UNITEDSTATES
SECURITIESANDEXCHANGECOMMISSION
Washington,D.C.20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21506
Name of Fund: BlackRock Enhanced Capital and Income Fund, Inc. (CII)
Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: Anne F. Ackerley, Chief Executive Officer, BlackRock
Enhanced Capital and Income Fund, Inc., 55 East 52nd Street, New York, NY 10055.
Registrant’s telephone number, including area code: (800) 882-0052, Option 4
Date of fiscal year end: 10/31/2010
Date of reporting period: 04/30/2010
Item 1 – Report to Stockholders
BlackRock Enhanced Capital
and Income Fund, Inc. (CII)
SEMI-ANNUAL REPORT
APRIL 30, 2010 | (UNAUDITED)
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
| Table of Contents | |
| Page | |
| Dear Shareholder | 3 |
| Semi-Annual Report: | |
| Fund Summary | 4 |
| Derivative Instruments | 6 |
| Financial Statements: | |
| Schedule of Investments | 7 |
| Statement of Assets and Liabilities | 10 |
| Statement of Operations | 11 |
| Statements of Changes in Net Assets | 12 |
| Financial Highlights | 13 |
| Notes to Financial Statements | 14 |
| Officers and Directors | 19 |
| Additional Information | 20 |
| Section 19(b) Disclosure |
BlackRock Enhanced Capital and Income Fund, Inc. (CII) (the “Fund”), acting pursuant to a Securities and Exchange Commission (“SEC”)
exemptive
order and with the approval of the Fund’s Board of Directors (the “Board”), has adopted a plan, consistent with its investment objectives and
policies to
support a level distribution of income, capital gains and/or return of capital (“Plan”). In accordance with the Plan, the Fund currently distributes the
fol-
lowing fixed amounts per share on a quarterly basis:
| Exchange Symbol | Amount Per Common Share |
| CII | $ 0.485 |
The fixed amounts distributed per share are subject to change at the discretion of the Fund’s Board. Under its Plan, the Fund will distribute all
avail-
able investment income to its shareholders, consistent with its primary investment objectives and as required by the Internal Revenue Code of 1986, as
amended (the “Code”). If sufficient investment income is not available on a monthly/quarterly basis, the Fund will distribute long-term capital
gains
and/or return of capital to shareholders in order to maintain a level distribution. Each monthly/quarterly distribution to shareholders is expected to
be
at the fixed amount established by the Board, except for extraordinary distributions and potential distribution rate increases or decreases to enable
the
Fund to comply with the distribution requirements imposed by the Code.
Shareholders should not draw any conclusions about the Fund’s investment performance from the amount of these distributions or from the terms of
the
Plan. The Fund’s total return performance on net asset value is presented in its financial highlights table.
The Board may amend, suspend or terminate the Fund’s Plan without prior notice if it deems such actions to be in the best interests of the Fund or
its
shareholders. The suspension or termination of the Plan could have the effect of creating a trading discount (if the Fund’s stock is trading at or
above
net asset value) or widening an existing trading discount. The Fund is subject to risks that could have an adverse impact on its ability to maintain
level
distributions. Examples of potential risks include, but are not limited to, economic downturns impacting the markets, decreased market volatility, com-
panies suspending or decreasing corporate dividend distributions and changes in the Code. Please refer to the Fund’s prospectus for a more complete
description of its risks.
Please refer to Additional Information for a cumulative summary of the Section 19(a) notices for the Fund’s current fiscal period. Section 19(a)
notices
for the Fund, as applicable, are available on the BlackRock website www.blackrock.com.
2 BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC. APRIL 30, 2010
Dear Shareholder
Although overall global economic and financial conditions have generally improved over the past year, the period ended with high levels of market
volatility and diminishing investor confidence sparked by the sovereign debt crisis in Europe, concerns over the strength of the economic recovery
and uncertainty surrounding the future of interest rate policies. Additionally, as the period drew to a close, the increasing likelihood of more stringent
financial market regulations added to the overall sense of investment uncertainty. Despite the uneven nature of recent market conditions, we continue
to believe that the “Great Recession” likely ended at some point last summer, thanks primarily to massive fiscal and monetary stimulus, and that the
global economy remains in recovery mode.
Global equity markets bottomed in early 2009 and since that time have moved unevenly higher as investors were lured back into the markets by
depressed valuations, desire for higher yields and improvements in corporate earnings prospects. There have been several corrections along the way
and volatility levels have remained elevated — reflections of mixed economic data, lingering deflation issues (especially in Europe) and uncertainty
surrounding financial regulations. On balance, however, improving corporate revenues and profits and a positive macro backdrop helped push stock
prices higher over the last twelve and six months. From a geographic perspective, US equities have outpaced their international counterparts in recent
months, as the domestic economic recovery has been more pronounced and as credit-related issues have held European markets down.
Within fixed income markets, yields have been moving unevenly as improving economic conditions have been acting to push Treasury yields higher
(and prices correspondingly lower), while concerns over ongoing deflation threats have acted as a counterweight. As the period drew to a close,
Treasury yields were falling as investors flocked to the “safe haven” asset class in the face of escalating uncertainty. Over the course of the last twelve
and six months, however, Treasuries underperformed other areas of the bond market, particularly the high yield sector, which has been benefiting from
increased investor demand. Meanwhile, municipal bonds slightly outperformed taxable sectors over both the six- and twelve-month periods thanks to
continued high demand levels, but have continued to face the headwinds of ongoing state and local budget problems. As in the taxable arena, high
yield municipals have been outperforming the rest of the market.
Regarding cash investments, yields on money market securities remain near all-time lows (producing returns only marginally above zero percent), with
the Federal Open Market Committee reiterating that economic circumstances are likely to necessitate an accommodative interest rate stance for an
“extended period.”
| Against this backdrop, the major market averages posted the following returns: | ||
| Total Returns as of April 30, 2010 | 6-month | 12-month |
| US equities (S&P 500 Index) | 15.66% | 38.84% |
| Small cap US equities (Russell 2000 Index) | 28.17 | 48.95 |
| International equities (MSCI Europe, Australasia, Far East Index) | 2.48 | 34.43 |
| 3-month Treasury bill (BofA Merrill Lynch 3-Month Treasury Bill Index) | 0.04 | 0.15 |
| US Treasury securities (BofA Merrill Lynch 10-Year US Treasury Index) | (0.54) | (1.32) |
| Taxable fixed income (Barclays Capital US Aggregate Bond Index) | 2.54 | 8.30 |
| Tax-exempt fixed income (Barclays Capital Municipal Bond Index) | 3.68 | 8.85 |
| High yield bonds (Barclays Capital US Corporate High Yield 2% Issuer Capped Index) | 11.60 | 42.53 |
Past performance is no guarantee of future results. Index performance shown for illustrative purposes only. You cannot invest directly in an index.
Global financial markets continue to show signs of improvement, but questions about the strength and sustainability of the recovery abound. Through
periods of uncertainty, as ever, BlackRock’s full resources are dedicated to the management of our clients’ assets. For additional market perspective
and investment insight, visit www.blackrock.com/shareholdermagazine, where you’ll find the most recent issue of our award-winning Shareholder®
magazine, as well as its quarterly companion newsletter, Shareholder Perspectives. As always, we thank you for entrusting BlackRock with your
investments, and we look forward to your continued partnership in the months and years ahead.
THIS PAGE NOT PART OF YOUR FUND REPORT
3
Fund Summary as of April 30, 2010
BlackRock Enhanced Capital and Income Fund, Inc.
Investment Objective
BlackRock Enhanced Capital and Income Fund, Inc. (CII) (the “Fund”) seeks to provide investors with a combination of current income and capital
appreciation. The Fund seeks to achieve its investment objective by investing primarily in a diversified portfolio of common stocks in an attempt to
generate current income and by employing a strategy of writing (selling) call options on any types of securities or instruments in which it may invest,
including on individual securities and equity indexes in an attempt to generate gains from option premiums primarily on the S&P 500 Index.
No assurance can be given that the Fund’s investment objective will be achieved.
Performance
For the six months ended April 30, 2010, the Fund returned 22.09% based on market price and 12.59% based on net asset value (NAV). For the
same period, the benchmark S&P 500 Value Index returned 17.98%. All returns reflect reinvestment of dividends. The Fund moved from a discount to
NAV to a premium by period-end, which accounts for the difference between performance based on price and performance based on NAV. The main
detractor from Fund performance relative to the S&P 500 Value Index was the call option overlay strategy, which added income from the writing of the
call options but had a negative impact as markets trended up and the call options lost value. Stock selection in the financials and consumer staples
sectors also detracted from relative performance, as did the Fund’s underweights in consumer discretionary and industrials. The main contributor to
relative performance for the six-month period was stock selection in the telecommunication services and utilities sectors.
