an inopportune time
due to mortgage indenture violations.

Your Fund managers see utility industry challenges as opportunities. The
industry as a whole is not in decline--modern economies require increasing
electricity usage to function. Considering the essential nature of providing
electric service, it is highly likely someone will always be able to make
money generating and selling electricity and pay interest and dividends for
the use of capital to do so. The opportunities and challenges are to select
those utility companies that will be more successful and avoid those utility
companies that will be less successful. Experience, research, and patience
should pay off for investors.

In response to the increasing competitive environment, the Fund has made
investments in faster growing companies in the telecommunication and power
industries both domestically and internationally and in real estate investment
trusts (REIT's) to enhance income to the shareholder. As always, a commitment
to high quality and diversification are a hallmark of the portfolio.

QUARTERLY BOARD MEETING: At the quarterly meeting held on July 10, 1996 the
Board of Directors declared the following monthly dividend:

<TABLE>
<CAPTION>
DIVIDEND PER SHARE RECORD DATE PAYMENT DATE
------------------ ----------- ------------
<S> <C> <C>
6 cents 7-31-96 8-12-96
6 cents 8-30-96 9-10-96
6 cents 9-30-96 10-10-96
6 cents 10-31-96 11-12-96
</TABLE>

2
<PAGE>

AUTOMATIC DIVIDEND REINVESTMENT PLAN AND DIRECT DEPOSIT SERVICE: The Fund
has a dividend reinvestment plan available 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 the 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 for
all shares purchased by it in the reinvestment of the distribution and
credited to the accounts of plan participants.

For those shareholders whose shares are held for them by a brokerage house
or nominee in "street-name", you may not participate in the Fund's automatic
dividend reinvestment plan inasmuch as the Fund cannot communicate directly
with you since the Fund does not have your name and address. Thus for those
Fund shareholders in "street-name" desiring automatic dividend reinvestment,
we suggest you contact your broker or other nominee.

As an added service, the Fund now offers direct deposit service through
electronic funds transfer to all registered shareholders currently receiving a
monthly dividend check. Direct deposit provides automatic and immediate access
to your funds on the dividend payment date and eliminates the possibility of
mail delays and lost or stolen checks. 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. You can
contact the Advisor, Administrator, or The Bank of New York by calling the
Fund's toll free number of 1-800-680-4DNP.

We appreciate your interest in Duff & Phelps Utilities Income Inc., and we
will continue to do our best to be of service to you.

/s/ Claire V. Hansen /s/ Calvin J. Pedersen

Claire V. Hansen, CFA Calvin J. Pedersen, CFA
Chairman President and Chief
Executive Officer

3
<PAGE>

The accompanying notes are an integral part of the financial statements.
DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JUNE 30, 1996

COMMON STOCKS--71.2%

<TABLE>
<CAPTION>
MARKET
VALUE
SHARES COMPANY (NOTE 1)
------ ------- --------------

. ELECTRIC--48.2%
<C> <S> <C>
874,700 Baltimore Gas & Electric Co.......................... $ 24,819,613
1,818,600 Boston Edison Co. ................................... 46,374,300
1,617,900 Carolina Power & Light Co. .......................... 61,480,200
1,036,000 Central and South West Corp. ........................ 30,044,000
735,000 CINergy Corp. ....................................... 23,520,000
705,000 CIPSCO Inc. ......................................... 27,230,625
1,352,700 CMS Energy Corp. .................................... 41,764,613
1,265,000 DQE Incorporated..................................... 34,787,500
215,500 DTE Energy Co. ...................................... 6,653,562
780,000 Duke Power Co. ...................................... 39,975,000
729,879 Eastern Utilities Associates......................... 14,323,875
2,388,000 Edison International................................. 42,088,500
560,000 Empresa National De Electricidad ADR................. 35,070,000
562,000 Entergy Corp. ....................................... 15,946,750
10,000 Florida Progress Corp. .............................. 347,500
300,000 FPL Group Inc. ...................................... 13,800,000
2,050,000 General Public Utilities Corp. ...................... 72,262,500
371,300 Houston Industries................................... 9,143,262
1,865,400 Illinova Corp. ...................................... 53,630,250
1,600,800 IPALCO Enterprises Inc. ............................. 42,021,000
1,141,800 LG&E Energy Corp. ................................... 26,118,675
500,000 National Power PLC ADR............................... 12,187,500
1,718,300 New England Electric System.......................... 62,503,163
1,278,300 NIPSCO Industries Inc. .............................. 51,451,575
997,400 Ohio Edison Co. ..................................... 21,818,125
1,600,000 PECO Energy Co. ..................................... 41,600,000
660,000 Portland General Corp. .............................. 20,377,500
227,500 Powergen PLC ADR P/P................................. 4,720,625
74,500 Powergen PLC ADR..................................... 2,216,375
500,050 Rochester Gas & Electric Corp. ...................... 10,751,075
3,341,700 Southern Co. ........................................ 82,289,363
945,000 TECO Energy Inc. .................................... 23,861,250
</TABLE>

