UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-06180
Name of Fund: BlackRock Utilities and Telecommunications Fund, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, BlackRock Utilities and Telecommunications Fund, Inc., 800
Scudders Mill Road, Plainsboro, NJ 08536. Mailing address: P.O. Box 9011,
Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 11/30/06
Date of reporting period: 12/01/05 - 11/30/06
Item 1 - Report to Stockholders
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES
FIXED INCOME LIQUIDITY REAL ESTATE
BlackRock Utilities and BLACKROCK
Telecommunications Fund, Inc.
ANNUAL REPORT | NOVEMBER 30, 2006
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
BlackRock Utilities and Telecommunications Fund, Inc.
Industry Classification as a Percentage of Total Investments as of November 30,
2006
Below is a pie chart showing the Industry Classification as a Percentage of
Total Investments as of November 30, 2006
Electric Utilities 28.5%
Diversified Telecommunication Services 19.9%
Multi-Utilities 17.6%
Wireless Telecommunication Services 8.9%
Independent Power Producers & Energy Traders 8.4%
Gas Utilities 4.4%
Oil, Gas & Consumable Fuels 4.3%
Media 1.4%
Water Utilities 0.9%
Real Estate Investment Trusts (REITs) 0.4%
Construction & Engineering 0.3%
Energy Equipment & Services 0.2%
Other* 4.8%
* Includes portfolio holdings in short-term investments.
For Fund compliance purposes, the Fund's industry classifications refer to
any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for purposes of
this report, which may combine industry sub-classifications for reporting
ease.
2 BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006
A Letter to Shareholders
Dear Shareholder
As 2006 nears a conclusion, we are able to say it has been an interesting year
for investors. After a volatile start and far-reaching mid-year correction, the
financial markets regained some positive momentum through late summer and into
fall. For the six-month and 12-month periods ended November 30, 2006, the major
market indexes posted positive returns:
Total Returns as of November 30, 2006 6-month 12-month
=================================================================================================
U.S. equities (Standard & Poor's 500 Index) +11.33% +14.23%
- -------------------------------------------------------------------------------------------------
Small cap U.S. equities (Russell 2000 Index) + 9.72 +17.43
- -------------------------------------------------------------------------------------------------
International equities (MSCI Europe, Australasia, Far East Index) +11.19 +28.20
- -------------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers Aggregate Bond Index) + 5.93 + 5.94
- -------------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 4.53 + 6.12
- -------------------------------------------------------------------------------------------------
High yield bonds (Credit Suisse High Yield Index) + 6.28 +11.53
- -------------------------------------------------------------------------------------------------
After raising the target short-term interest rate 17 times between June 2004 and
June 2006, the Federal Reserve Board (the Fed) finally opted to pause on August
8. This left the federal funds rate at 5.25%, where it remained through the
September, October and December Federal Open Market Committee meetings. In
interrupting its two-year interest rate-hiking campaign, the Fed acknowledged
that economic growth is slowing, led by softness in the housing market. However,
the central bankers continue to take a cautionary position on inflation, despite
a decline in energy prices in the fall. At the time of this writing, the price
of crude oil was roughly $62 per barrel after reaching nearly $78 per barrel in
the summer.
Notwithstanding the mid-year correction, equity markets generally found support
in solid corporate earnings reports in the first three quarters of the year.
Overall corporate health, including strong company balance sheets, helped to
sustain robust dividend-distribution, share-buyback and merger-and-acquisition
activity. Many international equity markets fared equally well or better, thanks
in part to higher economic growth rates and low inflation.
In the U.S. bond market, prices declined (and yields correspondingly rose) for
much of the year as investors focused on decent economic activity and inflation
concerns. Bond prices began to improve (yields fell) in the summer as the
economy showed signs of weakening and the Fed paused. Notably, the Treasury
curve inverted periodically, a phenomenon typically associated with periods of
economic weakness. At the end of November, the one-month Treasury bill offered
the highest yield on the curve at 5.22%, while the 30-year Treasury bond had a
yield of 4.56%.
Amid the uncertainty inherent in the financial markets, we encourage you to
review your goals periodically with your financial professional and to make
portfolio changes, as needed. For additional insight and timely "food for
thought" for investors, we also invite you to visit Shareholder magazine at
www.blackrock.com/shareholdermagazine. We are pleased to make our
investor-friendly magazine available to you online. We thank you for trusting
BlackRock with your investment assets, and we look forward to continuing to
serve your investment needs.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
President and Director
BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006 3
A Discussion With Your Fund's Portfolio Manager
Strong stock selection in electric utilities, multi-utilities and wireless
telecommunications contributed positively to performance for the fiscal year,
helping the Fund to outperform its benchmark indexes.
How did the Fund perform during the fiscal year in light of the existing market
conditions?
For the 12-month period ended November 30, 2006, BlackRock Utilities and
Telecommunications Fund's Institutional, Investor A, Investor B, Investor B1,
Investor C and Investor C1 Shares recorded total returns of +24.45%, +24.04%,
+23.10%, +23.43%, +23.17% and +23.30%, respectively. (Fund results shown do not
reflect sales charges and would be lower if sales charges were included. Prior
to October 2, 2006, Investor B and Investor C Shares' performance is based on
the performance of Institutional Shares (which have no distribution or service
fees) restated to reflect the Investor B and investor C Shares' fees,
respectively. Complete performance information can be found on pages 6 - 9 of
this report to shareholders.) For the same period, the Fund's benchmarks, the
Standard & Poor's (S&P) 500 Index and the S&P Utility Index, posted respective
returns of +14.23% and +20.96%, while the Lipper Utilities Funds category posted
an average return of +24.78%. (Funds in this Lipper category invest primarily in
the equity securities of domestic and foreign companies providing utilities. The
Fund also invests in telecommunication services stocks, in which many funds in
the Lipper group have no position.)
For the six-month period ended November 30, 2006, the Fund's Institutional,
Investor A, Investor B, Investor B1, Investor C and Investor C1 Shares recorded
total returns of +17.34%, +17.10%, +16.64%, +16.83%, +16.71% and +16.75%,
respectively. For the same period, the S&P 500 Index and the S&P Utilities Index
returned +11.33% and +17.27%, respectively, and the Lipper Utility Funds
category posted an average return of +17.77%.
The Fund's performance for the fiscal year was positively affected by
above-average returns from its positions in the electric utilities and
multi-utilities subsectors. Several of our non-U.S. holdings, such as Iberdrola
SA, Endesa SA, Suez, E. On AG, International Power Plc, Scottish Power Plc and
Scottish & Southern Energy Plc, were very strong performers. We also saw strong
performance from our positions in Entergy Corp., FPL Group, Inc., Duke Energy
Corp. and PPL Corp. Moreover, our holdings in the wireless telecommunications
sector posted a collective return of over 18%. Fund performance in this sector
was enhanced by our positions in America Movil, SA de CV and Rogers
Communications, Inc. (Class B Shares), American Tower Corp. (Class A), NII
Holdings, Inc. and SBA Communications Corp. (Class A). Share prices of
large-capitalization companies such as BellSouth Corp., AT&T Inc. and Verizon
Communications, Inc. also appreciated significantly. BellSouth was the
portfolio's best performer within the sector as a result of the announced
acquisition of the company by AT&T Corp.
During the six-month period ended November 30, 2006, the same three subsectors
contributed the most positively to the Fund's total return: wireless
telecommunications, electric utilities and multi-utilities, in order of
contribution. An average cash weighting of 4.2% hindered Fund performance during
the past six months. In addition, our holdings in energy underperformed those in
other primary sectors and, therefore, made a less significant positive
contribution to the Fund's total return. Lastly, an underweight versus our
Lipper Utility Funds peer group in the energy sector detracted somewhat from the
Fund's relative performance for the past six months.
What changes were made to the portfolio during the period?
The most notable change made to the Fund's portfolio during the fiscal year was
an increased weighting in telecommunication services. We added positions in the
telecommunications tower sector, which we believe should continue to benefit as
wireless service providers continue to increase coverage, quality and new
services. These companies tend to generate fairly stable cash flows given the
rental income they receive from carriers, and to date have used this cash for
growth as well as stock buybacks. One company, Global Signal, Inc., which is
being bought by Crown Castle International Corp., had a corporate structure as a
real estate investment trust (REIT) and, therefore, paid a dividend. Once the
merger is completed, the combined company will not be a REIT; however, some time
in the future, we may see some of the other companies take on this corporate
structure.
Within the electric utility sector, we added to our holdings in independent
power producers/merchant energy companies. The supply-and-demand outlook for
electric generation is moving in favor of the generators as demand for
electricity continues to grow and many existing plants become too costly to
operate given more stringent environmental regulations. Moreover, we added to
two other investment themes in the electric utility segment of the portfolio:
transmission/ distribution companies, such as ITC Holdings Corp., as well
4 BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006
as companies with significant nuclear operations, such as Entergy Corp. The
transmission/distribution business is rather old in the United States and needs
to be upgraded, and the allowed return is determined by the Federal Energy
Regulatory Committee, which moves it away from local political issues. We
believe that companies with an abundance of nuclear energy should do very well
in an environment of stricter emissions control. Lastly, we reduced our energy
weighting during the latter part of the year. The outlook for natural gas prices
had become more muted in our view but, just as importantly, costs for many
companies in the sector were rising.
How would you characterize the Fund's position at the close of the period?
At November 30, 2006, the portfolio consisted of 94 holdings across 12
countries. Utilities remains the most heavily weighted sector, followed by
telecommunication services. We initiated a modest weighting in the water sector
with the purchase of two companies: Aqua America, Inc. in the United States and
Northumbrian Water Group Plc in the United Kingdom.
In the utility sector, some of the market conditions that have influenced our
stock selections include the need for new transmission/distribution, nuclear
energy for an offset to emission controls, increased non-regulated
electric-generating assets, merger-and-acquisition activity, and renewable
energy.
At the end of the fiscal year, the telecommunication services sector comprised
approximately 29% of the Fund's net assets. As we all experience, the world is
moving even more toward wireless communications. The bundling of products
reduces churn and access line loss. Pricing in the enterprise customer base is
stabilizing as competition becomes more rational and new products provide
additional features. We have positioned the Fund's telecommunications holdings
in an effort to benefit from these and other sector trends. We own shares of
tower companies as well as some pure-play wireless companies. We prefer the
triple or quadruple plays that companies such as Verizon and AT&T offer
(wireline, wireless, broadband and video).
In Europe, where cable television is less of an investment opportunity than in
the United States, we own some broadband players such as Fastweb SpA in Italy
and Elisa Corp. in Finland. In the United States, we own shares of companies
such as Level 3 Communications, Inc., reflecting our efforts to capture the
continued growth of the Internet. We believe that the larger telecommunications
carriers, such as Verizon and AT&T, along with a smaller company, Time Warner
Telecom, Inc., represent good opportunities for capturing the more positive
trends in the enterprise business.
Kathleen M. Anderson
Vice President and Portfolio Manager
December 20, 2006
- --------------------------------------------------------------------------------
Effective October 2, 2006, the Fund's Class A, Class B, Class C and Class I
Shares were redesignated Investor A, Investor B1, Investor C1 and Institutional
Shares, respectively.
- --------------------------------------------------------------------------------
BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006 5
Performance Data
About Fund Performance
Effective October 2, 2006, the Fund's Class A, Class B, Class C and Class I
Shares were redesignated Investor A, Investor B1, Investor C1 and Institutional
Shares, respectively. Also, effective October 2, 2006, the Fund's Investor B and
Investor C Shares commenced operations. As previously communicated to
shareholders, new sales charge schedules came into effect at the same time for
certain of these classes.
The Fund has multiple classes of shares:
o Institutional Shares are not subject to any front-end sales charge.
Institutional Shares bear no ongoing distribution or service fees and are
available only to eligible investors.
o Investor A Shares incur a maximum initial sales charge (front-end load) of
5.25% and a service fee of 0.25% per year (but no distribution fee).
o Investor B Shares are subject to a maximum contingent deferred sales
charge of 4.50% declining to 0% after six years. In addition, Investor B
Shares are subject to a distribution fee of 0.75% per year and a service
fee of 0.25% per year. These shares automatically convert to Investor A
Shares after approximately eight years. (There is no initial sales charge
for automatic share conversions.) All returns for periods greater than
eight years reflect this conversion. Prior to October 2, 2006, Investor B
Share performance results are those of Institutional Shares (which have no
distribution or service fees) restated to reflect the Investor B Share
fees.
o Investor B1 Shares are subject to a maximum contingent deferred sales
charge of 4% declining to 0% after six years. In addition, Investor B1
Shares are subject to a distribution fee of 0.50% per year and a service
fee of 0.25% per year. These shares automatically convert to Investor A
Shares after approximately eight years. (There is no initial sales charge
for automatic share conversions.) All returns for periods greater than
eight years reflect this conversion.
o Investor C Shares are subject to a distribution fee of 0.75% per year and
a service fee of 0.25% per year. In addition, Investor C Shares are
subject to a 1% contingent deferred sales charge if redeemed within one
year of purchase. Prior to October 2, 2006, Investor C Share performance
results are those of Institutional Shares (which have no distribution or
service fees) restated to reflect the Investor C Share fees.
o Investor C1 Shares are subject to a distribution fee of 0.55% per year and
a service fee of 0.25% per year. In addition, Investor C1 Shares are
subject to a 1% contingent deferred sales charge if redeemed within one
year of purchase.
Performance information reflects past performance and does not guarantee future
results. Current performance may be lower or higher than the performance data
quoted. Refer to www.blackrock.com to obtain performance data current to the
most recent month-end. Performance results do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. Figures shown in each of the following tables assume reinvestment of all
dividends and capital gain distributions, if any, at net asset value on the
ex-dividend date. Investment return and principal value of shares will fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost. Dividends paid to each class of shares will vary because of the different
levels of service, distribution and transfer agency fees applicable to each
class, which are deducted from the income available to be paid to shareholders.
6 BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006
Performance Data (continued)
Recent Performance Results
6-Month 12-Month 10-Year Standardized
As of November 30, 2006 Total Return Total Return Total Return 30-day Yield
========================================================================================================
Institutional Shares* +17.34% +24.45% +166.91% 1.63%
- --------------------------------------------------------------------------------------------------------
Investor A Shares* +17.10 +24.04 +160.15 1.32
- --------------------------------------------------------------------------------------------------------
Investor B Shares* +16.64 +23.10 +141.35 0.66
- --------------------------------------------------------------------------------------------------------
Investor B1 Shares* +16.83 +23.43 +149.57 0.88
- --------------------------------------------------------------------------------------------------------
Investor C Shares* +16.71 +23.17 +141.50 0.66
- --------------------------------------------------------------------------------------------------------
Investor C1 Shares* +16.75 +23.30 +146.36 0.84
- --------------------------------------------------------------------------------------------------------
S&P 500(R) Index** +11.33 +14.23 +116.98 --
- --------------------------------------------------------------------------------------------------------
S&P Utilities Index*** +17.27 +20.96 +116.83 --
- --------------------------------------------------------------------------------------------------------
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Cumulative total investment
returns are based on changes in net asset values for the periods shown,
and assume reinvestment of all dividends and capital gains distributions
at net asset value on the ex-dividend date.