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These
views are not intended to be a forecast of future events and are no guarantee of future results.
| Fund Information | ||||||
| Symbol on NYSE | CII | |||||
| Initial Offering Date | April 30, 2004 | |||||
| Yield on Closing Market Price as of April 30, 2010 ($15.77)1 | 12.30% | |||||
| Current Quarterly Distribution per share2 | $0.485 | |||||
| Current Annualized Distribution per share2 | $1.940 | |||||
| 1 Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. | ||||||
| Past performance does not guarantee future results. | ||||||
| 2 The distribution is not constant and is subject to change. A portion of the distribution may be deemed a tax return of capital or net realized gain. | ||||||
| The table below summarizes the changes in the Fund’s market price and NAV per share: | ||||||
| 4/30/10 | 10/31/09 | Change | High | Low | ||
| Market Price | $15.77 | $13.76 | 14.61% | $16.49 | $13.76 | |
| Net Asset Value | $15.22 | $14.40 | 5.69% | $15.51 | $14.22 | |
The following charts show the ten largest holdings and sector allocations of the Fund’s long-term investments:
| Ten Largest Holdings | Sector Allocations | |||
| 4/30/10 | 10/31/09 | |||
| Maxim Integrated Products, Inc. | 3% | Financials | 17% | 19% |
| Chevron Corp. | 3 | Information Technology | 17 | 17 |
| The Travelers Cos., Inc. | 3 | Consumer Staples | 12 | 12 |
| Qwest Communications International, Inc. | 3 | Health Care | 11 | 13 |
| Time Warner, Inc. | 3 | Industrials | 10 | 9 |
| Kimberly-Clark Corp. | 3 | Consumer Discretionary | 9 | 6 |
| Exxon Mobil Corp. | 3 | Energy | 9 | 11 |
| Kraft Foods, Inc. | 3 | Telecommunication Services | 7 | 7 |
| Intel Corp. | 3 | Utilities | 4 | 3 |
| LSI Corp. | 2 | Materials | 4 | 3 |
| For Fund compliance purposes, the Fund’s sector classifications refer | ||||
| to any one or more of the sector 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 sector sub- | ||||
| classifications for reporting ease. | ||||
4 BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC. APRIL 30, 2010
Derivative Financial Instruments
The Fund may invest in various derivative instruments, including options
as specified in Note 2 of the Notes to Financial Statements, which con-
stitute forms of economic leverage. Such instruments are used to obtain
exposure to a market without owning or taking physical custody of secu-
rities or to hedge market, equity, credit, foreign currency exchange rate
and/or interest rate risks. Such derivative instruments involve risks,
including the imperfect correlation between the value of a derivative
instrument and the underlying asset, possible default of the other party
to the transaction or illiquidity of the derivative instrument. The Fund’s
ability to successfully use a derivative instrument depends on the invest-
ment advisor’s ability to accurately predict pertinent market movements,
which cannot be assured. The use of derivative instruments may result in
losses greater than if they had not been used, may require the Fund to
sell or purchase portfolio securities at inopportune times or distressed
values, may limit the amount of appreciation the Fund can realize on an
investment or may cause a Fund to hold a security that they might other-
wise sell. The Fund’s investments in these instruments are discussed in
detail in the Notes to Financial Statements.
BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC.
APRIL 30, 2010
5
Schedule of Investments April 30, 2010 (Unaudited)
BlackRock Enhanced Capital and Income Fund, Inc. (CII)
(Percentages shown are based on Net Assets)
| Common Stocks | Shares | Value | |
| Aerospace & Defense — 5.3% | |||
| Honeywell International, Inc. | 318,600 | $ 15,123,942 | |
| Northrop Grumman Corp. | 182,200 | 12,358,626 | |
| Raytheon Co. | 125,100 | 7,293,330 | |
| 34,775,898 | |||
| Capital Markets — 3.8% | |||
| Invesco Ltd. | 634,500 | 14,587,155 | |
| Morgan Stanley | 352,913 | 10,665,031 | |
| 25,252,186 | |||
| Chemicals — 1.9% | |||
| E.I. du Pont de Nemours & Co. | 317,400 | 12,645,216 | |
| Commercial Banks — 1.5% | |||
| Wells Fargo & Co. | 305,800 | 10,125,038 | |
| Communications Equipment — 0.9% | |||
| Nokia Oyj — ADR | 489,800 | 5,955,968 | |
| Computers & Peripherals — 1.5% | |||
| Hewlett-Packard Co. | 184,792 | 9,603,640 | |
| Diversified Financial Services — 4.8% | |||
| Bank of America Corp. (a) | 517,600 | 9,228,808 | |
| Citigroup, Inc. (b) | 1,657,400 | 7,242,838 | |
| JPMorgan Chase & Co. (a) | 361,439 | 15,390,073 | |
| 31,861,719 | |||
| Diversified Telecommunication Services — 6.8% | |||
| AT&T, Inc. (a) | 474,200 | 12,357,652 | |
| Qwest Communications International, Inc. | 3,407,801 | 17,822,799 | |
| Verizon Communications, Inc. | 500,200 | 14,450,778 | |
| 44,631,229 | |||
| Electric Utilities — 2.6% | |||
| FPL Group, Inc. | 145,144 | 7,554,745 | |
| The Southern Co. | 284,000 | 9,815,040 | |
| 17,369,785 | |||
| Electrical Equipment — 1.6% | |||
| Emerson Electric Co. | 203,100 | 10,607,913 | |
| Food & Staples Retailing — 1.2% | |||
| Walgreen Co. | 219,000 | 7,697,850 | |
| Food Products — 6.8% | |||
| General Mills, Inc. | 196,671 | 13,999,042 | |
| Kraft Foods, Inc. | 560,000 | 16,576,000 | |
| Unilever NV — ADR | 468,132 | 14,165,674 | |
| 44,740,716 | |||
| Household Products — 3.5% | |||
| Clorox Co. (a) | 99,500 | 6,437,650 | |
| Kimberly-Clark Corp. | 273,100 | 16,730,106 | |
| 23,167,756 | |||
| IT Services — 2.0% | |||
| International Business Machines Corp. | 100,953 | 13,022,937 | |
| Industrial Conglomerates — 1.0% | |||
| General Electric Co. | 367,200 | 6,925,392 | |
| Portfolio Abbreviation | |||
| ADR | American Depositary Receipts | ||
| Common Stocks | Shares | Value |
| Insurance — 6.7% | ||
| ACE Ltd. | 249,100 | $ 13,249,629 |
| MetLife, Inc. | 268,025 | 12,216,580 |
| The Travelers Cos., Inc. | 372,830 | 18,917,394 |
| 44,383,603 | ||
| Integrated Oil & Gas — 5.5% | ||
| Chevron Corp. (a) | 239,900 | 19,537,456 |
| Exxon Mobil Corp. | 244,500 | 16,589,325 |
| 36,126,781 | ||
| Machinery — 2.0% | ||
| Deere & Co. | 226,100 | 13,525,302 |
| Media — 4.7% | ||
| Comcast Corp. Special, Class A | 733,100 | 13,818,935 |
| Time Warner, Inc. | 512,500 | 16,953,500 |
| 30,772,435 | ||
| Metals & Mining — 2.0% | ||
| Nucor Corp. | 288,900 | 13,092,948 |
| Multi-Utilities — 1.4% | ||
| Dominion Resources, Inc. | 228,400 | 9,547,120 |
| Oil & Gas Equipment & Services — 2.0% | ||
| Halliburton Co. | 420,489 | 12,887,988 |
| Oil & Gas Exploration & Production — 1.0% | ||
| Occidental Petroleum Corp. | 77,200 | 6,844,553 |
| Pharmaceuticals — 10.5% | ||
| Bristol-Myers Squibb Co. (a) | 622,400 | 15,740,496 |
| Eli Lilly & Co. | 412,100 | 14,411,137 |
| Johnson & Johnson | 148,200 | 9,529,260 |
| Merck & Co., Inc. | 426,800 | 14,955,072 |
| Pfizer, Inc. | 861,500 | 14,404,280 |
| 69,040,245 | ||
| Semiconductors & Semiconductor | ||
| Equipment — 10.9% | ||
| Analog Devices, Inc. (a) | 478,000 | 14,306,540 |
| Intel Corp. | 710,878 | 16,229,345 |
| LSI Corp. (b) | 2,628,100 | 15,821,162 |
| Maxim Integrated Products, Inc. | 1,011,000 | 19,633,620 |
| Micron Technology, Inc. (b) | 629,800 | 5,888,630 |
| 71,879,297 | ||
| Software — 0.9% | ||
| Microsoft Corp. | 183,814 | 5,613,679 |
| Specialty Retail — 3.9% | ||
| Home Depot, Inc. | 391,400 | 13,796,850 |
| Limited Brands, Inc. | 453,500 | 12,153,800 |
| 25,950,650 | ||
| Total Long-Term Investments | ||
| (Cost — $663,427,113) — 96.7% | 638,047,844 | |
| Short-Term Securities | ||
| BlackRock Liquidity Funds, TempFund, | ||
| Institutional Class, 0.13% (c)(d) | 20,480,378 | 20,480,378 |
| Total Short-Term Securities | ||
| (Cost — $20,480,378) — 3.1% | 20,480,378 | |
| Total Investments Before Outstanding | ||
| Options Written (Cost — $683,907,491*) — 99.8% | 658,528,222 |
See Notes to Financial Statements.
