Dear Fellow Shareholders:

     Performance Review: Consistent with its primary objective of current income, the Fund paid three monthly dividends of 6.5 cents per share during the third quarter. The 6.5 cent per share monthly rate, without compounding, would be 78 cents annualized, or a 7.29% common stock dividend yield based on the September 29, 2006, closing price of $10.70 per share. That yield compares favorably with the September 29 yields of 3.13% on the Dow Jones Utility Index and 3.16% on the S&P Utilities Index.

     Your Fund had a total return (income plus change in market price) of 6.9% for the quarter ended September 29, 2006. In comparison, the S&P Utilities Index had a total return of 6.1% . 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 5.9% .

     On a longer-term basis, as of September 29, 2006, your Fund had a five-year cumulative total return of 46.8% . In comparison, the S&P Utilities Index had a total return during that period of 37.8%, while 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 34.2% .

     Economic Outlook: The rate of domestic economic growth, as measured by Gross Domestic Product (GDP), declined to a 1.6% annualized rate in the third quarter of 2006 from 2.5% in the second quarter and 5.6% in the first quarter. The current economic soft patch is the result of the combined effect of high energy prices, higher interest rates, and a weak residential construction and pricing environment. The American consumer is facing those issues from the added perspective of low real wage growth, high debt levels, and low savings.

     Although the cooling in aggregate consumption has been concentrated largely in the housing and auto related sectors, policy makers at the Federal Reserve (Fed) are keenly aware of the risks associated with declining growth and deteriorating consumer sentiment. As a result, short-term interest rates were left unchanged by the Fed for a third consecutive meeting in late October.

     Meanwhile, strong corporate balance sheets, earnings, and profit margins indicate strength in the broad-based business operating environment, and provide support for high capacity utilization and continued low unemployment. The favorable employment outlook and recently moderating energy prices are expected to boost disposable income growth and very likely fourth quarter GDP. As long as any upturn in economic growth is accompanied by moderating core inflation, exclusive of energy and housing, monetary policy makers are unlikely to move interest rates higher.

     Given the current elevated inflation rates and the uncertainty over the effects of recent monetary policy actions, we do not anticipate that short-term interest rates will be guided lower near-term either. The Fed has made it absolutely clear that it expects moderating economic growth to be reflected in moderating core inflation. Unfortunately, monetary policy drives while looking into the rear-view mirror at inflection points of the economy. Inflation lags economic activity and economic activity lags monetary


policy. Therefore, it may be some time before the Fed concludes its policies have been successful in moderating core inflation.

     The capital markets so far this year are expressing optimism on both the economy and inflation. Long-term bond yields have declined since the beginning of the year, and the broad stock market and your Fund are posting positive returns. Regardless of the economic and investment environment, your Fund managers will continue to seek high quality companies with favorable dividend policies.

     Mergers in the News: Merger and acquisition activity has been increasing in the utility sector. WPS Resources recently announced the proposed acquisition of Peoples Energy, MDU Resources Group announced the proposed acquisition of Cascade Natural Gas, and Duquesne Light Holdings is being acquired by an Australian infrastructure fund led by Macquarie Bank. Of special interest in these transactions is that they involve medium-to-small capitalization utilities. Last year when the Energy Policy Act was passed, repealing the Public Utility Holding Company Act, some industry observers believed that large capitalization utilities would be combining to form mega utilities.

     From the viewpoint of your Fund’s managers, mergers of large utilities will face the same challenges that the recently failed Exelon—Public Service Enterprise Group and the FPL Group—Constellation Energy Group combinations encountered. In the rush to deregulate and disaggregate the electric industry and open electricity markets to competition in the 1990’s, regulators encouraged low cost generation, especially nuclear facilities, to be sold to entities beyond their regulatory reach and at what now appears to be too low a price. Regulators are now holding the larger merger transactions hostage, trying to extract some of the lost value back for consumers. As cost saving synergies are clawed back from the economics of large mergers, the incentive for utility managements to invest time and effort to move mergers forward on behalf of shareholders is reduced.

     Before making or holding any investment, your Fund managers must assess the capability of utility managements involved in a proposed merger transaction to negotiate regulatory issues, and decide whether a merger would increase our shareholders’ value.

