BLACKROCK ASSET INVESTORS
(IN LIQUIDATION)
================================================================================
SEMI-ANNUAL REPORT
JUNE 30, 1999 (UNAUDITED)
<PAGE>
<TABLE>
<CAPTION>
BLACKROCK ASSET INVESTORS (IN LIQUIDATION)
CONSOLIDATED SCHEDULE OF INVESTMENTS
JUNE 30 ,1999 (UNAUDITED)
=========================================================================================================================
NAME OF ISSUER
AND TITLE OF ISSUE PAR ($000) VALUE
------------------ ---------- -----
<S> <C> <C>
RESIDENTIAL AND COMMERCIAL MORTGAGE PASS-THROUGH
CERTIFICATES - 16.7%
BCF L.L.C. Series 1996 - C2 Class D - Interest Only 1,123 $ 878
BCF L.L.C. Series 1996 - C2 Class E 9,079 9,050,897
BCF L.L.C. Series 1996 - C2 Class F 2,390 2,278,533
BCF L.L.C. Series 1996 - C2 Class G 6,608 2,841,549
BCF L.L.C. Series 1997 - R2 Class B4 980 347,245
BCF L.L.C. Series 1997 - R2 Class B5 1,015 163,555
BCF L.L.C. Series 1997 - R2 Class B6 1,279 49,382
BCF L.L.C. Series 1997 - C1 Class X1 - Interest Only 15,435 38,586
BCF L.L.C. Series 1997 - C1 Class X2 - Interest Only 11,948 16,803
BCF L.L.C. Series 1997 - C1 Class E - Interest Only 5,012 7,048
BCF L.L.C. Series 1997 - C1 Class F 1,566 1,158,622
BCF L.L.C. Series 1997 - C1 Class G 5,954 2,668,186
BCF L.L.C. Series 1998 - R3 Class B4 1,224 386,037
BCF L.L.C. Series 1998 - R3 Class B5 952 202,705
BCF L.L.C. Series 1998 - R3 Class B6 2,510 212,085
------------
Total Residential and Commercial Mortgage Pass-Through Certificates
(cost $19,486,136) 19,422,111
------------
L.L.C. INVESTMENTS - 7.7%
BCC Investors, L.L.C. (cost $8,922,170) 8,922,170
------------
PARTNERSHIP INVESTMENTS - 75.5%
BlackRock Capital Finance (cost $101,182,767) 87,758,946
------------
TOTAL LONG TERM INVESTMENTS - (COST $129,591,073) 116,103,227
------------
SHORT TERM INVESTMENT - 1.3%
Repurchase agreement dated 06/30/99
with State Street Bank and Trust, Co. 4.60% due 07/01/99
collateralized by $1,465,000 United States Treasury
Note 6.50% due 05/31/01 (market value $1,501,472)
(repurchase proceeds $1,461,187) (cost $1,461,000) 1,461 1,461,000
-------------
TOTAL INVESTMENTS - (COST $131,052,073) - 101.2% 117,564,227
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.3)% (389,909)
LIQUIDATION VALUE OF PREFERRED STOCK - (0.9)% (1,020,000)
------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS - 100% $116,154,318
============
- -------------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
BLACKROCK ASSET INVESTORS (IN LIQUIDATION)
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
===============================================================================================================
<S> <C>
ASSETS
Investments, at estimated fair value (cost $131,052,073) $ 117,564,227
Cash, including cash held in foreign banks of $77,612 75,962
Interest receivable 301,693
Unrealized appreciation on forward currency contracts (Note 1) 152,602
-------------
Total assets 118,094,484
-------------
LIABILITIES
Investment advisory fee payable (Note 2) 198,859
Notes payable 192,500
Interest payable on preferred stock 81,192
Administration fee payable 13,098
Other accrued expenses 434,517
-------------
Total liabilities 920,166
-------------
NET INVESTMENT ASSETS $ 117,174,318
=============
Net assets were comprised of:
Common shares of beneficial interest, at par (Note 5) 7,220
Paid in capital in excess of par 129,484,164
Preferred stock, at par (Note 5) 1,020,000
-------------
130,511,384
Net unrealized depreciation on investments, forward currency
contracts and foreign currency (13,337,066)
-------------
Total Net Investment Assets $ 117,174,318
=============
Net assets applicable to common shareholders $ 116,154,318
=============
Net asset value per common share ($116,154,318 divided by 729,898
common shares issued and outstanding) $ 159.14
=============
Total common shares outstanding at end of period 729,898.17
=============
- ----------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
BLACKROCK ASSET INVESTORS (IN LIQUIDATION)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
================================================================================================================
<S> <C>
NET INVESTMENT LOSS
Income
Net investment loss earned from BCF $ (5,541,011)
Interest (net of interest expense of $6,297) 318,013
Other income (Note 3) 13,488
------------
Total income (5,209,510)
------------
Expenses
Investment advisory 198,860
Professional services 50,000
Directors 30,000
Administration 16,000
Accounting 15,000
Miscellaneous 41,603
------------
Total operating expenses 351,463
------------
Net investment loss (5,560,973)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FORWARD CURRENCY CONTRACTS AND FOREIGN CURRENCY
TRANSACTIONS (NOTE 3)
Net realized gain on:
Investments 51,841,728
Foreign currency and forward currency contracts 530,056
BCF investments 12,106
------------
Net realized gain 52,383,890
------------