6 BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC. APRIL 30, 2010
Schedule of Investments (continued)
BlackRock Enhanced Capital and Income Fund, Inc. (CII)
(Percentages shown are based on Net Assets)
| Options Written | Contracts | Value |
| Exchange-Traded Call Options Written — (0.7)% | ||
| AT&T Inc., Strike Price $26, Expires 5/22/10 | 100 | $ (4,350) |
| Bank of America Corp.: | ||
| Strike Price $17, Expires 5/22/10 | 775 | (86,412) |
| Strike Price $19, Expires 6/19/10 | 1,050 | (48,300) |
| Bristol-Myers Squibb Co.: | ||
| Strike Price $26, Expires 5/22/10 | 1,340 | (30,150) |
| Strike Price $27, Expires 5/22/10 | 1,300 | (8,450) |
| Citigroup, Inc., Strike Price $5, Expires 5/22/10 | 1,000 | (4,500) |
| Clorox Co., Strike Price $65, Expires 5/22/10 | 350 | (34,125) |
| Comcast Corp. Special, Class A: | ||
| Strike Price $17, Expires 5/22/10 | 2,075 | (383,875) |
| Strike Price $18, Expires 5/22/10 | 500 | (51,250) |
| Deere & Co., Strike Price $60, Expires 5/22/10 | 1,400 | (281,400) |
| E.I. du Pont de Nemours & Co., | ||
| Strike Price $39, Expires 5/22/10 | 2,380 | (304,640) |
| Eli Lilly & Co.: | ||
| Strike Price $37, Expires 5/22/10 | 335 | (1,508) |
| Strike Price $36, Expires 6/19/10 | 1,030 | (40,170) |
| Emerson Electric Co., Strike Price $50, | ||
| Expires 5/22/10 | 100 | (28,750) |
| FPL Group, Inc., Strike Price $50, | ||
| Expires 5/22/10 | 870 | (202,275) |
| General Mills, Inc.: | ||
| Strike Price $72.50, Expires 5/22/10 | 725 | (34,438) |
| Strike Price $75, Expires 5/22/10 | 725 | (5,438) |
| Halliburton Co., Strike Price $32, | ||
| Expires 5/22/10 | 1,070 | (100,045) |
| Hewlett-Packard Co.: | ||
| Strike Price $52.50, Expires 5/22/10 | 535 | (62,060) |
| Strike Price $55, Expires 5/22/10 | 100 | (3,750) |
| Home Depot, Inc.: | ||
| Strike Price $33, Expires 5/22/10 | 735 | (188,160) |
| Strike Price $34, Expires 5/22/10 | 1,640 | (292,740) |
| Strike Price $35, Expires 5/22/10 | 105 | (12,075) |
| Honeywell International, Inc.: | ||
| Strike Price $44, Expires 5/22/10 | 650 | (237,250) |
| Strike Price $46, Expires 5/22/10 | 1,105 | (208,845) |
| Intel Corp.: | ||
| Strike Price $23, Expires 5/22/10 | 750 | (29,625) |
| Strike Price $25, Expires 6/19/10 | 1,660 | (27,390) |
| Strike Price $25, Expires 7/17/10 | 150 | (5,325) |
| Invesco Ltd., Strike Price $22.50, Expires 5/22/10 | 2,040 | (193,800) |
| JPMorgan Chase & Co.: | ||
| Strike Price $44, Expires 5/22/10 | 950 | (77,425) |
| Strike Price $47, Expires 5/22/10 | 275 | (3,988) |
| Strike Price $46, Expires 6/19/10 | 750 | (60,375) |
| Kimberly-Clark Corp., Strike Price $62.50, | ||
| Expires 5/22/10 | 130 | (5,200) |
| Kraft Foods, Inc.: | ||
| Strike Price $30, Expires 5/22/10 | 1,440 | (57,600) |
| Strike Price $31, Expires 6/19/10 | 730 | (20,805) |
| Limited Brands, Inc., Strike Price $25, | ||
| Expires 5/22/10 | 250 | (55,000) |
| Maxim Integrated Products, Inc., | ||
| Strike Price $20, Expires 5/22/10 | 1,350 | (43,875) |
| Merck & Co., Inc.: | ||
| Strike Price $37, Expires 5/22/10 | 200 | (5,400) |
| Strike Price $38, Expires 5/22/10 | 1,700 | (18,700) |
| Strike Price $39, Expires 5/22/10 | 450 | (2,250) |
| Options Written | Contracts | Value |
| Exchange-Traded Call Options Written (concluded) | ||
| MetLife, Inc., Strike Price $42, Expires 5/22/10 | 930 | $ (378,975) |
| Micron Technology, Inc.: | ||
| Strike Price $11, Expires 5/22/10 | 750 | (5,625) |
| Strike Price $11, Expires 6/19/10 | 1,450 | (30,450) |
| Microsoft Corp., Strike Price $32, | ||
| Expires 5/22/10 | 900 | (9,450) |
| Morgan Stanley, Strike Price $30, | ||
| Expires 5/22/10 | 1,250 | (163,125) |
| Nucor Corp., Strike Price $46, Expires 5/22/10 | 1,010 | (92,920) |
| Occidental Petroleum Corp., | ||
| Strike Price $85, Expires 5/22/10 | 390 | (199,875) |
| Pfizer, Inc., Strike Price $18, Expires 5/22/10 | 1,500 | (8,250) |
| Raytheon Co., Strike Price $57.50, | ||
| Expires 5/22/10 | 750 | (114,375) |
| Time Warner, Inc.: | ||
| Strike Price $32, Expires 5/22/10 | 250 | (37,500) |
| Strike Price $33, Expires 5/22/10 | 100 | (8,750) |
| Strike Price $33, Expires 6/19/10 | 2,470 | (296,400) |
| Unilever NV, Strike Price $30, Expires 5/22/10 | 1,100 | (82,500) |
| Verizon Communications, Inc., | ||
| Strike Price $31, Expires 5/22/10 | 1,200 | (3,000) |
| Wells Fargo & Co.: | ||
| Strike Price $32, Expires 5/22/10 | 1,515 | (248,460) |
| Strike Price $33, Expires 5/22/10 | 167 | (26,052) |
| Total Exchange-Traded Call Options Written | (4,967,421) | |
| Over-the-Counter Call Options Written — (0.7)% | ||
| ACE Ltd.: | ||
| Strike Price $53.25, Expires 5/13/10, | ||
| Broker Jeffries & Co., Inc. | 180 | (10,674) |
| Strike Price $53.53, Expires 6/08/10, | ||
| Broker Credit Suisse International | 700 | (63,070) |
| AT&T Inc.: | ||
| Strike Price $26.36, Expires 5/14/10, | ||
| Broker UBS AG | 550 | (8,968) |
| Strike Price $25.97, Expires 5/21/10, | ||
| Broker UBS AG | 975 | (40,129) |
| Strike Price $26.72, Expires 5/28/10, | ||
| Broker Morgan Stanley Capital Services, Inc. | 970 | (12,029) |
| Strike Price $26.51, Expires 6/04/10, | ||
| Broker Credit Suisse International | 15 | (310) |
| Analog Devices, Inc.: | ||
| Strike Price $31, Expires 5/22/10, | ||
| Broker Barclays Bank Plc | 100 | (5,545) |
| Strike Price $30.44, Expires 6/04/10, | ||
| Broker Goldman Sachs Bank USA | 1,575 | (144,185) |
| Chevron Corp.: | ||
| Strike Price $81.35, Expires 5/27/10, | ||
| Broker Credit Suisse International | 705 | (120,993) |
| Strike Price $81.13, Expires 6/02/10, | ||
| Broker UBS AG | 1,095 | (224,782) |
| Citigroup, Inc.: | ||
| Strike Price $4.56, Expires 5/28/10, | ||
| Broker Goldman Sachs Bank USA | 5,000 | (78,555) |
| Strike Price $4.89, Expires 6/11/10, | ||
| Broker UBS AG | 3,115 | (35,390) |
| Clorox Co., Strike Price $65.21, Expires 5/10/10, | ||
| Broker Credit Suisse International | 390 | (17,577) |
See Notes to Financial Statements.
BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC.