     Behind the Scenes at your Fund: Since its inception in 1987 your Fund has used J.J.B. Hilliard, W.L. Lyons, Inc. as its Administrator. Although some shareholders have had direct contact with the Administrator, most are unaware of the broad range of support that it provides. Among many other things, the Administrator: prepares expense tables and required information for shareholder reports and prospectuses, prepares various reports for use at Board meetings, monitors compliance with IRS, SEC and rating agency rules, and monitors and resolves issues in regard to shareholder distributions. Your Fund’s Treasurer is an employee of the Administrator. Every year the Fund’s Board of Directors reviews the performance of the Administrator to ensure the highest level of service.

     Board of Directors’Actions: At the regular Board of Directors’ meeting in August 2006, the Board declared the September, October, and November dividends. As is customary, the Board will declare the December, January and February dividends in mid-December.

2


     The determination of the character of all Fund distributions (specifying which portion is ordinary income, qualifying dividend income, short or long term capital gains, or return of capital) is made each year-end and is reported to shareholders on Form 1099-DIV, which is mailed every year in late January or early February.

     At the February 2006 Board of Directors meeting, the Board reviewed the Fund’s dividend policy and reaffirmed the current 6.5 cent per share per month dividend rate. Interest rates remain historically low despite recent Federal Reserve actions, and utility common stock dividend yields are well below their long-term average. Since 2004, the Fund has made increased use of realized gains to supplement its investment income and has reduced its use of short-term trading strategies designed to capture dividend income. Until the Fund utilizes all of its tax loss carryforwards, distributions to shareholders derived from realized gains will be treated as ordinary income for tax purposes. Once the Fund utilizes all of its tax loss carryforwards and, in the absence of an increase in the yields available on Fund investments and/or realizable gains on Fund investments, the Fund’s dividend distributions may include a portion of non-taxable return of capital in order to maintain the dividend rate.

     Automatic Dividend Reinvestment Plan and Direct Deposit Service—The Fund has a dividend reinvestment plan available as a benefit to all registered shareholders and also offers direct deposit service through electronic funds transfer to all registered shareholders currently receiving a monthly dividend check. These services are 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). Information on these services is also available on the Fund’s web site at the address noted below.

     Visit us on the Web—You can obtain the most recent shareholder financial reports and dividend information at our web site, http://www.dnpselectincome.com.

     We appreciate your interest in DNP Select Income Fund Inc., and we will continue to do our best to be of service to you.



 
     
Francis E. Jeffries, CFA    Nathan I. Partain, CFA 
Chairman of the Board    President and Chief 
    Executive Officer 

3


DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS
(UNAUDITED)

September 30, 2006

COMMON STOCKS—98.7%

       
Market 
       
Value 
Shares 
  Description   
(Note 1) 

 
 

 
    n ELECTRIC AND GAS—71.2%     
           
982,300    Ameren Corp.   
$ 
51,855,617 
1,000,000    Atmos Energy Corp.     
28,550,000 
3,071,300    CenterPoint Energy Inc.     
43,981,016 
1,125,000    Consolidated Edison Inc.     
51,975,000 
2,030,000    Duke Energy Corp.     
61,306,000 
900,000    Endesa S.A. (Spain)     
38,249,504 
1,100,000    Energy East Corp.     
26,092,000 
1,464,000    Exelon Corp.     
88,630,560 
1,735,000    FPL Group Inc.     
78,075,000 
1,535,000    FirstEnergy Corp.     
85,745,100 
800,000    Great Plains Energy Inc.     
24,816,000 
188,673    National Grid PLC ADR     
11,827,910 
675,714    National Grid PLC (United Kingdom)     
8,425,189 
800,000    Nicor Inc.     
34,208,000 
1,000,000    Northeast Utilities Inc.     
23,270,000 
2,237,200    NSTAR     
74,632,992 
1,000,000    OGE Energy Corp.     
36,110,000 
1,296,733    Oneok Inc.     
49,003,540 
1,350,000    PG&E Corp.     
56,227,500 
1,200,000    PPL Corp.     
39,480,000 
1,500,000    Pinnacle West Capital Corp.     
67,575,000 
1,375,000    Progress Energy Inc.     
62,397,500 
1,000,000    Puget Energy, Inc.     
22,730,000 
393,000    RWE AG (Germany)     
36,267,104 
600,000    SCANA Corp.     
24,162,000 
1,000,000    Scottish & Southern Energy ADR     
24,619,400 
850,000    Scottish & Southern Energy PLC (United Kingdom)     
20,926,653 
1,587,301    Scottish Power PLC (United Kingdom)     
19,316,976 
2,000,000    Southern Co.     
68,920,000 
1,625,000    Teco Energy Inc.     
25,431,250 
1,500,000    Vectren Corp.     
40,275,000 
1,000,000    WGL Holdings Inc.     
31,340,000 

