Edgar Filing: DUFF & PHELPS UTILITIES INCOME INC

Dear Fellow Shareholders:

Performance Review: We are very pleased to report that your Fund had a total
return (market price change plus income) of 13.67% for 2001. This compares
favorably to the -21.24% average return reported by Lipper for Utility Funds,
-5.64% for Equity Income Funds, -39.22% for Telecommunications Funds, and
-11.88% for the Standard and Poor's 500 Index. The Fund, whose portfolio
contains approximately 25% bonds, also surpassed the Lehman Brothers Utility
Bond Index, which had a 5.85% annual total return.

In pursuit of its objective of current income, the Fund declared twelve
monthly 6.5 cent per share dividends during 2001, plus an extra one cent per
share in the final dividend of the year. This was the eleventh "extra" dividend
in the last fourteen years. The 6.5 cent per share monthly rate, without
compounding, would be 78 cents annualized or a 7.05% common stock dividend
yield based on the December 31, 2001 closing price of $11.06 per share. That
yield compares favorably with the 2001 year-end yield of 4.06% for the Dow
Jones Utility Index and 3.83% for the S&P Utilities Index.

The negative returns of the indexes cited above indicate that it was a
difficult year for many investors. The economy entered a recession in March
2001, as determined by the National Bureau of Economic Research, ushered in
partially by large cutbacks in capital equipment spending on technology and
communications, and intensified by the economic impact of the September 11 New
York City terrorist attacks. The collapse of Enron's share price to pennies was
the year's bleak "Christmas gift" to some investors. The comparatively superior
return of your Fund indicates, in part, that investments not made can be as
important as investments made.

In response to economic weakness, the Federal Reserve executed a program of
rapid interest rate reductions during 2001. The federal funds interest rate was
lowered 475 basis points in 11 steps to 1.75%. Although there may not be more
interest rate reductions to come, we believe that the monetary policy
initiatives already in place, combined with modest current federal tax cuts and
increased spending, should support the domestic economy in an upward path in
2002.

Even with a more robust economy, there will be plenty of challenges ahead
for investors. To prepare for the challenges, Fund analysts prepare annual
industry reviews and outlooks. Following are highlights from those reviews.

Electric Utilities--Regulation and Yield Make A Comeback: The past year was
one of turmoil for the electric utility industry. Several factors dampened
investor enthusiasm and garnered negative press for the sector. Nonetheless, we
believe that industry turmoil will be resolved and investors will benefit. We
expect that electric companies will be financially stronger and their
managements focused on the successful execution of more modest business plans.

After reaching record highs in 2000, electric power prices plummeted in 2001
in response to weaker demand and increased supply. The summer cooling and fall
heating seasons of 2001 were milder than normal throughout most of the country.
The mild weather, coupled with the economic downturn, resulted in weak demand
for electricity. As demand was weakening, the industry was also experiencing
the largest increase in supply in many years. During the year, over 40,000
megawatts of new generating capacity entered service. Although weaker power
prices were good for companies with regulated distribution operations, they
were negative for those companies that had excess unregulated generation
capacity to sell in the open wholesale market.

During 2001, the fallout from the California power crisis continued, as many
states slowed-down, stopped, or reversed deregulation efforts. Given this
California inspired deregulatory reticence, as well as the potential political
ramifications from the ongoing Enron investigations, we expect that regulators
and legislators in other states and at the federal level will have little taste
for pursuing industry deregulation initiatives. As the appetite for
deregulation has faded, so has investor perception of the growth prospects of
companies focusing on unregulated operations, negatively impacting their common
stock valuations. However, we believe the returns that can be earned on
regulated operations are relatively attractive.

The Enron investigations are far from over and the outcome uncertain. But
there are positive implications for the power industry. Companies are enhancing
their credit strength and increasing accounting disclosure of power marketing
and trading operations. In addition, many companies have abandoned aggressive
earnings growth targets and are focusing on moderate earnings growth with
yield. Over the last several years the average dividend payout ratio (that
portion of earnings paid out as dividends) for the electric sector has fallen
from nearly 80% to just over 40%. Given the lessons learned from the recent
past, more companies appear to be gravitating back to strategies that include
an emphasis on dividends, as opposed to being singularly focused on
nonregulated earnings growth.

Gas, What A Difference A Year Makes! The price of natural gas and prices of
many natural gas utility stocks fell significantly in 2001 after surging during
the California crisis. The economic slowdown, record gas storage injections, a
cool summer and a warm winter, calamity in California, and the Enron meltdown
fed the "perfect storm".

Gas local distribution companies (LDC's), with less commodity price risk,
led performance in 2001, declining "only" about 8% but outperforming the S&P
500's 13% decline. Energy merchant company stocks suffered from guilt by
association with Enron, incurring double-digit declines in 2001 after a
spectacular year in 2000. Common stock prices of Dynegy Inc. were down nearly
55%, El Paso Corporation declined nearly 40%, and The Williams Companies, Inc.
lost over 30% in 2001. The worst performer of all, Enron Corp., filed for
bankruptcy in the fourth quarter after a number of income and debt-related
disclosures, an aborted merger agreement with Dynegy Inc., and credit
downgrades of company debt to "junk" status.

Looking ahead from a gas supply and demand standpoint, gas prices are likely
to remain subdued. Unless weather during the remainder of winter is closer to
or colder than normal, gas storage levels will be relatively high at the end of
the heating season. An emergent economic recovery will keep demand in check.
Consumers focused on conservation during the 2000/2001 winter, due to
exceptionally high gas prices. This frugality has persisted even as gas prices
have fallen. On the other hand, production is declining in response to lower
prices, bringing long-term supply into better balance with demand.

It is likely that a steady stream of additional financial disclosures, as
well as Congressional and other investigations of Enron, its executives, its
financial practices, and its independent public accountants, will keep gas
utilities from being boring again in 2002. The merchant energy group will
likely be the most sensitive to industry developments while gas distribution
companies should be less impacted. Over the past year, we have concentrated the
portfolio in the less-volatile distribution companies, minimizing our exposure
to the riskier energy merchants. We will continue to focus on that strategy.