APRIL 30, 2010
7
Schedule of Investments (continued)
BlackRock Enhanced Capital and Income Fund, Inc. (CII)
(Percentages shown are based on Net Assets)
| Options Written | Contracts | Value |
| Over-the-Counter Call Options Written (continued) | ||
| Deere & Co., Strike Price $59.42, Expires 5/12/10, | ||
| Broker Credit Suisse International | 300 | $ (47,655) |
| Dominion Resources, Inc.: | ||
| Strike Price $41.53, Expires 5/04/10, | ||
| Broker UBS AG | 569 | (20,527) |
| Strike Price $41.95, Expires 5/14/10, | ||
| Broker UBS AG | 1,140 | (41,768) |
| Eli Lilly & Co.: | ||
| Strike Price $36.55, Expires 5/20/10, | ||
| Broker Barclays Bank Plc | 750 | (8,550) |
| Strike Price $36.50, Expires 5/22/10, | ||
| Broker Barclays Bank Plc | 150 | (2,055) |
| Emerson Electric Co., Strike Price $49.25, | ||
| Expires 5/21/10, Broker Credit Suisse International | 620 | (192,599) |
| Exxon Mobil Corp., Strike Price $69.03, | ||
| Expires 6/10/10, Broker JPMorgan Chase Bank NA | 1,835 | (216,989) |
| FPL Group, Inc., Strike Price $48.30, Expires 5/04/10, | ||
| Broker Morgan Stanley Capital Services, Inc. | 214 | (80,293) |
| General Electric Co., Strike Price $18.10, | ||
| Expires 5/13/10, Broker UBS AG | 2,750 | (247,506) |
| Halliburton Co., Strike Price $35.27, | ||
| Expires 6/11/10, Broker UBS AG | 1,240 | (45,348) |
| Hewlett-Packard Co., Strike Price $53.99, | ||
| Expires 6/08/10, Broker Morgan Stanley | ||
| Capital Services, Inc. | 381 | (30,631) |
| Home Depot, Inc., Strike Price $35.55, | ||
| Expires 6/04/10, Broker UBS AG | 455 | (38,868) |
| Intel Corp., Strike Price $22.41, Expires 5/10/10, | ||
| Broker Morgan Stanley Capital Services, Inc. | 1,350 | (81,672) |
| International Business Machines Corp., | ||
| Strike Price $131.91, Expires 6/08/10, | ||
| Broker UBS AG | 550 | (90,233) |
| Invesco Ltd., Strike Price $20.99, Expires 5/10/10, | ||
| Broker Morgan Stanley Capital Services, Inc. | 180 | (36,883) |
| Johnson & Johnson, Strike Price $65.70, | ||
| Expires 6/14/10, Broker Citibank NA | 1,110 | (67,074) |
| Kimberly-Clark Corp.: | ||
| Strike Price $63.50, Expires 5/22/10, | ||
| Broker Jeffries & Co., Inc. | 1,000 | (12,632) |
| Strike Price $62.69, Expires 6/10/10, | ||
| Broker JPMorgan Chase Bank NA | 370 | (19,231) |
| Kraft Foods, Inc.: | ||
| Strike Price $29.75, Expires 5/10/10, | ||
| Broker Barclays Bank Plc | 430 | (12,121) |
| Strike Price $30.45, Expires 5/27/10, | ||
| Broker Goldman Sachs Bank USA | 1,600 | (41,746) |
| LSI Corp.: | ||
| Strike Price $6.51, Expires 5/13/10, | ||
| Broker Deutsche Bank AG | 5,050 | (45,208) |
| Strike Price $6.32, Expires 5/14/10, | ||
| Broker UBS AG | 5,000 | (73,535) |
| Strike Price $6.31, Expires 6/04/10, | ||
| Broker Credit Suisse International | 2,100 | (32,197) |
| Strike Price $6.68, Expires 6/25/10, | ||
| Broker Deutsche Bank AG | 2,300 | (47,474) |
| Limited Brands, Inc., Strike Price $23.42, | ||
| Expires 5/05/10, Broker UBS AG | 2,240 | (981,120) |
| Options Written | Contracts | Value |
| Over-the-Counter Call Options Written (concluded) | ||
| Maxim Integrated Products, Inc.: | ||
| Strike Price $19.40, Expires 5/04/10, | ||
| Broker Morgan Stanley Capital Services, Inc. | 2,000 | $ (46,356) |
| Strike Price $21.16, Expires 6/02/10, | ||
| Broker Morgan Stanley Capital Services, Inc. | 1,170 | (22,410) |
| Strike Price $20.63, Expires 6/04/10, | ||
| Broker Goldman Sachs Bank USA | 1,040 | (20,069) |
| Microsoft Corp., Strike Price $29.43, | ||
| Expires 5/04/10, Broker Credit Suisse International | 470 | (52,148) |
| Nokia Oyj, Strike Price $15.56, Expires 5/28/10, | ||
| Broker Citibank NA | 1,700 | (9,960) |
| Northrop Grumman Corp., Strike Price $69.30, | ||
| Expires 6/25/10, Broker UBS AG | 1,360 | (171,333) |
| Occidental Petroleum Corp., Strike Price $86.50, | ||
| Expires 5/22/10, Broker Jeffries & Co., Inc. | 35 | (14,053) |
| Qwest Communications International Inc.: | ||
| Strike Price $4.85, Expires 5/04/10, | ||
| Broker Citibank NA | 6,300 | (239,400) |
| Strike Price $5.01, Expires 5/10/10, | ||
| Broker Citibank NA | 6,230 | (146,754) |
| Strike Price $5.40, Expires 5/17/10, | ||
| Broker Morgan Stanley Capital Services, Inc. | 6,210 | (38,570) |
| The Southern Co.: | ||
| Strike Price $33.66, Expires 5/14/10, | ||
| Broker Morgan Stanley Capital Services, Inc. | 345 | (30,947) |
| Strike Price $34, Expires 6/11/10, | ||
| Broker Goldman Sachs Bank USA | 1,780 | (134,638) |
| The Travelers Cos., Inc.: | ||
| Strike Price $53.80, Expires 5/05/10, | ||
| Broker Morgan Stanley Capital Services, Inc. | 960 | (574) |
| Strike Price $51.30, Expires 6/10/10, | ||
| Broker Citibank NA | 345 | (42,084) |
| Unilever NV, Strike Price $31.20, Expires 5/27/10, | ||
| Broker Credit Suisse International | 550 | (11,367) |
| Verizon Communications, Inc., Strike Price $31.71, | ||
| Expires 5/18/10, Broker UBS AG | 1,550 | (1,125) |
| Walgreen Co., Strike Price $36.31, Expires 6/02/10, | ||
| Broker Citibank NA | 765 | (27,599) |
| Total Over-the-Counter Call Options Written | (4,285,509) | |
| Total Options Written | ||
| (Premiums Received — $9,182,967) — (1.4)% | (9,252,930) | |
| Total Investments, Net of Outstanding Options Written — 98.4% | 649,275,292 | |
| Other Assets Less Liabilities — 1.6% | 10,321,068 | |
| Net Assets — 100.0% | $ 659,596,360 | |
* The cost and unrealized appreciation (depreciation) of investments as of April 30,
2010, as computed for federal income tax purposes, were as follows:
| Aggregate cost | $ 709,423,994 |
| Gross unrealized appreciation | $ 9,657,668 |
| Gross unrealized depreciation | (60,553,440) |
| Net unrealized depreciation | $ (50,895,772) |
See Notes to Financial Statements.
8 BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC. APRIL 30, 2010
Schedule of Investments (concluded)
BlackRock Enhanced Capital and Income Fund, Inc. (CII)
(a) All or a portion of security has been pledged as collateral in connection with
open options written.
(b) Non-income producing security.
(c) Investments in companies considered to be an affiliate of the Fund during the
period, for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
were as follows:
| Shares Held at | Shares Held at | |||
| October 31, | Net | April 30, | ||
| Affiliate | 2009 | Activity | 2010 | Income |
| BlackRock Liquidity | ||||
| Funds, TempFund, | ||||
| Institutional Class | 24,567,455 | (4,087,077) | 20,480,378 | $13,620 |
(d) Represents the current yield as of report date.
• 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 rec-
ognized market indexes or rating group indexes, and/or as defined by Fund
management. This definition may not apply for purposes of this report, which
may combine such industry sub-classifications for reporting ease.
• Fair Value Measurements — Various inputs are used in determining the fair value
of investments, which are as follows:
• Level 1 — price quotations in active markets/exchanges for identical assets
and liabilities
• Level 2 — other observable inputs (including, but not limited to: quoted prices
for similar assets or liabilities in markets that are active, quoted prices for
identical or similar assets or liabilities in markets that are not active, inputs
other than quoted prices that are observable for the assets or liabilities (such
as interest rates, yield curves, volatilities, prepayment speeds, loss severities,
credit risks and default rates) or other market-corroborated inputs)
• Level 3 — unobservable inputs based on the best information available in the
circumstances, to the extent observable inputs are not available (including the
Fund’s own assumptions used in determining the fair value of investments)
The inputs or methodologies used for valuing securities are not necessarily
an indication of the risk associated with investing in those securities. For infor-
mation about the Fund’s policy regarding valuation of investments and other
significant accounting policies, please refer to Note 1 of the Notes to Financial
Statements.
The following tables summarize the inputs used as of April 30, 2010 in determin-
ing the fair valuation of the Fund’s investments:
| Investments in Securities | ||||
| Valuation Inputs | Level 1 | Level 2 | Level 3 | Total |
| Assets: | ||||
| Long-Term | ||||
| Investments1 | $ 638,047,844 | — | — | $ 638,047,844 |
| Short-Term | ||||
| Securities | 20,480,378 | — | — | 20,480,378 |
| Total | $ 658,528,222 | — | — | $ 658,528,222 |
| 1 | See above Schedule of Investments for values in each industry. | ||||
| Other Financial Instruments2 | |||||
|
| |||||
| Valuation Inputs | Level 1 | Level 2 | Level 3 | Total | |
| Liabilities | $(4,967,421) $(4,285,509) | — | $(9,252,930) | ||
| 2 | Other financial instruments are options, which are shown at value. | ||||
See Notes to Financial Statements.
BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC.
