-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H87Sa3f3XzghfzxWDTxSN7cS0Pt2kGa5iCZQpZjuoYIHkYlRIuvI0mNpn29nk1UJ iOZ0NFydCU64qrNuLxp2YA== 0001005477-01-000356.txt : 20010123 0001005477-01-000356.hdr.sgml : 20010123 ACCESSION NUMBER: 0001005477-01-000356 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001130 FILED AS OF DATE: 20010122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH GLOBAL UTILITY FUND INC CENTRAL INDEX KEY: 0000868452 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-06180 FILM NUMBER: 1512582 BUSINESS ADDRESS: STREET 1: P O BOX 9011 CITY: PRINCETON STATE: NJ ZIP: 08543-9011 BUSINESS PHONE: 6092823319 MAIL ADDRESS: STREET 1: P O BOX 9066 CITY: PRINCETON STATE: NJ ZIP: 08543-9011 N-30D 1 0001.txt ANNUAL REPORT MERRILL LYNCH UTILITIES AND TELECOMMUNICATIONS FUND, INC. [GRAPHIC OMITTED] STRATEGIC Performance Annual Report November 30, 2000 MERRILL LYNCH UTILITIES AND TELECOMMUNICATIONS FUND, INC. A pie graph depicting Sector Diversification As a percentage of Equities as of November 30, 2000. Utilities--Electric 68.9% Utilities--Gas 18.3% Telecommunications 12.0% Utilities--Water 0.8% A pie graph depicting Geographical Diversification As a Percentage of Equities as of November 30, 2000. United States 96.0% Spain 2.3% United Kingdom 1.1% Mexico 0.6% Merrill Lynch Utilities and Telecommunications Fund, Inc., November 30, 2000 DEAR SHAREHOLDER On August 21, 2000, the Fund's name was changed from Merrill Lynch Global Utility Fund, Inc. to Merrill Lynch Utilities and Telecommunications Fund, Inc. The name was changed to better reflect the underlying investments of the Fund. However, the Fund's stated investment objective remains the same. The Fund continues to seek both capital appreciation and current income through investment of at least 65% of its total assets in equity and debt securities issued by domestic and foreign companies that, in the opinion of the Investment Adviser, are primarily engaged in the ownership or operation of facilities used to generate, transmit or distribute electricity, telecommunications, natural gas or water. Fiscal Year in Review For the 12 months ended November 30, 2000, Merrill Lynch Utilities and Telecommunications Fund, Inc.'s Class A, Class B, Class C and Class D Shares had total returns of +5.07%, +4.25%, +4.17% and +4.72%, respectively. (Fund results shown do not reflect sales charges and would be lower if sales charges were included. For complete performance information, see pages 4-6 of this report to shareholders.) Although the Fund's investment objective remained the same during the fiscal year, the composition of the portfolio did shift. At November 30, 1999, approximately 35% of the Fund's net assets were invested in US-based utilities and 62% were invested in non-US based utility stocks. The most significant weightings were held in Europe, primarily in southern European telecom stocks. As of November 30, 2000, approximately 79% of the Fund's net assets were invested in US-based utilities and 3% of net assets were invested in non-US based utility stocks. The dominant utility sector in the Fund was domestic electric companies. The change in portfolio holdings was necessitated by several fundamental changes in the utilities industry, primarily, a deterioration in the outlook for the telecommunications sector and a positive valuation case for the domestic electric sector. The European telecom sector, which in the past provided investors price appreciation, began to erode. This erosion was driven by the high prices being paid for new spectrum to be used in the next generation of cellular technology. The basic business of large incumbent telecom companies also deteriorated as a result of price declines coming from technology substitution. Also, the need or desire of countries to further privatize their holdings created a stock overhang. Furthermore, the domestic electric utility sector finished calendar year 1999 selling at valuation levels that were extremely low. This factor, coupled with an improved earnings outlook for the sector, resulted in attractive investment opportunities, while the potential for spin-offs and the selling of assets at attractive prices added positively to the investment strategy. The changes made to the Fund's portfolio during the fiscal year ended November 30, 2000 were beneficial to performance. Overall, stock prices of the European telecom sector continued to decline. The value of the euro relative to the US dollar continued to erode. The domestic electric sector gained momentum as earnings guidance improved and higher asset valuations were derived from sales of electric generating plants. The domestic telecommunications sector continues to be under pressure. The 12-month period ended November 30, 2000 was a challenging one for utility investors. Global utility stocks, which had contributed positively to performance in the last several years, are under significant fundamental pressure. Generally, this is evident when surveying the performance of global or world utility funds tracked by Lipper, Inc. Funds that had significantly overweighted positions in the domestic electric and natural gas sectors since the start of the year 2000 showed the best performance relative to the Lipper benchmark. In Conclusion We thank you for your continued support of Merrill Lynch Utilities and Telecommunications Fund, Inc., and we look forward to updating you again in our next report to shareholders. Sincerely, /s/ Terry K. Glenn Terry K. Glenn President and Director /s/ Walter D. Rogers Walter D. Rogers Senior Vice President and Portfolio Manager January 8, 2001 PROXY RESULTS During the six-month period ended December 31, 2000, Merrill Lynch Utilities and Telecommunications Fund, Inc.'s (formerly Merrill Lynch Global Utility Fund, Inc.) shareholders voted on the following proposals. The proposals were approved at a shareholders' meeting on July 25, 2000. The description of each proposal and number of shares voted are as follows:
- -------------------------------------------------------------------------------------------------------------------- Shares Voted For - -------------------------------------------------------------------------------------------------------------------- 1. To elect the Fund's Board of Directors: Terry K. Glenn 16,879,129 Ronald W. Forbes 16,867,636 Cynthia A. Montgomery 16,877,407 Charles C. Reilly 16,868,607 Kevin A. Ryan 16,878,223 Roscoe S. Suddarth 16,878,071 Richard R. West 16,877,850 Arthur Zeikel 16,864,483 Edward D. Zinbarg 16,877,171 - -------------------------------------------------------------------------------------------------------------------- Shares Voted Shares Voted Shares Voted For Against Abstain - -------------------------------------------------------------------------------------------------------------------- 2. To ratify the selection of Deloitte & Touche LLP as the Fund's independent auditors for the current fiscal year. 16,268,611 159,348 839,558 - -------------------------------------------------------------------------------------------------------------------- 3. To approve to convert the Fund to "master/feeder" structure. 14,980,607 815,949 1,470,961 - --------------------------------------------------------------------------------------------------------------------
During the six-month period ended November 30, 2000, Merrill Lynch Utility Income Fund, Inc.'s shareholders voted on the following proposal. The proposal was approved at a shareholders' meeting on July 25, 2000. The description of the proposal and number of shares voted are as follows:
- -------------------------------------------------------------------------------------------------------------------- Shares Voted Shares Voted Shares Voted For Against Abstain - -------------------------------------------------------------------------------------------------------------------- 1. To approve the Agreement and Plan of Reorganization between the Fund and Merrill Lynch Utilities and Telecommunications Fund, Inc. (formerly Merrill Lynch Global Utility Fund, Inc.) 1,984,543 46,324 79,453 - --------------------------------------------------------------------------------------------------------------------