4
<PAGE>

DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS--(CONTINUED)
(UNAUDITED)
JUNE 30, 1996
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES COMPANY (NOTE 1)
------ ------- --------------
<C> <S> <C>
400,000 Unicom Corp. ....................................... 11,150,000
400,000 Texas Utilities Co. ................................ 17,100,000
690,000 Western Resources Inc. ............................. 20,613,750
--------------
1,044,042,026

. GAS--1.0%
661,600 Brooklyn Union Gas Co. ............................. 18,028,600
225,000 CMS Energy Corp. Class G............................ 4,218,750
--------------
22,247,350

. TELECOMMUNICATION--15.4%
1,443,100 Ameritech Corp. .................................... 85,684,063
900,094 AT&T Corp. ......................................... 55,805,828
165,000 Bellsouth Corp. .................................... 6,991,875
789,100 Frontier Corp. ..................................... 24,166,187
558,200 Nynex Corp. ........................................ 26,514,500
150,000 Portugal Telecom SA ADS............................. 3,937,500
400,000 Royal PTT Nederland ADS............................. 15,100,000
1,318,615 SBC Communications Inc. ............................ 64,941,789
664,400 Telefonica De Espana ADS............................ 36,625,050
75,600 CIA Telecom Chile ADR............................... 7,418,250
200,000 Telefonica De Argentina ADR......................... 5,925,000
--------------
333,110,042

. NON-UTILITY--6.6%
253,800 CBL & Associates Properties Inc. ................... 5,678,775
200,000 Centerpoint Properties Corporation.................. 4,850,000
120,000 Chelsea GCA Realty Inc. ............................ 3,810,000
100,000 Colonial Properties Trust........................... 2,425,000
300,000 Crescent Real Estate Equities Inc. ................. 11,025,000
150,000 Developers Diversified Realty Corp. ................ 4,781,250
400,000 Equity Residential Properties Trust................. 13,150,000
478,100 First Industrial Realty Trust....................... 11,235,350
426,300 Gables Residential Trust............................ 10,018,050
455,000 Highwoods Properties Inc. .......................... 12,569,375
384,300 Liberty Property Trust.............................. 7,637,962
200,000 Meditrust........................................... 6,675,000
</TABLE>

5
<PAGE>

DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS--(CONTINUED)
(UNAUDITED)
JUNE 30, 1996
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES COMPANY (NOTE 1)
------ ------- -------------
<C> <S> <C>
412,100 Merry Land & Investment Inc............................ 8,654,100
590,000 Nationwide Health Properties........................... 12,463,750
240,000 Oasis Residential Inc. ................................ 5,250,000
250,000 SouthWest Property Trust Inc. ......................... 3,343,750
75,000 Starwood Lodging Trust................................. 2,728,125
273,400 TriNet Corporate Realty Trust.......................... 7,928,600
160,600 Vornado Realty Trust................................... 6,564,525
75,000 Weeks Corp. ........................................... 1,950,000
-------------
142,738,612
-------------
Total Common Stocks (Cost--$1,491,814,315)............. 1,542,138,030
-------------
</TABLE>

CONVERTIBLE PREFERRED STOCKS--0.0%

<TABLE>
<CAPTION>
SHARES COMPANY
------ -------
<C> <S> <C>
. NON-UTILITY--0.0%
47,000 Tanger Factory Outlet Centers Inc. Series A 1,022,250
-------------
Total Convertible Preferred Stocks (Cost--$989,350) 1,022,250
-------------
</TABLE>