APRIL 30, 2010
9
| Statement of Assets and Liabilities | |
| April 30, 2010 (Unaudited) | |
| Assets | |
| Investments at value — unaffiliated (cost — $663,427,113) | $ 638,047,844 |
| Investments at value — affiliated (cost — $20,480,378) | 20,480,378 |
| Cash collateral for options written | 2,857,055 |
| Foreign currency at value (cost — $9,142) | 7,283 |
| Investments sold receivable | 10,735,084 |
| Dividends receivable | 1,156,863 |
| Options written receivable | 230,443 |
| Prepaid expenses | 55,894 |
| Total assets | 673,570,844 |
| Liabilities | |
| Bank overdraft | 2,085,148 |
| Options written at value (premiums received — $9,182,967) | 9,252,930 |
| Investments purchased payable | 2,043,952 |
| Investment advisory fees payable | 493,113 |
| Other affiliates payable | 4,027 |
| Officer’s and Directors’ fees payable | 1,056 |
| Other accrued expenses payable | 94,258 |
| Total liabilities | 13,974,484 |
| Net Assets | $ 659,596,360 |
| Net Assets Consist of | |
| Paid-in capital | $ 814,133,907 |
| Accumulated distributions in excess of net investment income | (35,184,794) |
| Accumulated net realized loss | (93,901,661) |
| Net unrealized appreciation/depreciation | (25,451,092) |
| Net Assets | $ 659,596,360 |
| Net Asset Value | |
| Based on net assets of $659,596,360 and 43,351,458 shares outstanding, 200 million shares authorized, $0.10 par value | $ 15.22 |
See Notes to Financial Statements.
10 BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC. APRIL 30, 2010
| Statement of Operations | |
| Six Months Ended April 30, 2010 (Unaudited) | |
| Investment Income | |
| Dividends | $ 9,642,511 |
| Foreign taxes withheld | (40,829) |
| Income — affiliated | 13,586 |
| Interest | 34 |
| Total income | 9,615,302 |
| Expenses | |
| Investment advisory | 2,750,580 |
| Accounting services | 90,511 |
| Transfer agent | 41,972 |
| Officer and Directors | 33,745 |
| Printing | 31,696 |
| Professional | 30,706 |
| Custodian | 28,561 |
| Registration | 7,526 |
| Miscellaneous | 29,479 |
| Total expenses | 3,044,776 |
| Less fees waived by advisor | (9,346) |
| Total expenses after fees waived | 3,035,430 |
| Net investment income | 6,579,872 |
| Realized and Unrealized Gain (Loss) | |
| Net realized gain from: | |
| Investments | 24,089,661 |
| Options written | 13,738,040 |
| 37,827,701 | |
| Net change in unrealized appreciation/depreciation on: | |
| Investments | 35,367,396 |
| Options written | (2,886,276) |
| Foreign currency transactions | (126) |
| 32,480,994 | |
| Total realized and unrealized gain | 70,308,695 |
| Net Increase in Net Assets Resulting from Operations | $ 76,888,567 |
See Notes to Financial Statements.
BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC.
APRIL 30, 2010
11
| Statements of Changes in Net Assets | ||
| Six Months | Year | |
| Ended | Ended | |
| April 30, 2010 | October 31, | |
| Increase (Decrease) in Net Assets: | (Unaudited) | 2009 |
| Operations | ||
| Net investment income | $ 6,579,872 | $ 12,296,699 |
| Net realized gain (loss) | 37,827,701 | (51,444,075) |
| Net change in unrealized appreciation/depreciation | 32,480,994 | 148,309,201 |
| Net increase in net assets resulting from operations | 76,888,567 | 109,161,825 |
| Dividends and Distributions to Shareholders From | ||
| Net investment income | (41,764,666) | (12,510,205) |
| Net realized gain | — | (50,728,478) |
| Tax return of capital | — | (19,660,314) |
| Decrease in net assets resulting from dividends and distributions to shareholders | (41,764,666) | (82,898,997) |
| Capital Share Transactions | ||
| Value of shares resulting from reorganization | — | 420,968,153 |
| Reinvestment of common dividends | 6,010,745 | 3,234,875 |
| Net increase in net assets derived from capital share transactions | 6,010,745 | 424,203,028 |
| Net Assets | ||
| Total increase in net assets | 41,134,646 | 450,465,856 |
| Beginning of period | 618,461,714 | 167,995,858 |
| End of period | $ 659,596,360 | $ 618,461,714 |
| Accumulated distributions in excess of net investment income | $ (35,184,794) | — |
See Notes to Financial Statements.
12 BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC. APRIL 30, 2010
| Financial Highlights | ||||||||
| Period | Period | |||||||
| Six Months | Year | January 1, | April 30, | |||||
| Ended | Ended | 2008 to | 20041 to | |||||
| Year Ended December 31, | ||||||||
| April 30, 2010 | October 31, | October 31, | December 31, | |||||
| (Unaudited) | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | ||
| Per Share Operating Performance | ||||||||
| Net asset value, beginning of period | $ 14.40 | $ 13.78 | $ 21.36 | $ 22.91 | $ 20.31 | $ 20.76 | $ 19.102 | |
| Net investment income | 0.153 | 0.293 | 0.233 | 0.313 | 0.373 | 0.463 | 0.46 | |
| Net realized and unrealized gain (loss) | 1.64 | 2.27 | (6.36) | 0.58 | 3.69 | 0.29 | 1.84 | |
| Net increase (decrease) from investment operations | 1.79 | 2.56 | (6.13) | 0.89 | 4.06 | 0.75 | 2.30 | |
| Dividends and distributions from: | ||||||||
| Net investment income | (0.97) | (0.29) | (0.23) | (0.34) | (0.33) | (0.47) | (0.48) | |
| Net realized gain | — | (1.19) | (0.62) | (2.10) | (1.13) | (0.73) | (0.11) | |
| Tax return of capital | — | (0.46) | (0.60) | — | — | — | (0.01) | |
| Total dividends and distributions | (0.97) | (1.94) | (1.45) | (2.44) | (1.46) | (1.20) | (0.60) | |
| Capital charges with respect to the issuance of shares | — | — | — | — | — | — | (0.04) | |
| Net asset value, end of period | $ 15.22 | $ 14.40 | $ 13.78 | $ 21.36 | $ 22.91 | $ 20.31 | $ 20.76 | |
| Market price, end of period | $ 15.77 | $ 13.76 | $ 12.37 | $ 20.06 | $ 20.41 | $ 17.21 | $ 18.32 | |
| Total Investment Return4 | ||||||||
| Based on net asset value | 12.59%5 | 22.01% | (29.46)%5 | 4.79% | 21.70% | 4.69% | 12.30%5 | |
| Based on market price | 22.09%5 | 29.88% | (32.58)%5 | 10.47% | 27.95% | 0.52% | (5.36)%5 | |
| Ratios to Average Net Assets | ||||||||
| Total expenses | 0.94%6 | 0.95% | 1.10%6 | 1.96% | 3.54% | 2.96% | 2.19%6 | |
| Total expenses after fees waived and paid indirectly | 0.94%6 | 0.95% | 1.10%6 | 1.96% | 3.54% | 2.96% | 1.96%6 | |
| Total expenses after fees waived and paid indirectly | ||||||||
| and excluding interest expense | 0.94%6 | 0.95% | 1.01%6 | 1.19% | 1.42% | 1.47% | 1.20%6 | |
| Net investment income | 2.03%6 | 1.10% | 1.46%6 | 1.36% | 1.75% | 2.28% | 3.52%6 | |
| Supplemental Data | ||||||||
| Net assets, end of period (000) | $ 659,596 | $ 618,462 | $ 167,996 | $ 260,385 | $ 279,272 | $ 260,638 | $ 266,345 | |
| Borrowings outstanding, end of period (000) | — | — | — | — | $ 100,000 | $ 109,000 | $ 109,000 | |
| Average borrowings outstanding, during the period (000) | — | — | — | $ 38,788 | $ 107,504 | $ 109,000 | $ 98,750 | |
| Portfolio turnover | 109% | 138% | 45% | 63% | 38% | 61% | 20% | |
| Asset coverage, end of period per $1,000 | — | — | — | — | $ 3,793 | $ 3,391 | $ 3,444 | |
1 Commencement of operations. This information includes the initial investment by BlackRock Investment Managers, LLC.
2 Net asset value, beginning of period, reflects a deduction of $0.90 per share sales charge from initial offering price of $20.00 per share.
3 Based on average shares outstanding.
4 Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns.
Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.
5 Aggregate total investment return.
6 Annualized.
See Notes to Financial Statements.
BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC.
APRIL 30, 2010
13
Notes to Financial Statements (Unaudited)
1. Organization and Significant Accounting Policies:
BlackRock Enhanced Capital and Income Fund, Inc. (“CII”) is registered
under the Investment Company Act of 1940, as amended (the “1940
Act”), as diversified, closed-end management investment company.
The Fund is organized as a Maryland corporation. The Fund’s financial
statements are prepared in conformity with accounting principles gener-
ally accepted in the United States of America ("US GAAP"), which may
require the use of management accruals and estimates. Actual results
may differ from these estimates. The Board of Directors of the Fund, are
referred to throughout this report as the “Board of Directors” or the
“Board.” The Fund determines and makes available for publication the
net asset value of its Common Shares on a daily basis.