** The S&P 500 Index covers 500 industrial, utility, transportation and
financial companies of the U.S. markets (mostly NYSE issues). The
unmanaged Index represents about 75% of NYSE market capitalization and 30%
of NYSE issues.
*** This unmanaged capitalization Index is comprised of all stocks designed to
measure the performance of electric and natural gas utilities within the
S&P 500 Index.
S&P 500 is a registered trademark of the McGraw-Hill Companies.
BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006 7
Performance Data (continued)
Total Return Based on a $10,000 Investment
Below is a line graph depicting the growth of an investment in the Fund's
Institutional, Investor A and Investor B Shares compared to growth of an
investment in the S&P 500 Index and the S&P Utilities Index. Values are from
November 1996 to November 2006:
Institutional Investor A Investor B S&P 500 S&P Utilities
Shares*+ Shares*+ Shares*+ Index++ Index+++
11/96 $10,000 $ 9,600 $10,000 $10,000 $10,000
11/97 $11,965 $11,457 $11,847 $11,512 $12,851
11/98 $15,132 $14,447 $14,834 $13,799 $15,892
11/99 $16,369 $15,597 $15,886 $12,789 $19,213
11/00 $17,198 $16,333 $16,525 $18,554 $18,402
11/01 $15,385 $14,591 $14,635 $13,763 $16,153
11/02 $12,364 $11,698 $11,644 $ 9,500 $13,485
11/03 $14,162 $13,366 $13,205 $11,697 $15,520
11/04 $18,292 $17,217 $16,888 $15,114 $17,516
11/05 $21,447 $20,135 $19,606 $17,925 $18,995
11/06 $26,691 $24,649 $24,135 $21,698 $21,683
* Assuming maximum sales charge, if any, transaction costs and other
operating expenses, including advisory fees.
+ The Fund invests at least 80% of its total assets in equity and debt
securities issued by domestic and foreign companies that are, in the
opinion of the Manager, primarily engaged in the ownership or operation of
facilities used to generate, transmit or distribute electricity,
telecommunications, gas or water.
++ The S&P 500 Index covers 500 industrial, utility, transportation and
financial companies of the U.S. markets (mostly NYSE issues). The
unmanaged Index represents about 75% of NYSE market capitalization and 30%
of NYSE issues.
+++ This unmanaged capitalization Index is comprised of all stocks designed to
measure the performance of electric and natural gas utilities within the
S&P 500 Index.
Average Annual Total Return
Return
================================================================================
Institutional Shares
================================================================================
One Year Ended 11/30/06 +24.45%
- --------------------------------------------------------------------------------
Five Years Ended 11/30/06 +11.65
- --------------------------------------------------------------------------------
Ten Years Ended 11/30/06 +10.32
- --------------------------------------------------------------------------------
Return Without Return With
Sales Charge Sales Charge*
================================================================================
Investor A Shares
================================================================================
One Year Ended 11/30/06 +24.04% +17.52%
- --------------------------------------------------------------------------------
Five Years Ended 11/30/06 +11.35 +10.15
- --------------------------------------------------------------------------------
Ten Years Ended 11/30/06 +10.03 + 9.44
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC++
================================================================================
Investor B Shares+
================================================================================
One Year Ended 11/30/06 +23.10% +18.60%
- --------------------------------------------------------------------------------
Five Years Ended 11/30/06 +10.52 +10.25
- --------------------------------------------------------------------------------
Ten Years Ended 11/30/06 + 9.21 + 9.21
- --------------------------------------------------------------------------------
* Assuming maximum sales charge of 5.25%.
+ Maximum contingent deferred sales charge is 4.50% and is reduced to 0%
after six years.
++ Assuming payment of applicable contingent deferred sales charge.
8 BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006
Performance Data (concluded)
Total Return Based on a $10,000 Investment
Below is a line graph depicting the growth of an investment in the Fund's
Investor B1, Investor C and Investor C1 Shares compared to growth of an
investment in the S&P 500 Index and the S&P Utilities Index. Values are from
November 1996 to November 2006:
Investor B1 Investor C Investor C1 S&P 500 S&P Utilities
Shares*+ Shares*+ Shares*+ Index++ Index+++
11/96 $10,000 $10,000 $10,000 $10,000 $10,000
11/97 $11,877 $11,847 $11,866 $11,512 $12,851
11/98 $14,893 $14,834 $14,873 $13,799 $15,892
11/99 $15,997 $15,886 $15,964 $12,789 $19,213
11/00 $16,677 $16,525 $16,684 $18,554 $18,402
11/01 $14,801 $14,635 $14,808 $13,763 $16,153
11/02 $11,818 $11,644 $11,806 $9,500 $13,485
11/03 $13,410 $13,205 $13,414 $11,697 $15,520
11/04 $17,205 $16,888 $17,175 $15,114 $17,516
11/05 $20,121 $19,606 $19,981 $17,925 $18,995
11/06 $24,957 $24,150 $24,636 $21,698 $21,683
* Assuming maximum sales charge, if any, transaction costs and other
operating expenses, including advisory fees.
+ The Fund invests at least 80% of its total assets in equity and debt
securities issued by domestic and foreign companies that are, in the
opinion of the Manager, primarily engaged in the ownership or operation of
facilities used to generate, transmit or distribute electricity,
telecommunications, gas or water.
++ The S&P 500 Index covers 500 industrial, utility, transportation and
financial companies of the U.S. markets (mostly NYSE issues). The
unmanaged Index represents about 75% of NYSE market capitalization and 30%
of NYSE issues.
+++ This unmanaged capitalization Index is comprised of all stocks designed to
measure the performance of electric and natural gas utilities within the
S&P 500 Index.
Average Annual Total Return
Return Return
Without CDSC With CDSC++
================================================================================
Investor B1 Shares+
================================================================================
One Year Ended 11/30/06 +23.43% +19.43%
- --------------------------------------------------------------------------------
Five Years Ended 11/30/06 +10.78 +10.51
- --------------------------------------------------------------------------------
Ten Years Ended 11/30/06 + 9.58 + 9.58
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC++
================================================================================
Investor C Shares+++
================================================================================
One Year Ended 11/30/06 +23.17% +22.17%
- --------------------------------------------------------------------------------
Five Years Ended 11/30/06 +10.54 +10.54
- --------------------------------------------------------------------------------
Ten Years Ended 11/30/06 + 9.22 + 9.22
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC++
================================================================================
Investor C1 Shares+++
================================================================================
One Year Ended 11/30/06 +23.30% +22.30%
- --------------------------------------------------------------------------------
Five Years Ended 11/30/06 +10.72 +10.72
- --------------------------------------------------------------------------------
Ten Years Ended 11/30/06 + 9.44 + 9.44
- --------------------------------------------------------------------------------
+ Maximum contingent deferred sales charge is 4% and is reduced to 0% after
six years.
++ Assuming payment of applicable contingent deferred sales charge.
+++ Maximum contingent deferred sales charge is 1% and is reduced to 0% after
one year.
BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006 9
Disclosure of Expenses
Shareholders of this Fund may incur the following charges: (a) expenses related
to transactions, including sales charges, redemption fees and exchange fees; and
(b) operating expenses including advisory fees, distribution fees including
12b-1 fees, and other Fund expenses. The following example (which is based on a
hypothetical investment of $1,000 invested on June 1, 2006 and held through
November 30, 2006) is intended to assist shareholders both in calculating
expenses based on an investment in the Fund and in comparing these expenses with
similar costs of investing in other mutual funds.
The first table below provides information about actual account values and
actual expenses. In order to estimate the expenses a shareholder paid during the
period covered by this report, shareholders can divide their account value by
$1,000 and then multiply the result by the number in the first line under the
heading entitled "Expenses Paid During the Period."
The second table below provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses. In order to assist
shareholders in comparing the ongoing expenses of investing in this Fund and
other funds, compare the 5% hypothetical example with the 5% hypothetical
examples that appear in other funds' shareholder reports.
The expenses shown in the table are intended to highlight shareholders' ongoing
costs only and do not reflect any transactional expenses, such as sales charges,
redemption fees or exchange fees. Therefore, the second table is useful in
comparing ongoing expenses only, and will not help shareholders determine the
relative total expenses of owning different funds. If these transactional
expenses were included, shareholder expenses would have been higher.
Expenses Paid
Ending During the
Beginning Account Value Period++ Ended
Account Value+ November 30, 2006 November 30, 2006*
==========================================================================================================================
Actual
==========================================================================================================================
Institutional $1,000 $1,173.40 $5.23
- --------------------------------------------------------------------------------------------------------------------------
Investor A $1,000 $1,171.00 $6.59
- --------------------------------------------------------------------------------------------------------------------------
Investor B $1,000 $1,060.50 $3.32
- --------------------------------------------------------------------------------------------------------------------------
Investor B1 $1,000 $1,168.30 $9.40
- --------------------------------------------------------------------------------------------------------------------------
Investor C $1,000 $1,061.10 $3.34
- --------------------------------------------------------------------------------------------------------------------------
Investor C1 $1,000 $1,167.50 $9.67
==========================================================================================================================
Hypothetical (5% annual return before expenses)**
==========================================================================================================================
Institutional $1,000 $1,020.29 $4.86
- --------------------------------------------------------------------------------------------------------------------------
Investor A $1,000 $1,019.03 $6.12
- --------------------------------------------------------------------------------------------------------------------------
Investor B $1,000 $1,021.88 $3.26
- --------------------------------------------------------------------------------------------------------------------------
Investor B1 $1,000 $1,016.43 $8.74
- --------------------------------------------------------------------------------------------------------------------------
Investor C $1,000 $1,021.86 $3.27
- --------------------------------------------------------------------------------------------------------------------------
Investor C1 $1,000 $1,016.18 $9.00
- --------------------------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (.96% for Institutional, 1.21% for Investor A, 1.96%
for Investor B, 1.73% for Investor B1, 1.97% for Investor C and 1.78% for
Investor C1), multiplied by the average account value over the period,
multiplied by 183/365 for the Institutional, Investor A, Investor B1 and
Investor C1 Shares and 60/365 for Investor B and Investor C Shares (to
reflect the one-half year period for Institutional, Investor A, Investor
B1 and Investor C1 Shares and the actual days since inception for Investor
B and Investor C Shares).
** Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal half-year for Institutional,
Investor A, Investor B1 and Investor C1 Shares and the actual days since
inception for Investor B and Investor C Shares divided by 365.
+ June 1, 2006 for Institutional, Investor A, Investor B1 and Investor C1
Shares and October 2, 2006 (commencement of operations) for Investor B and
Investor C Shares.
++ The period represents the six months ended for Institutional, Investor A,
Investor B1 and Investor C1 Shares and from October 2, 2006 (commencement
of operations) to November 30, 2006 for Investor B and Investor C Shares.