BONDS--27.6%

<TABLE>
<CAPTION>
RATINGS
-----------------------
STANDARD MARKET
DUFF & AND VALUE
PAR VALUE COMPANY PHELPS MOODY'S POOR'S (NOTE 1)
----------- ------- ------ ------- -------- --------------
<C> <S> <C> <C> <C> <C>
. ELECTRIC--16.4%
$24,920,000 Alabama Power Co.
9%, due 12/01/24........... A+ A1 A+ 26,838,938
14,500,000 Commonwealth Edison Co.
9 3/4%, due 2/15/20........ BBB Baa2 BBB 15,798,416
7,500,000 Commonwealth Edison Co.
9 7/8%, due 6/15/20........ BBB Baa2 BBB 8,342,594
10,000,000 Commonwealth Edison Co.
8 3/8%, due 2/15/23........ BBB Baa2 BBB 9,833,620
</TABLE>

6
<PAGE>

DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS--(CONTINUED)
(UNAUDITED)
JUNE 30, 1996
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
RATINGS
--------------------------
STANDARD MARKET
DUFF & AND VALUE
PAR VALUE COMPANY PHELPS MOODY'S POOR'S (NOTE 1)
----------- ------- --------- ------- -------- --------------
<C> <S> <C> <C> <C> <C>
CTC Mansfield Funding
35,000,000 Corp.
10 5/8%, due 9/30/16.... Not Rated Aaa AAA 37,778,157
8,000,000 Duquesne Light Co.
7.55%, due 6/15/25...... A- Baa1 BBB+ 7,482,504
11,500,000 Georgia Power Co.
7.95%, due 2/01/23...... AA- A1 A+ 11,393,498
5,000,000 Gulf States Utilities
8.94%, due 1/01/22...... Not Rated Baa3 BBB- 4,945,534
22,000,000 Illinois Power Co.
8%, due 2/15/23......... Not Rated Baa2 BBB 21,524,182
15,000,000 New York State Electric
& Gas Corp.
9 7/8%, due 11/01/20.... Not Rated Baa1 BBB+ 16,556,428
4,000,000 New York State Electric
& Gas Corp.
8 7/8%, due 11/01/21.... Not Rated Baa1 BBB+ 4,241,211
6,500,000 Ohio Edison Co.
8 3/4%, due 2/15/98..... BBB+ Baa2 BBB- 6,680,011
14,105,000 Pennsylvania Power &
Light Co.
9 1/4%, due 10/01/19.... Not Rated A3 A- 15,159,263
16,850,000 Pennsylvania Power &
Light Co.
9 3/8%, due 7/01/21..... Not Rated A3 A- 18,502,445
26,750,000 Philadelphia Electric
8 3/4%, due 4/01/22..... Not Rated Baa1 BBB+ 27,596,395
19,700,000 Potomac Electric Power
Co.
9%, due 6/01/21......... AA- A1 A 21,139,715
8,000,000 Potomac Electric Power
Co.
7 3/8%, due 9/15/25..... AA- A1 A 7,526,504
979,000 Public Service Electric
& Gas Co.
8 3/4%, due 11/01/21.... A A3 A- 1,046,306
3,000,000 Rochester Gas & Electric
Corp.
9 3/8%, due 4/01/21..... BBB+ Baa1 BBB+ 3,266,493
29,830,000 Texas Utilities Electric
Co.
9 3/4%, due 5/01/21..... Not Rated Baa2 BBB+ 32,760,587
10,000,000 Texas Utilities Electric
Co.
8 3/4%, due 11/01/23.... Not Rated Baa2 BBB+ 10,391,550
12,000,000 UtiliCorp United Inc.
8%, due 3/01/23......... BBB Baa3 BBB 11,673,287
</TABLE>