2 & 3 Merrill Lynch Utilities and Telecommunications Fund, Inc., November 30, 2000 PERFORMANCE DATA About Fund Performance Investors are able to purchase shares of the Fund through the Merrill Lynch Select Pricing(SM) System, which offers four pricing alternatives: o Class A Shares incur a maximum initial sales charge (front-end load) of 4% and bear no ongoing distribution or account maintenance fees. Class A Shares are available only to eligible investors. o Class B Shares are subject to a maximum contingent deferred sales charge of 4% if redeemed during the first year, decreasing 1% each year thereafter to 0% after the fourth year. In addition, Class B Shares are subject to a distribution fee of 0.50% and an account maintenance fee of 0.25%. These shares automatically convert to Class D Shares after approximately 10 years. (There is no initial sales charge for automatic share conversions.) o Class C Shares are subject to a distribution fee of 0.55% and an account maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1% contingent deferred sales charge if redeemed within one year of purchase. o Class D Shares incur a maximum initial sales charge of 4% and an account maintenance fee of 0.25% (but no distribution fee). None of the past results shown should be considered a representation of future performance. Figures shown in the "Recent Performance Results" and "Average Annual Total Return" tables assume reinvestment of all dividends and capital gains distributions 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 account maintenance, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders. Recent Performance Results*
6 Month 12 Month Since Inception As of November 30, 2000 Total Return Total Return Total Return ================================================================================================================= ML Utilities and Telecommunications Fund, Inc. Class A Shares -0.87% +5.07% +233.43% - ----------------------------------------------------------------------------------------------------------------- ML Utilities and Telecommunications Fund, Inc. Class B Shares -1.27 +4.25 +208.88 - ----------------------------------------------------------------------------------------------------------------- ML Utilities and Telecommunications Fund, Inc. Class C Shares -1.35 +4.17 +119.27 - ----------------------------------------------------------------------------------------------------------------- ML Utilities and Telecommunications Fund, Inc. Class D Shares -1.07 +4.72 +126.95 =================================================================================================================
* Investment results shown do not reflect sales charges; results shown would be lower if a sales charge was included. 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 Fund's since inception dates are from 12/28/90 for Class A & Class B Shares and from 10/21/94 for Class C & Class D Shares. Class A & Class B Shares Total Return Based on a $10,000 Investment A line graph depicting the growth of an investment in the Fund's Class A and Class B Shares compared to growth of an investment in the Actuaries World Index and the MSCI World Index. Beginning and ending values are: 12/28/90** 11/00 ML Utilities & Telecommunications Fund, Inc.+--Class A Shares* $ 9,600 $32,009 ML Utilities & Telecommunications Fund, Inc.+--Class B Shares* $10,000 $30,888 Financial Times/Standard & Poor's - --Actuaries World Index ++ $10,000 $31,218 MSCI World Index +++ $10,000 $31,001 * Assuming maximum sales charge, transaction costs and other operating expenses, including advisory fees. ** Commencement of operations. + ML Utilities and Telecommunications Fund, Inc. invests at least 65% of its total assets in common stocks (including preferred or debt securities convertible into common stocks), preferred stocks and debt securities issued by domestic and foreign companies in the utilities industries. ++ This unmanaged market capitalization-weighted Index is comprised of equities from 29 countries in 17 regions, including the United States. +++ This unmanaged market capitalization-weighted Index is comprised of a representative sampling of large-, medium-, and small-capitalization companies in 22 countries, including the United States. Class A & Class B Shares Average Annual Total Return % Return Without % Return With Sales Charge Sales Charge** ============================================================================== Class A Shares* ============================================================================== One Year Ended 9/30/00 +23.96% +19.01% - ------------------------------------------------------------------------------ Five Years Ended 9/30/00 +17.60 +16.64 - ------------------------------------------------------------------------------ Inception (12/28/90) through 9/30/00 +14.19 +13.71 - ------------------------------------------------------------------------------ * Maximum sales charge is 4%. ** Assuming maximum sales charge. % Return % Return Without CDSC With CDSC** ============================================================================== Class B Shares* ============================================================================== One Year Ended 9/30/00 +22.96% +20.02% - ------------------------------------------------------------------------------ Five Years Ended 9/30/00 +16.69 +16.69 - ------------------------------------------------------------------------------ Inception (12/28/90) through 9/30/00 +13.31 +13.31 - ------------------------------------------------------------------------------ * Maximum contingent deferred sales charge is 4% and is reduced to 0% after 4 years. ** Assuming payment of applicable contingent deferred sales charge. 4 & 5 Merrill Lynch Utilities and Telecommunications Fund, Inc., November 30, 2000 PERFORMANCE DATA (concluded) Class C and Class D Shares. Total Return Based on a $10,000 Investment A line graph depicting the growth of an investment in the Fund's Class C and Class D Shares compared to growth of an investment in the Actuaries World Index and the MSCI World Index. Beginning and ending values are: 10/21/94** 11/00 ML Utilities & Telecommunications Fund, Inc.+--Class C Shares* $10,000 $21,927 ML Utilities & Telecommunications Fund, Inc.+--Class D Shares* $ 9,600 $21,789 Financial Times/Standard & Poor's - --Actuaries World Index ++ $10,000 $20,639 MSCI World Index +++ $10,000 $20,323 * Assuming maximum sales charge, transaction costs and other operating expenses, including advisory fees. ** Commencement of operations. + ML Utilities and Telecommunications Fund, Inc. invests at least 65% of its total assets in common stocks (including preferred or debt securities convertible into common stocks), preferred stocks and debt securities issued by domestic and foreign companies in the utilities industries. ++ This unmanaged market capitalization-weighted Index is comprised of equities from 29 countries in 17 regions, including the United States. +++ This unmanaged market capitalization-weighted Index is comprised of a representative sampling of large-, medium-, and small-capitalization companies in 22 countries, including the United States. Class C & Class D Shares Average Annual Total Return % Return % Return Without CDSC With CDSC** ============================================================================== Class C Shares* ============================================================================== One Year Ended 9/30/00 +22.99% +22.26% - ------------------------------------------------------------------------------ Five Years Ended 9/30/00 +16.64 +16.64 - ------------------------------------------------------------------------------ Inception (10/21/94) through 9/30/00 +15.91 +15.91 - ------------------------------------------------------------------------------ * Maximum contingent deferred sales charge is 1% and is reduced to 0% after 1 year. ** Assuming payment of applicable contingent deferred sales charge. % Return Without % Return With Sales Charge Sales Charge** ============================================================================== Class D Shares* ============================================================================== One Year Ended 9/30/00 +23.61% +18.66% - ------------------------------------------------------------------------------ Five Years Ended 9/30/00 +17.26 +16.30 - ------------------------------------------------------------------------------ Inception (10/21/94) through 9/30/00 +16.56 +15.76 - ------------------------------------------------------------------------------ * Maximum sales charge is 4%. ** Assuming maximum sales charge. OFFICERS AND DIRECTORS Terry K. Glenn, President and Director Ronald W. Forbes, Director Cynthia A. Montgomery, Director Charles C. Reilly, Director Kevin A. Ryan, Director Roscoe S. Suddarth, Director Richard R. West, Director Edward D. Zinbarg, Director Robert C. Doll, Jr., Senior Vice President Walter D. Rogers, Senior Vice President and Portfolio Manager Donald C. Burke, Vice President and Treasurer Ira P. Shapiro, Secretary - -------------------------------------------------------------------------------- Arthur Zeikel, Director of Merrill Lynch Utilities and Telecommunications Fund, Inc. has recently retired. The Fund's Board of Directors wishes Mr. Zeikel well in his retirement. - -------------------------------------------------------------------------------- Custodian The Chase Manhattan Bank, N.A. 4 MetroTech Center, 18th Floor Brooklyn, NY 11245 Transfer Agent Financial Data Services, Inc. 4800 Deer Lake Drive East Jacksonville, FL 32246-6484 (800) 637-3863 6 & 7 Merrill Lynch Utilities and Telecommunications Fund, Inc., November 30, 2000 SCHEDULE OF INVESTMENTS (in US dollars)
