DUFF & PHELPS UTILITIES INCOME INC, N-30D, 1998-08-25

DUFF & PHELPS UTILITIES INCOME INC
N-30D, 1998-08-25

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<PAGE>

DEAR FELLOW SHAREHOLDERS:

THE INVESTMENT ENVIRONMENT AND OUTLOOK: Concern about the investment
implications of the ongoing Asian crisis is a major focus of the United States
capital markets. A forced change in leadership in Indonesia, labor unrest in
South Korea, outstanding questions about the soundness of Japan, declining
economic growth, and nuclear weapons testing in India and Pakistan are all
indicative of the turmoil in the region. An initial flight of investment
capital to U.S. Treasury obligations has already occurred. Your Fund managers
do not believe the total investment implications of the crisis will be
realized for some time and therefore, have not made investments in those
riskier "headline" countries.

THE MIDWEST POWER CRISIS: During the last week in June, the electric utility
industry experienced what has become known as "the Midwest Power Crisis." The
affected states were Illinois, Indiana, Michigan, Ohio, and Wisconsin. Over a
two-day period power prices surged from the normal $30 to $40 per Mwh to over
$5000 per Mwh. The cause of the crisis was threefold: 1) abnormally hot
weather; 2) unplanned generating station outages stemming from severe
thunderstorms across the Midwest; and 3) the default of a small Ohio-based
power marketer.

Those electric companies and power marketers that were short of capacity
purchased power at inflated prices and reported negative impacts to second
quarter earnings. This group included: Cilcorp, Cinergy, First Energy,
Illinova, LG&E Energy, and Pacificorp. On the other hand, those companies that
had power to sell into the capacity-strapped Midwest region fared well,
including: Enron, Dominion Resources, PECO Energy, and Utilicorp United.

Power marketing has been a rapidly growing segment of the electricity
business. Currently, over 400 firms nationwide hold power marketing licenses,
including many small undercapitalized "store front" operations. The Midwest
Power Crisis has been a wake-up call for many, and has triggered the expected
shake-out in the power marketing industry (similar to that which occurred in
the gas marketing industry in the early 1990s). Due to the inherent risks and
the lack of creditworthiness, the smallest firms (the store-front operators)
have begun to close-up shop. Additionally, several small to medium size
electric utility companies have been spurred to action, announcing the review,
paring back or shutting down of power marketing operations. These include:
Cilcorp, Cinergy, First Energy and LG&E Energy.

Power marketing activity is one of the many factors that your Fund's
management team considers prior to making an investment. The high volume, low-
margin, and extremely volatile power marketing business is one in which only
the largest companies will have the expertise and the resources required to be
successful. As in the past, we will continue to evaluate the power marketing
businesses and other potential hidden concerns of investment candidates. If
the power marketing goals of the utility's management exceed the firm's
expertise, resources, and size, your Fund management may not consider the
company to be an appropriate investment for the Fund.

PERFORMANCE REVIEW: Since the Fund's primary goal is current income, we are
pleased to report that the monthly dividend of 6.5 cents per share continued
for the first half of 1998. The 6.5 cents
<PAGE>

monthly rate would be 78 cents annualized without compounding, or a 7.52%
stock yield based on the 6/30/98 closing stock price of $10.375. That yield
compares favorably with the 3.75% yield on the Dow Jones Utility Average, and
the 4.05% yield on the S&P Utilities Index.

During the first half of 1998, the Utilities Income fund had a total return
of 6.4%, the Dow Jones Utility Average and the S&P Utilities Index had total
returns of 9.7% and 6.9% respectively, and the Lehman Brothers Utility Bond
Index returned 4.01% for the same period. A weighted average of the Dow Jones
Utility Average and the Lehman Utility Bond Index reflecting the Fund's
stock/bond ratio would have had a total return of 8.4%.

The significant difference in performance between the Dow and S&P Utilities
Indexes is the result of the way in which the indexes are constituted. The Dow
Jones Utility Average is a price-weighted average of 15 companies, while the
S&P Utilities Index is a capitalization-weighted index of 37 companies. The
Dow Jones Utility performance is being favorably influenced by two stocks that
comprise a relatively large portion of the Dow Utilities but a much smaller
percentage of the S&P Utilities and are not held by the Fund.