The accompanying notes are an integral part of the financial statement.

4


    

 DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS—(Continued)
(UNAUDITED)

September 30, 2006

       
Market 
       
Value 
Shares 
  Description   
(Note 1) 




581,000    WPS Resources Corp.   
$ 
28,835,030 
1,000,000    Westar Energy Inc.      23,510,000 
3,499,304    Xcel Energy Inc.      72,260,628 


          1,481,027,469 
 
    n TELECOMMUNICATION—15.8%       
           
1,799,230    AT&T Inc.      58,582,929 
1,464,000    BCE Inc.      39,659,760 
565,000    BT Group PLC ADR      28,572,050 
1,377,000    Chunghwa Telecom Co. Ltd. ADR      23,835,870 
2,500,000    Citizens Communications Co.      35,100,000 
1,028,000    Telecom Italia SpA ADR      29,123,240 
856,250    Telecom Corp of New Zealand Ltd. ADR      19,205,688 
4,855,000    TeliaSonera AB (Sweden)      31,136,446 
1,719,492    Verizon Communications Inc.      63,844,738 


          329,060,721 
 
    n NON-UTILITY—11.7%       
           
98,632    AMB Property Corp.      5,435,609 
76,015    Alexandria Real Estate Equities Inc.      7,130,207 
40,000    Apartment Investment and Management Co.      2,176,400 
192,850    Archstone Smith Trust      10,498,754 
66,221    AvalonBay Communities Inc.      7,973,008 
90,195    Boston Properties Inc.      9,320,751 
64,978    Camden Property Trust      4,938,978 
182,500    Corporate Office Properties Trust      8,168,700 
151,112    Developers Diversified Realty Corp.      8,426,005 
103,223    Diamondrock Hospitality Co.      1,714,534 
161,313    Digital Realty Trust Inc.      5,052,323 
170,450    Equity Office Properties Trust      6,777,092 
262,269    Equity Residential      13,265,566 
66,504    Essex Property Trust Inc.      8,073,586 
207,293    Extra Space Storage Inc.      3,588,242 
15,000    Federal Realty Investment Trust      1,114,500 

The accompanying notes are an integral part of the financial statement.

5


     DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS—(Continued)
(UNAUDITED)

September 30, 2006

       
Market 
       
Value 
Shares 
  Description   
(Note 1) 




159,118    General Growth Properties Inc.   
$ 
7,581,973 
44,159    Hospitality Properties Trust      2,084,305 
425,785    Host Hotels & Resorts Inc.      9,763,250 
73,078    Kilroy Realty Corp.      5,505,696 
215,015    Kimco Realty Corp.      9,217,693 
74,629    LaSalle Hotel Properties      3,234,421 
103,444    The Macerich Co.      7,898,984 
13,630    Pan Pacific Retail Properties Inc.      946,195 
248,630    ProLogis      14,186,828 
124,335    Public Storage Inc.      10,691,567 
55,055    Reckson Associates Realty Corp.      2,356,354 
75,535    Regency Centers Corp.      5,193,787 
81,284    SL Green Realty Corp.      9,079,423 
200,020    Simon Property Group Inc.      18,125,812 
56,598    Strategic Hotels and Resorts Inc.      1,125,168 
202,422    Sunstone Hotel Investors Inc.      6,015,982 
184,367    United Dominion Realty Trust Inc.      5,567,883 
173,891    Ventas Inc.      6,701,759 
120,381    Vornado Realty Trust      13,121,529 


          242,052,864 


    Total Common Stocks (Cost—$1,657,848,068)      2,052,141,054 


 

 


The accompanying notes are an integral part of the financial statement.