7
<PAGE>

DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS--(CONTINUED)
(UNAUDITED)
JUNE 30, 1996
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
RATINGS
--------------------------
STANDARD MARKET
DUFF & AND VALUE
PAR VALUE COMPANY PHELPS MOODY'S POOR'S (NOTE 1)
----------- ------- --------- ------- -------- --------------
<C> <S> <C> <C> <C> <C>
4,000,000 Union Electric Co.
8 3/4%, due 12/01/21.... AA- A1 AA- 4,310,896
29,780,000 Virginia Electric &
Power Co.
9 3/8%, due 6/01/98..... A A2 A 31,247,138
--------------
356,035,672
. GAS--3.4%
13,000,000 Enron Corp.
8 1/2%, due 2/01/00..... BBB+ Baa2 BBB+ 13,183,053
8,875,000 Enron Corp.
9.65%, due 5/15/01...... BBB+ Baa2 BBB+ 9,823,871
6,000,000 Northwest Pipeline Corp.
10.65%, due 11/15/18.... BBB Baa1 BBB 6,484,961
10,000,000 Phillips Petroleum Co.
9.18%, due 9/15/21...... Not Rated Baa1 BBB 10,815,759
9,500,000 Transco Energy
9 1/8%, due 5/01/98..... BBB- Baa2 BBB- 9,916,717
14,500,000 Transcontinental Gas
Pipe
Line Corp.
9 1/8%, due 2/01/17..... BBB Baa1 BBB 15,204,859
7,000,000 Williams Co.
10 1/4%, due 7/15/20.... BBB- Baa2 BBB- 8,584,176
--------------
74,013,396
. TELECOMMUNICATION--6.6%
13,500,000 Bellsouth Capital
Funding Corp.
9 1/4%, due 1/15/98..... AA+ Aa1 AAA 14,072,629
16,500,000 GTE Corp.
8.85%, due 3/01/98...... A- A3 BBB+ 17,117,280
14,991,000 GTE Corp
9 3/8%, due 12/01/00.... A- A3 BBB+ 16,360,637
5,000,000 GTE Corp.
10 1/4%, due 11/01/20... A- A3 BBB+ 5,706,395
11,995,000 Mountain States
Telephone
9 1/2%, due 5/01/00..... AA Aa3 A+ 13,046,889
13,750,000 New England Telephone
& Telegraph
9%, due 8/01/31......... AA Aa2 AA- 15,031,816
</TABLE>

8
<PAGE>

U.S. TREASURY OBLIGATIONS--1.6%
29,000,000 U.S. Treasury Bonds
11 3/4%, due 2/15/01.............................. 35,026,576
--------------
Total U.S. Treasury Obligations (Cost--
$35,325,625)...................................... 35,026,576
--------------

U.S. GOVERNMENT AGENCY OBLIGATIONS--0.1%
1,838,532 Federal National Mortgage Association
8%, due 5/01/05................................... 1,852,881
--------------
Total U. S. Government Agency Obligations (Cost--
$1,900,008)....................................... 1,852,881
--------------

COMMERCIAL PAPER -- 0.5%
10,000,000 General Electric Capital Corp.
5.35%, due 7/02/96................................ 9,998,514
--------------
Total Commercial Paper (Amortized cost --
$9,998,514)....................................... 9,998,514
--------------
TOTAL INVESTMENTS (Cost--$2,137,902,627)
(101.0%).......................................... $2,188,387,962
==============
</TABLE>
The percentage shown for each investment category is the total value of that
category as a percentage of the total net assets of the Fund.

9
<PAGE>

The accompanying notes are an integral part of the financial statements.
DUFF & PHELPS UTILITIES INCOME INC.
BALANCE SHEET
(UNAUDITED)
JUNE 30, 1996

<TABLE>
<S> <C>
ASSETS:
Investments at market value:
Common stocks (cost $1,491,814,315) $1,542,138,030
Convertible preferred stock (Cost $989,350) ................. 1,022,250
Bonds (cost $597,874,815) ................................... 598,349,711
U.S. Treasury obligations (cost $35,325,625) ................ 35,026,576
U.S. Government agency obligations (cost $1,900,008) ........ 1,852,881
Commercial paper (amortized cost $9,998,514) ................ 9,998,514
Interest-bearing deposits with custodian ..................... 59,509,700
Receivables:
Securities sold.............................................. 69,548,716
Interest .................................................... 16,160,024
Dividends ................................................... 9,625,886
Pre-paid expenses ............................................ 160,866
---------------
Total Assets ............................................... $2,343,393,154
===============
LIABILITIES:
Payable for investments purchased ............................ $ 46,430,903
Due to Adviser (Note 2) ...................................... 3,011,292
Due to Administrator (Note 2) ................................ 727,848
Dividends payable on common stock ............................ 11,886,837
Dividends payable on remarketed preferred stock .............. 1,436,875
Accrued expenses ............................................. 1,453,527
Commercial paper outstanding (Note 6) ........................ 112,824,522
---------------
Total Liabilities .......................................... 177,771,804
---------------
CAPITAL:
Remarketed preferred stock ($.001 par value; 100,000,000
shares authorized and 5,000 shares issued and outstanding,
liquidation preference $100,000 per share) (Note 5) .......... 500,000,000
---------------
Common stock ($.001 par value; 250,000,000 shares authorized
and 198,113,953 shares issued and outstanding) (Note 4) ...... 198,114
Paid-in surplus (Note 4) ..................................... 1,764,057,101
Accumulated net realized loss on investments ................. ( 150,441,724)
Undistributed net investment income .......................... 1,322,524
Net unrealized appreciation on investments ................... 50,485,335
---------------
Net assets applicable to common stock (equivalent to $8.41
per share based on 198,113,953 shares outstanding) ......... 1,665,621,350
---------------
Total Capital (Net Assets) ................................. 2,165,621,350
---------------
Total Liabilities and Capital .............................. $2,343,393,154
===============
</TABLE>