BOARD OF DIRECTORS MEETING: At the regular July Board of Directors meeting,
the Board declared the following monthly dividends:

<TABLE>
<CAPTION>
CENTS PER SHARE RECORD DATE PAYABLE DATE
--------------- ----------- ------------
<S> <C> <C>
6.5 cents August 31 September 10
6.5 cents September 30 October 13
6.5 cents October 30 November 10
</TABLE>

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.

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 inasmuch as the Fund cannot communicate directly with those
shareholders since the Fund does not have their 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.

2
<PAGE>

VISIT US ON THE WEB--You can obtain the most recent shareholder financial
report and dividend information at our web site http://www.duff.com. For more
information and/or an authorization form on automatic dividend reinvestment or
direct deposit, please contact The Bank of New York.

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, CFA /s/ Calvin J. Pedersen
Claire V. Hansen, CFA Calvin J. Pedersen
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, 1998

COMMON STOCKS--75.6%
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES COMPANY (NOTE 1)
--------- ------- --------------

. ELECTRIC--42.2%
<C> <S> <C>
1,618,600 BEC Energy......................................... $ 67,171,900
1,017,900 Carolina Power & Light Co.......................... 44,151,412
1,235,000 CINergy Corp....................................... 43,225,000
1,352,700 CMS Energy Corp.................................... 59,518,800
1,265,000 DQE Incorporated................................... 45,540,000
1,000,000 Duke Energy Corp................................... 59,250,000
1,858,400 Edison International............................... 54,938,950
200,000 Electricidade DePortugal ADR....................... 9,212,500
1,593,400 Endesa S.A......................................... 34,457,275
1,500,000 FirstEnergy Corp................................... 46,125,000
1,147,800 FPL Group Inc...................................... 72,311,400
1,500,000 Houston Industries Inc............................. 46,312,500
686,500 National Power PLC ADR............................. 25,314,687
1,000,000 New Century Energies, Inc.......................... 45,437,500
1,067,100 New England Electric System........................ 46,152,075
2,556,600 NIPSCO Industries Inc.............................. 71,584,800
920,000 Pinnacle West Capital Corp......................... 41,400,000
302,000 Powergen PLC ADR................................... 17,025,250
300,000 RWE AG ADR......................................... 17,750,340
500,000 Scottish Power PLC ADR............................. 17,625,000
902,280 Sempra Energy Solutions............................ 25,038,270
2,000,000 Southern Co........................................ 55,375,000
500,000 Southern Electric PLC ADR.......................... 4,617,550
1,319,700 TECO Energy Inc.................................... 35,384,456
700,000 Texas Utilities Co................................. 29,137,500
1,800,000 Unicom Corp........................................ 63,112,500
--------------
1,077,169,665
. GAS--8.0%
926,000 AGL Resources...................................... 18,404,250
225,000 CMS Energy Corp. Class G........................... 5,540,625
590,600 Columbia Energy Group.............................. 32,852,125
490,000 EL Paso Natural Gas Co............................. 18,742,500
661,600 Marketspan Corp.................................... 19,806,650
</TABLE>