10 BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006
Portfolio Information as of November 30, 2006
Percent of
Geographic Allocation Equities
- --------------------------------------------------------------------------------
United States ....................................................... 77.4%
United Kingdom ...................................................... 5.3
Canada .............................................................. 3.4
Germany ............................................................. 3.3
France .............................................................. 3.0
Spain ............................................................... 2.0
Finland ............................................................. 1.5
Mexico .............................................................. 1.2
Brazil .............................................................. 0.9
Norway .............................................................. 0.8
Italy ............................................................... 0.8
Greece .............................................................. 0.4
- --------------------------------------------------------------------------------
Ten Largest Holdings Percent of
(Equity Investments) Net Assets
- --------------------------------------------------------------------------------
Exelon Corp. ......................................................... 3.6%
TXU Corp. ............................................................ 3.5
BellSouth Corp. ...................................................... 3.4
AT&T Inc. ............................................................ 3.4
Duke Energy Corp. .................................................... 2.9
Entergy Corp. ........................................................ 2.9
PPL Corp. ............................................................ 2.4
Verizon Communications, Inc. ......................................... 2.3
FirstEnergy Corp. .................................................... 2.2
FPL Group, Inc. ...................................................... 2.1
- --------------------------------------------------------------------------------
BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006 11
Schedule of Investments as of November 30, 2006 (in U.S. dollars)
Shares
Industry Common Stocks Held Value
====================================================================================================
Brazil--0.9%
Electric Utilities--0.9%
CPFL Energia SA (b) 23,700 $ 936,150
EDP--Energias do Brasil SA 33,200 447,778
-------------------------------------------------------------------------------------
Total Common Stocks in Brazil 1,383,928
====================================================================================================
Canada--3.3%
Diversified Telecommunication
Services--2.5%
TELUS Corp. 30,300 1,486,280
TELUS Corp. (Non-Voting Shares) 49,024 2,358,801
--------------
3,845,081
-------------------------------------------------------------------------------------
Wireless Telecommunication
Services--0.8%
Rogers Communications, Inc. Class B (a) 20,500 1,254,805
-------------------------------------------------------------------------------------
Total Common Stocks in Canada 5,099,886
====================================================================================================
Finland--1.4%
Diversified Telecommunication
Services--0.4%
Elisa Corp. 26,000 676,952
-------------------------------------------------------------------------------------
Electric Utilities--1.0%
Fortum Oyj 53,000 1,549,100
-------------------------------------------------------------------------------------
Total Common Stocks in Finland 2,226,052
====================================================================================================
France--2.8%
Diversified Telecommunication
Services--0.5%
France Telecom SA 30,000 778,715
-------------------------------------------------------------------------------------
Electric Utilities--0.5%
Electricite de France 12,000 769,180
-------------------------------------------------------------------------------------
Multi-Utilities--1.8%
Suez SA 33,200 1,593,850
Veolia Environnement 18,800 1,244,636
--------------
2,838,486
-------------------------------------------------------------------------------------
Total Common Stocks in France 4,386,381
====================================================================================================
Germany--3.2%
Electric Utilities--1.5%
E.On AG 17,600 2,259,990
-------------------------------------------------------------------------------------
Multi-Utilities--1.7%
RWE AG 23,500 2,664,365
-------------------------------------------------------------------------------------
Total Common Stocks in Germany 4,924,355
====================================================================================================
Greece--0.4%
Diversified Telecommunication
Services--0.4%
Hellenic Telecommunications
Organization SA 20,000 581,123
-------------------------------------------------------------------------------------
Total Common Stocks in Greece 581,123
====================================================================================================
Italy--0.7%
Diversified Telecommunication
Services--0.4%
FastWeb SpA 14,000 729,953
-------------------------------------------------------------------------------------
Electric Utilities--0.3%
Enel SpA 41,000 418,259
-------------------------------------------------------------------------------------
Total Common Stocks in Italy 1,148,212
====================================================================================================
Mexico--1.1%
Wireless Telecommunication
Services--1.1%
America Movil, SA de CV (b) 40,200 1,787,694
-------------------------------------------------------------------------------------
Total Common Stocks in Mexico 1,787,694
====================================================================================================
Norway--0.7%
Diversified Telecommunication
Services--0.7%
Telenor ASA 67,600 1,160,541
-------------------------------------------------------------------------------------
Total Common Stocks in Norway 1,160,541
====================================================================================================
Spain--1.9%
Diversified Telecommunication
Services--1.0%
Telefonica SA 79,448 1,608,762
-------------------------------------------------------------------------------------
Electric Utilities--0.9%
Iberdrola SA 31,600 1,401,952
-------------------------------------------------------------------------------------
Total Common Stocks in Spain 3,010,714
====================================================================================================
United Kingdom--5.1%
Diversified Telecommunication
Services--0.6%
BT Group Plc 163,600 914,142
-------------------------------------------------------------------------------------
Electric Utilities--0.8%
Scottish & Southern Energy Plc 41,400 1,184,113
-------------------------------------------------------------------------------------
Independent Power Producers &
Energy Traders--1.1%
International Power Plc 253,500 1,690,548
-------------------------------------------------------------------------------------
Multi-Utilities--1.1%
Centrica Plc 133,600 868,632
National Grid Plc 69,918 944,912
--------------
1,813,544
-------------------------------------------------------------------------------------
Water Utilities--0.4%
Northumbrian Water Group Plc 100,000 591,693
-------------------------------------------------------------------------------------
Wireless Telecommunication
Services--1.1%
Vodafone Group Plc (b) 66,012 1,740,076
-------------------------------------------------------------------------------------
Total Common Stocks in the United Kingdom 7,934,116
====================================================================================================
12 BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006
Schedule of Investments (continued) (in U.S. dollars)
Shares
Industry Common Stocks Held Value
====================================================================================================
United States--73.8%
Construction & Engineering--0.3%
Infrasource Services, Inc. (a) 25,000 $ 540,250
-------------------------------------------------------------------------------------
Diversified Telecommunication
Services--13.4%
AT&T Inc. 154,700 5,245,877
BellSouth Corp. 120,500 5,373,095
Citizens Communications Co. 80,700 1,143,519
Globalstar, Inc. (a) 92,700 1,290,384
Level 3 Communications, Inc. (a)(g) 233,000 1,244,220
Time Warner Telecom, Inc. Class A (a) 86,300 1,574,112
Verizon Communications, Inc. 102,600 3,584,844
Windstream Corp. 110,241 1,536,760
--------------
20,992,811
-------------------------------------------------------------------------------------
Electric Utilities--23.0%
Allegheny Energy, Inc. (a) 35,000 1,552,600
American Electric Power Co., Inc. 37,000 1,535,870
DPL, Inc. 75,000 2,097,000
Edison International 66,700 3,066,866
Entergy Corp. 50,000 4,566,000
Exelon Corp. 91,700 5,568,941
FPL Group, Inc. 62,800 3,347,240
FirstEnergy Corp. 58,400 3,494,656
ITC Holdings Corp. 49,500 1,942,875
Mirant Corp. (a) 54,800 1,667,016
Northeast Utilities 36,600 1,025,898
PPL Corp. 101,800 3,700,430
Progress Energy, Inc. 16,300 778,651
The Southern Co. 43,800 1,587,750
--------------
35,931,793
-------------------------------------------------------------------------------------
Energy Equipment & Services--0.2%
Transocean, Inc. (a) 4,600 358,570
-------------------------------------------------------------------------------------
Gas Utilities--4.5%
AGL Resources, Inc. 26,100 1,002,501
Energen Corp. 23,500 1,065,960
Equitable Resources, Inc. 25,200 1,093,176
New Jersey Resources Corp. 20,200 1,045,350
Questar Corp. 21,500 1,854,375
UGI Corp. 32,200 907,396
--------------
6,968,758
-------------------------------------------------------------------------------------
Independent Power Producers &
Energy Traders--6.7%
The AES Corp. (a) 44,000 1,028,280
Constellation Energy Group, Inc. 11,500 789,015
NRG Energy, Inc. (a) 40,700 2,316,644
Ormat Technologies, Inc. 25,300 932,052
TXU Corp. 95,200 5,463,528
--------------
10,529,519
-------------------------------------------------------------------------------------
Media--1.4%
Comcast Corp. Special Class A (a) 50,200 2,022,056
Idearc Inc. (a) 6,285 173,089
--------------
2,195,145
-------------------------------------------------------------------------------------
Multi-Utilities--13.1%
Ameren Corp. 26,700 1,460,757
CMS Energy Corp. (a) 108,000 1,750,680
DTE Energy Co. 14,000 659,260
Dominion Resources, Inc. 34,237 2,764,295
Duke Energy Corp. 144,032 4,568,695
MDU Resources Group, Inc. 22,050 580,797
NSTAR 36,800 1,294,624
PG&E Corp. 55,000 2,526,150
Public Service Enterprise Group, Inc. 13,000 873,860
SCANA Corp. 12,000 495,120
Sempra Energy 19,900 1,084,550
TECO Energy, Inc. 37,500 637,125
Wisconsin Energy Corp. 19,100 893,498
Xcel Energy, Inc. 36,200 831,152
--------------
20,420,563
-------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels--4.4%
Devon Energy Corp. 13,500 990,495
EOG Resources, Inc. 15,500 1,093,215
Holly Corp. 13,000 702,130
Peabody Energy Corp. 18,000 828,180
Southwestern Energy Co. (a) 21,700 914,221
Valero Energy Corp. 12,000 660,840
Williams Cos., Inc. 58,800 1,632,288
--------------
6,821,369
-------------------------------------------------------------------------------------
Real Estate Investment Trusts
(REITs)--0.4%
Global Signal, Inc. 11,200 621,936
-------------------------------------------------------------------------------------
Water Utilities--0.5%
Aqua America, Inc. 34,000 812,940
-------------------------------------------------------------------------------------
Wireless Telecommunication
Services--5.9%
Alltel Corp. 51,645 2,930,337
American Tower Corp. Class A (a) 43,500 1,647,345
Crown Castle International Corp. (a) 25,100 864,946
NII Holdings, Inc. (a) 13,800 896,034
SBA Communications Corp. Class A (a) 42,900 1,217,073
Sprint Nextel Corp. 81,500 1,590,065
--------------
9,145,800
-------------------------------------------------------------------------------------
Total Common Stocks in the United States 115,339,454
====================================================================================================
Total Common Stocks
(Cost--$96,757,481)--95.3% 148,982,456
====================================================================================================
Face
Trust Preferred Amount
====================================================================================================
United States--0.7%
Independent Power Producers &
Energy Traders--0.7%
AES Trust III, 6.75% due 10/15/2029 (f) $1,092,450 1,066,044
-------------------------------------------------------------------------------------
Total Trust Preferred (Cost--$665,916)--0.7% 1,066,044
====================================================================================================
BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006 13
Schedule of Investments (concluded) (in U.S. dollars)
Short-Term Beneficial
Securities Interest Value
====================================================================================================
United States--4.8%
BlackRock Liquidity Series, LLC Cash
Sweep Series I, 5.26% (c)(d) $6,725,753 $ 6,725,753
BlackRock Liquidity Series, LLC
Money Market Series, 5.29% (c)(d)(e) 840,000 840,000
-------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost--$7,565,753)--4.8% 7,565,753
====================================================================================================
Total Investments
(Cost--$104,989,150*)--100.8% 157,614,253
Liabilities in Excess of Other Assets--(0.8%) (1,284,021)
--------------
Net Assets--100.0% $ 156,330,232
==============
* The cost and unrealized appreciation (depreciation) of investments as of
November 30, 2006, as computed for federal income tax purposes, were as
follows:
Aggregate cost .......................................... $ 104,989,150
==============
Gross unrealized appreciation ........................... $ 52,981,707
Gross unrealized depreciation ........................... (356,604)
--------------
Net unrealized appreciation ............................. $ 52,625,103
==============
(a) Non-income producing security.
(b) Depositary receipts.
(c) Investments in companies considered to be an affiliate of the Fund, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
--------------------------------------------------------------------------
Net Interest
Affiliate Activity Income
--------------------------------------------------------------------------
BlackRock Liquidity Series, LLC
Cash Sweep Series I $249,740 $221,972
BlackRock Liquidity Series, LLC
Money Market Series $840,000 $ 383
--------------------------------------------------------------------------
(d) Represents the current yield as of November 30, 2006.
(e) Security was purchased with cash proceeds from securities loans.
(f) Convertible security.
(g) Security, or a portion of the security, is on loan.
o For Fund compliance purposes, the Fund's industry classifications refer to
any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for purposes of
this report, which may combine industry sub-classifications for reporting
ease. Industries are shown as a percent of net assets. These industry
classifications are unaudited.
See Notes to Financial Statements.
14 BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006
Statement of Assets and Liabilities
As of November 30, 2006
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (including securities loaned of
$747,600) (identified cost--$97,423,397) ............................................... $150,048,500
Investments in affiliated securities, at value (identified cost--$7,565,753) ............ 7,565,753
Foreign cash (cost--$29,291) ............................................................ 29,497
Receivables:
Securities sold ...................................................................... $ 795,231
Dividends ............................................................................ 393,276
Capital shares sold .................................................................. 50,465
Interest ............................................................................. 10,420
Securities lending ................................................................... 84 1,249,476
------------
Prepaid expenses and other assets ....................................................... 155,110
------------
Total assets ............................................................................ 159,048,336
------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Collateral on securities loaned, at value ............................................... 840,000
Payables:
Securities purchased ................................................................. 1,452,469
Capital shares redeemed .............................................................. 238,801
Investment adviser ................................................................... 75,851
Distributor .......................................................................... 43,852
------------
Other affiliates ..................................................................... 1,841,356
Accrued expenses and other liabilities .................................................. 36,748
------------
Total liabilities ....................................................................... 2,718,104
------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets .............................................................................. $156,330,232
============
===================================================================================================================================
Net Assets Consist of
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional Shares of Common Stock, $.10 par value, 100,000,000 shares authorized ..... $ 189,710
Investor AShares of Common Stock, $.10 par value, 100,000,000 shares authorized ......... 651,679
Investor BShares of Common Stock, $.10 par value, 100,000,000 shares authorized ......... 1,665
Investor B1Shares of Common Stock, $.10 par value, 100,000,000 shares authorized ........ 128,012
Investor CShares of Common Stock, $.10 par value, 100,000,000 shares authorized ......... 2,067
Investor C1Shares of Common Stock, $.10 par value, 100,000,000 shares authorized ........ 116,518
Paid-in capital in excess of par ........................................................ 103,528,687
Undistributed investment income--net .................................................... $ 375,115
Accumulated realized capital losses--net ................................................ (1,289,252)
Unrealized appreciation--net ............................................................ 52,626,031
------------
Total accumulated earnings--net ......................................................... 51,711,894
------------
Net Assets .............................................................................. $156,330,232
============
===================================================================================================================================
Net Asset Value
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional--Based on net assets of $27,254,872 and 1,897,099 shares outstanding ...... $ 14.37
============
Investor A--Based on net assets of $93,670,249 and 6,516,787 shares outstanding ......... $ 14.37
============
Investor B--Based on net assets of $238,062 and 16,654 shares outstanding ............... $ 14.29
============
Investor B1--Based on net assets of $18,347,290 and 1,280,117 shares outstanding ........ $ 14.33
============
Investor C--Based on net assets of $292,473 and 20,670 shares outstanding ............... $ 14.15
============
Investor C1--Based on net assets of $16,527,286 and 1,165,178 shares outstanding ........ $ 14.18
============
See Notes to Financial Statements.
BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006 15
Statement of Operations
For the Year Ended November 30, 2006
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends (net of $147,950 foreign withholding tax) ..................................... $ 5,224,109
Interest (including $221,972 from affiliates) ........................................... 299,316
Securities lending--net ................................................................. 383
------------
Total income ............................................................................ 5,523,808
------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ................................................................ $ 885,855
Service fees--Investor A ................................................................ 204,816
Service and distribution fees--Investor B1 .............................................. 188,030
Service and distribution fees--Investor C1 .............................................. 121,819
Transfer agent fees--Investor A ......................................................... 101,347
Accounting services ..................................................................... 95,037
Professional fees ....................................................................... 62,523
Printing and shareholder reports ........................................................ 51,136
Registration fees ....................................................................... 50,535
Directors' fees and expenses ............................................................ 45,113
Transfer agent fees--Investor B1 ........................................................ 36,875
Custodian fees .......................................................................... 34,117
Transfer agent fees--Institutional ...................................................... 31,384
Transfer agent fees--Investor C1 ........................................................ 21,914
Pricing fees ............................................................................ 3,377
Service and distribution fees--Investor C ............................................... 285
Service and distribution fees--Investor B ............................................... 243
Transfer agent fees--Investor C ......................................................... 35
Transfer agent fees--Investor B ......................................................... 30
Other ................................................................................... 23,571
------------
Total expenses .......................................................................... 1,958,042
------------
Investment income--net .................................................................. 3,565,766
------------
===================================================================================================================================
Realized & Unrealized Gain (Loss)--Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments--net ..................................................................... 21,883,365
Foreign currency transactions--net ................................................... (13,554) 21,869,811
------------
Change in unrealized appreciation on:
Investments--net ..................................................................... 6,410,469
Foreign currency transactions--net ................................................... 848 6,411,317
---------------------------
Total realized and unrealized gain--net ................................................. 28,281,128
------------
Net Increase in Net Assets Resulting from Operations .................................... $ 31,846,894
============
See Notes to Financial Statements.
16 BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006
Statements of Changes in Net Assets
For the Year Ended
November 30,
---------------------------
Increase (Decrease) in Net Assets: 2006 2005
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income--net .................................................................. $ 3,565,766 $ 2,895,587
Realized gain--net ...................................................................... 21,869,811 14,086,694
Change in unrealized appreciation--net .................................................. 6,411,317 5,837,960
---------------------------
Net increase in net assets resulting from operations .................................... 31,846,894 22,820,241
---------------------------
===================================================================================================================================
Dividends to Shareholders
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income--net:
Institutional ........................................................................ (688,635) (605,203)
Investor A ........................................................................... (2,013,568) (1,690,691)
Investor B ........................................................................... (868) --
Investor B1 .......................................................................... (484,766) (498,453)
Investor C ........................................................................... (446) --
Investor C1 .......................................................................... (294,095) (231,125)
---------------------------
Net decrease in net assets resulting from dividends to shareholders ..................... (3,482,378) (3,025,472)
---------------------------
===================================================================================================================================
Capital Share Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets derived from capital share transactions ...................... (19,253,290) (13,372,133)
---------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ............................................................ 9,111,226 6,422,636
Beginning of year ....................................................................... 147,219,006 140,796,370
---------------------------
End of year* ............................................................................ $156,330,232 $147,219,006
===========================
* Undistributed investment income--net ............................................... $ 375,115 $ 305,281
===========================
See Notes to Financial Statements.
BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006 17
Financial Highlights
Institutional
----------------------------------------------------------------
The following per share data For the Year Ended
and ratios have been derived November 30,
from information provided in ----------------------------------------------------------------
the financial statements. 2006 2005 2004 2003 2002
============================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ..... $ 11.87 $ 10.37 $ 8.22 $ 7.39 $ 9.66
----------------------------------------------------------------
Investment income--net** ............... .35 .26 .22 .21 .29
Realized and unrealized gain (loss)--net 2.50 1.51 2.14 .84 (2.15)
----------------------------------------------------------------
Total from investment operations ....... 2.85 1.77 2.36 1.05 (1.86)
----------------------------------------------------------------
Less dividends and distributions:
Investment income--net ............... (.35) (.27) (.21) (.22) (.30)
Realized gain--net ................... -- -- -- -- (.11)
----------------------------------------------------------------
Total dividends and distributions ...... (.35) (.27) (.21) (.22) (.41)
----------------------------------------------------------------
Net asset value, end of year ........... $ 14.37 $ 11.87 $ 10.37 $ 8.22 $ 7.39
================================================================
============================================================================================================
Total Investment Return*
- ------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 24.45% 17.25% 29.16% 14.54% (19.64%)
================================================================
============================================================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------------------------------------
Expenses ............................... .97% .98% 1.03% 1.07% 1.00%
================================================================
Investment income--net ................. 2.77% 2.32% 2.36% 2.77% 3.39%
================================================================
============================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) . $ 27,255 $ 25,125 $ 23,677 $ 22,514 $ 20,342
================================================================
Portfolio turnover ..................... 44.32% 25.48% 10.89% 21.20% 31.16%
================================================================
Investor A
----------------------------------------------------------------
The following per share data For the Year Ended
and ratios have been derived November 30,
from information provided in ----------------------------------------------------------------
the financial statements. 2006 2005 2004 2003 2002
============================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ..... $ 11.88 $ 10.38 $ 8.23 $ 7.40 $ 9.67
----------------------------------------------------------------
Investment income--net** ............... .32 .24 .20 .19 .26
Realized and unrealized gain (loss)--net 2.47 1.51 2.14 .85 (2.14)
----------------------------------------------------------------
Total from investment operations ....... 2.79 1.75 2.34 1.04 (1.88)
----------------------------------------------------------------
Less dividends and distributions:
Investment income--net ............... (.30) (.25) (.19) (.21) (.28)
Realized gain--net ................... -- -- -- -- (.11)
----------------------------------------------------------------
Total dividends and distributions ...... (.30) (.25) (.19) (.21) (.39)
----------------------------------------------------------------
Net asset value, end of year ........... $ 14.37 $ 11.88 $ 10.38 $ 8.23 $ 7.40
================================================================
============================================================================================================
Total Investment Return*
- ------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 24.04% 16.95% 28.82% 14.26% (19.83%)
================================================================
============================================================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------------------------------------
Expenses ............................... 1.22% 1.23% 1.28% 1.33% 1.26%
================================================================
Investment income--net ................. 2.52% 2.07% 2.11% 2.42% 3.13%
================================================================
============================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) . $ 93,670 $ 79,008 $ 73,286 $ 60,142 $ 34,038
================================================================
Portfolio turnover ..................... 44.32% 25.48% 10.89% 21.20% 31.16%
================================================================
* Total investment returns exclude the effects of sales charges.
** Based on average shares outstanding.
See Notes to Financial Statements.
18 BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006
Financial Highlights (continued)
Investor B
----------
For the Investor B1
Period ----------------------------------------------------------------
October 2, For the Year Ended
The following per share data and ratios 2006+ to November 30,
have been derived from information November 30, ----------------------------------------------------------------
provided in the financial statements. 2006 2006 2005 2004 2003 2002
=============================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 13.58 $ 11.84 $ 10.35 $ 8.19 $ 7.37 $ 9.61
-------- ----------------------------------------------------------------
Investment income--net** ............... .02 .26 .18 .14 .16 .22
Realized and unrealized gain (loss)--net .80 2.48 1.49 2.16 .82 (2.13)
-------- ----------------------------------------------------------------
Total from investment operations ....... .82 2.74 1.67 2.30 .98 (1.91)
-------- ----------------------------------------------------------------
Less dividends and distributions:
Investment income--net ............... (.11) (.25) (.18) (.14) (.16) (.22)
Realized gain--net ................... -- -- -- -- -- (.11)
-------- ----------------------------------------------------------------
Total dividends and distributions ...... (.11) (.25) (.18) (.14) (.16) (.33)
-------- ----------------------------------------------------------------
Net asset value, end of period ......... $ 14.29 $ 14.33 $ 11.84 $ 10.35 $ 8.19 $ 7.37
======== ================================================================
=============================================================================================================================
Total Investment Return*
- -----------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 6.05%@ 23.43% 16.26% 28.30% 13.47% (20.16%)
======== ================================================================
=============================================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
Expenses ............................... 1.96%*** 1.75% 1.75% 1.81% 1.86% 1.77%
======== ================================================================
Investment income--net ................. 1.00%*** 2.02% 1.56% 1.58% 2.08% 2.63%
======== ================================================================
=============================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 238 $ 18,347 $ 28,298 $ 31,935 $ 41,317 $ 74,822
======== ================================================================
Portfolio turnover ..................... 44.32% 44.32% 25.48% 10.89% 21.20% 31.16%
======== ================================================================
* Total investment returns exclude the effects of sales charges.
** Based on average shares outstanding.
*** Annualized.
+ Commencement of operations.
@ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006 19
Financial Highlights (concluded)
Investor C
----------
For the Investor C1
Period ----------------------------------------------------------------
October 2, For the Year Ended
The following per share data and ratios 2006+ to November 30,
have been derived from information November 30, ----------------------------------------------------------------
provided in the financial statements. 2006 2006 2005 2004 2003 2002
=============================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 13.44 $ 11.73 $ 10.25 $ 8.13 $ 7.31 $ 9.55
-------- ----------------------------------------------------------------
Investment income--net** ............... .02 .25 .17 .14 .15 .21
Realized and unrealized gain (loss)--net .80 2.45 1.50 2.12 .83 (2.11)
-------- ----------------------------------------------------------------
Total from investment operations ....... .82 2.70 1.67 2.26 .98 (1.90)
-------- ----------------------------------------------------------------
Less dividends and distributions:
Investment income--net ............... (.11) (.25) (.19) (.14) (.16) (.23)
Realized gain--net ................... -- -- -- -- -- (.11)
-------- ----------------------------------------------------------------
Total dividends and distributions ...... (.11) (.25) (.19) (.14) (.16) (.34)
-------- ----------------------------------------------------------------
Net asset value, end of period ......... $ 14.15 $ 14.18 $ 11.73 $ 10.25 $ 8.13 $ 7.31
======== ================================================================
=============================================================================================================================
Total Investment Return*
- -----------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 6.11%@ 23.30% 16.34% 28.03% 13.62% (20.27%)
======== ================================================================
=============================================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
Expenses ............................... 1.97%*** 1.79% 1.80% 1.85% 1.91% 1.84%
======== ================================================================
Investment income--net ................. .98%*** 1.94% 1.49% 1.53% 1.93% 2.55%
======== ================================================================
=============================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 292 $ 16,527 $ 14,789 $ 11,898 $ 10,994 $ 10,545
======== ================================================================
Portfolio turnover ..................... 44.32% 44.32% 25.48% 10.89% 21.20% 31.16%
======== ================================================================
* Total investment returns exclude the effects of sales charges.
** Based on average shares outstanding.
*** Annualized.
+ Commencement of operations.
@ Aggregate total investment return.
See Notes to Financial Statements.
20 BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006
Notes to Financial Statements
1. Significant Accounting Policies:
On September 29, 2006, Merrill Lynch Utilities and Telecommunications Fund, Inc.
was renamed BlackRock Utilities and Telecommunications Fund, Inc. (the "Fund").
The Fund is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. The Fund's financial
statements are prepared in conformity with U.S. generally accepted accounting
principles, which may require the use of management accruals and estimates.
Actual results may differ from these estimates. The Fund offers multiple classes
of shares. On October 2, 2006, Class I, Class A, Class B and Class C Shares were
redesignated Institutional, Investor A, Investor B1 and Investor C1 Shares,
respectively. Newly created Investor B and Investor C Shares commenced
operations on October 2, 2006. Institutional Shares are sold only to certain
eligible investors. Investor A Shares are sold with a front-end sales charge.
Shares of Investor B, Investor B1, Investor C and Investor C1 may be subject to
a contingent deferred sales charge. All classes of shares have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
that Investor A, Investor B, Investor B1, Investor C and Investor C1 Shares bear
certain expenses related to the account maintenance of such shares, and Investor
B, Investor B1, Investor C and Investor C1 Shares also bear certain expenses
related to the distribution of such shares. Each class has exclusive voting
rights with respect to matters relating to its account maintenance and
distribution expenditures (except that Investor B and Investor B1 shareholders
may vote on certain changes to the Investor A distribution plan). Income,
expenses (other than expenses attributable to a specific class) and realized and
unrealized gains and losses are allocated daily to each class based on its
relative net assets. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of securities -- Equity securities held by the Fund that are
traded on stock exchanges or the NASDAQ Global Market are valued at the last
sale price or official close price on the exchange, as of the close of business
on the day the securities are being valued or, lacking any sales, at the last
available bid price for long positions, and at the last available asked price
for short positions. In cases where equity securities are traded on more than
one exchange, the securities are valued on the exchange designated as the
primary market by or under the authority of the Board of Directors of the Fund.
Long positions traded in the over-the-counter ("OTC") markets, NASDAQ Capital
Market or Bulletin Board are valued at the last available bid price or yield
equivalent obtained from one or more dealers or pricing services approved by the
Board of Directors of the Fund. Short positions traded in the OTC markets are
valued at the last available asked price. Portfolio securities that are traded
both in the OTC markets and on a stock exchange are valued according to the
broadest and most representative market.
Options written or purchased are valued at the last sale price in the case of
exchange-traded options. Options traded in the OTC market are valued at the last
asked price (options written) or the last bid price (options purchased). Swap
agreements are valued based upon quoted fair valuations received daily by the
Fund from a pricing service or counterparty. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their last sale
price as of the close of such exchanges. Obligations with remaining maturities
of 60 days or less are valued at amortized cost unless BlackRock Advisors, Inc.
(the "Manager"), an indirect, wholly owned subsidiary of BlackRock, Inc.,
believes that this method no longer produces fair valuations. Valuation of other
short-term investment vehicles is generally based on the net asset value of the
underlying investment vehicle or amortized cost.
Repurchase agreements are valued at cost plus accrued interest. The Fund employs
pricing services to provide certain securities prices for the Fund. Securities
and assets for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of the Board of
Directors of the Fund, including valuations furnished by the pricing services
retained by the Fund, which may use a matrix system for valuations. The
procedures of a pricing service and its valuations are reviewed by the officers
of the Fund under the general supervision of the Fund's Board of Directors. Such
valuations and procedures will be reviewed periodically by the Board of
Directors of the Fund.
Generally, trading in foreign securities, as well as U.S. government securities,
money market instruments and certain fixed income securities, is substantially
completed each day at various times prior to the close of business on the New
York Stock Exchange ("NYSE"). The values of such securities used in computing
the net asset value of the Fund's shares are determined as of such times.
Foreign currency exchange rates will generally be determined as of the close of
business on the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which they are
determined and the close of business on the NYSE that may not be reflected in
the computation of the Fund's net asset value. If events (for example, a company
announcement, market volatility or a natural disaster) occur
BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006 21
Notes to Financial Statements (continued)
during such periods that are expected to materially affect the value of such
securities, those securities will be valued at their fair value as determined in
good faith by the Fund's Board of Directors or by the Manager using a pricing
service and/or procedures approved by the Fund's Board of Directors.
(b) Foreign currency transactions -- Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into U.S. dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on investments.
The Fund invests in foreign securities, which may involve a number of risk
factors and special considerations not present with investments in securities of
U.S. corporations.
(c) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movements and movements in the securities
markets. Losses may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
o Options -- The Fund may purchase and write call options and put options.
When the Fund writes an option, an amount equal to the premium received by
the Fund is reflected as an asset and an equivalent liability. The amount
of the liability is subsequently marked-to-market to reflect the current
market value of the option written. When a security is purchased or sold
through an exercise of an option, the related premium paid (or received)
is added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security sold. When an
option expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the closing
transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
o Financial futures contracts -- The Fund may purchase or sell financial
futures contracts and options on such financial futures contracts.
Financial futures contracts are contracts for delayed delivery of
securities at a specific future date and at a specific price or yield.
Upon entering into a contract, the Fund deposits and maintains as
collateral such initial margin as required by the exchange on which the
transaction is effected. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or
losses. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value of the contract at the time
it was opened and the value at the time it was closed.
o Forward foreign exchange contracts -- The Fund may enter into forward
foreign exchange contracts as a hedge against either specific transactions
or portfolio positions. The contract is marked-to-market daily and the
change in market value is recorded by the Fund as an unrealized gain or
loss. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value at the time it was opened
and the value at the time it was closed.
o Foreign currency options and futures -- The Fund may also purchase or sell
listed or OTC foreign currency options, foreign currency futures and
related options on foreign currency futures as a short or long hedge
against possible variations in foreign exchange rates. Such transactions
may be effected with respect to hedges on non-U.S. dollar denominated
securities owned by the Fund, sold by the Fund but not yet delivered, or
committed or anticipated to be purchased by the Fund.
(d) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends and
capital gains at various rates.
(e) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Dividends from foreign securities where the ex-dividend date may have passed are
subsequently recorded when the Fund has determined the ex-dividend dates.
Interest income is recognized on the accrual basis.
22 BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006
Notes to Financial Statements (continued)
(f) Prepaid registration fees -- Prepaid registration fees are charged to
expense as the related shares are issued.
(g) Dividends and distributions -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(h) Securities lending -- The Fund may lend securities to financial institutions
that provide cash or securities issued or guaranteed by the U.S. government as
collateral, which will be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. The market value of
the loaned securities is determined at the close of business of the Fund and any
additional required collateral is delivered to the Fund on the next business
day. Where the Fund receives securities as collateral for the loaned securities,
it collects a fee from the borrower. The Fund typically receives the income on
the loaned securities but does not receive the income on the collateral. Where
the Fund receives cash collateral, it may invest such collateral and retain the
amount earned on such investment, net of any amount rebated to the borrower.
Loans of securities are terminable at any time and the borrower, after notice,
is required to return borrowed securities within five business days. The Fund
may pay reasonable finder's, lending agent, administrative and custodial fees in
connection with its loans. In the event that the borrower defaults on its
obligation to return borrowed securities because of insolvency or for any other
reason, the Fund could experience delays and costs in gaining access to the
collateral. The Fund also could suffer a loss where the value of the collateral
falls below the market value of the borrowed securities, in the event of
borrower default or in the event of losses on investments made with cash
collateral.