Shares Percent of COUNTRY Industries Held Common Stocks Value Net Assets ==================================================================================================================================== Mexico Telecommunications 35,000 Telefonos de Mexico SA (ADR) (a) $ 1,640,625 0.5% ------------------------------------------------------------------------------------------------------------------- Total Investments in Mexico 1,640,625 0.5 ==================================================================================================================================== Spain Utilities--Electric 120,900 Endesa SA (ADR) (a) 1,934,400 0.6 323,500 Iberdrola SA 3,872,093 1.3 ------------------------------------------------------------------------------------------------------------------- Total Investments in Spain 5,806,493 1.9 ==================================================================================================================================== United Kingdom Telecommunications 79,000 Vodafone Group PLC (ADR) (a) 2,705,750 0.9 ------------------------------------------------------------------------------------------------------------------- Total Investments in the United Kingdom 2,705,750 0.9 ==================================================================================================================================== United States Telecommunications 51,000 ALLTEL Corporation 3,123,750 1.0 183,600 BellSouth Corporation 7,676,775 2.5 60,000 +Qwest Communications International Inc. 2,265,000 0.7 193,000 SBC Communications Inc. 10,602,938 3.4 162,000 +WorldCom, Inc. 2,419,875 0.8 ------------ ---- 26,088,338 8.4 ------------------------------------------------------------------------------------------------------------------- Utilities--Electric 94,000 +The AES Corporation 4,876,250 1.6 205,000 Allegheny Energy, Inc. 8,558,750 2.8 28,600 Ameren Corporation 1,269,125 0.4 88,500 American Electric Power Company, Inc. 4,071,000 1.3 208,000 +Calpine Corporation 7,384,000 2.4 6,500 +Capstone Turbine Corporation 117,812 0.0 188,962 Cinergy Corp. 6,034,974 2.0 48,000 Cleco Corporation 2,247,000 0.7 113,300 Consolidated Edison, Inc. 4,220,425 1.4 159,800 Constellation Energy Group 6,501,862 2.1 153,000 DPL Inc. 4,685,625 1.5 150,300 DTE Energy Company 5,702,006 1.9 91,037 Dominion Resources, Inc. 5,462,220 1.8 85,000 Duke Energy Corporation 7,644,688 2.5 182,000 Edison International 4,174,625 1.4 212,000 Energy East Corporation 4,293,000 1.4 271,000 FPL Group, Inc. 17,953,750 5.8 33,400 FirstEnergy Corp. 985,300 0.3 28,000 Florida Progress Corporation 1,534,750 0.5 275,500 GPU, Inc. 9,694,156 3.1 156,000 The Montana Power Company 3,714,750 1.2 87,200 NSTAR 3,438,950 1.1 118,000 PPL Corporation 4,926,500 1.6 168,000 Pinnacle West Capital Corporation 7,822,500 2.5 29,400 Public Service Enterprise Group Incorporated 1,256,850 0.4 50,000 RGS Energy Group Inc. 1,475,000 0.5 189,500 Reliant Energy, Inc. 7,437,875 2.4 138,000 SCANA Corporation 3,889,875 1.3 303,600 The Southern Company 9,582,375 3.1 97,200 +Southern Energy, Inc. 2,369,250 0.8 116,000 TXU Corp. 4,632,750 1.5 61,000 Tyco International Ltd. 3,217,750 1.0 20,000 WPS Resources Corporation 635,000 0.0 277,500 Xcel Energy, Inc. 7,561,875 2.5 ------------ ---- 169,372,618 54.8 ------------------------------------------------------------------------------------------------------------------- Utilities--Gas 40,300 AGL Resources Inc. 906,750 0.3 95,000 The Coastal Corporation 6,958,750 2.3 106,000 Dynegy Inc. (Class A) 4,690,500 1.5 155,300 El Paso Energy Corporation 9,327,706 3.0 80,000 Enron Corp. 5,180,000 1.7 174,000 KeySpan Corporation 6,633,750 2.2 105,000 National Fuel Gas Company 5,978,438 2.0 10,000 New Jersey Resources Corporation 402,500 0.0 183,000 The Williams Companies, Inc. 6,473,625 2.1 ------------ ---- 46,552,019 15.1 ------------------------------------------------------------------------------------------------------------------- Utilities--Water 86,200 Philadelphia Suburban Corporation 2,020,313 0.7 ------------------------------------------------------------------------------------------------------------------- Total Investments in the United States 244,033,288 79.0 ==================================================================================================================================== Total Investments in Common Stocks (Cost--$191,831,644) 254,186,156 82.3 ==================================================================================================================================== Face Amount Fixed-Income Securities ==================================================================================================================================== United States Telecommunications $ 2,000,000 GTE Corp., 6.36% due 4/15/2006 1,939,920 0.6 2,000,000 MCI WorldCom Inc., 7.75% due 4/01/2007 2,017,000 0.7 2,000,000 NiSource Finance Corp., 7.875% due 11/15/2010 (b) 2,029,200 0.8 1,000,000 Southwestern Bell Corp., 7% due 7/01/2015 965,620 0.3 2,000,000 US West Capital Funding Inc., 6.375% due 7/15/2008 1,884,320 0.6 1,000,000 United Telephone of Florida, Series FF, 6.875% due 7/15/2013 956,560 0.3 ------------ ---- 9,792,620 3.3 ------------------------------------------------------------------------------------------------------------------- Utilities--Electric 1,000,000 Alabama Power Co., Series G, 5.375% due 10/01/2008 889,100 0.3 1,000,000 Public Service Company of Colorado, Series 1, 6.375% due 11/01/2005 978,380 0.3 2,000,000 Public Service Electric & Gas, 6.375% due 5/01/2008 1,906,800 0.6 2,000,000 TXU Eastern Funding Co., 6.45% due 5/15/2005 1,919,800 0.6 ------------ ---- 5,694,080 1.8 ------------------------------------------------------------------------------------------------------------------- Utilities--Gas 1,500,000 ENSERCH Corporation, 6.375% due 2/01/2004 1,486,755 0.5 1,000,000 El Paso Natural Gas, 7.75% due 1/15/2002 1,006,840 0.3 2,150,000 Williams Companies Inc., 6.625% due 11/15/2004 2,134,520 0.6 ------------ ---- 4,628,115 1.4 ------------------------------------------------------------------------------------------------------------------- Total Fixed-Income Securities (Cost--$21,222,185) 20,114,815 6.5 ====================================================================================================================================
8 & 9 Merrill Lynch Utilities and Telecommunications Fund, Inc., November 30, 2000 SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
SHORT-TERM Face Percent of SECURITIES Amount Short-Term Securities Value Net Assets ==================================================================================================================================== Commercial Paper* $13,683,000 General Electric Capital Corp., 6.54% due 12/01/2000 $ 13,683,000 4.4% 2,000,000 Honeywell International, Inc., 6.50% due 12/15/2000 1,994,944 0.7 ------------------------------------------------------------------------------------------------------------------- Total Investments in Short-Term Securities (Cost--$15,677,944) 15,677,944 5.1 ==================================================================================================================================== Total Investments (Cost--$228,731,773) 289,978,915 93.9 Other Assets Less Liabilities 18,796,714 6.1 ------------ ----- Net Assets $308,775,629 100.0% ============ ===== ====================================================================================================================================
(a) American Depositary Receipts (ADR). (b) The security may be offered and sold to "qualified institutional buyers" under Rule 144A of the Securities Act of 1933. * Commercial Paper is traded on a discount basis; the interest rates shown reflect the discount rates paid at the time of purchase by the Fund. + Non-income producing security. See Notes to Financial Statements. STATEMENT OF ASSETS AND LIABILITIES