6


     DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS—(Continued)
(UNAUDITED)

September 30, 2006

PREFERRED STOCKS—10.4%

       
Market 
       
Value 
Shares 
  Description   
(Note 1) 




 
    n UTILITY—4.3%       
           
700,000    Entergy Corp. 7 5/8% due 2/17/09   
$ 
38,094,000 
1,200,000    Great Plains Energy Inc. 8% due 2/16/07      29,904,000 
220,000    Southern California Edison 6 1/8% Perpetual      21,993,136 


          89,991,136 
 
    n NON-UTILITY—6.1%       
           
710,432    AMB Property Corp. 7% Series O Perpetual      18,073,390 
17,300    AvalonBay Communities Inc. 8.70% Series H Perpetual      473,847 
650,000    Duke Realty Corp. 6.95% Series M Perpetual      16,562,000 
104,900    Equity Office Properties Trust 7 3/4% Series G Perpetual      2,664,460 
300,000    Federal National Mortgage Association 7% Perpetual      15,956,250 
400,000    New Plan Excel Realty Trust 7 5/8% Series E Perpetual      10,216,000 
8,500    ProLogis 6 3/4% Series F Perpetual      212,500 
9,600    ProLogis 6 3/4% Series G Perpetual      240,000 
208,600    Public Storage Inc. 6.95% Series H Perpetual      5,283,838 
900,000    Public Storage Inc. 7 1/4% Series I Perpetual      23,328,000 
600,000    Realty Income Corp. 7 3/8% Series D Perpetual      15,240,000 
200,000    Vornado Realty Trust 7% Series E Perpetual      5,114,000 
234,900    Vornado Realty Trust 6 5/8% Series G Perpetual      5,708,070 
350,000    Vornado Realty Trust 6 5/8% Series I Perpetual      8,522,500 


          127,594,855 


    Total Preferred Stocks (Cost—$213,330,081)      217,585,991 


 

 


The accompanying notes are an integral part of the financial statement.

7


     DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS—(Continued)
(UNAUDITED)

September 30, 2006

BONDS—43.1%

      Ratings       

     
Standard 
Market 
     
and 
Value 
Par Value 
   
Moody’s 
Poor’s 
(Note 1) 




 
    
n ELECTRIC AND GAS—14.2%
             
                   
$22,000,000   
Arizona Public Service Company
             
   
67/8%, due 8/01/36 
Baa2    BBB-   
$
23,015,366 
19,450,000   
Comed Financing II
           
   
8½%, due 1/15/27 
Ba1    BBB-      20,192,776 
9,304,000   
Commonwealth Edison Co.
           
   
8%, due 5/15/08
  Baa1    A-      9,680,430 
24,000,000   
Dominion Resources Capital Trust I
             
   
7.83%, due 12/01/27
  Baa3    BB+      24,994,200 
20,000,000   
Duke Energy Corp., Series D
             
   
73/8%, due 3/01/10 
A3    BBB      21,293,880 
5,000,000   
Entergy Corp.
             
   
6.30%, due 9/01/35
  Baa1    A-      4,886,610 
10,000,000   
FirstEnergy Corp., Series B
             
   
6.45%, due 11/15/11
  Baa3    BBB-      10,443,070 
24,340,000   
Illinois Power Co.
             
   
7½%, due 6/15/09 
Baa2    BBB+      25,627,927 
17,000,000   
Keyspan Corp.
             
   
75/8%, due 11/15/10 
A3    A      18,361,700 
15,825,000   
Niagara Mohawk Power Corp.
             
   
87/8%, due 5/15/07 
Baa1    A-      16,150,615 
10,000,000   
Northern Border Partners LP
             
   
87/8%, due 6/15/10 
Baa2    BBB      11,087,840 
5,000,000   
NSTAR
             
   
8% due 2/15/10
  A2    A      5,406,640 
9,000,000   
PSEG Power LLC
             
   
85/8%, due 4/15/31 
Baa1    BBB      11,703,699 
15,000,000   
Progress Energy Inc.
             
   
7.10%, due 3/01/11
  Baa2    BBB-      16,094,340 
22,750,000   
Puget Capital Trust
             
   
8.231%, due 6/01/27
  Ba1    BB      22,195,742 

The accompanying notes are an integral part of the financial statement.

