August 20,
2008
Dear
Shareholder:
This is a report on
the efforts of BlackRock and the Boards of Directors/Trustees (the “Board”) of
the BlackRock closed-end funds (the “Funds”) to provide liquidity to
shareholders of the auction market preferred shares (“AMPS”) of the
Funds.
Upon the failure of
the auction market in February, the Board established an Ad Hoc Committee on
AMPS (the “AMPS Committee”) to provide oversight of BlackRock’s efforts to
provide liquidity to AMPS holders. BlackRock has worked closely with the
AMPS Committee and the full Board seeking potential solutions for all BlackRock
fund shareholders affected by the lack of liquidity in the AMPS
market.
BlackRock has been
a leader in efforts to add liquidity to the frozen AMPS market:
•
To date, the Funds have redeemed approximately $2.5 billion of their $9.8
billion in AMPS previously outstanding, across both tax-exempt and taxable
closed-end funds.
•
The Funds have redeemed the greatest amount of tax-exempt AMPS in the closed-end
fund industry and have redeemed over 54% of their taxable AMPS.
•
The Funds were some of the first in the industry to announce AMPS redemptions
using tender options bonds (TOBs).
BlackRock continues
to explore potential solutions that will provide liquidity to AMPS holders. It
is important to note that any resolution must be in the best interests of both
common and preferred shareholders. Potential solutions, which may involve the
use of additional TOBs, bank financing, lines of credit, reverse repurchase
agreements and/or the creation of new securities, are complex and take
time.
BlackRock and the
Board have made progress in the development of an alternative form of preferred
stock referred to as a Liquidity Enhanced Adjustable Rate Security (LEARS),
which is intended to be eligible for purchase by money market funds and other
institutions. BlackRock believes that the development of a LEARS structure may
present a solution for all industry participants. In designing LEARS, BlackRock
has negotiated tax implications of the structure with the Internal Revenue
Service (IRS) and is awaiting review and action by the
Securities and
Exchange Commission (SEC). Successful implementation of a LEARS structure
depends on identifying market participants who are willing and able to provide
liquidity backup. The timing and availability of definitive approvals and
agreements are beyond BlackRock’s and the Board’s control.
The Funds’ ability
to continue to redeem AMPS through some form of alternative leverage will depend
on several factors, including market conditions and the need to comply with
applicable laws and regulations. It will also depend on the availability of
liquidity support or financing, which to date has been a very real challenge for
BlackRock and other investment advisors in the current market. There can be no
guarantee that any potential solution can or will be
implemented.
BlackRock and the
Board understand the uncertainty facing shareholders of the AMPS and the
importance of finding a solution. We call your attention to recent announcements
made by some broker-dealers to repurchase outstanding AMPS, which will allow
some shareholders to receive liquidity. BlackRock believes that this development
represents an important step toward achieving a resolution to this market
event.
We
hope this information, which reflects months of work, explains our efforts on
behalf of all our closed-end fund shareholders. BlackRock will continue to
provide you with periodic updates on its progress via shareholder press releases
and on the web at www.blackrock.com.
Sincerely,
|
Richard E.
Cavanagh
|
Robert S.
Kapito
|
|
Chairman of
the Board
|
President
|
|
BlackRock
Closed-End Funds
|
BlackRock,
Inc.
|