(i) Recent accounting pronouncements -- In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48"), "Accounting
for Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109."
FIN 48 prescribes the minimum recognition threshold a tax position must meet in
connection with accounting for uncertainties in income tax positions taken or
expected to be taken by an entity, including mutual funds, before being measured
and recognized in the financial statements. Adoption of FIN 48 is required for
fiscal years beginning after December 15, 2006. The impact on the Fund's
financial statements, if any, is currently being assessed.
In addition, in September 2006, Statement of Financial Accounting Standards No.
157, "Fair Value Measurements" ("FAS 157"), was issued and is effective for
fiscal years beginning after November 15, 2007. FAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the implications of
FAS 157. At this time its impact on the Fund's financial statements has not been
determined.
(j) Reclassification -- U.S. generally accepted accounting principles require
that certain components of net assets be adjusted to reflect permanent
differences between financial and tax reporting. Accordingly, during the current
year, $13,554 has been reclassified between undistributed net investment income
and accumulated net realized capital losses as a result of a permanent
difference attributable to foreign currency transactions. This reclassification
has no effect on net assets or net asset values per share.
2. Investment Advisory Agreement and Transactions with Affiliates:
On September 29, 2006, BlackRock, Inc. and Merrill Lynch & Co., Inc. ("Merrill
Lynch") combined Merrill Lynch's investment management business, Merrill Lynch
Investment Managers, L.P. ("MLIM"), and its affiliates, with BlackRock, Inc. to
create a new independent company. Merrill Lynch has a 49.8% economic interest
and a 45% voting interest in the combined company and The PNC Financial Services
Group, Inc. ("PNC"), has approximately a 34% economic and voting interest. The
new company operates under the BlackRock name and is governed by a board of
directors with a majority of independent members.
On August 15, 2006, shareholders of the Fund approved a new Investment Advisory
Agreement with the Manager. The Manager was recently reorganized into a limited
liability company and renamed BlackRock Advisors, LLC. The new Investment
Advisory Agreement between the Fund and the Manager became effective on
September 29, 2006. Prior to September 29, 2006, MLIM was the Fund's Manager.
The general partner of MLIM is Princeton Services, Inc. ("PSI"), an indirect,
wholly owned subsidiary of Merrill Lynch, which is the limited partner. The Fund
has also entered into separate Distribution Agreements and Distribution Plans
with FAM Distributors, Inc. ("FAMD") and BlackRock Distributors, Inc. ("BDI")
(collectively, the "Distributor"). FAMD is a wholly owned subsidiary of Merrill
Lynch Group, Inc. and BDI is an affiliate of BlackRock, Inc.
The Manager is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the
BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006 23
Notes to Financial Statements (continued)
operation of the Fund. For such services, the Fund pays a monthly fee of .60%,
on an annual basis, of the average daily value of the Fund's net assets. In
addition, the Manager has entered into a sub-advisory agreement with BlackRock
Investment Management, LLC ("BIM"), an affiliate of the Manager, under which the
Manager pays the Sub-Adviser for services it provides a monthly fee that is a
percentage of the management fee paid by the Fund to the Manager. Prior to
September 29, 2006, MLIM had a Sub-Advisory Agreement with Merrill Lynch Asset
Management U.K. Limited ("MLAM U.K."), an affiliate of MLIM.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance fees ("service fees") and distribution fees. The
fees are accrued daily and paid monthly at annual rates based upon the average
daily net assets of the shares as follows:
- --------------------------------------------------------------------------------
Service Distribution
Fee Fee
- --------------------------------------------------------------------------------
Investor A .................................. .25% --
Investor B .................................. .25% .75%
Investor B1 ................................. .25% .50%
Investor C .................................. .25% .75%
Investor C1 ................................. .25% .55%
- --------------------------------------------------------------------------------
Pursuant to sub-agreements with the Distributor, broker-dealers, including
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a wholly owned
subsidiary of Merrill Lynch, and an affiliate of the Distributor, also provide
account maintenance and distribution services to the Fund. The ongoing service
fee compensates the Distributor and each broker-dealer (including MLPF&S) for
providing account maintenance services to Investor A, Investor B, Investor B1,
Investor C and Investor C1 shareholders. The ongoing distribution fee
compensates the Distributor and the broker-dealers for providing shareholder and
distribution-related services to Investor B, Investor B1, Investor C and
Investor C1 shareholders.
For the year ended November 30, 2006, FAMD, the Fund's sole Distributor until
September 29, 2006, and BDI earned underwriting discounts and direct commissions
and MLPF&S earned dealer concessions on sales of the Fund's Institutional and
Investor A Shares as follows:
- --------------------------------------------------------------------------------
FAMD MLPF&S BDI
- --------------------------------------------------------------------------------
Institutional ...................... $ 1 $ 4 --
Investor A ......................... $1,945 $56,603 $299
- --------------------------------------------------------------------------------
For the year ended November 30, 2006, MLPF&S received contingent deferred sales
charges of $3, $13,051, $1 and $170 relating to transactions in Investor B
Shares, Investor B1 Shares, Investor C Shares and Investor C1 Shares,
respectively. Furthermore, MLPF&S received contingent deferred sales charges of
$112 relating to transactions subject to front-end sales charge waivers on
Investor A Shares.
BlackRock maintains a call center, which is responsible for providing certain
shareholder services to the Fund, such as responding to shareholder inquiries
and processing transactions based upon instructions from shareholders with
respect to the subscription and redemption of Fund shares. During the period
September 29, 2006 to November 30, 2006, the following amounts have been accrued
by the Fund to reimburse BlackRock for costs incurred running the call center,
which are a component of the transfer agent fees in the accompanying Statement
of Operations.
- --------------------------------------------------------------------------------
Call Center Fees
- --------------------------------------------------------------------------------
Institutional .................................................... $ 68
Investor A ....................................................... $404
Investor B ....................................................... --
Investor B1 ...................................................... $132
Investor C ....................................................... --
Investor C1 ...................................................... $ 65
- --------------------------------------------------------------------------------
The Fund has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to MLPF&S or its
affiliates. Pursuant to that order, the Fund has retained BIM, an affiliate of
the Manager, as the securities lending agent for a fee based on a share of the
returns on investment of cash collateral. Prior to September 29, 2006, BIM was
organized as Merrill Lynch Investment Managers, LLC ("MLIM, LLC"), an affiliate
of MLIM, and MLIM, LLC, was the Fund's securities lending agent. BIM may, on
behalf of the Fund, invest cash collateral received by the Fund for such loans,
among other things, in a private investment company managed by the Manager or in
registered money market funds advised by the Manager or its affiliates. For the
year ended November 30, 2006, BIM received $169 in securities lending agent
fees.
In addition, MLPF&S received $37,459 in commissions on the execution of
portfolio security transactions for the Fund for the year ended November 30,
2006.
Effective September 29, 2006, PFPC Inc., an indirect, wholly owned subsidiary of
PNC and an affiliate of the Manager, became the Fund's transfer agent. Prior to
September 29, 2006, the Fund's transfer agent was Financial Data Services, Inc.
("FDS"), a wholly owned subsidiary of Merrill Lynch.
24 BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006
Notes to Financial Statements (continued)
For the year ended November 30, 2006, the Fund reimbursed MLIM and the Manager
$2,729 and $474, respectively, for certain accounting services.
Prior to September 29, 2006, certain officers and/or directors of the Fund were
officers and/or directors of MLIM, PSI, MLAM U.K., FDS, FAMD, Merrill Lynch,
and/or MLIM, LLC.
Commencing September 29, 2006, certain officers and/or directors of the Fund are
officers and/or directors of BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended November 30, 2006 were $63,403,434 and $82,065,952, respectively.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$19,253,290 and $13,372,133 for the years ended November 30, 2006 and November
30, 2005, respectively.
Transactions in capital shares for each class were as follows:
- -------------------------------------------------------------------------------
Institutional Shares for the Year Dollar
Ended November 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 191,231 $ 2,481,454
Shares issued to shareholders in
reinvestment of dividends .............. 34,464 425,158
-------------------------------
Total issued ............................. 225,695 2,906,612
Shares redeemed .......................... (444,397) (5,674,752)
-------------------------------
Net decrease ............................. (218,702) $ (2,768,140)
===============================
- -------------------------------------------------------------------------------
Institutional Shares for the Year Dollar
Ended November 30, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 260,026 $ 2,946,308
Shares issued to shareholders
in reinvestment of dividends ........... 45,445 516,186
-------------------------------
Total issued ............................. 305,471 3,462,494
Shares redeemed .......................... (472,012) (5,345,255)
-------------------------------
Net decrease ............................. (166,541) $ (1,882,761)
===============================
- -------------------------------------------------------------------------------
Investor A Shares for the Year Dollar
Ended November 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 752,525 $ 10,267,785
Automatic conversion of shares ........... 214,681 2,677,349
Shares issued to shareholders in
reinvestment of dividends .............. 92,142 1,140,520
-------------------------------
Total issued ............................. 1,059,348 14,085,654
Shares redeemed .......................... (1,192,638) (15,249,824)
-------------------------------
Net decrease ............................. (133,290) $ (1,164,170)
===============================
- -------------------------------------------------------------------------------
Investor A Shares for the Year Dollar
Ended November 30, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 465,190 $ 5,276,033
Automatic conversion of shares ........... 283,666 3,199,572
Shares issued to shareholders
in reinvestment of dividends ........... 116,214 1,322,524
-------------------------------
Total issued ............................. 865,070 9,798,129
Shares redeemed .......................... (1,275,616) (14,475,156)
-------------------------------
Net decrease ............................. (410,546) $ (4,677,027)
===============================
- -------------------------------------------------------------------------------
Investor B Shares for the
Period October 2, 2006* Dollar
to November 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 16,659 $ 230,574
Shares redeemed .......................... (5) (70)
-------------------------------
Net increase ............................. 16,654 $ 230,504
===============================
* Commencement of operations.
- -------------------------------------------------------------------------------
Investor B1 Shares for the Year Dollar
Ended November 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 181,883 $ 2,354,000
Shares issued to shareholders in
reinvestment of dividends .............. 20,090 247,890
-------------------------------
Total issued ............................. 201,973 2,601,890
-------------------------------
Automatic conversion of shares ........... (215,375) (2,677,349)
Shares redeemed .......................... (1,095,896) (14,568,848)
-------------------------------
Total redeemed ........................... (1,311,271) (17,246,197)
-------------------------------
Net decrease ............................. (1,109,298) $(14,644,307)
===============================
- -------------------------------------------------------------------------------
Investor B1 Shares for the Year Dollar
Ended November 30, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 309,576 $ 3,457,354
Shares issued to shareholders
in reinvestment of dividends ........... 31,715 359,265
-------------------------------
Total issued ............................. 341,291 3,816,619
-------------------------------
Automatic conversion of shares ........... (284,614) (3,199,572)
Shares redeemed .......................... (754,153) (8,527,451)
-------------------------------
Total redeemed ........................... (1,038,767) (11,727,023)
-------------------------------
Net decrease ............................. (697,476) $ (7,910,404)
===============================
BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006 25
Notes to Financial Statements (concluded)
- -------------------------------------------------------------------------------
Investor C Shares for the
Period October 2, 2006* Dollar
to November 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 20,675 $ 283,796
Shares redeemed .......................... (5) (70)
-------------------------------
Net increase ............................. 20,670 $ 283,726
===============================
* Commencement of operations.
- -------------------------------------------------------------------------------
Investor C1 Shares for the Year Dollar
Ended November 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 168,923 $ 2,139,280
Shares issued to shareholders in
reinvestment of dividends .............. 13,384 163,401
-------------------------------
Total issued ............................. 182,307 2,302,681
Shares redeemed .......................... (278,090) (3,493,584)
-------------------------------
Net decrease ............................. (95,783) $ (1,190,903)
===============================
- -------------------------------------------------------------------------------
Investor C1 Shares for the Year Dollar
Ended November 30, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 372,824 $ 4,174,489
Shares issued to shareholders
in reinvestment of dividends ........... 16,623 187,409
-------------------------------
Total issued ............................. 389,447 4,361,898
Shares redeemed .......................... (288,951) (3,263,839)
-------------------------------
Net increase ............................. 100,496 $ 1,098,059
===============================
5. Short-Term Borrowings:
The Fund, along with certain other funds managed by the Manager and its
affiliates (or MLIM and its affiliates), is a party to a $500,000,000 credit
agreement with a group of lenders. The Fund may borrow under the credit
agreement to fund shareholder redemptions and for other lawful purposes other
than for leverage. The Fund may borrow up to the maximum amount allowable under
the Fund's current prospectus and statement of additional information, subject
to various other legal, regulatory or contractual limits. The Fund pays a
commitment fee of .06% per annum based on the Fund's pro rata share of the
unused portion of the credit agreement. Amounts borrowed under the credit
agreement bear interest at a rate equal to, at each Fund's election, the federal
funds rate plus .35% or a base rate as defined in the credit agreement. The Fund
did not borrow under the credit agreement during the year ended November 30,
2006. On November 22, 2006 the credit agreement was renewed for one year under
substantially the same terms.
6. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years ended November
30, 2006 and November 30, 2005 was as follows:
- --------------------------------------------------------------------------------
11/30/2006 11/30/2005
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income ........................ $3,482,378 $3,025,472
-----------------------------
Total taxable distributions .............. $3,482,378 $3,025,472
=============================
As of November 30, 2006, the components of accumulated earnings on a tax basis
were as follows:
- ------------------------------------------------------------------------------
Undistributed ordinary income -- net ......................... $ 375,115
Undistributed long-term capital gains -- net ................. --
------------
Total undistributed earnings -- net .......................... 375,115
Capital loss carryforward .................................... (1,289,252)*
Unrealized gains -- net ...................................... 52,626,031
------------
Total accumulated earnings -- net ............................ $ 51,711,894
============
* On November 30, 2006, the Fund had a net capital loss carryforward of
$1,289,252, all of which expires in 2011. This amount will be available to
offset like amounts of any future taxable gains.
7. Subsequent Event:
The Fund paid an ordinary dividend in the amount of $.042701 per Institutional
Share, $.036859 per Investor A Share, $.029081 per Investor B Share, $.020835
per Investor B1 Share, $.030504 per Investor C Share and $.023034 per Investor
C1 Share on December 20, 2006 to shareholders of record on December 18, 2006.