Telecommunications--Wait Until Next Year: After a difficult year in 2000,
many industry observers were guardedly optimistic that a telecommunications
recovery would occur in the second half of 2001. Clearly, that did not happen.
Instead, the telecommunications environment worsened with a continuous flow of
bad news, from weak demand as a result of the recession to bankruptcies.
Because of the high quality investments of your Fund, the telecom holdings
performed relatively well compared to the rest of the industry. Can we expect a
recovery in 2002, or is this industry like the Chicago Cubs--perpetually
waiting for next year? Let's look at the key industry trends for 2002.

First, there is a back-to-basics mentality emanating from companies'
management. After a few years of profligate spending without concern for
earning a reasonable return, an almost singular focus on the successful
execution of the core telecommunications business has surfaced. Since demand is
still muted and the industry tends to lag an economic recovery by six months,
management's first priority in order to weather the current environment is
running its operations as efficiently as possible.

Second, we do not believe the industry shakeout is over just yet. Several
companies entered bankruptcy last year and a couple of former stars have
already fallen in 2002. However painful this trend may be, it is entirely
necessary in order for the industry to return to health. As competitors fail,
the pricing environment improves, excess capacity is worked off, and returns on
invested capital should begin to increase for the surviving players.
Consolidation will also eventually play a part in improving the industry
structure, but it is unlikely to occur this year. Low stock prices and focus on
the core business have discouraged the strong companies from entering into a
lengthy merger process.

Finally, we would highlight the continuation of a trend that came to the
forefront last year--the importance of a healthy balance sheet. Given the Enron
debacle, this issue has taken on even greater meaning this year. We have seen a
sharpened focus on the generation of free cash flow, primarily through a
reduction in capital spending. Combined with asset sales of non-core businesses
and/or initial public offerings of wireless divisions, lower debt levels by the
end of 2002 are expected. These developments could be a catalyst for improved
stock performance. Despite what is shaping up to be another trying year for the
industry, we remain comfortable with our holdings of financially strong,
incumbent local telecommunications companies.

REIT Yields Remain Attractive: Our outlook for REIT shares in 2002 is
positive, primarily driven by the year-end 2001 dividend yield of 7.1% for the
National Association of Real Estate Investment Trusts (NAREIT) Equity Index.
However, earnings growth for the REIT universe is expected to be a relatively
modest 3%. As real estate is a lagging component of the economy, the current
slowdown in aggregate domestic economic growth may linger in the REIT sector

somewhat longer than in other sectors. In addition, many REITs have been
building significant amounts of capital to deploy on opportunities that may not
come to fruition. However, in light of the expectation that the economic
slowdown will be mild, and the record spread on the 7.1% dividend yield versus
many alternative stock and bond investments, selected REIT shares are
attractive.

Capital market investors have imposed discipline on the REIT sector in
recent years, which has kept property supply and demand in balance in markets
where there are limited barriers to entry--smoothing and lengthening the real
estate cycle. In fact, many banks are noting how well real estate loans are
performing today. While the economy has slowed, the market has faced little new
supply, a fortunate circumstance for landlords. In addition, most landlords
prepared themselves for reduced demand and attractive acquisitions by
maintaining very healthy balance sheets. As management teams sit on the
sidelines with available investment capital, waiting for opportunities brought
on by the economy, the Fund will emphasize secure and attractive dividend
yields and diversification of holdings.

Your Fund's team of investment professionals seeks to steer the Fund's
portfolio away from risky investments without sacrificing the consistency of
income to which shareholders have become accustomed.

Board of Directors Meeting--At the December Special Board of Directors'
meeting, the Board declared the following monthly dividends:

Cents Per Share Record Date Payable Date
--------------- ----------- ------------

7.5 cents December 31 January 10
6.5 cents January 31 February 11
6.5 cents February 28 March 11

At the regular February Board of Directors' meeting, the Board declared the
following monthly dividends:

Cents Per Share Record Date Payable Date
--------------- ----------- ------------

6.5 cents March 29 April 10
6.5 cents April 30 May 10

Automatic Dividend Reinvestment Plan and Direct Deposit Service--The Fund
has a dividend reinvestment plan available to all registered shareholders.
Those shareholders whose shares are held for them by a brokerage house or
nominee in "street-name" may not participate in the Fund's automatic dividend
reinvestment plan. For such shareholders desiring automatic dividend
reinvestment, we suggest you contact your broker or other nominee.

As an added service, the Fund offers direct deposit service through
electronic funds transfer to all registered shareholders currently receiving a
monthly dividend check. This service is offered through The Bank of New York.
For more information and/or an authorization form on automatic dividend
reinvestment or direct deposit, please contact The Bank of New York at
1-877-381-2537 or http://stock.bankofny.com.

Visit us on the Web--You can obtain the most recent shareholder financial
report and dividend information at our web site http://www.duffutility.com.

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/ Nathan I. Partain

Claire V. Hansen, CFA
Nathan I. Partain, CFA
Chairman
President and Chief
Executive Officer

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of
Duff & Phelps Utilities Income Inc.:

We have audited the accompanying balance sheet of Duff & Phelps Utilities
Income Inc. (a Maryland corporation), including the schedule of investments, as
of December 31, 2001, and the related statements of operations and cash flows
for the year then ended, the statements of changes in net assets for each of
the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 2001, by correspondence
with the custodian. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Duff
& Phelps Utilities Income Inc. as of December 31, 2001, the results of its
operations and its cash flows for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Chicago, Illinois
February 5, 2002

DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS
December 31, 2001

COMMON STOCKS--69.9%

Market
Value
Shares Company (Note 1)
----------- ------- -------------

[_] ELECTRIC--39.8%

1,300,000 Allegheny Energy Inc....................... $ 47,086,000
1,000,000 Allete Inc................................. 25,200,000
# 796,000 Dominion Resources......................... 47,839,600
# 1,417,000 DTE Energy Co.............................. 59,428,980
# 1,300,000 Duke Energy Corp........................... 51,038,000
# 1,593,400 Endesa S.A................................. 24,968,578
1,005,000 Entergy Corp............................... 39,305,550
1,000,000 Exelon Corp................................ 47,880,000
1,100,000 FPL Group Inc.............................. 62,040,000
# 1,000,000 Keyspan Corp............................... 34,650,000
# 215,000 National Grid Group PLC ADR................ 6,611,250
770,000 National Grid Group PLC (United Kingdom)... 4,790,787
2,256,600 NiSource Inc............................... 52,037,196
# 1,318,600 NSTAR...................................... 59,139,210
1,120,000 Pinnacle West Capital Corp................. 46,872,000
# 1,375,000 Progress Energy Inc........................ 61,916,250
1,000,000 Public Service Enterprise Group............ 42,190,000
850,000 Scottish & Southern Energy (United Kingdom) 7,589,507
200,000 Scottish & Southern Energy ADR............. 17,857,660
1,000,000 Scottish Power PLC ADR..................... 21,700,000
# 3,000,000 Southern Co................................ 76,050,000
1,000,000 TECO Energy Inc............................ 26,240,000
# 420,748 TXU Corp................................... 19,838,268
# 2,425,000 Utilicorp United Inc....................... 61,037,250
1,500,000 Vectren Corp............................... 35,970,000
-------------
979,276,086

[_] GAS--6.4%

926,000 AGL Resources.............................. 21,316,520
800,000 National Fuel Gas Co....................... 19,760,000
600,000 NICOR Inc.................................. 24,984,000
600,000 Peoples Energy Corp........................ 22,758,000
1,000,000 WGL Holdings Inc........................... 29,070,000
# 1,500,000 Williams Companies Inc..................... 38,280,000
-------------
156,168,520

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

DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS--(Continued)
December 31, 2001

Market
Value
Shares Company (Note 1)
----------- ------- --------------

[_] TELECOMMUNICATION--13.6%

# 1,000,000 Alltel Corp............................. $ 61,730,000
# 1,000,000 BCE Inc. ............................... 22,800,000
1,730,000 BellSouth Corp.......................... 65,999,500
1,637,230 SBC Communications Inc.................. 64,130,299
# 700,000 Swisscom AG ADR......................... 19,425,000
856,250 Telecom Corp. of New Zealand Interim ADR 14,342,188
1,068,400 Telstra Corp. ADR....................... 14,904,180
# 1,519,000 Verizon Communications.................. 72,091,740
--------------
335,422,907

[_] NON-UTILITY--10.1%

223,450 Apartment Investment & Management Co.... 10,218,368
444,375 Archstone-Smith Trust................... 11,687,063
162,200 Avalon Bay Communities Inc.............. 7,673,682
409,000 Boston Properties Inc................... 15,542,000
266,900 Camden Property Trust................... 9,795,230
# 347,400 CBL & Associates Properties Inc......... 10,943,100
364,000 Centerpoint Properties Corporation...... 18,127,200
290,000 Chelsea Property Group Inc.............. 14,239,000
295,000 Duke Realty Corp........................ 7,177,350
620,000 Equity Office Properties Trust.......... 18,649,600
310,000 Equity Residential Properties Trust..... 8,900,100
161,300 Essex Property Trust Inc................ 7,969,833
200,000 First Industrial Realty Trust .......... 6,220,000
# 250,000 General Growth Properties, Inc.......... 9,700,000
290,000 Green S.L. Realty Properties Inc........ 8,905,900
139,100 iStar Financial Inc..................... 3,470,545
300,000 Kimco Realty Corp....................... 9,807,000
300,000 Pan Pacific Retail Properties Inc....... 8,616,000
370,600 ProLogis Trust.......................... 7,971,606
105,000 Public Storage Inc...................... 3,507,000
90,000 Realty Income Corp...................... 2,646,000
# 260,000 Reckson Associates Realty Corp.......... 6,073,600
171,545 Reckson Associates Realty Corp. Class B. 4,376,113
# 305,000 Simon Property Group.................... 8,945,650

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

DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS--(Continued)
December 31, 2001

Market
Value
Shares Company (Note 1)
----------- ------- --------------

# 465,800 Vornado Realty Trust........................... $ 19,377,280
154,500 Weingarten Realty Investors.................... 7,416,000
--------------
247,955,220
--------------
Total Common Stocks (Cost--$1,611,226,760)..... 1,718,822,733
--------------
PREFERRED STOCKS--9.8%

[_] NON-UTILITY--1.1%
500,000 Cox Communications Inc. 7% 8/16/02............. 27,585,000

--------------
27,585,000

[_] UTILITY--8.7%

626,200 Cinergy Corp. 9 1/2% 2/16/05................... 34,566,240
450,000 Dominion Resources 91/2% 11/16/04.............. 26,874,000
700,000 Duke Capital Financing Trust III 8 3/8% 8/31/29 18,830,000
# 1,200,000 Duke Energy 8 1/4% 5/18/04..................... 31,620,000
223,500 EIX Trust II Series B 8.60% 10/29/29**......... 4,492,350
550,000 MediaOne Group 7.00% 11/15/02.................. 14,932,500
500,000 NiSource Industries Inc. 7.75% 2/19/03......... 22,725,000
209,000 P P & L Capital Trust II 8.10% 7/01/27......... 5,237,540
789,100 Texas Utilities Co. 9 1/4% 8/16/02............. 20,579,728
400,000 Texas Utilities Co. 8 3/4% 11/16/05............ 20,696,000
450,900 Utilicorp United Inc. 9 3/4% 11/16/02.......... 12,309,570

--------------
212,862,928

--------------
Total Preferred Stocks (Cost--$237,077,619).... 240,447,928

--------------

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

DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS--(Continued)
December 31, 2001