8


     DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS—(Continued)
(UNAUDITED)

September 30, 2006

      Ratings       

     
Standard 
Market 
     
and 
Value 
Par Value 
   
Moody’s 
Poor’s 
(Note 1) 





$12,915,000   
Sempra Energy 
             
   
7.95%, due 3/01/10 
  Baa1    BBB+   
$ 
13,937,635 
13,000,000   
Southern Co. Capital Trust II 
             
   
8.14%, due 2/15/27 
  Baa1    BBB+      13,614,224 
6,488,000   
Southern Union Co. 
             
   
7.60%, due 2/01/24 
  Baa3    BBB      6,780,382 
8,850,000   
Southern Union Co. 
             
   
8¼%, due 11/15/29 
  Baa3    BBB      9,843,820 
10,000,000   
TE Products Pipeline Co. 
             
   
7.51%, due 1/15/28 
  Baa3    BBB-      10,445,940 


   
            295,756,836 
    
n TELECOMMUNICATION—17.5% 
             
   
             
17,200,000   
AT&T Wireless Services Inc. 
             
   
7½%, due 5/01/07 
  Baa1    A      17,402,289 
11,500,000   
Alltel Corp. 
             
   
77/8%, due 7/01/32 
  A2    A-      13,035,434 
15,098,000   
BellSouth Capital Funding Corp. 
             
   
7¾%, due 2/15/10 
  A2    A      16,168,886 
10,000,000   
BellSouth Capital Funding Corp. 
             
   
77/8%, due 2/15/30 
  A2    A      11,426,990 
22,000,000   
British Telecom PLC 
             
   
83/8%, due 12/15/10 
  Baa1    BBB+      24,676,080 
15,000,000   
Centurytel Inc. 
             
   
83/8%, due 10/15/10 
  Baa2    BBB      16,328,655 
15,000,000   
Centurytel Inc. 
             
   
67/8%, due 1/15/28 
  Baa2    BBB      14,485,185 
5,645,000   
Comcast Cable Communications Inc. 
             
   
83/8%, due 5/01/07 
  Baa2    BBB+      5,741,518 
13,900,000   
Comcast Corp. 
             
   
7.05%, due 3/15/33 
  Baa2    BBB+      14,930,671 
10,000,000   
France Telecom SA 
             
   
73/4%, due 3/01/11 
  A3    A-      10,966,040 

The accompanying notes are an integral part of the financial statement.

9


     DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS—(Continued)
(UNAUDITED)

September 30, 2006

      Ratings       

          Standard      Market 
          and      Value 
Par Value      Moody’s       Poor’s      (Note 1) 





$     17,625,000    GTE Corp.               
    7.90%, due 2/01/27    Baa1    A    $  18,381,025 
17,000,000    Koninklijke KPN NV               
    8%, due 10/01/10    Baa2    BBB+      18,382,117 
15,000,000    Koninklijke KPN NV               
    83/8%, due 10/01/30    Baa2    BBB+      17,243,835 
24,104,000    Nextel Communications Corp.               
    73/8%, due 8/01/15    Baa3    BBB+      24,894,105 
10,000,000    Sprint Capital Corp.               
    83/8%, due 3/15/12    Baa3    BBB+      11,220,220 
10,000,000    TCI Communications Inc.               
    83/4%, due 8/01/15    Baa2    BBB+      11,860,320 
32,000,000    Telecom Italia Capital               
    7.20%, due 7/18/36    Baa2    BBB+      32,991,776 
15,000,000    Telefonica Emisiones SAU               
    7.045%, due 6/20/36    Baa1    BBB+      15,880,665 
11,500,000    Telefonica Europe BV               
    73/4%, due 9/15/10    Baa1    BBB+      12,425,842 
5,000,000    Telefonica Europe BV               
    81/4%, due 9/15/30    Baa1    BBB+      5,971,320 
10,000,000    Telus Corp.               
    71/2%, due 6/01/07    Baa2    BBB+      10,132,060 
10,500,000    Verizon Global Funding Corp.               
    73/4%, due 12/01/30    A3    A      12,071,682 
20,000,000    Vodafone Group PLC               
    73/4%, due 2/15/10    A3    A-      21,461,760 
5,000,000    Vodafone Group PLC               
    77/8%, due 2/15/30    A3    A-      5,879,790 


                363,958,265 

The accompanying notes are an integral part of the financial statement.