10
<PAGE>

The accompanying notes are an integral part of the financial statements.
DUFF & PHELPS UTILITIES INCOME INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest....................................................... $ 29,323,624
Dividends (less withholding tax of $578,961)................... 65,352,275
-------------
Total investment income....................................... 94,675,899
EXPENSES:
Commercial paper interest expense (Note 6)..................... 3,093,961
Management fees (Note 2)....................................... 6,155,969
Administrative fees (Note 2)................................... 1,471,703
Transfer agent fees............................................ 309,400
Custodian fees................................................. 127,400
Remarketing agent fees......................................... 631,944
Shareholder reports............................................ 273,000
Legal and audit fees........................................... 91,000
Directors' fees (Note 2)....................................... 91,000
Other expenses................................................. 269,772
-------------
Total expenses................................................ 12,515,149
-------------
Net investment income......................................... 82,160,750
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments............................... 40,055,436
Net change in unrealized appreciation on investments........... ( 128,315,641)
-------------
Net loss on investments........................................ ( 88,260,205)
-------------
Net decrease in net assets resulting from operations........... ($ 6,099,455)
=============
</TABLE>

11
<PAGE>

The accompanying notes are an integral part of the financial statements.
DUFF & PHELPS UTILITIES INCOME INC.
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED
1996 DECEMBER 31,
(UNAUDITED) 1995
------------------ ------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income................... $ 82,160,750 $ 164,486,063
Net realized gain on investments........ 40,055,436 11,609,834
Net change in unrealized appreciation on
investments............................. ( 128,315,641) 305,307,239
--------------- ---------------
Net increase (decrease) in net assets
resulting from operations.............. ( 6,099,455) 481,403,136
DISTRIBUTIONS TO STOCKHOLDERS FROM:
Net investment income--preferred stock
(Note 5)................................ ( 10,271,902) ( 22,621,518)
Net investment income--common stock
(Note 3)................................ ( 71,080,058) ( 142,377,331)
--------------- ---------------
Total distributions..................... ( 81,351,960) ( 164,998,849)
FROM CAPITAL STOCK TRANSACTIONS (NOTE 4):
Shares issued to common stockholders
from dividend reinvestment.............. 13,741,831 26,836,422
--------------- ---------------
Net increase in net assets derived from
capital share transactions.............. 13,741,831 26,836,422
--------------- ---------------
Total increase (decrease).............. ( 73,709,584) 343,240,709
TOTAL NET ASSETS:
Beginning of period..................... 2,239,330,934 1,896,090,225
--------------- ---------------
End of period (including undistributed
net investment income of $1,322,524 and
$513,734, respectively)................. $2,165,621,350 $2,239,330,934
=============== ===============
</TABLE>

12
<PAGE>

The accompanying notes are an integral part of the financial statements.
DUFF & PHELPS UTILITIES INCOME INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996

<TABLE>
<S> <C> <C>
CASH FLOWS FROM (FOR):
OPERATING ACTIVITIES
Interest received............................ $ 29,113,045
Income dividends received.................... 66,392,498
Operating expenses paid (excluding interest). ( 9,719,118)
Interest paid on commercial paper............ ( 2,478,779)
---------------
Net cash provided by operating activities................... $83,307,646
INVESTING ACTIVITIES
Purchase of investment securities............ ( 2,309,596,907)
Proceeds from sale/redemption of investment
securities................................... 2,328,040,594
---------------
Net cash provided by investing activities................... 18,443,687
FINANCING ACTIVITIES
Dividends paid............................... ( 83,657,248)
Proceeds from issuance of common stock under
dividend reinvestment plan................... 13,741,831
Change in net proceeds from issuance of
commercial paper............................. ( 486,090)
---------------
Net cash used in financing activities....................... ( 70,401,507)
------------
Net increase in cash and cash equivalents..................... 31,349,826
Cash and cash equivalents--beginning of period................ 28,159,874
------------
Cash and cash equivalents--end of period...................... $59,509,700
============
Reconciliation of net investment income to net
cash provided by operating activities:
Net investment income........................................ $82,160,750
Adjustments to reconcile net investment
income to net cash provided by operating
activities:
Increase in interest receivable............. ( 210,579)
Decrease in dividends receivable............ 1,040,223
Increase in accrued expenses................ 317,252
---------------
Total adjustments.......................................... 1,146,896
------------
Net cash provided by operating activities.................... $83,307,646
============
</TABLE>