4
<PAGE>

DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS--(CONTINUED)
(UNAUDITED)
JUNE 30, 1998
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES COMPANY (NOTE 1)
--------- ------- --------------
<C> <S> <C>
300,000 KN Energy........................................... $ 16,256,250
525,000 MCN Energy Group Inc................................ 13,059,375
400,000 National Fuel Gas Co................................ 17,425,000
444,700 NICOR Inc........................................... 17,843,588
1,320,000 Williams Companies Inc.............................. 44,550,000
--------------
204,480,363
. TELECOMMUNICATION--14.8%
1,619,000 Bell Atlantic Corp.................................. 73,866,875
565,000 BellSouth Corp...................................... 37,925,625
1,015,000 Cable and Wireless ADS.............................. 37,428,125
2,037,230 SBC Communications Inc.............................. 81,489,200
575,000 Sprint Corp......................................... 40,537,500
556,250 Telecom Corp. of New Zealand Interim ADR............ 9,351,953
314,400 Telefonica De Espana ADS............................ 43,721,250
142,100 Telestra Corp. ADR.................................. 7,211,575
1,000,000 U.S. West Inc....................................... 47,000,000
--------------
378,532,103
. NON-UTILITY--10.6%
200,000 Avalon Bay Communities Inc.......................... 7,600,000
409,000 Boston Properties Inc............................... 14,110,500
253,800 CBL & Associates Properties Inc..................... 6,154,650
350,000 Centerpoint Properties Corporation.................. 11,571,875
120,000 Chelsea GCA Realty Inc.............................. 4,800,000
150,000 Colonial Properties Trust........................... 4,650,000
450,000 Cornerstone Properties Inc.......................... 7,931,250
50,000 Crescent Operating Inc.............................. 850,000
500,000 Crescent Real Estate Equities Inc................... 16,812,500
200,000 Developers Diversified Realty Corp.................. 7,837,500
400,000 Equity Residential Properties Trust................. 18,975,000
200,000 Essex Property Trust Inc............................ 6,200,000
478,100 First Industrial Realty Trust....................... 15,209,556
126,300 Gables Residential Trust............................ 3,425,887
131,000 Great Lakes REIT Inc................................ 2,284,312
200,000 Health & Retirement Property Trust.................. 3,762,500
455,000 Highwoods Properties Inc............................ 14,702,188
</TABLE>

5
<PAGE>

CONVERTIBLE PREFERRED STOCKS--0.1%

. NON-UTILITY--0.1%
47,000 Tanger Factory Outlet Centers Inc. Series A........... 1,327,750
--------------
Total Convertible Preferred Stocks (Cost--$989,350)... 1,327,750
--------------
</TABLE>

BONDS--23.7%
<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--13.1%
$24,920,000 Alabama Power Co.
9%, due 12/01/24........... AA- A1 A+ $ 27,274,292
14,500,000 Commonwealth Edison Co.
9 3/4%, due 2/15/20........ BBB Baa2 BBB 15,921,957
7,500,000 Commonwealth Edison Co.
9 7/8%, due 6/15/20........ BBB Baa2 BBB 8,809,125
</TABLE>

6
<PAGE>

DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS--(CONTINUED)
(UNAUDITED)
JUNE 30, 1998
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>
$ 6,850,000 Commonwealth Edison Co.
8 5/8%, due 2/01/22..... BBB Baa2 BBB $ 7,494,934
5,000,000 Commonwealth Edison Co.
8 3/8%, due 9/15/22..... BBB Baa2 BBB 5,386,555
10,000,000 Commonwealth Edison Co.
8 3/8%, due 2/15/23..... BBB Baa2 BBB 10,852,430
8,000,000 Duquesne Light Co.
7.55%, due 6/15/25...... A- Baa1 BBB+ 8,215,344
5,000,000 Gulf States Utilities
8.94%, due 1/01/22...... Not Rated Baa3 BBB- 5,305,660
20,000,000 Illinois Power Co.
8%, due 2/15/23......... BBB+ Baa1 BBB 21,038,960
5,000,000 Illinois Power Co.
7 1/2%, due 7/15/25..... BBB+ Baal BBB 5,116,875
Louisiana Power & Light
5,000,000 Co.
8 3/4%, due 3/01/26..... Not Rated Baa2 BBB 5,340,435
New York State Electric
15,000,000 & Gas Corp.
9 7/8, due 11/01/20..... Not Rated Baa1 BBB+ 16,639,335
New York State Electric
4,000,000 & Gas Corp.
8 7/8, due 11/01/21..... Not Rated Baa1 BBB+ 4,358,192
Pennsylvania Power &
14,105,000 Light Co.
9 1/4%, due 10/01/19.... Not Rated A3 A- 15,483,750
Pennsylvania Power &
16,850,000 Light Co.
9 3/8%, due 7/01/21..... Not Rated A3 A- 18,998,426
11,750,000 Philadelphia Electric
8 3/4%, due 4/01/22..... Not Rated Baa1 BBB+ 12,437,516
Potomac Electric Power
27,580,000 Co.
9%, due 6/01/21......... A+ A1 A 30,096,068
Public Service Co. of
10,000,000 Colorado
8 3/4%, due 3/01/22..... Not Rated A3 A 11,005,580
9,000,000 Puget Capital Trust
8.231%, due 6/01/27..... Not Rated Baa2 BBB 10,241,811
Rochester Gas & Electric
3,000,000 Corp.
9 3/8%, due 4/01/21..... A- A3 A- 3,311,694
</TABLE>