10


     DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS—(Continued)
(UNAUDITED)

September 30, 2006

        Ratings       

            Standard   
Market 
            and   
Value 
Par Value      Moody’s       Poor’s   
(Note 1) 





      
n NON-UTILITY—11.4%
             
                   
#$  30,000,000    Bank of America, NA              
      5.43%, due 6/13/07   Aa1    AA    $   30,010,410 
  8,000,000    Dayton Hudson Corp.              
      97/8%, due 7/01/20    A1    A+       11,342,936 
  9,600,000    Duke Realty LP              
      6.80%, due 2/12/09   Baa1    BBB+      9,892,627 
  10,000,000    EOP Operating LP              
      73/4%, due 11/15/07    Baa2    BBB       10,246,140 
  100,000,000    Federal National Mortgage Association              
      71/2%, due 7/18/08    Aaa    AAA      100,645,100 
#  25,000,000    Harrier Finance Funding LLC              
      5.32%, due 11/15/06   Aaa    AAA       24,998,991 
#  25,000,000    Premier Asset Collateralized Entity LLC              
      5.36%, due 4/25/07   Aaa    AAA       25,006,850 
#  25,000,000    Stanfield Victoria Funding LLC              
      5.33%, due 1/22/07   Aaa    AAA       25,003,225 


                  237,146,279 


      Total Bonds (Cost—$908,240,008)             896,861,380 



The accompanying notes are an integral part of the financial statement.

11


     DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS—(Continued)
(UNAUDITED)
September 30, 2006

SHORT-TERM INSTRUMENTS—35.1%

            Market 
Par Value/          Value 
Shares          (Note 1) 



#$  7,785,954    AIM STIC Liquid Assets Portfolio    $  7,785,954 
#  5,000,000    Banc of America Securities LLC Repurchase Agreement, 5.415%,       
      dated 9/29/06, due 10/02/06, with a repurchase price of $5,002,256       
      and collateralized by $5,100,000 market value of corporate bonds       
      having an average coupon rate of 6.50% and an original weighted       
      average maturity of 1/15/12      5,000,000 
#  125,000,000    BNP Paribas Securities Repurchase Agreement, 5.425%, dated 9/29/06,       
      due 10/02/06, with a repurchase price of $125,056,510 and collateralized       
      by $127,500,001 market value of asset-backed securities (ABS) and       
      corporate bonds having an average coupon rate of 5.98% and an original       
      weighted average maturity of 10/16/16      125,000,000 
#  50,000,000    Citigroup Global Markets Inc. Master Note       
      5.45%, due 10/02/06      50,000,000 
#  120,000,000    Credit Suisse First Boston LLC Repurchase Agreement, 5.425%,       
      dated 9/29/06, due 10/02/06, with a repurchase price of $120,054,250       
      and collateralized by $122,403,118 market value of ABS having an       
      average coupon rate of 6.57% and an original weighted average       
      maturity of 6/03/36      120,000,000 
#  90,000,000    Dresdner Kleinwort Wasserstein Securities LLC Repurchase Agreement,       
      5.425%, dated 9/29/06, due 10/02/06, with a repurchase price of       
      $90,040,688 and collateralized by $91,804,313 market value of corporate       
      bonds having an average coupon rate of 5.33% and an original weighted       
      average maturity of 8/19/18      90,000,000 
#  18,560,000    Fenway Funding LLC       
      5.44%, due 10/02/06      18,557,195 
#  113,000,000    Goldman Sachs & Co. Repurchase Agreement, 5.445%, dated 9/29/06,       
      due 10/02/06, with a repurchase price of $113,051,274 and collateralized       
      by $115,260,001 market value of ABS and collateralized mortgage       
      obligations (CMOs) having an average coupon rate of 5.47% and an       
      original weighted average maturity of 2/21/35      113,000,000 
#  50,000,000    Greenwich Capital Markets Inc. Repurchase Agreement, 5.455%,       
      dated 9/29/06, due 10/02/06, with a repurchase price of $50,022,729       
      and collateralized by $51,005,043 market value of CMOs having an       
      average coupon rate of 4.74% and an original weighted average       
      maturity of 5/28/27      50,000,000 

The accompanying notes are an integral part of the financial statement.