13
<PAGE>

DUFF & PHELPS UTILITIES INCOME INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1996

(1) SIGNIFICANT ACCOUNTING POLICIES:

Duff & Phelps Utilities Income Inc. (the "Fund") was incorporated under the
laws of the State of Maryland on November 26, 1986. The Fund commenced
operations on January 21, 1987, as a closed-end diversified management
investment company registered under the Investment Company Act of 1940. The
primary investment objectives of the Fund are current income and long-term
growth of income. Capital appreciation is a secondary objective.

The following are the significant accounting policies of the Fund:

(a) The market values for securities are determined as follows:
Securities traded on a national securities exchange or traded over-the-
counter and quoted on the NASDAQ System are valued at last sales prices.
Securities so traded for which there were no sales and other securities are
valued at the mean of the most recent bid-asked quotations. Bonds not
traded on a securities exchange nor quoted on the NASDAQ System 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. Other assets and securities
are valued at a fair value, as determined in good faith by the Board of
Directors.

(b) No provision is made for Federal income taxes since the Fund has
elected to be taxed as a "regulated investment company" and has made such
distributions to its shareholders deemed necessary to be relieved of all
Federal income taxes under provisions of current Federal tax law. The Fund
intends to utilize provisions of Federal income tax laws which allow a
realized capital loss to be carried forward for eight years following the
year of loss and offset such losses against any future realized gains. At
December 31, 1995, the Fund had tax capital loss carryforwards of
$201,770,357 which expire beginning on December 31, 2002.

In 1993, the Fund adopted the American Institute of Certified Public
Accountants' Statement of Position 93-2, "Determination, Disclosure and
Financial Statement Presentation of Income, Capital Gain and Return of
Capital Distributions by Investment Companies". In conformance with this
statement, the Fund changed the classification of distributions to
shareholders to better disclose the differences between financial statement
amounts and distributions determined in accordance with federal income tax
regulations. As a result, the accumulated net realized loss and
undistributed net investment income captions on the balance sheet reflect
book/tax temporary differences. These differences are a result of the
deferral of wash sale losses, the accretion of market discount and the cash
basis recognition of preferred dividends for tax purposes.

(c) The accounts of the Fund are kept on the accrual basis of accounting.
Security transactions are recorded on the trade date. Realized gains or
losses from sales of securities are determined on the specific identified
cost basis. Dividend income is recognized on the ex-dividend date. Interest
income and expense are recognized on the accrual basis.

(d) The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and

14
<PAGE>

DUFF & PHELPS UTILITIES INCOME INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.

(2) MANAGEMENT ARRANGEMENTS:

The Fund has engaged Duff & Phelps Investment Management Co. (the "Adviser")
to provide professional investment management services for the Fund and has
engaged J. J. B. Hilliard, W. L. Lyons, Inc. (the "Administrator") to provide
administrative and management services for the Fund. The Adviser receives a
quarterly fee at an annual rate of .60% of the average weekly net assets of
the Fund up to $1.5 billion and .50% of average weekly net assets in excess
thereof. The Administrator receives a quarterly fee at annual rates of .25% of
average weekly net assets up to $100 million, .20% of average weekly net
assets from $100 million to $1 billion, .10% of average weekly net assets from
$1 billion to $1.5 billion, and .06% of average weekly net assets in excess
thereof. Directors of the Fund not affiliated with the Adviser receive a fee
of $15,000 per year plus $1,000 per board or committee meeting attended.
Committee Chairmen receive an additional fee of $2,500 per year. Transfer
agent and custodian fees are paid to The Bank of New York.