BONDS--21.4%

Ratings*
--------------------------
Fitch
IBCA, Standard Market
Duff & and Value
Par Value Company Phelps Moody's Poor's (Note 1)
------------ ------- --------- ------- -------- ------------

[_] ELECTRIC--10.0%
$ 5,000,000 AES Ironwood Corp.
8.857%, due 11/30/25............... Not Rated Baa3 BBB- $ 4,716,120
12,271,000 Cleveland Electric Illuminating
9%, due 7/01/23.................... BBB Baa2 BBB 12,713,909
18,050,000 Comed Financing II
8 1/2%, due 1/15/27................ Not Rated Baa2 BBB 17,751,904
7,500,000 Commonwealth Edison Co.
9 7/8%, due 6/15/20................ A- A3 A- 8,387,603
8,850,000 Commonwealth Edison Co.
8 5/8%, due 2/01/22................ A- A3 A- 9,007,149
5,000,000 Commonwealth Edison Co.
8 3/8%, due 9/15/22................ A- A3 A- 5,065,940
# 10,000,000 Commonwealth Edison Co.
8 3/8%, due 2/15/23................ A- A3 A- 10,227,800
6,000,000 Dayton Power and Light
8.15% due 1/15/2026................ AA A2 BBB+ 6,220,278
# 24,000,000 Dominion Resources Capital Trust
7.83%, due 12/01/27................ BBB Baa2 BBB- 22,896,312
5,000,000 Gulf States Utilities
8.94%, due 1/01/22................. BBB Baa3 BBB- 5,189,135
1,000,000 Houston Lighting
8 3/4%, due 3/01/22................ A- A3 BBB+ 1,042,575
# 19,800,000 Hydro - Quebec
9 3/4%, due 1/15/18................ AA- A1 A+ 21,157,270
5,000,000 Illinois Power Co.
7 1/2, due 7/15/25................. A- Baa2 BBB+ 4,186,420
5,000,000 Louisiana Power & Light Co.
8 3/4, due 3/01/26................. BBB+ Baa2 BBB+ 5,010,345
4,000,000 New York State Electric & Gas Corp.
8 7/8%, due 11/01/21............... A A3 A 4,099,472
# 5,000,000 Progress Energy Inc
7 3/4% 3/1/31...................... Not Rated Baa1 BBB 5,363,965

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

DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS--(Continued)
December 31, 2001

Ratings*
--------------------------
Fitch
IBCA, Standard Market
Duff & and Value
Par Value Company Phelps Moody's Poor's (Note 1)
------------ ------- --------- ------- -------- ------------

$ 5,000,000 PSEG Power
8 5/8% 4/15/31................... Not Rated Baa1 BBB $ 5,568,240
# 10,000,000 Public Service Co. of Colorado
8 3/4%, due 3/01/22.............. A A3 A 10,165,840
22,750,000 Puget Capital Trust
8.231%, due 6/01/27.............. Not Rated Baa3 BB 21,371,123
# 13,000,000 Southern Co. Capital Trust
8.14%, due 2/15/27............... Not Rated Baa1 BBB+ 13,134,706
11,150,000 Texas Utilities Electric Co.
8 1/8%, due 2/01/02.............. A- A3 BBB+ 11,195,670
12,000,000 UtiliCorp United Inc.
8%, due 3/01/23.................. BBB Baa3 BBB 11,168,916
# 10,000,000 Virginia Electric & Power Co.
8 5/8%, due 10/01/24............. A+ A2 A 10,789,070
# 17,700,000 Virginia Electric & Power Co.
8 1/4%, due 3/01/25.............. A+ A2 A 18,740,937
------------
245,170,699
[_] GAS--2.5%
5,125,000 ANR Pipeline Co.
9 5/8%, due 11/01/21............. Not Rated Baa1 BBB+ 5,957,725
5,000,000 KN Energy Inc.
7 1/4%, due 3/01/28.............. BBB Baa2 BBB 4,883,775
10,000,000 Northern Border Partners LP
8 7/8%, due 6/15/10.............. BBB+ Baa1 BBB+ 10,750,000
6,488,000 Southern Union Co.
7.60%, due 2/01/24............... BBB+ Baa2 BBB+ 6,230,933
8,850,000 Southern Union Co.
8 1/4%, due 11/15/29............. BBB+ Baa2 BBB+ 9,104,836
10,000,000 TE Products Pipeline Co.
7.51%, due 1/15/28............... Not Rated Baa2 BBB 9,155,440
9,000,000 Trans-Canada Pipeline
9 1/8%, due 4/20/06.............. Not Rated A3 BBB 10,050,246
4,000,000 Transcontinental Gas Pipeline Co.
8 7/8%, due 9/15/02.............. BBB+ Baa1 BBB+ 4,160,344
------------
60,293,299

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

DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS--(Continued)
December 31, 2001

Ratings*
--------------------------
Fitch
IBCA, Standard Market
Duff & and Value
Par Value Company Phelps Moody's Poor's (Note 1)
------------ ------- --------- ------- -------- ------------