7
<PAGE>

DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS--(CONTINUED)
(UNAUDITED)
JUNE 30, 1998
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>
Texas Utilities Electric
$29,830,000 Co.
9 3/4%, due 5/01/21..... A- Baa1 BBB+ $ 33,672,581
Texas Utilities Electric
10,000,000 Co.
8 3/4%, due 11/01/23.... A- Baa1 BBB+ 10,962,560
12,000,000 UtiliCorp United Inc.
8%, due 3/01/23......... BBB Baa3 BBB 12,988,896
12,600,000 Union Electric Co.
8 3/4%, due 12/01/21.... Not Rated Aa3 AA- 13,856,951
Virginia Electric &
17,700,000 Power Co.
8 1/4%, due 3/01/25..... A A2 A 19,563,509
--------------
334,373,436
. GAS--2.2%
2,125,000 ANR Pipeline Co.
9 5/8%, due 11/01/21.... Not Rated Baa2 BBB 2,904,463
8,875,000 Enron Corp.
9.65%, due 5/15/01...... BBB+ Baa2 BBB+ 9,691,101
7,885,000 Penzoil Co.
10 1/8, due 11/15/09.... Not Rated Baa3 BBB 9,987,606
10,000,000 Phillips Petroleum Co.
9.18%, due 9/15/21...... Not Rated A3 A- 11,213,960
4,500,000 Sonat Inc.
9 1/2%, due 8/15/99..... Not Rated A3 BBB+ 4,655,803
5,000,000 Southern California Gas
Co.
8 3/4%, due 10/01/21.... AA- A1 AA- 5,527,305
9,000,000 Trans-Canada Pipeline
9 1/8%, due 4/20/06..... Not Rated A3 A- 10,544,849
--------------
54,525,087
. TELECOMMUNICATION--
8.0%
29,000,000 AT & T Corp.
8.35%, due 1/15/25...... AA Aa3 AA- 32,435,601
35,428,000 GTE Corp
9 3/8%, due 12/01/00.... A- Baa1 A 38,003,545
6,000,000 GTE Corp.
10 1/4%, due 11/01/20... A- Baa1 A 6,723,846
10,000,000 GTE California Inc.
8.07%, due 4/15/24...... AA A2 AA- 11,004,170
6,625,000 GTE Corp.
7.90%, due 2/01/27...... A- Baa1 A 7,082,383
</TABLE>

8
<PAGE>

DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS--(CONTINUED)
(UNAUDITED)
JUNE 30, 1998
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>
$11,995,000 Mountain States
Telephone
9 1/2%, due 5/01/00..... Not Rated Aa3 A+ $ 12,720,470
13,750,000 New England Telephone &
Telegraph
9%, due 8/01/31......... AA Aa2 AA 15,456,554
10,000,000 New York Telephone Co.
7 5/8%, due 2/01/23..... A A2 A+ 10,635,140
10,000,000 New York Telephone Co.
7%, due 8/15/25......... A A2 A+ 10,075,000
20,740,000 New York Telephone Co.
9 3/8%, due 7/15/31..... A A2 A+ 23,047,325
5,000,000 Pacific Bell
8 1/2%, due 8/15/31..... AA- A1 AA- 5,398,435
24,900,000 Southwestern Bell
Telephone
7.20%, due 10/15/26..... AA Aa3 AA 26,035,017
5,000,000 US West Communications
8 7/8%, due 6/01/31..... AA- A2 A+ 5,527,850
--------------
204,145,336
. NON-UTILITY--0.4%
8,000,000 Dayton Hudson Corp.
9 7/8%, due 7/01/20..... A- A3 BBB+ 11,014,952
--------------
11,014,952
--------------
Total Bonds (Cost--$585,111,248).................... 604,058,811
--------------

U.S. TREASURY OBLIGATIONS--3.0%

66,000,000 U.S. Treasury Bonds
11 3/4%, due 2/15/01................................ 75,941,316
--------------
Total U.S. Treasury Obligations (Cost--
$78,725,547)........................................ 75,941,316
--------------