As of November 30, 2000 =================================================================================================================================== Assets: Investments, at value (identified cost--$228,731,773) ............................ $289,978,915 Cash ............................................................................. 85,614 Foreign cash ..................................................................... 2,355 Receivables: Securities sold ................................................................ $ 25,063,336 Dividends ...................................................................... 837,804 Capital shares sold ............................................................ 297,990 Interest ....................................................................... 255,587 26,454,717 ------------- Prepaid registration fees and other assets ....................................... 58,067 ------------ Total assets ..................................................................... 316,579,668 ------------ =================================================================================================================================== Liabilities: Payables: Securities purchased ........................................................... 5,904,616 Capital shares redeemed ........................................................ 1,185,954 Distributor .................................................................... 169,603 Investment adviser ............................................................. 141,966 Reorganization costs ........................................................... 19,520 7,421,659 ------------- Accrued expenses and other liabilities ........................................... 382,380 ------------ Total liabilities ................................................................ 7,804,039 ------------ =================================================================================================================================== Net Assets: Net assets ....................................................................... $308,775,629 ============ =================================================================================================================================== Net Assets Class A Shares of Common Stock, $.10 par value, 100,000,000 shares authorized .... $ 276,915 Consist of: Class B Shares of Common Stock, $.10 par value, 100,000,000 shares authorized .... 2,096,569 Class C Shares of Common Stock, $.10 par value, 100,000,000 shares authorized .... 97,718 Class D Shares of Common Stock, $.10 par value, 100,000,000 shares authorized .... 155,616 Paid-in capital in excess of par ................................................. 247,939,957 Undistributed investment income--net ............................................. 789,534 Accumulated realized capital losses on investments and foreign currency transactions--net ................................................................ (15,664) Accumulated distributions in excess of realized capital gains on investments and foreign currency transactions--net ............................................... (3,807,987) Unrealized appreciation on investments and foreign currency transactions--net .... 61,242,971 ------------ Net assets ....................................................................... $308,775,629 ============ =================================================================================================================================== Net Asset Class A--Based on net assets of $32,697,937 and 2,769,152 shares outstanding ..... $ 11.81 Value: ============ Class B--Based on net assets of $246,278,885 and 20,965,686 shares outstanding ... $ 11.75 ============ Class C--Based on net assets of $11,415,607 and 977,179 shares outstanding ....... $ 11.68 ============ Class D--Based on net assets of $18,383,200 and 1,556,161 shares outstanding ..... $ 11.81 ============ ===================================================================================================================================
See Notes to Financial Statements. 10 & 11 Merrill Lynch Utilities and Telecommunications Fund, Inc., November 30, 2000 STATEMENT OF OPERATIONS
For the Year Ended November 30, 2000 =================================================================================================================================== Investment Income: Dividends (net of $269,800 foreign withholding tax) ......................... $ 10,447,510 Interest and discount earned ................................................ 1,671,624 ------------- Total income ................................................................ 12,119,134 ------------- =================================================================================================================================== Expenses: Account maintenance and distribution fees--Class B .......................... $ 2,168,989 Investment advisory fees .................................................... 2,121,122 Transfer agent fees--Class B ................................................ 279,213 Accounting services ......................................................... 203,691 Custodian fees .............................................................. 101,315 Professional fees ........................................................... 84,519 Account maintenance and distribution fees--Class C .......................... 79,682 Printing and shareholder reports ............................................ 72,343 Account maintenance fees--Class D ........................................... 41,168 Transfer agent fees--Class A ................................................ 30,492 Directors' fees and expenses ................................................ 28,943 Registration fees ........................................................... 14,928 Transfer agent fees--Class D ................................................ 13,490 Transfer agent fees--Class C ................................................ 10,627 Pricing fees ................................................................ 5,138 Other ....................................................................... 14,636 ------------- Total expenses .............................................................. 5,270,296 ------------- Investment income--net ...................................................... 6,848,838 ------------- =================================================================================================================================== Realized & Realized gain from: Unrealized Gain Investments--net .......................................................... 122,378,425 (Loss) on Foreign currency transactions--net ........................................ 15,667 122,394,092 Investments & ------------- Foreign Currency Change in unrealized appreciation/depreciation on: Transactions--Net: Investments--net .......................................................... (110,612,310) Foreign currency transactions--net ........................................ 311 (110,611,999) ------------- ------------- Net Increase in Net Assets Resulting from Operations ........................ $ 18,630,931 ============= ===================================================================================================================================