[_] TELECOMMUNICATION--6.9%
#$19,000,000 AT & T Corp.
8.35%, due 1/15/25 A- A3 BBB+ $ 19,339,074
15,000,000 AT&T Wireless Services Inc.
8 3/4%, due 3/01/31 BBB Baa2 BBB 17,049,450
# 10,000,000 Bell South Capital Funding
7 7/8% 2/15/30 AA- Aa3 A+ 11,476,760
25,000,000 British Telecom PLC
8 5/8%, due 12/15/30 A Baa1 A- 28,799,675
11,350,000 France Telecom
8 1/2%, due 3/01/31 BBB+ Baa1 BBB+ 13,001,175
# 12,000,000 GTE California Inc.
8.07%, due 4/15/24 AA Aa3 A+ 12,284,856
# 17,625,000 GTE Corp.
7.90%, due 2/01/27 A+ A2 A+ 18,327,480
# 13,750,000 New England Telephone & Telegraph
9%, due 8/01/31 AA Aa2 A+ 14,321,450
# 9,000,000 New York Telephone Co.
7 5/8%, due 2/01/23 AA A1 A+ 8,946,153
9,000,000 Tele-Commun Inc.
9.80%, due 2/01/12 A- Baa2 BBB+ 10,835,829
5,000,000 US West Communications
8 7/8%, due 6/01/31 A A2 BBB+ 5,214,110
5,000,000 Vodafone Group PCL
7 7/8% 2/15/30 Not Rated A2 A 5,658,020
5,000,000 Worldcom Inc
8 1/4% 5/15/13 A- A3 BBB+ 5,300,390
------------
170,554,422
[_] NON-UTILITY--2.0%
17,500,000 Contl Cablevision
9 1/2%, due 8/01/13.............. Not Rated Baa2 BBB+ 19,836,163
# 8,000,000 Dayton Hudson Corp.
9 7/8%, due 7/01/20.............. A A2 A+ 10,728,616
# 19,940,000 EOP Operating LP
7 1/2%, due 4/19/29.............. BBB+ Baa1 BBB+ 19,132,649
------------
49,697,428
------------
Total Bonds (Cost--$524,883,988)............................ 525,715,848
------------

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

DUFF & PHELPS UTILITIES INCOME INC.
SCHEDULE OF INVESTMENTS--(Continued)
December 31, 2001

Market
Value
Par Value Company (Note 1)
------------ ------- --------------

U.S. TREASURY OBLIGATIONS--0.6%
#$10,000,000 U.S. Treasury Notes
10 3/4%, due 5/15/03........................................ $ 11,111,720
2,000,000 U.S. Treasury Bonds
10 3/4%, due 8/15/05........................................ 2,445,704
--------------
Total U.S. Treasury Obligations (Cost--$13,233,858)......... 13,557,424
--------------

U.S. GOVERNMENT AGENCY OBLIGATIONS--2.8%
# 65,000,000 Federal Home Loan Mortgage Corp.
9 3/4%, due 2/14/03......................................... 69,709,445
--------------
Total U.S. Government Agency Obligations (Cost--$68,298,493) 69,709,445
--------------

COMMERCIAL PAPER--3.3%
82,000,000 General Electric Capital Corp.
1.80%, due 1/02/02.......................................... 81,995,900
--------------
Total Commercial Paper (Amortized Cost--$81,995,900)........ 81,995,900
--------------

TOTAL INVESTMENTS (Cost--$2,536,716,618) (107.8%).......................... $2,650,249,278
--------------

--------

*Bond Ratings are not covered by the report of independent public accountants.

**Dividends are currently deferred.

#This security, or a portion of this security is out on loan at December 31,
2001. Total loaned securities had a market value of $412,874,440 at
December 31, 2001. (Note 7).

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.

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

DUFF & PHELPS UTILITIES INCOME INC.
BALANCE SHEET
December 31, 2001

ASSETS:
Investments at market value:
Common stocks (cost $1,611,226,760)....................................................... $1,718,822,733
Preferred stocks cost ($237,077,619)...................................................... 240,447,928
Bonds (cost $524,883,988)................................................................. 525,715,848
U.S. Treasury obligations (cost $13,233,858).............................................. 13,557,424
U.S. government agency obligation (cost $68,298,493)...................................... 69,709,445
Commercial paper (amortized cost $81,995,900)............................................. 81,995,900
Collateral held for securities on loan, at value........................................... 435,375,081
Interest-bearing deposits with custodian................................................... 7,160,106
Receivables:
Interest.................................................................................. 15,742,593
Dividends................................................................................. 6,791,876
Securities lending income................................................................. 89,134
Prepaid expenses........................................................................... 105,232
--------------
Total Assets............................................................................ $3,115,513,300
==============
LIABILITIES:
Due to Adviser (Note 2).................................................................... 3,722,866
Due to Administrator (Note 2).............................................................. 933,614
Dividends payable on common stock.......................................................... 16,014,093
Dividends payable on remarketed preferred stock............................................ 669,039
Accrued expenses........................................................................... 2,274,691
Commercial paper outstanding (Note 6)...................................................... 196,827,285
Payable upon return of securities on loan.................................................. 435,375,081
--------------
Total Liabilities....................................................................... 655,816,669
--------------
Remarketed preferred stock ($.001 par value; 100,000,000 shares authorized and 5,000 shares
issued and outstanding, liquidation preference $100,000 per share) (Note 5).............. 500,000,000
--------------
CAPITAL:
Common stock ($.001 par value; 250,000,000 shares authorized and 213,521,241 shares issued
and outstanding) (Note 4)................................................................ 213,521
Paid-in surplus (Note 4)................................................................... 1,909,811,939
Accumulated net realized loss on investments............................................... (47,217,895)
Distributions in excess of net investment income........................................... (16,645,171)
Unrealized appreciation on foreign currency translation.................................... 1,577
Net unrealized appreciation on investments................................................. 113,532,660
--------------
Net assets applicable to common stock (equivalent to $9.18 per share based on
213,521,241 outstanding).............................................................. 1,959,696,631
--------------
Total Net Assets Applicable to Common and Preferred Stock............................... 2,459,696,631
--------------
Total Liabilities and Capital........................................................... $2,680,138,219
==============

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

DUFF & PHELPS UTILITIES INCOME INC.
STATEMENT OF OPERATIONS
For the year ended December 31, 2001

INVESTMENT INCOME:
Interest............................................................................. $ 49,417,814
Dividends (less withholding tax of $853,250)......................................... 160,245,524
Securities lending income............................................................ 1,220,457
-------------
Total investment income............................................................ 210,883,795