CII Reorganization: The Board and the shareholders of each of
BlackRock Enhanced Equity Yield Fund, Inc. (“EEF”), BlackRock
Enhanced Equity Yield and Premium Fund, Inc. (“ECV”) (the “Target
Funds”) and CII approved the reorganization of each Target Fund into
CII (the “Reorganizations”). The Reorganizations were tax-free events
and were effective as of the opening for business of the New York
Stock Exchange (“NYSE”) on November 3, 2008.
|
Target Funds EEF ECV |
Acquiring Fund CII CII |
Under the agreement and plan of reorganization between each Target
Fund and CII, the shares of each Target Fund (“Target Fund Shares”)
were exchanged for CII shares. The conversion ratios for Target Fund
Shares were as follows:
| EEF/CII | 0.80653563 |
| ECV/CII | 0.81144752 |
The net assets of CII before and after the Reorganizations and CII shares
issued and Target Fund Shares redeemed in connection with the
Reorganizations were as follows:
| Net Assets | Net Assets | |||
| Acquiring | After the | Prior to the | Shares | Target Funds |
| Fund | Reorganizations Reorganizations | Issued | Shares Redeemed | |
| CII | $591,399,963 | $170,431,810 | 30,542,706 | 37,766,622 |
Included in the net assets acquired by CII were the following compo-
nents:
| Paid-in | Realized | Net Unrealized | ||
| Target Funds | Capital | Loss | Depreciation | Net Assets |
| EEF | $329,483,362 | $(16,478,636) | $(80,066,510) | $232,938,216 |
| ECV | $270,207,354 | $(15,306,983) | $(66,870,434) | $188,029,937 |
The following is a summary of significant accounting policies followed by
the Fund:
Valuation: The Fund’s policy is to fair value its financial instruments
at market value, using independent dealers or pricing services selected
under the supervision of the Board. Equity investments traded on a rec-
ognized securities exchange or the NASDAQ Global Market System are
valued at the last reported sale price that day or the NASDAQ official
closing price, if applicable. For equity investments traded on more than
one exchange, the last reported sale price on the exchange where the
stock is primarily traded is used. Equity investments traded on a recog-
nized exchange for which there were no sales on that day are valued at
the last available bid (long positions) or ask (short positions) price. If
no bid or ask price is available, the prior day’s price will be used, unless
it is determined that such prior day’s price no longer reflects the fair
value of the security. Investments in open-end investment companies
are valued at net asset value each business day. Short-term securities
with remaining maturities of 60 days or less may be value at amortized
cost, which approximates fair value.
In the event that application of these methods of valuation results in a
price for an investment which is deemed not to be representative of the
market value of such investment or is not available, the investment will
be valued by a method approved by the Fund’s Board as reflecting fair
value (“Fair Value Assets”). When determining the price for Fair Value
Assets, the investment advisor and/or the sub-advisor seeks to deter-
mine the price that the Fund might reasonably expect to receive from
the current sale of that asset in an arm’s-length transaction. Fair value
determinations shall be based upon all available factors that the
investment advisor and/or sub-advisor deems relevant. The pricing of
all Fair Value Assets is subsequently reported to the Board or a
committee thereof.
Generally, trading in foreign instruments is substantially completed
each day at various times prior to the close of business on the NYSE.
Occasionally, events affecting the values of such instruments may occur
between the foreign market close and the close of business on the
NYSE that may not be reflected in the computation of the Fund’s net
assets. If events (for example, a company announcement, market volatili-
ty or a natural disaster) occur during such periods that are expected to
materially affect the value of such instruments, those instruments may
be Fair Value Assets and be valued at their fair values, as determined
in good faith by the Board or by the investment advisor using a pricing
service and/or procedures approved by the Board. Each business day,
the Fund uses a pricing service selected under the supervision of the
Fund’s Board to assist with the valuation of certain foreign exchange-
traded equity securities and foreign exchange-traded and OTC options
(the “Systematic Fair Value Price”). Using current market factors, the
Systematic Fair Value Price is designed to value such foreign securities
and foreign options at fair value as of the close of business on the
NYSE, which follows the close of the local markets.
14 BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC. APRIL 30, 2010
Notes to Financial Statements (continued)
Securities and other assets and liabilities denominated in foreign
currencies are translated into US dollars using exchange rates deter-
mined as of the close of business on the New York Stock Exchange
(“NYSE”). Foreign currency exchange contracts are valued at the mean
between the bid and ask prices and are determined as of the close of
business on the NYSE. Interpolated values are derived when the settle-
ment date of the contract is an interim date for which quotations are
not available.
Exchange-traded options are valued at the mean between the last bid
and ask prices at the close of the options market in which the options
trade. An exchange-traded option for which there is no mean price is
valued at the last bid (long positions) or ask (short positions) price. If no
bid or ask price is available, the prior day’s price will be used, unless it
is determined that the prior day’s price no longer reflects the fair value
of the option. Over-the-counter (“OTC”) options and swaptions are val-
ued by an independent pricing service using a mathematical model
which incorporates a number of market data factors, such as the trades
and prices of the underlying instruments.
Foreign Currency Transactions: The Fund’s books and records are main-
tained in US dollars. Foreign currency amounts are translated into US
dollars as follows: (i) market value of investment securities, assets and
liabilities at the current rate of exchange; and (ii) purchases and sales
of investment securities, income and expenses at the rates of exchange
prevailing on the respective dates of such transactions. Generally, when
the US dollar rises in value against foreign currency, the Fund’s invest-
ments denominated in that currency will lose value because its currency
is worth fewer US dollars; the opposite effect occurs if the US dollar falls
in relative value.
The Fund reports foreign currency related transactions as components of
realized gain (loss) for financial reporting purposes, whereas such com-
ponents are treated as ordinary income for federal income tax purposes.
Segregation and Collateralization: In cases in which the 1940 Act and
the interpretive positions of the Securities and Exchange Commission
(“SEC”) require that the Fund either delivers collateral or segregates
assets in connection with certain investments (e.g., written options), the
Fund will, consistent with SEC rules and/or certain interpretive letters
issued by the SEC, segregate collateral or designate on its books and
records cash or other liquid securities having a market value at least
equal to the amount that would otherwise be required to be physically
segregated. Furthermore, based on requirements and agreements with
certain exchanges and third party broker-dealers, each party has require-
ments to deliver/deposit securities as collateral for certain investments.
Investment Transactions and Investment Income: For financial reporting
purposes, investment transactions are recorded on the dates the trans-
actions are entered into (the trade dates). Realized gains and losses on
investment 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 sub-
sequently recorded when the Fund has determined the ex-dividend date.
Under the applicable foreign tax laws, a withholding tax at various rates
may be imposed on capital gains, dividends and interest. Upon notifica-
tion from issuers, some of the dividend income received from a real
estate investment trust may be redesignated as a reduction of cost of
the related investment and/or realized gain. Interest income, including
amortization of premium and accretion of discount on debt securities, is
recognized on the accrual basis.
Dividends and Distributions: Dividends from net investment income are
declared and paid quarterly. Distributions of capital gains are recorded
on the ex-dividend dates. If the total dividends and distributions made in
any tax year exceeds net investment income and accumulated realized
capital gains, a portion of the total distribution may be treated as a tax
return of capital. The amount and timing of dividends and distributions
are determined in accordance with federal income tax regulations, which
may differ from US GAAP.
Income Taxes: It is the Fund’s policy to comply with the requirements
of the Internal Revenue Code of 1986, as amended, 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.
The Fund files US federal and various state and local tax returns. No
income tax returns are currently under examination. The statute of
limitations on the Fund’s US federal tax returns remains open for the two
years ended December 31, 2007, the period ended October 31, 2008
and the year ended October 31, 2009. The statutes of limitations on the
Fund’s state and local tax returns may remain open for an additional
year depending upon the jurisdiction. There are no uncertain tax posi-
tions that require recognition of a tax liability.
Recent Accounting Standard: In January 2010, Financial Accounting
Standards Board issued amended guidance to improve disclosure about
fair value measurements, which will require additional disclosures
about transfers into and out of Levels 1 and 2 and separate disclosures
about purchases, sales, issuances and settlements in the reconciliation
for fair value measurements using significant unobservable inputs (Level
3). It also clarifies existing disclosure requirements relating to the levels
of disaggregation for fair value measurement and inputs and valuation
techniques used to measure fair value. The amended guidance is effec-
tive for financial statements for fiscal years beginning after December
15, 2009, and interim periods within those fiscal years, except for dis-
closures about purchases, sales, issuances and settlements in the roll-
forward of activity in Level 3 fair value measurements, which are effective
for fiscal years beginning after December 15, 2010 and for interim
BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC.
APRIL 30, 2010
15
Notes to Financial Statements (continued)
periods within those fiscal years. The impact of this guidance on the
Fund’s financial statements and disclosures is currently being assessed.
Other: Expenses directly related to the Fund are charged to the Fund.
Other operating expenses shared by several funds are pro rated among
those funds on the basis of relative net assets or other appropriate
methods. The Fund has an arrangement with the custodian whereby
fees may be reduced by credits earned on uninvested cash balances,
which if applicable are shown as fees paid indirectly in the Statement
of Operations. The custodian imposes fees on overdrawn cash balances,
which can be offset by accumulated credits earned or may result in
additional custody charges.
