-----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, Ly56DoRAijV00fjpXzS/QwYsrJSRWF1rAhzEmd514jtdURsa2PyKvVwhDmWLk7fm nxrGgXhzeqrBF3TnV3vMUw== 0001193805-07-000273.txt : 20070209 0001193805-07-000273.hdr.sgml : 20070209 20070209105511 ACCESSION NUMBER: 0001193805-07-000273 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20061130 FILED AS OF DATE: 20070209 DATE AS OF CHANGE: 20070209 EFFECTIVENESS DATE: 20070209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLACKROCK UTILITIES & TELECOMMUNICATIONS FUND, INC. CENTRAL INDEX KEY: 0000868452 IRS NUMBER: 223072498 STATE OF INCORPORATION: MA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-06180 FILM NUMBER: 07596046 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 FORMER COMPANY: FORMER CONFORMED NAME: MERRILL LYNCH UTILITIES & TELECOMMUNICATIONS FUND INC DATE OF NAME CHANGE: 20020325 FORMER COMPANY: FORMER CONFORMED NAME: MERRILL LYNCH UTILITIES & COMMUNICATIONS FUND INC DATE OF NAME CHANGE: 20020307 FORMER COMPANY: FORMER CONFORMED NAME: MERRILL LYNCH GLOBAL UTILITY FUND INC DATE OF NAME CHANGE: 19920703 0000868452 S000002249 BLACKROCK UTILITIES & TELECOMMUNICATIONS FUND, INC. C000005810 Investor A C000005811 Investor B1 C000005812 Investor C1 C000005813 Institutional C000038212 Investor B C000038213 Investor C N-CSR 1 e601451_ncsr-util.txt ANNUAL REPORT 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 EX-99.CERT 2 e601451_ex99-cert.txt CERTIFICATION PURSUANT TO SECTION 302 EX-99. CERT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - -------------------------------------------------------------------------------- I, Robert C. Doll, Jr., Chief Executive Officer of BlackRock Utilities and Telecommunications Fund, Inc., certify that: 1. I have reviewed this report on Form N-CSR of BlackRock Utilities and Telecommunications Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 29, 2007 /s/ Robert C. Doll, Jr. ----------------------------- Robert C. Doll, Jr., Chief Executive Officer of BlackRock Utilities and Telecommunications Fund, Inc. EX-99. CERT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - -------------------------------------------------------------------------------- I, Donald C. Burke, Chief Financial Officer of BlackRock Utilities and Telecommunications Fund, Inc., certify that: 1. I have reviewed this report on Form N-CSR of BlackRock Utilities and Telecommunications Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 29, 2007 /s/ Donald C. Burke ----------------------------- Donald C. Burke, Chief Financial Officer of BlackRock Utilities and Telecommunications Fund, Inc. EX-99.1350CERT 3 e601451_ex99-1350cert.txt CERTIFICATION PURSUANT TO SECTION 906 Exhibit 99.1350CERT Certification Pursuant to Section 906 of the Sarbanes Oxley Act I, Robert C. Doll, Jr., Chief Executive Officer of BlackRock Utilities and Telecommunications Fund, Inc. (the "Fund"), certify that: 1. The N-CSR of the Fund (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Dated: January 29, 2007 /s/ Robert C. Doll, Jr. ----------------------------- Robert C. Doll, Jr., Chief Executive Officer of BlackRock Utilities and Telecommunications Fund, Inc. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to BlackRock Utilities and Telecommunications Fund, Inc. and will be retained by BlackRock Utilities and Telecommunications Fund, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. Exhibit 99.1350CERT Certification Pursuant to Section 906 of the Sarbanes Oxley Act I, Donald C. Burke, Chief Financial Officer of BlackRock Utilities and Telecommunications Fund, Inc. (the "Fund"), certify that: 1. The N-CSR of the Fund (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Dated: January 29, 2007 /s/ Donald C. Burke ----------------------------- Donald C. Burke, Chief Financial Officer of BlackRock Utilities and Telecommunications Fund, Inc. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to BlackRock Utilities and Telecommunications Fund, Inc. and will be retained by BlackRock Utilities and Telecommunications Fund, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----