U.S. GOVERNMENT AGENCY OBLIGATIONS--0.0%

1,004,237 Federal National
Mortgage Association
8%, due 5/01/05..................................... 1,038,757
--------------
Total U. S. Government Agency Obligations (Cost--
$1,037,816)......................................... 1,038,757
--------------
TOTAL INVESTMENTS (Cost--$2,344,253,857) (102.4%)... $2,612,505,620
==============
</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, 1998

<TABLE>
<S> <C>
ASSETS:
Investments at market value:
Common stocks (cost $1,678,389,896).......................... $1,930,138,986
Convertible preferred stock (cost $989,350).................. 1,327,750
Bonds (cost $585,111,248).................................... 604,058,811
U.S. Treasury obligations (cost $78,725,547)................. 75,941,316
U.S. Government agency obligations (cost $1,037,816)......... 1,038,757
Interest-bearing deposits with custodian..................... 17,353,169
Receivables:
Securities sold.............................................. 48,762,000
Interest..................................................... 15,568,694
Dividends.................................................... 11,056,675
Securities lending income.................................... 63,219
Pre-paid expenses............................................. 176,909
---------------
Total Assets................................................ $2,705,486,286
===============
LIABILITIES:
Payable for investments purchased............................. $ 10,573,625
Due to Adviser (Note 2)....................................... 3,680,375
Due to Administrator (Note 2)................................. 923,061
Dividends payable on common stock............................. 13,282,381
Dividends payable on remarketed preferred stock............... 1,757,414
Accrued expenses.............................................. 1,632,164
Commercial paper outstanding (Note 6)......................... 122,750,550
---------------
Total Liabilities........................................... $ 154,599,570
---------------
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 204,344,328 shares issued and outstanding) (Note 4)....... 204,344
Paid-in surplus (Note 4)...................................... 1,819,655,398
Accumulated net realized loss on investments.................. ( 40,947,694)
Undistributed net investment income........................... 3,722,904
Net unrealized appreciation on investments.................... 268,251,764
---------------
Net assets applicable to common stock (equivalent to $10.04
per share based on 204,344,328 shares outstanding).......... 2,050,886,716
---------------
Total Capital (Net Assets).................................. 2,550,886,716
---------------
Total Liabilities and Capital............................... $2,705,486,286
===============
</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, 1998

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest....................................................... $ 28,773,788
Dividends (less withholding tax of $643,938)................... 75,677,795
Securities lending income...................................... 488,383
-------------
Total investment income....................................... 104,939,966
EXPENSES:
Commercial paper interest expense (Note 6 ).................... 3,103,696
Management fees (Note 2)....................................... 7,149,213
Administrative fees (Note 2)................................... 1,801,760
Transfer agent fees............................................ 277,100
Custodian fees................................................. 126,700
Remarketing agent fees......................................... 628,472
Shareholder reports............................................ 202,300
Legal and audit fees........................................... 72,000
Directors' fees (Note 2)....................................... 144,800
Other expenses................................................. 292,757
-------------
Total expenses................................................ 13,798,798
-------------
Net investment income......................................... 91,141,168
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments............................... 95,405,336
Net change in unrealized appreciation on investments........... ( 70,096,062)
-------------
Net gain on investments........................................ 25,309,274
-------------
Net increase in net assets resulting from operations........... $116,450,442
=============
</TABLE>

11
<PAGE>

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

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED
1998 DECEMBER 31,
(UNAUDITED) 1997
------------------ ------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income................... $ 91,141,168 $ 173,238,151
Net realized gain on investments........ 95,405,336 43,757,905
Net change in unrealized appreciation
(depreciation) on investments........... ( 70,096,062) 250,102,364
--------------- ---------------
Net increase in net assets resulting
from operations........................ 116,450,442 467,098,420
DISTRIBUTIONS TO STOCKHOLDERS FROM:
Net investment income--preferred stock
(Note 5)................................ ( 10,265,106) ( 20,366,612)
Net investment income--common stock
(Note 3)................................ ( 79,468,533) ( 151,165,448)
--------------- ---------------
Total distributions.................... ( 89,733,639) ( 171,532,060)
FROM CAPITAL STOCK TRANSACTIONS (NOTE 4):
Shares issued to common stockholders
from dividend reinvestment.............. 14,135,221 28,025,074
--------------- ---------------
Net increase in net assets derived from
capital share transactions.............. 14,135,221 28,025,074
--------------- ---------------
Total increase......................... 40,852,024 323,591,434
TOTAL NET ASSETS:
Beginning of period..................... 2,510,034,692 2,186,443,258
--------------- ---------------
End of period (including undistributed
net investment income of $3,722,904 and
$2,315,375 respectively)................ $2,550,886,716 $2,510,034,692
=============== ===============
</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, 1998