2. Derivative Financial Instruments:
The Fund may engage in various portfolio investment strategies both
to increase the returns of the Fund and to economically hedge, or pro-
tect, its exposure to certain risks such as credit risk, equity risk, interest
rate risk and foreign currency exchange rate risk. Losses may arise if the
value of the contract decreases due to an unfavorable change in the
price of the underlying instrument or if the counterparty does not per-
form under the contract. The Fund may mitigate counterparty risk through
master netting agreements included within an International Swap and
Derivatives Association, Inc. (“ISDA”) Master Agreement between a Fund
and separately each of its counterparties. The ISDA Master Agreement
allows the Fund to offset with its counterparty certain derivative financial
instrument’s payables and/or receivables with collateral held with each
separate counterparty. The amount of collateral moved to/from applica-
ble counterparties is based upon minimum transfer amounts of up to
$500,000. To the extent amounts due to the Fund from its counterpar-
ties are not fully collateralized contractually or otherwise, the Fund
bears the risk of loss from counterparty non-performance. See Note 1
“Segregation and Collateralization” for information with respect to coll-
ateral practices. In addition, the Fund manages counterparty risk by
entering into agreements only with counterparties that it believes have
the financial resources to honor their obligations and by monitoring the
financial stability of those counterparties.
The Fund’s maximum risk of loss from counterparty credit risk on OTC
derivatives is generally the aggregate unrealized gain in excess of any
collateral pledged by the counterparty to the Fund. For OTC options
purchased, the Fund bears the risk of loss in the amount of the
premiums paid and change in market value of the options should the
counterparty not perform under the contracts. Options written by the
Fund do not give rise to counterparty credit risk, as options written
obligate the Fund to perform and not the counterparty. Certain ISDA
Master Agreements allow counterparties to OTC derivatives to terminate
derivative contracts prior to maturity in the event the Fund’s net assets
decline by a stated percentage or the Fund fails to meet the terms of
its ISDA Master Agreements, which would cause the Fund to accelerate
payment of any net liability owed to the counterparty. Counterparty risk
related to exchange-traded financial futures contracts and options is
minimal because of the protection against defaults provided by the
exchange on which they trade.
Options: The Fund may purchase and write call and put options to
increase or decrease its exposure to underlying instruments (equity
risk) and/or, in the case of options written, to generate gains from
options premiums. A call option gives the purchaser of the option the
right (but not the obligation) to buy, and obligates the seller to sell
(when the option is exercised), the underlying instrument at the exercise
price at any time or at a specified time during the option period. A put
option gives the holder the right to sell and obligates the writer to buy
the underlying instrument at the exercise price at any time or at a
specified time during the option period. When the Fund purchases
(writes) an option, an amount equal to the premium paid (received)
by the Fund is reflected as an asset (liability). The amount of the asset
(liability) is subsequently marked-to-market to reflect the current market
value of the option purchased (written). When an instrument is pur-
chased or sold through an exercise of an option, the related premium
paid (or received) is added to (or deducted from) the basis of the
instrument acquired or deducted from (or added to) the proceeds of the
instrument sold. When an option expires (or the Fund enters into a clos-
ing 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 received or
paid). When the Fund writes a call option, such option is “covered,”
meaning that the Fund holds the underlying instrument subject to being
called by the option counterparty, or cash in an amount sufficient to
cover the obligation. When the Fund writes a put option, such option
is covered by cash in an amount sufficient to cover the obligation.
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. When foreign currency is purchased or sold through
an exercise of a foreign currency option, the related premium paid
(or received) is added to (or deducted from) the basis of the foreign
currency acquired or deducted from (or added to) the proceeds of the
foreign currency sold. Such transactions may be effected with respect
to hedges on non-US dollar denominated instruments owned by the
Portfolios but not yet delivered, or committed or anticipated to be
purchased by the Portfolios.
In purchasing and writing options, the Fund bears the risk of an
unfavorable change in the value of the underlying instrument or the risk
that the Fund may not be able to enter into a closing transaction due
to an illiquid market. Exercise of an option written could result in the
Fund purchasing or selling a security at a price different from the
current market value. The Fund may execute transactions in both listed
and OTC options.
16 BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC. APRIL 30, 2010
Notes to Financial Statements (continued)
Derivative Instruments Categorized by Risk Exposure:
| Fair Values of Derivative Instruments as of April 30, 2010 | ||
|
| ||
| Liability Derivatives | ||
| Statements | ||
| of Assets and | ||
| Liabilities | ||
| Location | Value | |
| Equity contracts | Options written at value | $ 9,252,930 |
| The Effect of Derivative Instruments on the Statement of Operations | |
| Six Months Ended April 30, 2010 | |
|
| |
| Net Realized Gain from | |
|
| |
| Options* | |
| Equity contracts | $13,734,817 |
| Net Change in Unrealized Appreciation/Depreciation on | |
|
| |
| Options | |
| Equity contracts | $ (2,886,276) |
* Includes options purchased which are shown in the net realized gain (loss)
from investments and net change in unrealized appreciation/depreciation
on investments.
For the six months ended April 30, 2010, the average quarterly balance
of outstanding derivative financial instruments was as follows:
| Options: | |
| Average number of contracts purchased | 800 |
| Average number of contracts written | 133,031 |
| Average notional value of contracts purchased | $ 2,480,000 |
| Average notional value of contracts written | $347,562,410 |
3. Investment Advisory Agreement and Other Transactions
with Affiliates:
The PNC Financial Services Group, Inc. ("PNC"), Bank of America
Corporation ("BAC") and Barclays Bank PLC ("Barclays") are the largest
stockholders of BlackRock, Inc. ("BlackRock"). Due to the ownership
structure, PNC is an affiliate of the Fund for 1940 Act purposes, but
BAC and Barclays are not.
The Fund entered into an Investment Advisory Agreement with BlackRock
Advisors, LLC (the “Manager”), the Fund’s investment advisor, an indirect,
wholly owned subsidiary of BlackRock, to provide investment advisory
and administration services. The Manager is responsible for the manage-
ment of the Fund’s portfolio and provides the necessary personnel, facil-
ities, equipment and certain other services necessary to the operations
of the Fund. For such services, the Fund pays the Manager a monthly fee
at an annual rate of 0.85% of the Fund’s average daily net assets.
The Manager has voluntarily agreed to waive its advisory fees by the
amount of investment advisory fees the Fund pays to the Manager
indirectly through its investment in affiliated money market funds,
however the manager does not waive its advisory fees by the amount
of investment advisory fees through its investment in other affiliated
investment companies, if any. This amount is included in fees waived
by advisor in the Statement of Operations.
The Manager has entered into a separate sub-advisory agreement
with BlackRock Investment Management, LLC (“BIM”) and BlackRock
Financial Management, Inc. (“BFM”) affiliates of the Manager. The
Manager pays BIM and BFM for services it provides, a monthly fee
that is a percentage of the investment advisory fees paid by the Fund
to the Manager.
For the six months ended April 30, 2010, the Fund reimbursed the
Manager $6,185 for certain accounting services, which is included in
accounting services in the Statement of Operations.
Certain officers and/or directors of the Fund are officers and/or directors
of BlackRock or its affiliates. The Fund reimburses the Manager for
compensation paid to the Fund’s Chief Compliance Officer.
4. Investments:
Purchases and sales of investments, excluding short-term securities
for the six months ended April 30, 2010, were $684,894,471 and
$697,837,627, respectively.
Transactions in options written for the six months ended April 30, 2010,
were as follows:
| Calls | Premiums | |
| Contracts | Received | |
| Outstanding options at | ||
| beginning of period | 117,087 | $ 9,193,459 |
| Options written | 432,706 | 31,498,444 |
| Options exercised | (217,526) | (15,896,581) |
| Options closed | (63,460) | (4,622,817) |
| Options expired | (136,391) | (10,989,538) |
| Outstanding options at end | ||
| of period | 132,416 | $ 9,182,967 |
As of April 30, 2010, the value of portfolio securities subject to cover
call options written was $345,587,409.
5. Market and Credit Risk:
In the normal course of business, the Fund invests in securities and
enters into transactions where risks exist due to fluctuations in the
market (market risk) or failure of the issuer of a security to meet all its
obligations (credit risk). The value of securities held by the Fund may
decline in response to certain events, including those directly involving
the issuers whose securities are owned by the Fund; conditions affecting
the general economy; overall market changes; local, regional or global
political, social or economic instability; and currency and interest rate
and price fluctuations. Similar to credit risk, the Fund may be exposed
to counterparty risk, or the risk that an entity with which the Fund has
unsettled or open transactions may default. The Fund manages counter-
party risk by entering into transactions only with counterparties that it
believes have the financial resources to honor their obligations and by
monitoring the financial stability of those counterparties. Financial
BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC.
APRIL 30, 2010
17
Notes to Financial Statements (concluded)
assets, which potentially expose the Fund to credit and counterparty
risks, consist principally of investments and cash due from counterpar-
ties. The extent of the Fund’s exposure to credit and counterparty risks
with respect to these financial assets is generally approximated by their
value recorded in the Fund’s Statement of Assets and Liabilities, less any
collateral held by the Fund.
6. Capital Share Transactions:
The Fund is authorized to issue 200 million of $0.10 par value shares,
all of which were initially classified as Common Shares.
Common Shares
At April 30, 2010, 24,887 shares were owned by an affiliate of the
Manager.
Shares issued and outstanding increased by 398,146 for the six months
ended April 30, 2010 and 221,870 for the year ended October 31,
2009 as a result of dividend reinvestment.