(3) DIVIDENDS:

The Board of Directors has authorized the following distributions to common
stockholders from investment income in 1996:

<TABLE>
<CAPTION>
RECORD PAYABLE DIVIDEND
DATE DATE PER SHARE
------ ------- ---------
<S> <C> <C>
01-31-96 02-12-96 $.06
02-29-96 03-11-96 .06
03-29-96 04-10-96 .06
</TABLE>
<TABLE>
<CAPTION>
RECORD PAYABLE DIVIDEND
DATE DATE PER SHARE
------ ------- ---------
<S> <C> <C>
04-30-96 05-10-96 $.06
05-31-96 06-10-96 .06
06-28-96 07-10-96 .06
</TABLE>

(4) CAPITAL STOCK TRANSACTIONS:

The Fund may purchase shares of its own stock in open market or private
transactions, from time to time and in such amounts and at such prices (not
exceeding $100,000 plus accumulated and unpaid dividends in the case of the
Fund's remarketed preferred stock and less than net asset value in the case of
the Fund's common stock) as management may deem advisable. Since any such
purchases of the Fund's common stock would be made at prices below net asset
value, they would increase the net asset value per share of the remaining
shares of common stock outstanding. The Fund has not purchased any shares of
its common stock.

15
<PAGE>

DUFF & PHELPS UTILITIES INCOME INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Transactions in common stock and paid-in surplus during 1995 and for the six
months ended June 30, 1996 were as follows:

<TABLE>
<CAPTION>
SHARES AMOUNT
----------- --------------
<S> <C> <C>
For the year ended December 31, 1995:
Beginning capitalization........................ 193,221,697 $1,723,676,962
Dividend reinvestment........................... 3,280,543 26,836,422
----------- --------------
Total capitalization........................... 196,502,240 $1,750,513,384
=========== ==============
For the six months ended June 30, 1996:
Beginning capitalization........................ 196,502,240 $1,750,513,384
Dividend Reinvestment........................... 1,611,713 13,741,831
----------- --------------
Total capitalization........................... 198,113,953 $1,764,255,215
=========== ==============
</TABLE>

(5) REMARKETED PREFERRED STOCK:

In 1988, the Fund issued 5,000 shares of Remarketed Preferred Stock ("RP")
in five series of 1,000 shares each at a public offering price of $100,000 per
share. The underwriting discount and other expenses incurred in connection
with the issuance of the RP were recorded as a reduction of paid-in surplus on
common stock. Dividends on the RP are cumulative at a rate which was initially
established for each series at its offering. Since the initial offering of
each series, the dividend rate on each series has been reset every 49 days by
a remarketing process. Dividend rates ranged from 3.880% to 4.385% during the
six months ended June 30, 1996.

The RP is redeemable at the option of the Fund on any dividend payment date
at a redemption price equal to $100,000 per share, plus accumulated and unpaid
dividends. The Fund is required to maintain certain asset coverage with
respect to the RP, and the RP is subject to mandatory redemption if that asset
coverage is not maintained. Each series of RP is also subject to mandatory
redemption on a date certain as follows: Series A--November 28, 2012; Series
B--November 18, 2015; Series C--November 7, 2018; Series D--December 22, 2021;
and Series E--December 11, 2024.

In general, the holders of the RP and of the Common Stock have equal voting
rights of one vote per share, except that the holders of the RP, as a class,
vote to elect two members of the Board of Directors, and separate class votes
are required on certain matters that affect the respective interests of the RP
and the Common Stock. The RP has a liquidation preference of $100,000 per
share plus accumulated and unpaid dividends.

(6) COMMERCIAL PAPER:

The Board of Directors has authorized the Fund to issue up to $200,000,000
of Commercial Paper Notes (the "Notes") in minimum denominations of $100,000
with maturities up to 270 days. The Notes generally will be sold on a discount
basis, but may be sold on an interest-bearing basis. The Notes are not
redeemable by the Fund nor are they subject to voluntary prepayment prior to
maturity. The aggregate amount of Notes outstanding changes from time to time.
The Notes are unsecured, general obligations of the Fund. The Fund has entered
into

16
<PAGE>

DUFF & PHELPS UTILITIES INCOME INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
a credit agreement to provide liquidity. The Fund is able to request loans
under the credit agreement of up to $100,000,000 at any one time, subject to
certain restrictions. Interest rates on the Notes ranged from 4.93% to 5.37%
during the six months ended June 30, 1996. At June 30, 1996, the Fund had
Notes outstanding of $112,824,522.