See Notes to Financial Statements. STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended November 30, ----------------------------- Increase (Decrease) in Net Assets: 2000 1999 =================================================================================================================================== Operations: Investment income--net ...................................................... $ 6,848,838 $ 4,494,985 Realized gain on investments and foreign currency transactions--net ......... 122,394,092 13,142,000 Change in unrealized appreciation/depreciation on investments and foreign currency transactions--net .......................................... (110,611,999) 8,553,202 ------------- ------------- Net increase in net assets resulting from operations ........................ 18,630,931 26,190,187 ------------- ------------- =================================================================================================================================== Dividends & Investment income--net: Distributions to Class A ................................................................... (934,676) (740,613) Shareholders: Class B ................................................................... (4,881,487) (3,451,994) Class C ................................................................... (176,035) (98,007) Class D ................................................................... (372,511) (235,257) Realized gain on investments--net: Class A ................................................................... (14,641,297) (3,200,306) Class B ................................................................... (110,836,295) (24,711,996) Class C ................................................................... (3,670,539) (613,584) Class D ................................................................... (6,065,319) (915,061) In excess of realized gain on investments--net: Class A ................................................................... (412,340) Class B ................................................................... (3,121,458) Class C ................................................................... (103,373) Class D ................................................................... (170,816) ------------- ------------- Net decrease in net assets resulting from dividends and distributions to shareholders ............................................................. (145,386,146) (33,966,818) ------------- ------------- =================================================================================================================================== Capital Share Net increase (decrease) in net assets derived from capital share transactions 74,181,671 (19,934,887) Transactions: ------------- ------------- =================================================================================================================================== Net Assets: Total decrease in net assets ................................................ (52,573,544) (27,711,518) Beginning of year ........................................................... 361,349,173 389,060,691 ------------- ------------- End of year* ................................................................ $ 308,775,629 $ 361,349,173 ============= ============= =================================================================================================================================== *Undistributed investment income--net ........................................ $ 789,534 $ 289,741 ============= ============= ===================================================================================================================================
See Notes to Financial Statements 12 & 13 Merrill Lynch Utilities and Telecommunications Fund, Inc., November 30, 2000 FINANCIAL HIGHLIGHTS
Class A+ The following per share data and ratios have been derived ---------------------------------------------------- from information provided in the financial statements. For the Year Ended November 30, ---------------------------------------------------- Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996 =================================================================================================================================== Per Share Net asset value, beginning of year ............. $ 19.16 $ 19.49 $ 16.97 $ 15.09 $ 13.52 Operating -------- -------- -------- -------- -------- Performance: Investment income--net ......................... .44 .34 .41 .47 .50 Realized and unrealized gain on investments and foreign currency transactions--net ......... .68 1.14 3.77 2.35 1.84 -------- -------- -------- -------- -------- Total from investment operations ............... 1.12 1.48 4.18 2.82 2.34 -------- -------- -------- -------- -------- Less dividends and distributions: Investment income--net ....................... (.45) (.34) (.42) (.49) (.53) Realized gain on investments--net ............ (7.80) (1.47) (1.24) (.45) (.24) In excess of realized gain on investments--net (.22) -- -- -- -- -------- -------- -------- -------- -------- Total dividends and distributions .............. (8.47) (1.81) (1.66) (.94) (.77) -------- -------- -------- -------- -------- Net asset value, end of year ................... $ 11.81 $ 19.16 $ 19.49 $ 16.97 $ 15.09 ======== ======== ======== ======== ======== =================================================================================================================================== Total Investment Based on net asset value per share ............. 5.07% 8.17% 26.47% 19.65% 17.94% Return:* ======== ======== ======== ======== ======== =================================================================================================================================== Ratios to Average Expenses ....................................... .83% .82% .82% .82% .84% Net Assets: ======== ======== ======== ======== ======== Investment income--net ......................... 2.59% 1.82% 2.26% 2.98% 3.51% ======== ======== ======== ======== ======== =================================================================================================================================== Supplemental Net assets, end of year (in thousands) ......... $ 32,698 $ 38,309 $ 41,977 $ 38,825 $ 40,055 Data: ======== ======== ======== ======== ======== Portfolio turnover ............................. 51.79% 7.43% 6.56% 6.23% 5.03% ======== ======== ======== ======== ======== ===================================================================================================================================
Class B+ The following per share data and ratios have been derived ---------------------------------------------------- from information provided in the financial statements. For the Year Ended November 30, ---------------------------------------------------- Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996 =================================================================================================================================== Per Share Net asset value, beginning of year ............. $ 19.10 $ 19.42 $ 16.93 $ 15.05 $ 13.47 Operating -------- -------- -------- -------- -------- Performance: Investment income--net ......................... .31 .20 .27 .35 .39 Realized and unrealized gain on investments and foreign currency transactions--net ......... .67 1.15 3.74 2.35 1.84 -------- -------- -------- -------- -------- Total from investment operations ............... .98 1.35 4.01 2.70 2.23 -------- -------- -------- -------- -------- Less dividends and distributions: Investment income--net ....................... (.31) (.20) (.28) (.37) (.41) Realized gain on investments--net ............ (7.80) (1.47) (1.24) (.45) (.24) In excess of realized gain on investments--net (.22) -- -- -- -- -------- -------- -------- -------- -------- Total dividends and distributions .............. (8.33) (1.67) (1.52) (.82) (.65) -------- -------- -------- -------- -------- Net asset value, end of year ................... $ 11.75 $ 19.10 $ 19.42 $ 16.93 $ 15.05 ======== ======== ======== ======== ======== =================================================================================================================================== Total Investment Based on net asset value per share ............. 4.25% 7.41% 25.40% 18.77% 17.07% Return:* ======== ======== ======== ======== ======== =================================================================================================================================== Ratios to Average Expenses ....................................... 1.59% 1.59% 1.59% 1.59% 1.61% Net Assets: ======== ======== ======== ======== ======== Investment income--net ......................... 1.83% 1.06% 1.48% 2.22% 2.74% ======== ======== ======== ======== ======== =================================================================================================================================== Supplemental Net assets, end of year (in thousands) ......... $246,279 $299,912 $327,589 $301,459 $335,487 Data: ======== ======== ======== ======== ======== Portfolio turnover ............................. 51.79% 7.43% 6.56% 6.23% 5.03% ======== ======== ======== ======== ======== ===================================================================================================================================