<TABLE>
<S> <C> <C>
CASH FLOWS FROM (FOR):
OPERATING ACTIVITIES
Interest received............................ $ 27,822,598
Income dividends received.................... 73,618,443
Securities lending income.................... 597,269
Operating expenses paid (excluding interest). ( 10,684,144)
Interest paid on commercial paper............ ( 2,891,260)
---------------
Net cash provided by operating activities................... $88,462,906
INVESTING ACTIVITIES
Purchase of investment securities............ ( 3,238,943,906)
Proceeds from sale/redemption of investment
securities................................... 3,174,684,299
Net cash used in investing activities....................... ( 64,259,607)
FINANCING ACTIVITIES
Dividends paid............................... ( 89,424,899)
Proceeds from issuance of common stock under
dividend reinvestment plan................... 14,135,221
Change in net proceeds from issuance of
commercial paper............................. 24,308,667
---------------
Net cash used in financing activities....................... ( 50,981,011)
------------
Net decrease in cash and cash equivalents..................... ( 26,777,712)
Cash and cash equivalents--beginning of period................ 44,130,881
------------
Cash and cash equivalents--end of period...................... $17,353,169
------------
Reconciliation of net investment income to net cash provided
by operating activities:
Net investment income........................................ $91,141,168
Adjustments to reconcile net investment
income to net cash provided by operating
activities:
Increase in interest receivable............. ( 951,191)
Increase in dividends receivable............ ( 2,059,351)
Increase in accrued expenses................ 223,394
Decrease in other receivable................ 108,886
---------------
Total adjustments.......................................... ( 2,678,262)
------------
Net cash provided by operating activities.................... $88,462,906
============
</TABLE>

13
<PAGE>

DUFF & PHELPS UTILITIES INCOME INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998

(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, 1997, the Fund had tax capital loss carry forwards of
$149,351,791 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.

14
<PAGE>

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

(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 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, and .10% of average weekly net assets
over $1 billion. For purposes of the foregoing calculations, "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. Directors of the Fund not affiliated with the
Adviser receive a fee of $17,500 per year plus $1,000 per board or committee
meeting attended. Committee Chairmen receive an additional fee of $3,000 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 1998:

<TABLE>
<CAPTION>
RECORD PAYABLE DIVIDEND
DATE DATE PER SHARE
------ ------- ---------
<S> <C> <C>
01-28-98 02-10-98 $.065
02-25-98 03-10-98 .065
03-27-98 04-10-98 .065
</TABLE>
<TABLE>
<CAPTION>
RECORD PAYABLE DIVIDEND
DATE DATE PER SHARE
------ ------- ---------
<S> <C> <C>
04-28-98 05-11-98 $.065
05-27-98 06-10-98 .065
06-26-98 07-10-98 .065
</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 1997 and for the six
months ended June 30, 1998 were as follows:

<TABLE>
<S> <C> <C>
For the year ended December 31, 1997:
Beginning capitalization....................... 199,741,443 $1,777,699,447
Dividend reinvestment.......................... 3,195,438 28,025,074
----------- --------------
Total capitalization........................... 202,936,881 $1,805,724,521
=========== ==============
For the six months ended June 30, 1998:
Beginning capitalization....................... 202,936,881 $1,805,724,521
Dividend reinvestment.......................... 1,407,717 14,135,221
----------- --------------
Total capitalization........................... 204,344,598 $1,819,859,742
=========== ==============
</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 3.915% to 4.190% during the
six months ended June 30, 1998.