26 BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of BlackRock Utilities and
Telecommunications Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of BlackRock Utilities and Telecommunications Fund,
Inc. (formerly Merrill Lynch Utilities and Telecommunications Fund, Inc.) as of
November 30, 2006, and the related statement of operations 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 the standards of the Public Company
Accounting Oversight Board (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. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of November 30, 2006, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. 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
BlackRock Utilities and Telecommunications Fund, Inc. as of November 30, 2006,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and its financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
January 19, 2007
Important Tax Information (unaudited)
The following information is provided with respect to the quarterly
distributions paid by BlackRock Utilities and Telecommunications Fund, Inc.
during the fiscal year ended November 30, 2006:
- --------------------------------------------------------------------------------
Qualified Dividend
Dividend Received
Record Date Income Deduction
- --------------------------------------------------------------------------------
December 14, 2005 ............................... 100% 100%
April 12, 2006 to October 10, 2006 .............. 100% 90.35%
- --------------------------------------------------------------------------------
BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006 27
Disclosure of Investment Advisory Agreement
BlackRock Investment Advisory Agreement -- Matters Considered by the Board
The following disclosure appeared in the May 31, 2006 Semi-Annual Report of the
Fund and is the discussion referred to in "New BlackRock Sub-Advisory Agreement
- -- Matters Considered by the Board" below.
In connection with the Transaction between Merrill Lynch and BlackRock, the
Fund's Board of Directors considered a new investment advisory agreement (the
"New Investment Advisory Agreement") between the Fund and BlackRock Advisors,
Inc. or its successor ("BlackRock Advisors"). If the New Investment Advisory
Agreement is approved by the Fund's shareholders, it will become effective upon
the closing of the Transaction, which is expected in the third quarter of 2006.
The Board discussed the New Investment Advisory Agreement at telephonic and
in-person meetings held during April and May 2006. The Board, including the
independent directors, approved the New Investment Advisory Agreement at a
meeting held on May 12, 2006.
To assist the Board in its consideration of the New Investment Advisory
Agreement, BlackRock provided materials and information about BlackRock,
including its financial condition and asset management capabilities and
organization, and Merrill Lynch provided materials and information about the
Transaction. The independent directors, through their independent legal counsel,
also requested and received additional information from Merrill Lynch and
BlackRock in connection with their consideration of the New Investment Advisory
Agreement. The additional information was provided in advance of the May 12,
2006 meeting. In addition, the independent directors consulted with their
counsel and Fund counsel on numerous occasions, discussing, among other things,
the legal standards and certain other considerations relevant to the directors'
deliberations.
At the Board meetings, members of the Board discussed with Merrill Lynch
management and certain BlackRock representatives the Transaction, its strategic
rationale and BlackRock's general plans and intentions regarding the Fund. At
these Board meetings, representatives of Merrill Lynch and BlackRock made
presentations to and responded to questions from the Board. The directors also
inquired about the plans for and anticipated roles and responsibilities of
certain employees and officers of the Investment Adviser and certain affiliates
being transferred to BlackRock in connection with the Transaction. The
independent directors of the Board also conferred separately and with their
counsel about the Transaction and other matters related to the Transaction on a
number of occasions, including in connection with the April and May 2006
meetings. After the presentations and after reviewing the written materials
provided, the independent directors met in executive sessions with their counsel
to consider the New Investment Advisory Agreement.
In connection with the Board's review of the New Investment Advisory Agreement,
Merrill Lynch and/or BlackRock advised the directors about a variety of matters.
The advice included the following, among other matters:
o that there is not expected to be any diminution in the nature, quality and
extent of services provided to the Fund and its shareholders by BlackRock
Advisors, including compliance services;
o that operation of New BlackRock as an independent investment management
firm will enhance its ability to attract and retain talented
professionals;
o that the Fund should benefit from having access to BlackRock's state of
the art technology and risk management analytic tools, including
investment tools, provided under the BlackRock Solutions(R) brand name;
o that BlackRock has no present intention to alter any applicable expense
waivers and reimbursements currently in effect and, while it reserves the
right to do so in the future, it would seek the approval of the Board
before making any changes;
o that BlackRock and Merrill Lynch will enter into an agreement, for an
initial three-year period and automatically renewable from year to year
thereafter, in connection with the Transaction under which Merrill
Lynch-affiliated broker-dealers will continue to offer the Fund as an
investment product;
o that BlackRock Advisors will have substantially the same access to the
Merrill Lynch sales force when distributing shares of the Fund as is
currently provided to the Investment Adviser and that other arrangements
between the Investment Adviser and Merrill Lynch sales channels will be
preserved;
o that the Fund will have access to BlackRock's network of third party
brokers, retirement plan platforms and registered investment advisers;
o that under the Transaction Agreement, Merrill Lynch and BlackRock have
agreed to conduct, and use reasonable
28 BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006
best efforts to cause their respective affiliates to conduct, their
respective businesses in compliance with the conditions of Section 15(f)
of the Investment Company Act of 1940 (the "1940 Act") in relation to any
public funds advised by BlackRock or the Investment Adviser (or its
affiliates), respectively; and
o that Merrill Lynch and BlackRock would derive benefits from the
Transaction and that, as a result, they have a different financial
interest in the matters that were being considered than do Fund
shareholders;
The directors considered the information provided by Merrill Lynch and BlackRock
above, and, among other factors, the following:
o the potential benefits to Fund shareholders from being part of a combined
fund family with BlackRock-sponsored funds, including possible economies
of scale and access to investment opportunities;
o the potential for expanding distribution of Fund shares through improved
access to third party distribution;
o the reputation, financial strength and resources of BlackRock and its
investment advisory subsidiaries and the anticipated financial strength
and resources of New BlackRock;
o the compliance policies and procedures of BlackRock Advisors;
o the terms and conditions of the New Investment Advisory Agreement,
including the fact that the schedule of the Fund's total advisory fees
will not increase by virtue of the New Investment Advisory Agreement, but
will remain the same;
o that within the past year the Board performed a full annual review of the
investment advisory agreement currently in effect for the Fund (the
"Current Investment Advisory Agreement") as required by the 1940 Act and
has determined that the Investment Adviser has the capabilities, resources
and personnel necessary to provide the advisory and administrative
services currently provided to the Fund; and that the advisory and/or
management fees paid by the Fund, taking into account any applicable
agreed-upon fee waivers and breakpoints, represent reasonable compensation
to the Investment Adviser in light of the services provided, the costs to
the Investment Adviser of providing those services, economies of scale,
the fees and other expenses paid by similar funds (including information
provided by Lipper, Inc. ["Lipper"]), and such other matters as the
directors have considered relevant in the exercise of their reasonable
judgment (the Board had most recently performed a full annual review of
the Current Investment Advisory Agreement in May 2005); and
o that Merrill Lynch agreed to pay all expenses of the Fund in connection
with the Board's consideration of the New Investment Advisory Agreement
and related agreements and all costs of shareholder approval of the New
Investment Advisory Agreement and as a result the Fund would bear no costs
in obtaining shareholder approval of the New Investment Advisory
Agreement.
Certain of these considerations are discussed in more detail below.
In its review of the New Investment Advisory Agreement, the Board assessed the
nature, scope and quality of the services to be provided to the Fund by the
personnel of BlackRock Advisors and its affiliates, including administrative
services, shareholder services, oversight of fund accounting, marketing services
and assistance in meeting legal and regulatory requirements. In its review of
the New Investment Advisory Agreement, the Board also considered a range of
information in connection with its oversight of the services to be provided by
BlackRock Advisors and its affiliates. Among the matters considered were: (a)
fees (in addition to management fees) to be paid to BlackRock Advisors and its
affiliates by the Fund; (b) Fund operating expenses paid to third parties; (c)
the resources devoted to and compliance reports relating to the Fund's
investment objective, policies and restrictions, and its compliance with its
Code of Ethics and BlackRock Advisors' compliance policies and procedures; and
(d) the nature, cost and character of non-investment management services to be
provided by BlackRock Advisors and its affiliates.
In the period prior to the Board meetings to consider renewal of the Current
Investment Advisory Agreement, the Board had requested and received materials
specifically relating to the agreement. These materials included (a) information
compiled by Lipper on the fees and expenses and the investment performance of
the Fund as compared to a comparable group of funds as classified by Lipper; (b)
a discussion by the Fund's portfolio management team on investment strategies
used by the Fund during its most recent fiscal year; (c) information on the
profitability to the Investment Adviser of the Current Investment Advisory
Agreement and other payments
BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006 29
Disclosure of Investment Advisory Agreement (continued)
received by the Investment Adviser and its affiliates from the Fund; and (d)
information provided by the Investment Adviser concerning services related to
the valuation and pricing of Fund portfolio holdings, allocation of Fund
brokerage fees, the Fund's portfolio turnover statistics, and direct and
indirect benefits to the Investment Adviser and its affiliates from their
relationship with the Fund.
In their deliberations, the directors considered information received in
connection with their most recent continuation of the Current Investment
Advisory Agreement, in addition to information provided by BlackRock and
BlackRock Advisors in connection with their evaluation of the terms and
conditions of the New Investment Advisory Agreement. The directors did not
identify any particular information that was all-important or controlling, and
each director attributed different weights to the various factors. The
directors, including a majority of the independent directors, concluded that the
terms of the New Investment Advisory Agreement are appropriate, that the fees to
be paid are reasonable in light of the services to be provided to the Fund, and
that the New Investment Advisory Agreement should be approved and recommended to
Fund shareholders.
Nature, Quality and Extent of Services Provided -- The Board reviewed the
nature, extent and quality of services provided by the Investment Adviser,
including the investment advisory services and the resulting performance of the
Fund, as well as the nature, quality and extent of services expected to be
provided by BlackRock Advisors. The Board focused primarily on the Investment
Adviser's investment advisory services and the Fund's investment performance,
but also considered certain areas in which both the Investment Adviser and the
Fund receive services as part of the Merrill Lynch complex. The Board compared
the Fund's performance -- both including and excluding the effects of the Fund's
fees and expenses -- to the performance of a comparable group of mutual funds,
and the performance of a relevant index or combination of indexes. While the
Board reviews performance data at least quarterly, consistent with the
Investment Adviser's investment goals, the Board attaches more importance to
performance over relatively long periods of time, typically three to five years.
In evaluating the nature, quality and extent of the services to be provided by
BlackRock Advisors under the New Investment Advisory Agreement, the directors
considered, among other things, the expected impact of the Transaction on the
operations, facilities, organization and personnel of New BlackRock and how it
would affect the Fund; the ability of BlackRock Advisors to perform its duties
after the Transaction; and any anticipated changes to the current investment and
other practices of the Fund.
The directors were given information with respect to the potential benefits to
the Fund and its shareholders from having access to BlackRock's state of the art
technology and risk management analytic tools, including the investment tools
provided under the BlackRock Solutions brand name.
The directors were advised that, as a result of Merrill Lynch's equity interest
in BlackRock after the Transaction, the Fund will continue to be subject to
restrictions concerning certain transactions involving Merrill Lynch affiliates
(for example, transactions with a Merrill Lynch broker-dealer acting as
principal) absent revised or new regulatory relief. The directors were advised
that a revision of existing regulatory relief with respect to these restrictions
was being sought from the Securities and Exchange Commission and were advised of
the possibility of receipt of such revised regulatory relief. There can be no
assurance that such relief will be obtained.
Based on their review of the materials provided and the assurances they had
received from the management of Merrill Lynch and of BlackRock, the directors
determined that the nature and quality of services to be provided to the Fund
under the New Investment Advisory Agreement were expected to be as good or
better than that provided under the Current Investment Advisory Agreement. It
was noted, however, that it is expected that there will be changes in personnel
following the Transaction and the combination of the operations of the
Investment Adviser and its affiliates with those of BlackRock. The directors
noted that if current portfolio managers or other personnel cease to be
available, the Board would consider all available options, which could include
seeking the investment advisory or other services of BlackRock affiliates.
Accordingly, the directors concluded that, overall, they were satisfied at the
present time with assurances from BlackRock and BlackRock Advisors as to the
expected nature, extent and quality of the services to be provided to the Fund
under the New Investment Advisory Agreement.
Costs of Services Provided and Profitability -- It was noted that, in
conjunction with the recent review of the Current Investment Advisory Agreement,
the directors had received, among other things, a report from Lipper comparing
the Fund's fees, expenses and performance to those of a peer group selected by
Lipper, and information as to the fees charged by the Investment Adviser or its
affiliates to other registered investment company clients for investment
30 BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006
management services. The Board reviewed the Fund's contractual management fee
rate and actual management fee rate as a percentage of total assets at common
asset levels -- the actual rate includes advisory fees and the effects of any
fee waivers -- compared to the other funds in its Lipper category. They also
compared the Fund's total expenses to those of other comparable funds. The
information showed that the Fund had fees and expenses within the range of fees
and expenses of comparable funds. The Board considered the services to be
provided by and the fees to be charged by BlackRock Advisors to other funds with
similar investment mandates and noted that the fees charged by BlackRock
Advisors in those cases, including fee waivers and expense reimbursements, were
generally comparable to those being charged to the Fund. The Board also noted
that, as a general matter, according to the information provided by BlackRock,
fees charged to institutional clients were lower than the fees charged to the
Fund, but BlackRock Advisors provided less extensive services to such clients.
The Board concluded that the Fund's management fee and fee rate and overall
expense ratio are reasonable compared to those of other comparable funds.
In evaluating the costs of the services to be provided by BlackRock Advisors
under the New Investment Advisory Agreement, the directors considered, among
other things, whether advisory fees or other expenses would change as a result
of the Transaction. Based on their review of the materials provided and the fact
that the New Investment Advisory Agreement is substantially similar to the
Current Investment Advisory Agreement in all material respects, including the
rate of compensation, the directors determined that the Transaction should not
increase the total fees payable, including any fee waivers and expense
reimbursements, for advisory and administrative services. The directors noted
that it was not possible to predict how the Transaction would affect BlackRock
Advisors' profitability from its relationship with the Fund.
The directors discussed with BlackRock Advisors its general methodology to be
used in determining its profitability with respect to its relationship with the
Fund. The directors noted that they expect to receive profitability information
from BlackRock Advisors on at least an annual basis and thus be in a position to
evaluate whether any adjustments in Fund fees and/or fee breakpoints would be
appropriate.
Fees and Economies of Scale -- The Board considered the extent to which
economies of scale might be realized as the assets of the Fund increase and
whether there should be changes in the management fee rate or structure in order
to enable the Fund to participate in these economies of scale. The Board
determined that changes were not currently necessary and that the Fund
appropriately participated in these economies of scale.
In reviewing the Transaction, the directors considered, among other things,
whether advisory fees or other expenses would change as a result of the
Transaction. Based on the fact that the New Investment Advisory Agreement is
substantially similar to the Current Investment Advisory Agreement in all
material respects, including the rate of compensation, the directors determined
that as a result of the Transaction, the Fund's total advisory fees would be no
higher than the fees under its Current Investment Advisory Agreement. The
directors noted that in conjunction with their most recent deliberations
concerning the Current Investment Advisory Agreement, the directors had
determined that the total fees for advisory and administrative services for the
Fund were reasonable in light of the services provided. It was noted that in
conjunction with the recent review of the Current Investment Advisory Agreement,
the directors had received, among other things, a report from Lipper comparing
the Fund's fees, expenses and performance to those of a peer group selected by
Lipper, and information as to the fees charged by the Investment Adviser to
other registered investment company clients for investment management services.