EXPENSES:
Commercial paper interest expense (Note 6 ).......................................... 9,423,270
Management fees (Note 2)............................................................. 15,284,267
Administrative fees (Note 2)......................................................... 3,806,813
Transfer agent fees.................................................................. 537,200
Custodian fees....................................................................... 328,500
Remarketing agent fees............................................................... 1,267,360
Shareholder reports.................................................................. 517,300
Legal and audit fees................................................................. 255,200
Directors' fees (Note 2)............................................................. 365,600
Other expenses....................................................................... 724,706
-------------
Total expenses..................................................................... 32,510,216
-------------
Net investment income.............................................................. 178,373,579

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments..................................................... 18,943,412
Net change in unrealized appreciation on investments and foreign currency translation (296,203,058)
-------------
Net loss on investments.............................................................. (277,259,646)
-------------
Net decrease in net assets resulting from operations................................. $ (98,886,067)
=============

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

DUFF & PHELPS UTILITIES INCOME INC.
STATEMENTS OF CHANGES IN NET ASSETS

For the year For the year
ended ended
December 31, December 31,
2001 2000
-------------- --------------

FROM OPERATIONS:
Net investment income.................................................... $ 178,373,579 $ 190,201,026
Net realized gain on investments......................................... 18,943,412 53,471,923
Net change in unrealized appreciation on investments and foreign currency
translation............................................................ (296,203,058) 311,528,851
-------------- --------------
Net increase (decrease) in net assets resulting from operations........ (98,886,067) 555,201,800

DISTRIBUTIONS TO STOCKHOLDERS FROM;
Net investment income--preferred stock (Note 5).......................... (16,247,814) (23,887,016)
Net investment income--common stock (Note 3)............................. (167,778,258) (165,926,959)
-------------- --------------
Total distributions.................................................... (184,026,072) (189,813,975)

FROM CAPITAL STOCK TRANSACTIONS (Note 4):
Shares issued to common stockholders from dividend reinvestment.......... 26,595,226 22,497,362
-------------- --------------
Net increase in net assets derived from capital share transactions....... 26,595,226 22,497,362
-------------- --------------
Total increase (decrease).............................................. (256,316,913) 387,885,187

TOTAL NET ASSETS:
Beginning of year........................................................ 2,716,013,544 2,328,128,357
-------------- --------------
End of year (including distributions in excess of and undistributed net
investment income of $16,645,171and $3,415,147, respectively).......... $2,459,696,631 $2,716,013,544
============== ==============

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

DUFF & PHELPS UTILITIES INCOME INC.
STATEMENT OF CASH FLOWS
For the year ended December 31, 2001

Cash Flows From (For):
OPERATING ACTIVITIES

Interest received....................................................... $ 50,202,102
Income dividends received............................................... 160,291,180
Securities lending income............................................... 1,205,519
Operating expenses paid (excluding interest)............................ (23,272,568)
Interest paid on commercial paper....................................... (11,591,438)

---------------
Net cash provided by operating activities........................................... 176,834,795
INVESTING ACTIVITIES
Purchase of investment securities....................................... (6,059,454,313)
Proceeds from sale/redemption of investment securities.................. 6,032,511,204
Amortization of premiums and discounts on debt securities............... 4,338,222
Return of capital on investments........................................ 2,063,887
Long-term capital gains dividends received.............................. 1,868,107

---------------
Net cash used in investing activities............................................... (18,672,893)
FINANCING ACTIVITIES
Dividends paid.......................................................... (184,860,697)
Proceeds from issuance of common stock under dividend reinvestment
plan.................................................................. 26,595,226
Change in net proceeds from issuance of commercial paper................ 3,639,893

---------------
Net cash used in financing activities............................................... (154,625,578)

-------------
Net increase in cash and cash equivalents................................................. 3,536,324
Cash and cash equivalents--beginning of year.............................................. 3,623,782

-------------
Cash and cash equivalents--end of year.................................................... $ 7,160,106

=============
Reconciliation of net investment income to net cash provided by operating
activities:
Net investment income................................................................... $ 178,373,579
Adjustments to reconcile net investment income to net cash provided by
operating activities:
Decrease in interest receivable....................................... 784,288
Decrease in dividends receivable...................................... 45,656
Decrease in accrued expenses.......................................... (2,353,790)
Increase in other receivable.......................................... (14,938)

---------------
Total adjustments............................................................... (1,538,784)

-------------
Net cash provided by operating activities................................................. $ 176,834,795

=============

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

DUFF & PHELPS UTILITIES INCOME INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2001

(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 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, 2001, the Fund had tax capital loss carry forwards of
$72,506,566 which expire beginning on December 31, 2003.

At December 31, 2001, on a tax basis, the Fund had undistributed net
investment income of $2,100,876; and based on a $2,553,161,886 tax cost of
investments, gross unrealized appreciation of $196,489,611 and unrealized
depreciation of $99,402,219. The difference between the book basis and tax
basis of distributable earnings are a result of tax 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 accounting
principles generally accepted in the United States 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.

DUFF & PHELPS UTILITIES INCOME INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2001

(e) As required, effective January 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing discount and premium on debt securities. Prior to
January 1, 2001, the Fund did not amortize premiums on debt securities. The
cumulative effect of this accounting change had no impact on total net
assets of the Fund, but resulted in a $14,407,825 reduction in cost of
securities and a corresponding $14,407,825 increase in net unrealized
appreciation, based on securities held by the Fund on January 1, 2001.

(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 $22,500 per year plus $1,500 per board meeting, plus $1,000
per 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 2001:

Record Payable Dividend
Date Date Per Share
-------- -------- ---------

01-31-01 02-12-01 $.065
02-28-01 03-12-01 .065
03-30-01 04-10-01 .065
04-30-01 05-10-01 .065
05-31-01 06-11-01 .065
06-29-01 07-10-01 .065

Record Payable Dividend
Date Date Per Share
-------- -------- ---------

07-31-01 08-10-01 .065
08-31-01 09-10-01 .065
09-28-01 10-10-01 .065
10-31-01 11-13-01 .065
11-30-01 12-10-01 .065
12-31-01 01-10-02 .075

The tax basis for all distributions was net investment income.

DUFF & PHELPS UTILITIES INCOME INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2001

(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.