Class C+ The following per share data and ratios have been derived ---------------------------------------------------- from information provided in the financial statements. For the Year Ended November 30, ---------------------------------------------------- Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996 =================================================================================================================================== Per Share Net asset value, beginning of year ............. $ 19.04 $ 19.37 $ 16.89 $ 15.03 $ 13.46 Operating -------- -------- -------- -------- -------- Performance: Investment income--net ......................... .28 .19 .25 .33 .38 Realized and unrealized gain on investments and foreign currency transactions--net ......... .69 1.14 3.73 2.35 1.84 -------- -------- -------- -------- -------- Total from investment operations ............... .97 1.33 3.98 2.68 2.22 -------- -------- -------- -------- -------- Less dividends and distributions: Investment income--net ....................... (.31) (.19) (.26) (.37) (.41) Realized gain on investments--net ............ (7.80) (1.47) (1.24) (.45) (.24) In excess of realized gain on investments--net (.22) -- -- -- -- -------- -------- -------- -------- -------- Total dividends and distributions .............. (8.33) (1.66) (1.50) (.82) (.65) -------- -------- -------- -------- -------- Net asset value, end of year ................... $ 11.68 $ 19.04 $ 19.37 $ 16.89 $ 15.03 ======== ======== ======== ======== ======== =================================================================================================================================== Total Investment Based on net asset value per share ............. 4.17% 7.34% 25.34% 18.66% 17.03% Return:* ======== ======== ======== ======== ======== =================================================================================================================================== Ratios to Average Expenses ....................................... 1.65% 1.65% 1.64% 1.63% 1.66% Net Assets: ======== ======== ======== ======== ======== Investment income--net ......................... 1.75% 1.02% 1.38% 2.07% 2.65% ======== ======== ======== ======== ======== =================================================================================================================================== Supplemental Net assets, end of year (in thousands) ......... $ 11,416 $ 8,381 $ 7,954 $ 5,486 $ 3,325 Data: ======== ======== ======== ======== ======== Portfolio turnover ............................. 51.79% 7.43% 6.56% 6.23% 5.03% ======== ======== ======== ======== ======== ===================================================================================================================================
* Total investment returns exclude the effects of sales charges. + Based on average shares outstanding. See Notes to Financial Statements. 14 & 15 Merrill Lynch Utilities and Telecommunications Fund, Inc., November 30, 2000 FINANCIAL HIGHLIGHTS (concluded)
Class D+ The following per share data and ratios have been derived ---------------------------------------------------- from information provided in the financial statements. For the Year Ended November 30, ---------------------------------------------------- Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996 =================================================================================================================================== Per Share Net asset value, beginning of year ............. $ 19.17 $ 19.49 $ 16.98 $ 15.10 $ 13.55 Operating -------- -------- -------- -------- -------- Performance: Investment income--net ......................... .39 .30 .36 .43 .50 Realized and unrealized gain on investments and foreign currency transactions--net ......... .68 1.15 3.77 2.35 1.79 -------- -------- -------- -------- -------- Total from investment operations ............... 1.07 1.45 4.13 2.78 2.29 -------- -------- -------- -------- -------- Less dividends and distributions: Investment income--net ....................... (.41) (.30) (.38) (.45) (.50) Realized gain on investments--net ............ (7.80) (1.47) (1.24) (.45) (.24) In excess of realized gain on investments--net (.22) -- -- -- -- -------- -------- -------- -------- -------- Total dividends and distributions .............. (8.43) (1.77) (1.62) (.90) (.74) -------- -------- -------- -------- -------- Net asset value, end of year ................... $ 11.81 $ 19.17 $ 19.49 $ 16.98 $ 15.10 ======== ======== ======== ======== ======== =================================================================================================================================== Total Investment Based on net asset value per share ............. 4.72% 7.96% 26.09% 19.35% 17.45% Return:* ======== ======== ======== ======== ======== =================================================================================================================================== Ratios to Average Expenses ....................................... 1.08% 1.07% 1.07% 1.06% 1.07% Net Assets: ======== ======== ======== ======== ======== Investment income--net ......................... 2.34% 1.60% 1.97% 2.70% 3.30% ======== ======== ======== ======== ======== =================================================================================================================================== Supplemental Net assets, end of year (in thousands) ......... $ 18,383 $ 14,747 $ 11,541 $ 6,935 $ 4,365 Data: ======== ======== ======== ======== ======== Portfolio turnover ............................. 51.79% 7.43% 6.56% 6.23% 5.03% ======== ======== ======== ======== ======== ===================================================================================================================================
* Total investment returns exclude the effects of sales charges. + Based on average shares outstanding. See Notes to Financial Statements. NOTES TO FINANCIAL STATEMENTS 1. Significant Accounting Policies: Merrill Lynch Utilities and Telecommunications Fund, Inc. (the "Fund") (formerly Merrill Lynch Global Utility Fund, Inc.) is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund's financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require the use of management accruals and estimates. The Fund offers four classes of shares under the Merrill Lynch Select Pricing(SM) System. Shares of Class A and Class D are sold with a front-end sales charge. Shares of Class B and Class C 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 Class B, Class C and Class D Shares bear certain expenses related to the account maintenance of such shares, and Class B and Class C 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. The following is a summary of significant accounting policies followed by the Fund. (a) Valuation of securities--Portfolio securities that are traded on stock exchanges are valued at the last sale price on the exchange on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Securities traded in the over-the-counter market are valued at the last available bid price prior to the time of valuation. In cases where securities are traded on more than one exchange, the securities are valued on the exchange designated by or under the authority of the Board of Directors as the primary market. Securities that are traded both in the over-the-counter market 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. In the case of options traded in the over-the-counter market, valuation is the last asked price (options written) or the last bid price (options purchased). Short-term securities are valued at amortized cost, which approximates market value. Other investments, including futures contracts and related options, are stated at market value. Securities and assets for which market value quotations are not available are valued at their fair value as determined in good faith by or under the direction of 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 US dollars. Realized and unrealized gains or losses from investments include the effects of foreign exchange rates on investments. (c) Derivative financial instruments--The Fund may engage in various portfolio investment strategies to increase or decrease the level of risk to which the Fund is exposed more quickly and efficiently than transactions in other types of instruments. 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 is authorized to write and purchase 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), 16 & 17 Merrill Lynch Utilities and Telecommunications Fund, Inc., November 30, 2000 NOTES TO FINANCIAL STATEMENTS (continued) 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 contacts and options on such futures contracts. 