12


     DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS—(Continued)
(UNAUDITED)
September 30, 2006

       
Market
 
Par Value/       
Value
 
Shares       
(Note 1)
 




 
#$ 100,000,000    Lehman Brothers Inc. Repurchase Agreement, 5.425%,       
    dated 9/29/06, due 10/02/06, with a repurchase price of       
    $100,045,208 and collateralized by $102,002,311 market value       
    of CMOs and corporate bonds having an average coupon rate of       
    4.99% and an original weighted average maturity of 4/18/21    $  100,000,000  
#  50,000,000    Nomura Securities International Inc. Repurchase Agreement,       
    5.425%, dated 9/29/06, due 10/02/06, with a repurchase price of       
    $50,022,604 and collateralized by $51,000,000 market value of       
    CMOs and corporate bonds having an average coupon rate of 5.17%       
    and an original weighted average maturity of 7/09/39      50,000,000  


 
    Total Short-Term Instruments (Amortized Cost—$729,343,149)      729,343,149  


 
 
    Total Investments—187.3% (Cost—$3,508,761,306)      3,895,931,574  


 
 
OTHER ASSETS LESS LIABILITIES—(63.3%)      (1,316,012,681 ) 


 
 
AUCTION PREFERRED STOCK—(24.0%)       
           (12,000 shares issued and outstanding; liquidation preference $25,000 per share)      (500,000,000 ) 

 
 
NET ASSETS APPLICABLE TO COMMON STOCK—100.0%       
          (equivalent to $9.21 per share of common stock based on 225,866,244 shares       
          of common stock outstanding; authorized 250,000,000 shares)      2,079,918,893  

 
          # 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.       

The accompanying notes are an integral part of the financial statement.

13


     DNP SELECT INCOME FUND INC.
STATEMENT OF NET ASSETS—(Continued)
(UNAUDITED)
September 30, 2005

 

(1)   Equity securities traded on a national or foreign securities exchange or traded over-the-counter and quoted on the NASDAQ System are valued at the last reported sales price, or if there was no sale on the pricing date, then the security is valued at the mean of the bid and ask prices as obtained on that day from one or more dealers regularly making a market in that security. Fixed income securities are valued at the mean of bid and ask prices provided by an independent pricing service when such prices are believed to reflect the fair market value of such securities. Such bid and ask prices are determined taking into account securities prices, yields, maturities, call features, ratings, and institutional size trading in similar securities and developments related to specific securities. Any 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. Short-term investments having a maturity of 60 days or less are valued on an amortized cost basis, which approximates market value.
   
(2)   At December 31, 2005, the Fund’s most recent fiscal tax year end, based on a tax cost of investments of $3,010,132,491, the Fund had gross unrealized appreciation of $362,153,165 and gross unrealized depreciation of $83,919,490.

 

 

14


Board of Directors 

FRANCIS E. JEFFRIES 
Chairman

NANCY LAMPTON
Vice Chairman

STEWART E. CONNER

CONNIE K. DUCKWORTH

ROBERT J. GENETSKI

CHRISTIAN H. POINDEXTER

CARL F. POLLARD


DAVID J. VITALE

 

 

 

Officers

NATHAN I. PARTAIN, CFA

President, Chief Executive Officer
and Chief Investment Officer

T. BROOKS BEITTEL, CFA

Senior Vice President
and Secretary

JOSEPH C. CURRY, JR.

Senior Vice President and Treasurer

JOYCE B. RIEGEL

Chief Compliance Officer

MICHAEL SCHATT

Senior Vice President

DIANNA P. WENGLER

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, Suite 3600

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 1258
New York, New York 10286-1258
(877) 381-2537

Investment Adviser


Duff & Phelps Investment

Management Co.
55 East Monroe Street, Suite 3600
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 LLP

71 South Wacker Drive
Chicago, Illinois 60606

Independent Registered Public Accounting Firm


Ernst & Young LLP

233 South Wacker Drive
Chicago, Illinois 60606

 


DNP Select
Income Fund Inc.

   
 

Third Quarter
Report

September 30, 2006