The directors concluded that, because the rates for advisory fees for the Fund
would be no higher than its current fee rates, the proposed management fee
structure, including any fee waivers, was reasonable and that no additional
changes were currently necessary.
Fall-Out Benefits -- In evaluating the fall-out benefits to be received by
BlackRock Advisors under the New Investment Advisory Agreement, the directors
considered whether the Transaction would have an impact on the fall-out benefits
received by the Investment Adviser by virtue of the Current Investment Advisory
Agreement. Based on their review of the materials provided, including materials
received in connection with their most recent approval or continuance of the
Current Investment Advisory Agreement, and their discussions with management of
the Investment Adviser and BlackRock, the directors determined that those
benefits could include increased ability for BlackRock to distribute shares of
its funds and other investment products and, where applicable, to obtain
research services using the Fund's portfolio transaction brokerage commissions.
The directors noted that any such benefits were difficult to quantify with
certainty at this time, and indicated that they would continue to evaluate them
going forward.
BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006 31
Disclosure of Investment Advisory Agreement (concluded)
Investment Performance -- The directors considered investment performance for
the Fund. The directors compared the Fund's performance -- both including and
excluding the effects of the Fund's fees and expenses -- to the performance of a
comparable group of mutual funds, and the performance of a relevant index or
combination of indexes. The comparative information received from Lipper showed
Fund performance at various levels within the range of performance of comparable
funds over different time periods. While the Board reviews performance data at
least quarterly, consistent with the Investment Adviser's investment goals, the
Board attaches more importance over relatively long periods of time, typically
three to five years. The directors believed the Fund's performance was
satisfactory. Also, the directors took into account the investment performance
of funds currently advised by BlackRock Advisors. The Board considered
comparative information from Lipper which showed that the performance of the
funds advised by BlackRock Advisors was within the range of performance of
comparable funds over different time periods. The Board noted BlackRock's
considerable investment management experience and capabilities, but were unable
to predict what effect, if any, consummation of the Transaction would have on
the future performance of the Fund.
Conclusion -- After the independent directors of the Fund deliberated in
executive session, the entire Board, including the independent directors,
approved the New Investment Advisory Agreement, concluding that the advisory fee
rate was reasonable in relation to the services provided and that the New
Investment Advisory Agreement was in the best interests of the shareholders. In
approving the New Investment Advisory Agreement, the Board noted that it
anticipated reviewing the continuance of the agreement in advance of the
expiration of the initial two-year period.
Contingent BlackRock Sub-Advisory Agreement -- Matters Considered by the Board
At the telephonic and in-person meetings held during April and May 2006 at which
the Board of Directors discussed and approved the New Investment Advisory
Agreement, the Board, including the independent directors, also discussed and
approved a contingent sub-advisory agreement (the "Contingent Sub-Advisory
Agreement") between the Investment Adviser and BlackRock Advisors (the
"BlackRock Sub-Adviser"). The Contingent Sub-Advisory Agreement is intended to
ensure that the Fund operates with efficient portfolio management services until
the closing of the Transaction, in the event that the Board deems it necessary
and in the best interests of the Fund and its shareholders that the BlackRock
Sub-Adviser assist in managing the operations of the Fund during the interim
period until the closing of the Transaction. If shareholders approve the
Contingent Sub-Advisory Agreement, it will take effect only upon recommendation
from the Investment Adviser and upon subsequent approval of the Board in the
period up to the closing of the Transaction. The effectiveness of the Contingent
Sub-Advisory Agreement, therefore, would be contingent on further Board approval
after shareholders approve it. Pursuant to the Contingent Sub-Advisory
Agreement, the BlackRock Sub-Adviser would receive a monthly fee from the
Investment Adviser equal to 50% of the advisory fee received by the Investment
Adviser. The Investment Adviser would pay the BlackRock Sub-Adviser out of its
own resources. There would be no increase in Fund expenses as a result of the
Contingent Sub-Advisory Agreement.
In making its approval, the Board considered the Contingent Sub-Advisory
Agreement in conjunction with the New Investment Advisory Agreement and reviewed
the same information and factors discussed above, and came to the same
conclusions. The Board also considered in conjunction with the Contingent
Sub-Advisory Agreement the necessity of ensuring that the Fund operates with
effective management services until the closing of the Transaction. In reviewing
the sub-advisory fee rate provided in the Contingent Sub-Advisory Agreement, the
Board took note of the fact that both the Investment Adviser and the BlackRock
Sub-Adviser would have significant responsibilities under their respective
advisory agreements. The Investment Adviser would remain responsible for
oversight of the Fund's operations and administration and the BlackRock
Sub-Adviser would provide advisory services to the Fund under the Contingent
Sub-Advisory Agreement. The Board also took into account the expected short
duration of the term of any Contingent Sub-Advisory Agreement and the fact that
total advisory fees paid by the Fund would not increase as a result of the
Contingent Sub-Advisory Agreement. Under all of the circumstances, the Board
concluded that it was a reasonable allocation of fees for the BlackRock
Sub-Adviser to receive 50% of the advisory fee paid by the Fund to the
Investment Adviser.
After the independent directors deliberated in executive session, the entire
Board, including the independent directors, approved the Contingent Sub-Advisory
Agreement, concluding that the advisory fee was reasonable in relation to the
services provided and that the Contingent Sub-Advisory Agreement was in the best
interests of shareholders.
32 BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006
Disclosure of Sub-Advisory Agreement
New BlackRock Sub-Advisory Agreement -- Matters Considered by the Board
At an in-person meeting held on August 14-16, 2006, the Board of Directors,
including the independent directors, discussed and approved the sub-advisory
agreement between BlackRock Advisors and its affiliate, BlackRock Investment
Management, LLC (the "Sub-Adviser") (the "BlackRock Sub-Advisory Agreement").
The BlackRock Sub-Advisory Agreement became effective on September 29, 2006, at
the same time the New Investment Advisory Agreement with BlackRock Advisors
(which had been approved by the Fund's shareholders) became effective.
Pursuant to the BlackRock Sub-Advisory Agreement, the Sub-Adviser receives a
monthly fee from BlackRock Advisors equal to 74% of the advisory fee received by
BlackRock Advisors from the Fund. BlackRock Advisors pays the Sub-Adviser out of
its own resources, and there is no increase in Fund expenses as a result of the
BlackRock Sub-Advisory Agreement.
In approving the BlackRock Sub-Advisory Agreement at the August in-person
meeting, the Board reviewed its considerations in connection with its approval
of the New Investment Advisory Agreement in May 2006. The Board relied on the
same information and considered the same factors as those discussed above in
connection with the approval of the New Investment Advisory Agreement, and came
to the same conclusions. In reviewing the sub-advisory fee rate provided for in
the BlackRock Sub-Advisory Agreement, the Board noted the fact that both
BlackRock Advisors and the Sub-Adviser have significant responsibilities under
their respective advisory agreements. Under the New Investment Advisory
Agreement, BlackRock Advisors remains responsible for the overall management of
the Fund and for oversight of the Fund's operations and administration. Under
the BlackRock Sub-Advisory Agreement, the Sub-Adviser provides advisory services
to the Fund and is responsible for the day-to-day management of the Fund's
portfolio. The Board also took into account the fact that there is no increase
in total advisory fees paid by the Fund as a result of the BlackRock
Sub-Advisory Agreement. Based on its considerations, the Board concluded that it
was a reasonable allocation of fees for the Sub-Adviser to receive 74% of the
advisory fee paid by the Fund to BlackRock Advisors.
After the independent directors deliberated in executive session, the entire
Board, including the independent directors, approved the BlackRock Sub-Advisory
Agreement, concluding that the sub-advisory fee was reasonable in relation to
the services provided and that the BlackRock Sub-Advisory Agreement was in the
best interests of the Fund's shareholders.
BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006 33
Officers and Directors
Number of
Funds and
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Interested Director
- ------------------------------------------------------------------------------------------------------------------------------------
Robert C. P.O. Box 9011 President 2005 to Vice Chairman and Director of BlackRock, Inc., 122 Funds None
Doll, Jr.* Princeton, NJ and present Global Chief Investment Officer for Equities, 168 Portfolios
08543-9011 Director Chairman of the BlackRock Retail Operating
Age: 52 Committee, and member of the BlackRock Executive
Committee since 2006; President of the Funds
advised by Merrill Lynch Investment Managers, L.P.
("MLIM") and its affiliates ("MLIM/FAM-advised
funds") from 2005 to 2006; President and Chief
Investment Officer of MLIM and Fund Asset
Management, L.P. ("FAM") from 2001 to 2006; Co-Head
(Americas Region) thereof from 2000 to 2001 and
Senior Vice President from 1999 to 2001; President
and Director of Princeton Services, Inc.
("Princeton Services") and President of Princeton
Administrators, L.P. ("Princeton Administrators")
from 2001 to 2006; Chief Investment Officer of
OppenheimerFunds, Inc. in 1999 and Executive Vice
President thereof from 1991 to 1999.
------------------------------------------------------------------------------------------------------------------------
* Mr. Doll is a director, trustee or member of an advisory board of certain other investment companies for which
BlackRock Advisors acts as investment adviser. Mr. Doll is an "interested person," as described in the Investment
Company Act, of the Fund based on his current and former positions with BlackRock, Inc. and its affiliates.
Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.
As Fund President, Mr. Doll serves at the pleasure of the Board of Directors.
34 BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006
Officers and Directors (continued)
Number of
Funds and
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Independent Directors*
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald W. P.O. Box 9095 Director 1990 to Professor Emeritus of Finance, School of Business, 47 Funds None
Forbes** Princeton, NJ present State University of New York at Albany since 2000 49 Portfolios
08543-9095 and Professor thereof from 1989 to 2000;
Age: 66 International Consultant, Urban Institute,
Washington, D.C. from 1995 to 1999.
- ------------------------------------------------------------------------------------------------------------------------------------
Cynthia A. P.O. Box 9095 Director 1994 to Professor, Harvard Business School since 1989; 47 Funds Newell
Montgomery Princeton, NJ present Associate Professor, J.L. Kellogg Graduate School 49 Portfolios Rubbermaid,
08543-9095 of Management, Northwestern University from 1985 to Inc.
Age: 54 1989; Associate Professor, Graduate School of (manufactur-
Business Administration, University of Michigan ing)
from 1979 to 1985; Director, Harvard Business
School Publishing since 2005; Director, McLean
Hospital since 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Jean Margo P.O. Box 9095 Director 2004 to Self-employed consultant since 2001; Counsel of 47 Funds None
Reid Princeton, NJ present Alliance Capital Management (investment adviser) in 49 Portfolios
08543-9095 2000; General Counsel, Director and Secretary
Age: 61 Sanford C. Bernstein & Co., Inc. (investment
adviser/broker-dealer) from 1997 to 2000;
Secretary, Sanford C. Bernstein Fund, Inc. from
1994 to 2000; Director and Secretary of SCB, Inc.
since 1998; Director and Secretary of SCB Partners,
Inc. since 2000; and Director of Covenant House
from 2001 to 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
Roscoe S. P.O. Box 9095 Director 2000 to President, Middle East Institute, from 1995 to 47 Funds None
Suddarth Princeton, NJ present 2001; Foreign Service Officer, United States 49 Portfolios
08543-9095 Foreign Service, from 1961 to 1995 and Career
Age: 71 Minister from 1989 to 1995; Deputy Inspector
General, U.S. Department of State, from 1991 to
1994; U.S. Ambassador to the Hashemite Kingdom of
Jordan from 1987 to 1990.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard R. P.O. Box 9095 Director 1990 to Professor of Finance from 1984 to 1995, Dean from 47 Funds Bowne & Co.,
West Princeton, NJ present 1984 to 1993 and since 1995 Dean Emeritus of New 49 Portfolios Inc.
08543-9095 York University's Leonard N. Stern School of (financial
Age: 68 Business Administration. printers);
Vornado
Realty Trust
(real estate
company);
Alexander's,
Inc. (real
estate
company)
- ------------------------------------------------------------------------------------------------------------------------------------
Edward D. P.O. Box 9095 Director 2000 to Self-employed financial consultant since 1994; 47 Funds None
Zinbarg Princeton, NJ present Executive Vice President of the Prudential 49 Portfolios
08543-9095 Insurance Company of America from 1988 to 1994;
Age: 72 Former Director of Prudential Reinsurance Company
and former Trustee of the Prudential Foundation.
------------------------------------------------------------------------------------------------------------------------
* Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.
** Chairman of the Board of Directors and the Audit Committee.
BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006 35
Officers and Directors (concluded)
Position(s) Length of
Held with Time
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund Officers*
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 1993 to Managing Director of BlackRock, Inc. since 2006; Managing Director of Merrill Lynch
Burke Princeton, NJ President present Investment Managers, L.P. ("MLIM") and Fund Asset Management, L.P. ("FAM") in 2006;
08543-9011 and and First Vice President of MLIM and FAM from 1997 to 2005 and Treasurer thereof from
Age: 46 Treasurer 1999 to 1999 to 2006; Vice President of MLIM and FAM from 1990 to 1997.
present
- ------------------------------------------------------------------------------------------------------------------------------------
Kathleen P.O. Box 9011 Vice 2002 to Director of BlackRock, Inc. since 2006; Director of MLIM from 2000 to 2006 and Vice
M. Princeton, NJ President present President of MLIM from 1994 to 2000; Associate Portfolio Manager of MLIM since 1998
Anderson 08543-9011 Research Analyst of MLIM from 1993 to 1998.
Age: 48
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey P.O. Box 9011 Fund Chief 2004 to Managing Director of BlackRock Inc. and Fund Chief Compliance Officer since 2006;
Hiller Princeton, NJ Compliance present Chief Compliance Officer of the MLIM/FAM-advised funds and First Vice President and
08543-9011 Officer Chief Compliance Officer of MLIM (Americas Region) from 2004 to 2006; Chief
Age: 55 Compliance Officer of the IQ Funds since 2004; Global Director of Compliance at
Morgan Stanley Investment Management from 2002 to 2004; Managing Director and
Global Director of Compliance at Citigroup Asset Management from 2000 to 2002;
Chief Compliance Officer at Soros Fund Management in 2000; Chief Compliance Officer
at Prudential Financial from 1995 to 2000; Senior Counsel in the Securities and
Exchange Commission's Division of Enforcement in Washington, D.C. from 1990 to
1995.
- ------------------------------------------------------------------------------------------------------------------------------------
Alice A. P.O. Box 9011 Secretary 2004 to Director of BlackRock, Inc. since 2006; Director (Legal Advisory) of MLIM from 2002
Pellegrino Princeton, NJ present to 2006; Vice President of MLIM from 1999 to 2002; Attorney associated with MLIM
08543-9011 from 1997 to 2006; Secretary of MLIM, FAM, FAM Distributors, Inc. and Princeton
Age: 46 Services from 2004 to 2006.