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 is authorized to enter into forward foreign exchange contracts as a hedge against either specific transactions or portfolio positions. Such contracts are not entered on the Fund's records. However, the effect on operations is recorded from the date the Fund enters into such contracts. o Foreign currency options and futures--The Fund may also purchase or sell listed or over-the-counter 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-US 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 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). Interest income (including amortization of discount) is recognized on the accrual 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. Realized gains and losses on security transactions are determined on the identified cost basis. The Fund will adopt the provisions of the AICPA Audit and Accounting Guide for Investment Companies, as revised, effective for fiscal years beginning after December 15, 2000. As required, the Fund will begin amortizing premiums and discounts on debt securities effective December 1, 2001. Prior to this date, the Fund did not amortize premiums or discounts on debt securities. The cumulative effect of this accounting change will have no impact on the total net assets of the Fund. The impact of this accounting change has not been determined but will result in an adjustment to cost of securities and a corresponding adjustment in net unrealized appreciation/depreciation, based on securities held as of November 30, 2001. (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. Distributions in excess of realized gains for the Fund are due primarily to differing tax treatments for post-October losses. (h) Reclassification--Accounting principles generally accepted in the United States of America require that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. Accordingly, the current year's permanent book/tax differences of $15,664 have been reclassified between accumulated net realized capital losses and undistributed net investment income. These reclassifications have no effect on net assets or net asset values per share. 2. Investment Advisory Agreement and Transactions with Affiliates: The Fund has entered into an Investment Advisory Agreement with Merrill Lynch Investment Managers, L.P. ("MLIM"). The general partner of MLIM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited partner. The Fund has also entered into a Distribution Agreement and Distribution Plans with FAM Distributors, Inc. ("FAMD" or the "Distributor"), which is a wholly-owned subsidiary of Merrill Lynch Group, Inc. MLIM is responsible for the management of the Fund's portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the 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. 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 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: - -------------------------------------------------------------------------------- Account Distribution Maintenance Fee Fee - -------------------------------------------------------------------------------- Class B ................................ .25% .50% Class C ................................ .25% .55% Class D ................................ .25% -- - -------------------------------------------------------------------------------- Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account maintenance and distribution services to the Fund. The ongoing account maintenance fee compensates the Distributor and MLPF&S for providing account maintenance services to Class B, Class C and Class D shareholders. The ongoing distribution fee compensates the Distributor and MLPF&S for providing shareholder and distribution-related services to Class B and Class C shareholders. For the year ended November 30, 2000, FAMD earned underwriting discounts and MLPF&S earned dealer concessions on sales of the Fund's Class A and Class D Shares as follows: - ------------------------------------------------------------------------------- FAMD MLPF&S - ------------------------------------------------------------------------------- Class A................................. $ 187 $ 2,250 Class D................................. $2,084 $22,595 - ------------------------------------------------------------------------------- For the year ended November 30, 2000, MLPF&S received contingent deferred sales charges of $264,485 and $2,370, relating to transactions in Class B Shares and Class C Shares, respectively. In addition, MLPF&S received $80,544 in commissions on the execution of portfolio security transactions for the Fund for the year ended November 30, 2000. Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is the Fund's transfer agent. Accounting services were provided to the Fund by MLIM. Certain officers and/or directors of the Fund are officers and/or directors of MLIM, PSI, FDS, FAMD, and/or ML & Co. 3. Investments: Purchases and sales of investments, excluding short-term securities, for the year ended November 30, 2000 were $168,679,268 and $297,502,571, respectively. Net realized gains (losses) for the year ended November 30, 2000 and net unrealized gains (losses) as of November 30, 2000 were as follows: - ------------------------------------------------------------------------------- Realized Unrealized Gains (Losses) Gains (Losses) - ------------------------------------------------------------------------------- Long-term investments .................. $ 122,378,615 $ 61,247,142 Short-term investments ................. (190) -- Foreign currency transactions .......... 15,667 (4,171) ------------- ------------- Total .................................. $ 122,394,092 $ 61,242,971 ============= ============= - ------------------------------------------------------------------------------- As of November 30, 2000, net unrealized appreciation for Federal income tax purposes aggregated $61,247,142, of which $68,694,712 related to appreciated securities and $7,447,570 related to depreciated securities. The aggregate cost of investments at November 30, 2000 for Federal income tax purposes was $228,731,773. 4. Capital Share Transactions: Net increase (decrease) in net assets derived from capital share transactions was $74,181,671 and $(19,934,887) for 18 & 19 Merrill Lynch Utilities and Telecommunications Fund, Inc., November 30, 2000 NOTES TO FINANCIAL STATEMENTS (concluded) the years ended November 30, 2000 and November 30, 1999, respectively. Transactions in capital shares for each class were as follows: - -------------------------------------------------------------------------------- Class A Shares for the Year Dollar Ended November 30, 2000 Shares Amount - -------------------------------------------------------------------------------- Shares sold ............................ 313,755 $ 5,025,043 Shares issued resulting from reorganization ......................... 231,439 2,860,132 Shares issued to shareholders in reinvestment of dividends and distributions ...................... 1,000,637 12,865,797 --------- ------------ Total issued ........................... 1,545,831 20,750,972 Shares redeemed ........................ (775,856) (12,591,336) --------- ------------ Net increase ........................... 769,975 $ 8,159,636 ========= ============ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class A Shares for the Year Dollar Ended November 30, 1999 Shares Amount - -------------------------------------------------------------------------------- Shares sold ............................ 495,258 $ 9,307,178 Shares issued to shareholders in reinvestment of dividends and distributions ...................... 171,563 3,145,784 -------- ------------ Total issued ........................... 666,821 12,452,962 Shares redeemed ........................ (821,807) (15,270,384) -------- ------------ Net decrease ........................... (154,986) $ (2,817,422) ======== ============ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class B Shares for the Year Dollar Ended November 30, 2000 Shares Amount - -------------------------------------------------------------------------------- Shares sold ............................ 1,095,325 $ 16,981,910 Shares issued resulting from reorganization ......................... 2,574,511 31,658,664 Shares issued to shareholders in reinvestment of dividends and distributions ...................... 7,120,780 90,775,890 ---------- ------------- Total issued ........................... 10,790,616 139,416,464 Automatic conversion of shares ......... (282,988) (3,878,400) Shares redeemed ........................ (5,244,876) (85,952,904) ---------- ------------- Net increase ........................... 5,262,752 $ 49,585,160 ========== ============= - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class B Shares for the Year Dollar Ended November 30, 1999 Shares Amount - -------------------------------------------------------------------------------- Shares sold ............................ 