Transactions in common stock and paid-in surplus during 2000 and 2001 were
as follows:

Shares Amount
----------- --------------

For the year ended December 31, 2000:
Beginning capitalization.......... 208,478,761 $1,860,932,872
Dividend reinvestment............. 2,456,999 22,497,362
----------- --------------
Total capitalization.......... 210,935,760 $1,883,430,234
=========== ==============
For the year ended December 31, 2001:
Beginning capitalization.......... 210,935,760 $1,883,430,234
Dividend reinvestment............. 2,585,481 26,595,226
----------- --------------
Total capitalization.......... 213,521,241 $1,910,025,460
=========== ==============

(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 1.657% to 4.850% during the
year ended December 31, 2001.

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.

DUFF & PHELPS UTILITIES INCOME INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2001

(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 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 2.16% to 5.34%
during the year ended December 31, 2001. At December 31, 2001, the Fund had
Notes outstanding of $196,827,285.

(7) INVESTMENT TRANSACTIONS:

For the year ended December 31, 2001, purchases and sales of investment
securities (excluding short-term securities) were $5,786,016,232 and
$5,737,909,437, 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
December 31, 2001, the fund had loaned portfolio securities with a market value
of $412,874,440 to a broker/dealer and money market instruments with a market
value of $435,375,081 were held in the Fund's account at The Bank of New York
as collateral.

DUFF & PHELPS UTILITIES INCOME INC.
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 years indicated:

For the year ended December 31
-----------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------

Net asset value:
Beginning of year......................... $ 10.51 $ 8.77 $ 10.36 $ 9.90 $ 8.44
---------- ---------- ---------- ---------- ----------
Net investment income..................... 0.77 0.88 0.89 0.88 0.85
Net realized gain (loss) and change in
unrealized appreciation/depreciation on
investments............................. (1.23) 1.76 (1.59) 0.46 1.46
---------- ---------- ---------- ---------- ----------
Total from investment operations.......... (0.46) 2.64 (0.70) 1.34 2.31
Dividends on preferred stock from net
investment income....................... (0.08) (0.11) (0.10) (0.10) (0.10)
Dividends on common stock from net
investment income....................... (0.79) (0.79) (0.79) (0.78) (0.75)
---------- ---------- ---------- ---------- ----------
Total distributions....................... (0.87) (0.90) (0.89) (0.88) (0.85)
Net asset value:
End of year.............................. $ 9.18 $ 10.51 $ 8.77 $ 10.36 $ 9.90
========== ========== ========== ========== ==========
Per share market value:
End of year.............................. $ 11.06 $ 10.50 $ 8.31 $ 11.25 $ 10.13
Ratio of expenses to average net assets
attributable to common shares........... 1.57% 1.79% 1.66% 1.46% 1.45%
Total investment return................... 13.67% 37.37% (19.85%) 19.95% 27.69%
Ratio of net investment income to average
net assets attributable to common shares 8.63% 9.73% 9.40% 8.85% 9.87%
Portfolio turnover rate................... 213.48% 229.70% 223.78% 251.19% 213.57%
Net assets, end of year (000s omitted).... $2,459,697 $2,716,014 $2,328,128 $2,631,692 $2,510,035

Information about Directors and Officers of the Fund

Set forth below are the names and certain biographical information about the
directors and officers of the Fund. Directors are divided into three classes
and elected to serve staggered three-year terms. Except as indicated in the
table, directors are elected by the holders of the Fund's common stock. The
officers are elected at the annual meeting of the board of directors of the
Fund.

Name, Position with the Fund,
Address Length of Time Served Principal Occupation During Past 5 Years
and Age and Term of Office and Other Affiliations
------- ----------------------- ----------------------------------------

Interested Director of the Fund

Claire V. Hansen*....... Chairman and Director Senior Advisor to the Board of Directors, Phoenix
55 East Monroe Street since January 1987 Investment Partners, Ltd. since November 1995;
Chicago, Illinois 60603 Class III (term expires President and Chief Executive Officer, Duff &
Age 76 2002) Phelps Utilities Income Inc. January 2000-February
2001; Senior Advisor to the Board of Directors, Duff
& Phelps Corporation, 1988-November 1995
(Chairman of the Board, 1987-1988; Chairman of the
Board and Chief Executive Officer prior thereto);
Chairman of the Board, Duff Research Inc. and Duff
& Phelps Investment Management Co., 1985-1987
Independent Directors of the Fund

Wallace B. Behnke....... Director since January 1987 Consulting engineer since July 1989; prior thereto,
323 Glen Eagle Class III (term expires Vice Chairman, Commonwealth Edison Company
Kiawah Island 2002) (public utility)
South Carolina 29455
Age 76

Harry J. Bruce.......... Director since January 1989 Private investor; former Chairman and Chief
1630 Sheridan Road Class I (term expires 2003) Executive Officer, Illinois Central Railroad Co.
Wilmette, Illinois 60091
Age 70

Franklin A. Cole........ Director since January 1989 Chairman, Croesus Corporation (private management
54 West Hubbard Street Class II (term expires 2004) and investment company); former Chairman and
Chicago, Illinois 60610 Chief Executive Officer, Amerifin Corporation
Age 75 (formerly named Walter E. Heller International
Corporation); Director, Aon Corporation

Gordon B. Davidson...... Director since January 1989 Of Counsel, Wyatt, Tarrant & Combs (law firm)
PNC Plaza Class III (term expires since September 1995 (Chairman of the Executive
Louisville, Kentucky 2002) Committee prior thereto); retired Director, BellSouth
40202 Corp.; former Chairman of the Board and Director,
Age 75 Trans Financial Advisers, Inc.