7. Capital Loss Carryforwards:
As of October 31, 2009, the Fund had capital loss carryforwards
available to offset future realized capital gains through the indicated
expiration dates:
| Expires October 31, | |
| 2016 | $ 26,706,998 |
| 2017 | 79,505,861 |
| Total | $106,212,859 |
8. Subsequent Events:
Management’s evaluation of the impact of all subsequent events on
the Funds’ financial statements was completed through the date the
financial statements were issued and the following items were noted:
The Fund paid a distribution in the amount of $0.485 per share on
June 30, 2010 to shareholders of record on June 15, 2010.
18 BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC. APRIL 30, 2010
Officers and Directors
Richard E. Cavanagh, Chairman of the Board and Director
Karen P. Robards, Vice Chair of the Board, Chair of the Audit Committee
and Director
Richard S. Davis, Director
Frank J. Fabozzi, Director and Member of the Audit Committee
Kathleen F. Feldstein, Director
James T. Flynn, Director and Member of the Audit Committee
Henry Gabbay, Director
Jerrold B. Harris, Director
R. Glenn Hubbard, Director
W. Carl Kester, Director and Member of the Audit Committee
Anne Ackerley, President and Chief Executive Officer
Brendan Kyne, Vice President
Neal Andrews, Chief Financial Officer
Jay Fife, Treasurer
Brian Kindelan, Chief Compliance Officer of the Funds
Howard Surloff, Secretary
Investment Advisor
BlackRock Advisors, LLC
Wilmington, DE 19809
Sub-Advisors
BlackRock Investment Management, LLC
Plainsboro, NJ 08536
BlackRock Financial Management, Inc.
New York, NY 10055
Custodian
Brown Brothers, Harriman & Co.
Boston, MA 02109
Transfer Agent
BNY Mellon Shareowner Services
Jersey City, NJ 07310
Auction Agent
Preferred Shares
BNY Mellon Shareowner Services
Jersey City, NJ 07310
Accounting Agent
State Street Bank and Trust Company
Princeton, NJ 08540
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Princeton, NJ 08540
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
New York, NY 10036
Address of the Fund
100 Bellevue Parkway
Wilmington, DE 19809
Effective January 1, 2010, Kent Dixon, a Director of the Fund, retired.
Effective March 31, 2010, G. Nicholas Beckwith, III, a Director of the Fund, resigned.
The Fund’s Board of Directors extends its best wishes to both Mr. Dixon and Mr. Beckwith.
BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC.
APRIL 30, 2010
19
Additional Information
General Information
The Fund does not make available copies of its Statements of Additional
Information because the Fund’s shares are not continuously offered,
which means that the Statement of Additional Information of the Fund
has not been updated after completion of the Fund’s offerings and the
information contained in the Fund’s Statement of Additional Information
may have become outdated.
Electronic Delivery
Electronic copies of most financial reports are available on the Fund’s
website or shareholders can sign up for e-mail notifications of quarterly
statements, annual and semi-annual reports by enrolling in the Fund’s
electronic delivery program.
Shareholders Who Hold Accounts with Investment Advisors, Banks
or Brokerages:
Please contact your financial advisor to enroll. Please note that not all
investment advisors, banks or brokerages may offer this service.
Householding
The Fund will mail only one copy of shareholder documents, including
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 elimi-
nate 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.
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (“SEC”) for the first and third quar-
ters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available
on the SEC’s website at http://www.sec.gov and may also be reviewed
and copied at the SEC’s Public Reference Room in Washington, DC.
Information on 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 and without charge by calling (800) 441-7762.
Availability of Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to deter-
mine how to vote proxies relating to portfolio securities is available (1)
without charge, upon request, by calling toll-free (800) 441-7762; (2) at
www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.
Availability of Proxy Voting Record
Information about how the Fund voted proxies relating to securities
held in the Fund’s portfolio during the most recent 12-month period
ended June 30 is available upon request and without charge (1) at
www.blackrock.com or by calling (800) 441-7762 and (2) on the
SEC’s website at http://www.sec.gov.
20 BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC. APRIL 30, 2010
Additional Information (continued)
Section 19(a) Notices
These reported amounts and sources of distributions are estimates and are not being provided for tax reporting purposes. The actual amounts and
sources for tax reporting purposes will depend upon the Fund’s investment experience during the year and may be subject to changes based on
the tax regulations. The Fund will provide a Form 1099-DIV each calendar year that will explain the character of these dividends and distributions
for federal income tax purposes.
| April 30, 2010 | ||||||||
| Total Cumulative Distributions | % Breakdown of the Total Cumulative | |||||||
| for the Fiscal Year | Distributions for the Fiscal Year | |||||||
| Net | Net Realized | Total Per | Net | Net Realized | Total Per | |||
| Investment | Capital | Return of | Common | Investment | Capital | Return of | Common | |
| Income | Gains | Capital | Share | Income | Gains | Capital | Share | |
| CII | $0.125728 | — | $0.844272 | $0.970000 | 13% | 0% | 87% | 100% |
The Fund estimates that it has distributed more than the amount of earned income and net realized gains; therefore, a portion of the distribution
may be a return of capital. A return of capital may occur, for example, when some or all of the shareholder’s investment in the Fund is returned to the
shareholder. A return of capital does not necessarily reflect the Fund’s investment performance and should not be confused with ‘yield’ or ‘income’.
BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC.
APRIL 30, 2010
21
Additional Information (concluded)
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and for-
mer fund investors and individual clients (collectively, “Clients”) and to
safeguarding their non-public personal information. The following infor-
mation 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 non-public information from and
about you from different sources, including the following: (i) information
we receive from you or, if applicable, your financial intermediary, on appli-
cations, forms or other documents; (ii) information about your transac-
tions with us, our affiliates, or others; (iii) information we receive from a
consumer reporting agency; and (iv) from visits to our websites.
BlackRock does not sell or disclose to non-affiliated third parties any non-
public personal information about its Clients, except as permitted by law
or as is necessary to respond to regulatory requests or to service Client
accounts. These non-affiliated 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 non-public 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 non-public personal information of its Clients, including pro-
cedures relating to the proper storage and disposal of such information.
22 BLACKROCK ENHANCED CAPITAL AND INCOME FUND, INC. APRIL 30, 2010
This report is transmitted to shareholders only. It is not a pro-
spectus. Past performance results shown in this report should
not be considered a representation of future performance.
Statements and other information herein are as dated and
are subject to change.
Item 2 – Code of Ethics – Not Applicable to this semi-annual report
Item 3 – Audit Committee Financial Expert – Not Applicable to this semi-annual report
Item 4 – Principal Accountant Fees and Services – Not Applicable to this semi-annual report
Item 5 – Audit Committee of Listed Registrants – Not Applicable to this semi-annual report
Item 6 – Investments
(a) The registrant’s Schedule of Investments is included as part of the Report to
Stockholders filed under Item 1 of this form.
(b) Not Applicable due to no such divestments during the semi-annual period covered since
the previous Form N-CSR filing.
Item 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management
Investment Companies – Not Applicable to this semi-annual report
Item 8 – Portfolio Managers of Closed-End Management Investment Companies – Not Applicable to
this semi-annual report
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 – The registrant’s Nominating and
Governance Committee will consider nominees to the board of directors recommended by
shareholders when a vacancy becomes available. Shareholders who wish to recommend a
nominee should send nominations that include biographical information and set forth the
qualifications of the proposed nominee to the registrant’s Secretary. There have been no
material changes to these procedures.
Item 11 – Controls and Procedures
11(a) – The registrant’s principal executive and principal financial officers or persons performing
similar functions have concluded that the registrant’s disclosure controls and procedures (as
defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the
“1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the
evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act
and Rule 13(a)-15(b) under the Securities Exchange Act of 1934, as amended.
11(b) – There were no changes in the registrant’s internal control over financial reporting (as
defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter
of the period covered by this report that have materially affected, or are reasonably likely to
materially affect, the registrant’s internal control over financial reporting.
Item 12 – Exhibits attached hereto
12(a)(1) – Code of Ethics – Not Applicable to this semi-annual report
12(a)(2) – Certifications – Attached hereto
12(a)(3) – Not Applicable
12(b) – Certifications – Attached hereto
12(c) – Notices to the registrant’s common shareholders in accordance with 1940 Act Section 19(a)
and Rule 19a-11
1 The Fund has received exemptive relief from the Securities and Exchange Commission permitting
it
to make periodic distributions of long-term capital gains with respect to its outstanding common
stock as frequently as twelve times each year, and as frequently as distributions are specified by or in
accordance with the terms of its outstanding preferred stock. This relief is conditioned, in part, on an
undertaking by the Fund to make the disclosures to the holders of the Fund’s common shares, in
addition to the information required by Section 19(a) of the 1940 Act and Rule 19a-1 thereunder. The
Fund is likewise obligated to file with the SEC the information contained in any such notice to
shareholders and, in that regard, has attached hereto copies of each such notice made during the
period.
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 Enhanced Capital and Income Fund, Inc.
By: /s/ Anne F. Ackerley
Anne F. Ackerley
Chief Executive Officer of
BlackRock Enhanced Capital and Income Fund, Inc.
Date: June 28, 2010
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/ Anne F. Ackerley
Anne F. Ackerley
Chief Executive Officer (principal executive officer) of
BlackRock Enhanced Capital and Income Fund, Inc.
Date: June 28, 2010
By: /s/ Neal J. Andrews
Neal J. Andrews
Chief Financial Officer (principal financial officer) of
BlackRock Enhanced Capital and Income Fund, Inc.
Date: June 28, 2010