------------------------------------------------------------------------------------------------------------------------
* Officers of the Fund serve at the pleasure of the Board of Directors.
- ------------------------------------------------------------------------------------------------------------------------------------
Further information about the Fund's Officers and Directors is available in the Fund's Statement of Additional
Information, which can be obtained without charge by calling 1-800-441-7762.
- ------------------------------------------------------------------------------------------------------------------------------------
Custodian
JPMorgan Chase Bank, N.A.
3 Chase MetroTech Center
Brooklyn, NY 11245
Transfer Agent
PFPC Inc.
Wilmington, DE 19809
- --------------------------------------------------------------------------------
Effective January 1, 2007, Edward D. Zinbarg retired as Director of BlackRock
Utilities and Telecommunications Fund, Inc. The Fund's Board of Directors wishes
Mr. Zinbarg well in his retirement.
- --------------------------------------------------------------------------------
Proxy Results
During the six-month period ended November 30, 2006, BlackRock Utilities and
Telecommunications Fund, Inc.'s shareholders voted on the following proposals,
which were approved at a special shareholders' meeting on August 15, 2006. A
description of the proposals and number of shares voted were as follows:
- --------------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- --------------------------------------------------------------------------------------------------------------------------
To approve a new investment advisory agreement
with BlackRock Advisors, Inc. 6,046,653 168,775 218,102
- --------------------------------------------------------------------------------------------------------------------------
To approve a contingent subadvisory agreement
with BlackRock Advisors, Inc. 6,054,130 161,305 218,096
- --------------------------------------------------------------------------------------------------------------------------
36 BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006
BlackRock Funds
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund
investors and individual clients (collectively, "Clients") and to safeguarding
their nonpublic personal information. The following information is provided to
help you understand what personal information BlackRock collects, how we protect
that information and why in certain cases we share such information with select
parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
BlackRock obtains or verifies personal nonpublic information from and about you
from different sources, including the following: (i) information we receive from
you or, if applicable, your financial intermediary, on applications, forms or
other documents; (ii) information about your transactions with us, our
affiliates, or others; (iii) information we receive from a consumer reporting
agency; and (iv) from visits to our Web sites.
BlackRock does not sell or disclose to nonaffiliated third parties any nonpublic
personal information about its Clients, except as permitted by law or as is
necessary to service Client accounts. These nonaffiliated third parties are
required to protect the confidentiality and security of this information and to
use it only for its intended purpose.
We may share information with our affiliates to service your account or to
provide you with information about other BlackRock products or services that may
be of interest to you. In addition, BlackRock restricts access to nonpublic
personal information about its Clients to those BlackRock employees with a
legitimate business need for the information. BlackRock maintains physical,
electronic and procedural safeguards that are designed to protect the nonpublic
personal information of its Clients, including procedures relating to the proper
storage and disposal of such information.
Availability of Additional Information
Electronic copies of most financial reports and prospectuses are available on
the Fund's Web site or shareholders can sign up for e-mail notifications of
quarterly statements, annual and semi-annual reports and prospectuses by
enrolling in the Fund's electronic delivery program.
To enroll:
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:
Please contact your financial adviser. Please note that not all investment
advisers, banks or brokerages may offer this service.
Shareholders Who Hold Accounts Directly with BlackRock:
1) Access the BlackRock Web site at http://www.blackrock.com/edelivery
2) Select eDelivery under the More Information section
3) Log into your account
The Fund will mail only one copy of shareholder documents, including
prospectuses, annual and semi-annual reports and proxy statements, to
shareholders with multiple accounts at the same address. This practice is
commonly called "householding" and it is intended to reduce expenses and
eliminate duplicate mailings of shareholder documents. Mailings of your
shareholder documents may be householded indefinitely unless you instruct us
otherwise. If you do not want the mailing of these documents to be combined with
those for other members of your household, please contact the Fund at (800)
441-7762.
BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006 37
BlackRock Funds (concluded)
Availability of Additional Information (concluded)
Availability of Proxy Voting Policies and Procedures
The Fund has delegated proxy voting responsibilities to BlackRock and its
affiliates, subject to the general oversight of the Fund's Board of Directors. A
description of the policies and procedures that BlackRock and its affiliates use
to determine how to vote proxies relating to portfolio securities is available
without charge, upon request, on our Web site at www.blackrock.com, by calling
(800) 441-7762, or on the Web site of the Securities and Exchange Commission
(the"Commission") at http://www.sec.gov.
Availability of Proxy Voting Record
Information on how proxies relating to the Fund's voting securities were voted
(if any) by BlackRock during the most recent 12-month period ended June 30 is
available, upon request and without charge, on our Web site at
www.blackrock.com, by calling (800) 441-7762 or on the Web site of the
Commission at http://www.sec.gov.
Availability of Quarterly Portfolio Schedule
The Fund files its complete schedule of portfolio holdings for the first and
third quarters of its fiscal year with the Commission on Form N-Q. The Fund's
Form N-Q is available on the Commission's Web site at http://www.sec.gov and may
be reviewed and copied at the Commission's Public Reference Room in Washington,
D.C. Information regarding the operation of the Public Reference Room may be
obtained by calling (800) SEC-0330. The Fund's Forms N-Q may also be obtained
upon request, without charge, by calling (800) 441-7762.
Shareholder Privileges
Account Information
Call us at (800) 441-7762 8:00 AM - 6:00 PM EST to get information about your
account balances, recent transactions and share prices. You can also reach us on
the web at www.blackrock.com.
Automatic Investment Plans
Investor Class shareholders who want to invest regularly can arrange to have $50
or more automatically deducted from their checking or savings account and
invested in any of the BlackRock portfolios.
Systematic Withdrawal Plans
Investor Class shareholders can establish a systematic withdrawal plan and
receive periodic payments of $50 or more from their BlackRock portfolios, as
long as their account is at least $10,000.
Retirement Plans
Shareholders may make investments in conjunction with Traditional, Rollover,
Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.
38 BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006
A World-Class Mutual Fund Family
BlackRock now offers an expanded lineup of open-end mutual funds. Our range
includes more than 85 funds crossing all investment styles and managed by
experts in equity, fixed income and tax-exempt investing.
Equity Portfolios
BlackRock All-Cap Global Resources Portfolio
BlackRock Aurora Portfolio
BlackRock Asset Allocation Portfolio+
BlackRock Balanced Capital Fund+
BlackRock Basic Value Fund
BlackRock Developing Capital Markets Fund
BlackRock Equity Dividend Fund
BlackRock EuroFund
BlackRock Focus Twenty Fund
BlackRock Focus Value Fund
BlackRock Fundamental Growth Fund
BlackRock Global Allocation Fund+
BlackRock Global Dynamic Equity Fund
BlackRock Global Financial Services Fund
BlackRock Global Growth Fund
BlackRock Global Opportunities Portfolio
BlackRock Global Resources Portfolio*
BlackRock Global Science & Technology Opportunities Portfolio
BlackRock Global SmallCap Fund
BlackRock Global Technology Fund
BlackRock Global Value Fund
BlackRock Healthcare Fund
BlackRock Health Sciences Opportunities Portfolio
BlackRock Index Equity Portfolio*
BlackRock International Fund
BlackRock International Index Fund
BlackRock International Opportunities Portfolio*
BlackRock International Value Fund
BlackRock Investment Trust
BlackRock Large Cap Core Fund
BlackRock Large Cap Growth Fund
BlackRock Large Cap Value Fund
BlackRock Latin America Fund
BlackRock Legacy Portfolio
BlackRock Mid-Cap Growth Equity Portfolio
BlackRock Mid-Cap Value Equity Portfolio
BlackRock Mid Cap Value Opportunities Fund
BlackRock Natural Resources Trust
BlackRock Pacific Fund
BlackRock Small Cap Core Equity Portfolio
BlackRock Small Cap Growth Equity Portfolio
BlackRock Small Cap Growth Fund II
BlackRock Small Cap Index Fund
BlackRock Small Cap Value Equity Portfolio*
BlackRock Small/Mid-Cap Growth Portfolio
BlackRock S&P 500 Index Fund
BlackRock U.S. Opportunities Portfolio
BlackRock Utilities and Telecommunications Fund
BlackRock Value Opportunities Fund
Fixed Income Portfolios
BlackRock Bond Fund
BlackRock Enhanced Income Portfolio
BlackRock GNMA Portfolio
BlackRock Government Income Portfolio
BlackRock High Income Fund
BlackRock High Yield Bond Portfolio
BlackRock Inflation Protected Bond Portfolio
BlackRock Intermediate Bond Portfolio
BlackRock Intermediate Bond Portfolio II
BlackRock Intermediate Government Bond Portfolio
BlackRock International Bond Portfolio
BlackRock Low Duration Bond Portfolio
BlackRock Managed Income Portfolio
BlackRock Real Investment Fund
BlackRock Short-Term Bond Fund
BlackRock Total Return Portfolio
BlackRock Total Return Portfolio II
BlackRock World Income Fund
Municipal Bond Portfolios
BlackRock AMT-Free Municipal Bond Portfolio
BlackRock California Insured Municipal Bond Fund
BlackRock Delaware Municipal Bond Portfolio
BlackRock Florida Municipal Bond Fund
BlackRock High Yield Municipal Fund
BlackRock Intermediate Municipal Fund
BlackRock Kentucky Municipal Bond Portfolio
BlackRock Municipal Insured Fund
BlackRock National Municipal Fund
BlackRock New Jersey Municipal Bond Fund
BlackRock New York Municipal Bond Fund
BlackRock Ohio Municipal Bond Portfolio
BlackRock Pennsylvania Municipal Bond Fund
BlackRock Short-Term Municipal Fund
Money Market Portfolios
BlackRock Money Market Portfolio
BlackRock Municipal Money Market Portfolio@
BlackRock NC Municipal MM Portfolio@
BlackRock NJ Municipal MM Portfolio@
BlackRock OH Municipal MM Portfolio@
BlackRock PA Municipal MM Portfolio@
BlackRock Summit Cash Reserves Fund*
BlackRock U.S. Treasury MM Portfolio
BlackRock VA Municipal MM Portfolio@
* See the prospectus for information on specific limitations on investments
in the fund.
+ Mixed asset fund.
@ Tax-exempt fund.
BlackRock mutual funds are distributed by BlackRock Distributors, Inc. and
certain funds are also distributed by FAM Distributors, Inc. You should consider
the investment objectives, risks, charges and expenses of the funds under
consideration carefully before investing. Each fund's prospectus contains this
and other information and is available at www.blackrock.com or by calling
800-882-0052 or from your financial advisor. The prospectus should be read
carefully before investing.
BLACKROCK UTILITIES AND TELECOMMUNICATIONS FUND, INC.
NOVEMBER 30, 2006 39
This report is transmitted to shareholders only. It is not authorized for use as
an offer of sale or a solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past performance
results shown in this report should not be considered a representation of future
performance. Investment return and principal value of shares will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject to change.
BlackRock Utilities and
Telecommunications Fund, Inc.
P.O. Box 9011
Princeton, NJ 08543-9011
BLACKROCK
#11693-11/06
Item 2 - Code of Ethics - The registrant has adopted a code of ethics, as of the
end of the period covered by this report, that applies to the
registrant's principal executive officer, principal financial officer
and principal accounting officer, or persons performing similar
functions. A copy of the code of ethics is available without charge at
www.blackrock.com.
Item 3 - Audit Committee Financial Expert - The registrant's board of directors
has determined that (i) the registrant has the following audit
committee financial experts serving on its audit committee and (ii)
each audit committee financial expert is independent: (1) Ronald W.
Forbes, (2) Richard R. West, and (3) Edward D. Zinbarg (retired as of
December 31, 2006).
Item 4 - Principal Accountant Fees and Services
(a) Audit Fees - Fiscal Year Ending November 30, 2006 - $31,500
Fiscal Year Ending November 30, 2005 - $31,000
(b) Audit-Related Fees - Fiscal Year Ending November 30, 2006 - $0
Fiscal Year Ending November 30, 2005 - $0
(c) Tax Fees - Fiscal Year Ending November 30, 2006 - $6,000
Fiscal Year Ending November 30, 2005 - $5,700
The nature of the services include tax compliance, tax advice and tax
planning.
(d) All Other Fees - Fiscal Year Ending November 30, 2006 - $0
Fiscal Year Ending November 30, 2005 - $0
(e)(1) The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to the
registrant's affiliated service providers that relate directly to the
operations and the financial reporting of the registrant. Certain of
these non-audit services that the Committee believes are a) consistent
with the SEC's auditor independence rules and b) routine and recurring
services that will not impair the independence of the independent
accountants may be approved by the Committee without consideration on a
specific case-by-case basis ("general pre-approval"). However, such
services will only be deemed pre-approved provided that any individual
project does not exceed $5,000 attributable to the registrant or
$50,000 for all of the registrants the Committee oversees. Any proposed
services exceeding the pre-approved cost levels will require specific
pre-approval by the Committee, as will any other services not subject
to general pre-approval (e.g., unanticipated but permissible services).
The Committee is informed of each service approved subject to general
pre-approval at the next regularly scheduled in-person board meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ending November 30, 2006 - $3,138,117
Fiscal Year Ending November 30, 2005 - $5,738,110
(h) The registrant's audit committee has considered and determined that
the provision of non-audit services that were rendered to the
registrant's investment adviser and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant
to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible
with maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $1,739,500 , 0%
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Portfolio Managers of Closed-End Management Investment Companies - Not
Applicable
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 11 - Controls and Procedures
11(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others particularly
during the period in which this report is being prepared. The
registrant's certifying officers have determined that the registrant's
disclosure controls and procedures are effective based on our evaluation
of these controls and procedures as of a date within 90 days prior to
the filing date of this report.
11(b) - As of September 29, 2006, with the conclusion of the combination of
Merrill Lynch's asset management business with BlackRock, the registrant
was migrated to BlackRock's trading and compliance monitoring systems,
and various personnel changes occurred. In conjunction with these
business improvements, there were no changes in the registrants internal
control over financial reporting (as defined in Rule 30a-3(d) under Act
(17 CFR 270.30a-3(d)) that occurred during the last fiscal half-year of
the period covered by this report that has materially affected, or is
reasonably likely to affect, the registrant's internal control over
financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BlackRock Utilities and Telecommunications Fund, Inc.
By: /s/ Robert C. Doll, Jr.
---------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock Utilities and Telecommunications Fund, Inc.
Date: January 29, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Robert C. Doll, Jr.
---------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock Utilities and Telecommunications Fund, Inc.
Date: January 29, 2007
By: /s/ Donald C. Burke
---------------------------------
Donald C. Burke,
Chief Financial Officer of
BlackRock Utilities and Telecommunications Fund, Inc.
Date: January 29, 2007