(7) INVESTMENT TRANSACTIONS:

For the six months ended June 30, 1996, purchases and sales of investment
securities (excluding short-term securities) were $2,166,249,543 and
$2,135,125,563, respectively. For federal income tax purposes, at June 30,
1996, the gross unrealized depreciation on investments was $42,027,555 and
gross unrealized appreciation was $92,512,889. The cost of investments for
financial reporting and Federal income tax purposes was $2,137,902,627 and
$2,149,609,887, respectively.

17
<PAGE>

FINANCIAL HIGHLIGHTS--SELECTED PER SHARE DATA AND RATIOS

The table below provides information about income and capital changes for a
share of common stock outstanding throughout the periods indicated:

<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31
JUNE 30, 1996 -------------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991
------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period..... $ 8.85 $ 7.23 $ 9.65 $ 9.67 $ 9.55 $ 8.29
---------- ---------- ---------- ---------- ---------- ----------
Net investment income... 0.41 0.85 0.82 0.81 0.89 0.95
Net realized gain (loss)
and change in unrealized
appreciation/
depreciation on
investments............. ( 0.44) 1.62 ( 2.42) 0.09 0.11 1.25
---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations.............. ( 0.03) 2.47 ( 1.60) 0.90 1.00 2.20
Dividends on preferred
stock from net
investment income....... ( 0.05) ( 0.12) ( 0.10) ( 0.08) ( 0.10) ( 0.17)
Dividends on common
stock from net
investment income....... ( 0.36) ( 0.73) ( 0.72) ( 0.74) ( 0.78) ( 0.77)
Dividends on common
stock from net realized
capital gains........... ( 0.00) ( 0.00) ( 0.00) ( 0.10) ( 0.00) ( 0.00)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions..... ( 0.41) ( 0.85) ( 0.82) ( 0.92) ( 0.88) ( 0.94)
Net asset value:
End of period........... $ 8.41 $ 8.85 $ 7.23 $ 9.65 $ 9.67 $ 9.55
========== ========== ========== ========== ========== ==========
Per share market value:
End of period........... $ 8.750 $ 9.00 $ 7.88 $10.50 $10.50 $10.00
Ratio of expenses to
average net assets...... 1.16%* 1.23% 1.18% 1.04% 1.04% 1.17%
Total investment return. 1.46% 24.77% (18.04%) 8.43% 13.81% 24.56%
Ratio of net investment
income to average net
assets.................. 7.63%* 8.13% 7.66% 6.09% 6.99% 7.75%
Portfolio turnover rate. 97.37% 188.28% 129.56% 56.11% 43.30% 41.09%
Average commission rate
paid per share.......... $0.0227 ** ** ** ** **
Net assets, end of
period
(000s omitted).......... $2,165,621 $2,239,331 $1,896,090 $2,017,833 $1,997,984 $1,863,427
</TABLE>
- -------
* Annualized
** Not required for periods beginning before September 1, 1995

18
<PAGE>

BOARD OF DIRECTORS

WALLACE B. BEHNKE

HARRY J. BRUCE

FRANKLIN A. COLE

GORDON B. DAVIDSON

ROBERT J. DAY

CLAIRE V. HANSEN, CFA

FRANCIS E. JEFFRIES, CFA

NANCY LAMPTON

BERYL W. SPRINKEL

OFFICERS

CLAIRE V. HANSEN, CFA
Chairman

CALVIN J. PEDERSEN, CFA
President and Chief Executive Officer

RICHARD J. SPLETZER, CFA, CIC
Senior Vice President and Chief Investment Officer

T. BROOKS BEITTEL
Senior Vice President, Secretary and Treasurer

JOSEPH C. CURRY, JR.
Vice President

DIANNA P. WENGLER
Assistant Secretary

DUFF & PHELPS
UTILITIES INCOME INC.

Common stock listed on the New York Stock Exchange under the symbol DNP

55 East Monroe Street
Chicago, Illinois 60603
(800) 680-4367
(312) 368-5510

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
(502) 588-8400

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
1-800-432-8224

Legal Counsel

Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603

Independent Public Accountants

Arthur Andersen LLP
33 West Monroe Street
Chicago, Illinois 60603

19
<PAGE>

Duff & Phelps
Utilities Income Inc.

2ND

SEMI-ANNUAL
REPORT

JUNE 30, 1996
[ARTWORK]