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

16
<PAGE>

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

changes from time to time. The Notes are unsecured, general obligations of the
Fund. The Fund has entered into 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 5.43% to 5.55% during the six months ended June 30, 1998. At June
30, 1998, the Fund had Notes outstanding of $122,750,550.

(7)INVESTMENT TRANSACTIONS:

For the six months ended June 30, 1998, purchases and sales of investment
securities (excluding short-term securities) were $3,249,517,531 and
$3,190,504,795, respectively. For federal income tax purposes, at June 30,
1998, the gross unrealized depreciation on investments was $29,544,376 and
gross unrealized appreciation was $297,796,140. The cost of investments for
financial reporting and Federal income tax purposes was $2,344,253,857 and
$2,350,465,547, respectively.

The Fund may lend portfolio securities to a broker/dealer. Loans are
required to be secured at all times by collateral at least equal to the market
value of securities loaned. The Fund receives a portion of the income earned
on the securities held as collateral and continues to earn income on the
loaned securities. Security loans are subject to the risk of failure by the
borrower to return the loaned securities in which case the Fund could incur a
loss. At June 30, 1998, the fund had loaned portfolio securities with a market
value of $519,911,675 to a broker/dealer and money market instruments with a
market value of $520,551,265 were held in the Fund's account at the
broker/dealer as collateral.

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 JUNE FOR THE YEAR ENDED DECEMBER 31
30, 1998 -------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period..... $ 9.90 $ 8.44 $ 8.85 $ 7.23 $ 9.65 $ 9.67
-------- -------- -------- --------- --------- ---------
Net investment income... 0.45 0.85 0.84 0.85 0.82 0.81
Net realized gain (loss)
and change in unrealized
appreciation/
depreciation on
investments............. 0.13 1.46 (0.41) 1.62 (2.42) 0.09
-------- -------- -------- --------- --------- ---------
Total from investment
operations.............. 0.58 2.31 0.43 2.47 (1.60) 0.90
Dividends on preferred
stock from net
investment income....... ( 0.05) ( 0.10) ( 0.10) ( 0.12) ( 0.10) ( 0.08)
Dividends on common
stock from net
investment income....... ( 0.39) ( 0.75) ( 0.74) ( 0.73) ( 0.72) ( 0.74)
Dividends on common
stock from net realized
capital gains........... ( 0.00) ( 0.00) ( 0.00) ( 0.00) ( 0.00) ( 0.10)
-------- -------- -------- --------- --------- ---------
Total distributions..... ( 0.44) ( 0.85) ( 0.84) ( 0.85) ( 0.82) ( 0.92)
-------- -------- -------- --------- --------- ---------
Net asset value:
End of period........... $10.04 $ 9.90 $ 8.44 $ 8.85 $ 7.23 $ 9.65
======== ======== ======== ========= ========= =========
Per share market value:
End of period........... $10.38 $10.13 $ 8.63 $ 9.00 $ 7.88 $10.50
Ratio of expenses to
average net assets
attributable to common
shares/1/............... 1.36%a 1.45% 1.53% 1.62% 1.58% 1.37%
Total investment return. 6.49% 27.69% 4.68% 24.77% (18.04%) 8.43%
Ratio of net investment
income to average net
assets attributable to
common shares/2/........ 9.01%a 9.87% 10.16% 10.65% 10.21% 8.02%
Portfolio turnover rate. 124.57% 213.57% 226.21% 188.28% 129.56% 56.11%
Average commission rate
paid per share.......... $0.0218 $0.0224 $0.0232 ** ** **
Net assets, end of
period
(000s omitted).......... $2,550,887 $2,510,035 $2,186,443 $2,239,331 $1,896,090 $2,017,833
- -------
a Annualized
/1/Ratio of expenses to
average total net
assets including
preferred shares.... 1.10%a 1.13% 1.18% 1.23% 1.18% 1.04%
/2/Ratio of net
investment income to
average total net
assets including
preferred shares.... 7.24%a 7.68% 7.79% 8.13% 7.66% 6.09%
</TABLE>
** 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

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

NATHAN I. PARTAIN, CFA
Executive Vice President and Chief Investment Officer

T. BROOKS BEITTEL, CFA
Senior Vice President, Secretary and Treasurer

MICHAEL SCHATT
Senior Vice President

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, 1998
LOGO