Robert J. Genetski**... Director since April 2001 President, Robert Genetski & Associates, Inc.
195 North Harbor Drive Class II (term expires (economic and financial consulting firm) since 1991;
Chicago, Illinois 60601 2004) Senior Managing Director, Chicago Capital, Inc.
Age 59 (financial services firm) 1995-2001; former Senior
Vice President and Chief Economist, Harris Trust &
Savings Bank; author of several books; regular
contributor to the Nikkei Financial Daily

Francis E. Jeffries***. Director since January Retired Chairman, Phoenix Investment Partners, Ltd.
8477 Bay Colony Drive 1987 since May 1997 (Chairman, November 1995-May
Naples, Florida 34108 Class II (term expires 1997); Chairman and Chief Executive Officer, Duff
Age 71 2004) & Phelps Corporation, June 1993-November 1995
(President and Chief Executive Officer, January
1992-June 1993); President and Chief Executive
Officer, Duff & Phelps Illinois Inc. since 1987
(President and Chief Operating Officer, 1984-1987)
and Chairman of the Board, Duff & Phelps
Investment Management Co. 1988-1993; Director,
The Empire District Electric Company

Nancy Lampton**........ Director since October Chairman and Chief Executive Officer, Hardscuffle
3 Riverfront Plaza 1994 Inc. (insurance holding company) and Chairman and
Louisville, Kentucky Class I (term expires Chief Executive Officer, American Life and Accident
40202 2003) Insurance Company of Kentucky; Director,
Age 59 Constellation Energy Group, Inc.

David J. Vitale........ Director since April 2000 President and Chief Executive Officer, Board of
141 West Jackson Class I (term expires 2003) Trade of the City of Chicago, Inc. since March 2001;
Boulevard Retired bank executive 1999-2001; Vice Chairman
Chicago, Illinois 60604 and Director, Bank One Corporation, 1998-1999;
Age 55 Vice Chairman and Director, First Chicago NBD
Corporation, and President, The First National Bank
of Chicago, 1995-1998; Vice Chairman, First
Chicago Corporation and The First National Bank of
Chicago, 1993-1998 (Director, 1992-1998;
Executive Vice President, 1986-1993); Director,
Ariel Capital Management, Inc., Ark Investment
Management, Wheels Inc.

Additional information about the Fund's directors is contained in the
Statement of Additional Information ("SAI") constituting Part B of the Fund's
Registration Statement on Form N-2 filed with the SEC. The most recent
post-effective amendment to that Registration Statement is available
electronically at the SEC's Internet web site, http://www.sec.gov. The Fund
will also furnish a copy of the SAI portion of the Registration Statement,
without charge, to any shareholder who so requests by calling the Administrator
at (888) 878-7845 (toll-free).

Officers of the Fund (other than the Chairman, for whom see above)

Nathan I. Partain...... President and Chief Executive Vice President, Duff & Phelps Investment
55 East Monroe Street Executive Officer, since Management Co. since January 1997; Director of
Chicago, Illinois 60603 February 2001 (Executive Utility Research, Phoenix Investment Partners, Ltd.,
Age 45 Vice President, Chief 1989-1996 (Director of Equity Research, 1993-1996
Investment Officer and and Director of Fixed Income Research, 1993);
Assistant Secretary, April Director, Otter Tail Corporation
1998-February 2001;
Senior Vice President, Chief
Investment Officer and
Assistant Secretary,
January-April 1998; Senior
Vice President and Assistant
Secretary, January 1997-
January 1998)

T. Brooks Beittel...... Secretary, Treasurer and Senior Vice President, Duff & Phelps Investment
55 East Monroe Street Senior Vice President, since Management Co. since 1993 (Vice President 1987-
Chicago, Illinois 60603 January 1995 1993)
Age 51

Michael Schatt......... Senior Vice President since Senior Vice President, Duff & Phelps Investment
55 East Monroe Street April 1998 (Vice President, Management Co. since January 1997; Managing
Chicago, Illinois 60603 January 1997-April 1998) Director, Phoenix Investment Partners, Ltd., 1994-
Age 54 1996

Joseph C. Curry, Jr.... Vice President since April Senior Vice President, J.J.B. Hilliard, W.L. Lyons,
Hilliard Lyons Center 1988 Inc. since 1994 (Vice President 1982-1994); Vice
Louisville, Kentucky President Hilliard Lyons Trust Company; President,
40202 Hilliard-Lyons Government Fund, Inc.; Vice
Age 57 President, Treasurer and Secretary, Hilliard Lyons
Growth Fund, Inc.; Treasurer, Senbanc Fund

Dianna P. Wengler...... Assistant Secretary since Vice President, J.J.B. Hilliard, W.L. Lyons, Inc. since
Hilliard Lyons Center April 1988 1990; Vice President, Hilliard-Lyons Government
Louisville, Kentucky Fund, Inc.; Assistant Secretary, Hilliard Lyons
40202 Growth Fund, Inc.
Age 41

--------
*Mr. Hansen is deemed to be an "interested person" of the Fund under the
Investment Company Act of 1940 because of his positions with the Fund and
with Phoenix Investment Partners, Ltd., parent company of the Fund's
investment adviser.
**Elected by the holders of the Fund's preferred stock.
***Mr. Jeffries oversees 34 portfolios in the Fund Complex to which the Fund
belongs.

Duff & Phelps
Utilities Income Inc.

Annual
Report

December
31, 2001

[GRAPHIC]

4th

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
(312) 368-5510

Shareholder inquiries please contact

Transfer Agent
Dividend Disbursing
Agent and Custodian

The Bank of New York
Shareholder Relations
Church Street Station
P.O. Box 11258
New York, New York 10286-1258
(877) 381-2537

Investment Adviser

Duff & Phelps
Investment Management Co.
55 East Monroe Street
Chicago, Illinois 60603

Administrator

J.J.B. Hilliard, W.L. Lyons, Inc.
Hilliard Lyons Center
Louisville, Kentucky 40202
(888) 878-7845

Legal Counsel

Mayer, Brown, Rowe & Maw
190 South LaSalle Street
Chicago, Illinois 60603

Independent Public Accountants

Arthur Andersen LLP
33 West Monroe Street
Chicago, Illinois 60603