2,192,359 $ 40,896,557 Shares issued to shareholders in reinvestment of dividends and distributions ...................... 1,193,461 21,827,524 ---------- ------------ Total issued ........................... 3,385,820 62,724,081 Automatic conversion of shares ......... (57,842) (1,073,457) Shares redeemed ........................ (4,489,430) (82,728,308) ---------- ------------ Net decrease ........................... (1,161,452) $(21,077,684) ========== ============ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class C Shares for the Year Dollar Ended November 30, 2000 Shares Amount - -------------------------------------------------------------------------------- Shares sold .............................. 166,345 $ 2,731,197 Shares issued resulting from reorganization ........................... 272,412 3,332,647 Shares issued to shareholders in reinvestment of dividends and distributions ........................ 264,259 3,331,747 ------- ----------- Total issued ............................. 703,016 9,395,591 Shares redeemed .......................... (165,996) (2,624,766) ------- ----------- Net increase ............................. 537,020 $ 6,770,825 ======= =========== - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class C Shares for the Year Dollar Ended November 30, 1999 Shares Amount - -------------------------------------------------------------------------------- Shares sold .............................. 216,881 $ 4,042,518 Shares issued to shareholders in reinvestment of dividends and distributions ........................ 34,001 620,183 ------- ----------- Total issued ............................. 250,882 4,662,701 Shares redeemed .......................... (221,267) (4,058,280) ------- ----------- Net increase ............................. 29,615 $ 604,421 ======= =========== - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class D Shares for the Year Dollar Ended November 30, 2000 Shares Amount - -------------------------------------------------------------------------------- Shares sold ............................ 158,485 $ 2,601,201 Shares issued resulting from reorganization ......................... 242,109 2,993,746 Automatic conversion of shares ......... 281,585 3,878,400 Shares issued to shareholders in reinvestment of dividends and distributions ...................... 437,484 5,591,823 --------- ------------ Total issued ........................... 1,119,663 15,065,170 Shares redeemed ........................ (332,884) (5,399,120) --------- ------------ Net increase ........................... 786,779 $ 9,666,050 ========= ============ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class D Shares for the Year Dollar Ended November 30, 1999 Shares Amount - -------------------------------------------------------------------------------- Shares sold .............................. 328,342 $ 6,144,143 Automatic conversion of shares ........... 57,639 1,073,457 Shares issued to shareholders in reinvestment of dividends and distributions ........................ 53,368 979,083 ------- ----------- Total issued ............................. 439,349 8,196,683 Shares redeemed .......................... (262,039) (4,840,885) ------- ----------- Net increase ............................. 177,310 $ 3,355,798 ======= =========== - -------------------------------------------------------------------------------- 5. Short-Term Borrowings: On December 3, 1999, the Fund, along with certain other funds managed by MLIM and its affiliates, entered into a $1,000,000,000 credit agreement with Bank of America, N.A. and certain other 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 .09% per annum based on the Fund's pro rata share of the unused portion of the facility. Amounts borrowed under the facility bear interest at a rate equal to, at each fund's election, the Federal Funds rate plus .50% or a base rate as determined by Bank of America, N.A. The Fund did not borrow under the facility during the year ended November 30, 2000. On December 1, 2000, this credit agreement was renewed and amended with Bank One, N.A., replacing Bank of America, N.A. as administrative agent. 6. Acquisition of Merrill Lynch Utility Income Fund, Inc.: On August 21, 2000, the Fund acquired all of the net assets of Merrill Lynch Utility Income Fund, Inc. pursuant to a plan of reorganization. The acquisition was accomplished by a tax-free exchange of 3,768,671 shares of common stock of Merrill Lynch Utility Income Fund, Inc. for 3,320,471 shares of common stock of the Fund. Merrill Lynch Utility Income Fund, Inc.'s net assets on that date of $40,845,188, including $1,752,262 of net unrealized appreciation and $367,004 of accumulated net realized capital losses, were combined with those of the Fund. The aggregate net assets immediately after the acquisition amounted to $347,914,451. 7. Capital Loss Carryforward: At November 30, 2000, the Fund had a net capital loss carryforward of approximately $165,000 of which $115,000 expires in 2007 and $50,000 expires in 2008. This amount will be available to offset like amounts of any future taxable gains. 8. Subsequent Event: On December 20, 2000, the Fund's Board of Directors declared an ordinary income dividend and a long-term capital gains distribution payable on December 26, 2000 to shareholders of record as of December 19, 2000 as follows: - -------------------------------------------------------------------------------- Ordinary Long-Term Income Capital Gains - -------------------------------------------------------------------------------- Class A ............................ $.148491 $.588800 Class B ............................ .124026 .588800 Class C ............................ .123076 .588800 Class D ............................ .140903 .588800 - -------------------------------------------------------------------------------- 20 & 21 Merrill Lynch Utilities and Telecommunications Fund, Inc., November 30, 2000 INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders, Merrill Lynch Utilities and Telecommunications Fund, Inc.: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Merrill Lynch Utilities and Telecommunications Fund, Inc. (formerly Merrill Lynch Global Utility Fund, Inc.) as of November 30, 2000, the related statements of operations for the year then ended and changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and the financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned at November 30, 2000 by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Merrill Lynch Utilities and Telecommunications Fund, Inc. as of November 30, 2000, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Princeton, New Jersey January 12, 2001 IMPORTANT TAX INFORMATION (unaudited) Of the net investment income distributions paid by Merrill Lynch Utilities and Telecommunications Fund, Inc. during the fiscal year ended November 30, 2000, 69.37% qualifies for the dividends received deduction for corporations. Additionally, the Fund paid foreign taxes of $0.001916 per share to shareholders of record on December 16, 1999. The foreign taxes paid or withheld represent taxes incurred by the Fund on dividends received by the Fund from foreign sources. Finally, the Fund distributed long-term capital gains of $.872045 and $7.148243 per share to shareholders of record on December 16, 1999 and August 9, 2000, respectively. Please retain this information for your records. PORTFOLIO INFORMATION (unaudited) Worldwide Investments as of November 30, 2000 Ten Largest Holdings Percent of (Equity Investments) Net Assets FPL Group, Inc..................................................... 5.8% SBC Communications Inc............................................. 3.4 GPU, Inc........................................................... 3.1 The Southern Company............................................... 3.1 El Paso Energy Corporation......................................... 3.0 Allegheny Energy, Inc.............................................. 2.8 Pinnacle West Capital Corporation.................................. 2.5 BellSouth Corporation.............................................. 2.5 Duke Energy Corporation............................................ 2.5 Xcel Energy, Inc................................................... 2.5 22 & 23 This report 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. Merrill Lynch Utilities and Telecommunications Fund, Inc. Box 9011 Princeton, NJ 08543-9011 11693--11/00 [RECYCLE LOGO] Printed on post-consumer recycled paper -----END PRIVACY-ENHANCED MESSAGE-----