Net change in unrealized appreciation (depreciation) on:
Foreign currency and forward currency contracts 141,296
BCF investments (15,941,155)
Other investments (1,906,493)
------------
Net change in unrealized depreciation (17,706,352)
------------
Net realized and unrealized gain 34,677,538
------------
NET INCREASE IN NET INVESTMENT ASSETS
RESULTING FROM OPERATIONS $ 29,116,565
============
- ----------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
BLACKROCK ASSET INVESTORS (IN LIQUIDATION)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN CASH
Cash flows provided by operating activities:
Net investment income $ 2,258,874
Expenses paid (378,860)
Recievable from affiliates (1,564,351)
Net realized gain from forward currency contracts and transactions 530,056
------------
Net cash flows provided by operating activities 845,719
------------
Cash flows provided by investing activities:
Net sale of investments 84,035,276
Purchase of repurchase agreements, net 630,000
------------
Net cash flows provided by investing activities 84,665,276
------------
Cash flows used for financing activities:
Payment of distributions (86,000,000)
------------
Net decrease in cash (489,005)
Cash, beginning of period 564,967
------------
Cash, end of period $ 75,962
------------
RECONCILIATION OF NET INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS
TO NET CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES
Net increase in net assets resulting from operations $ 29,116,565
------------
Increase in unrealized depreciation 17,706,352
Net realized gain on investments (51,853,834)
Net loss from BCF 7,327,231
Decrease in accrued expenses and other liabilities (21,099)
Increase in due from affiliates (1,564,351)
Decrease in interest receivable 134,855
------------
Total adjustments (28,270,846)
------------
Net cash flows provided by operating activities $ 845,719
============
- ----------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BLACKROCK ASSET INVESTORS (IN LIQUIDATION)
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
===========================================================================================================================
FOR THE
SIX MONTHS ENDED FOR THE YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
----------------------- -----------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $ (5,560,973) $ 14,719,023
Net realized gain (loss) 52,383,890 (4,352,049)
Net change in unrealized appreciation
(depreciation) (17,706,352) 2,627,956
------------- -------------
Net increase in net assets resulting
from operations 29,116,565 12,994,930
------------- -------------
Dividends and distributions:
To common shareholders from:
Net investment income - (14,637,831)
Net realized gain (28,791,131) -
Return of capital (57,208,869) (68,362,169)
To preferred shareholders from:
Net investment income - (81,192)
------------- -------------
Total dividends and distributions to
common and preferred shareholde rs (86,000,000) (83,081,192)
------------- -------------
Net decrease (56,883,435) (70,086,262)
NET INVESTMENT ASSETS
Beginning of period 174,057,753 244,144,015
------------- -------------
End of period $ 117,174,318 $ 174,057,753
============= =============
- -------------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BLACKROCK ASSET INVESTORS (IN LIQUIDATION)
CONSOLIDATED STATEMENTS OF FINANCIAL HIGHLIGHTS (UNAUDITED)
===================================================================================================================================
FOR THE SIX FOR THE YEAR FOR THE YEAR FOR THE YEAR MARCH 29, 1995*
MONTHS ENDED ENDED ENDED ENDED THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996 1995
------------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value per common share,
Beginning of period $ 237.07 $ 333.09 $ 741.42 $ 765.99 $ 1,000.00
-------- -------- -------- -------- ----------
Net investment income (loss) (a) (7.62) 20.16 224.83 262.06 (150.13)**
Net realized and unrealized gain (loss) (a) 46.56 (2.36) (17.90) 14.05 (83.88)**
-------- -------- -------- -------- ----------
Net increase (decrease) from investment operations 38.94 17.80 206.93 276.11 (234.01)
-------- -------- -------- -------- ----------
Less dividends & distributions: To common
shareholders from:
Net investment income -- (20.05) (213.98) (168.12) --
Net realized gains (39.45) -- -- (5.92) --
In excess of net realized gain -- -- -- (13.96) --
Return of capital (78.37) (93.66) (401.18) (112.68) --
To preferred shareholders from net
investment income -- (0.11) (0.10) -- --
-------- -------- -------- -------- ----------
(117.82) (113.82) (615.26) (300.68) --
-------- -------- -------- -------- ----------
Net asset value per common share, end of period $ 158.19 $ 237.07 $ 333.09 $ 741.42 $ 765.99
======== ======== ======== ======== ==========
TOTAL INVESTMENT RETURN (B) 16.43% 5.34% 27.91% 50.00% (23.40)%
RATIOS TO AVERAGE NET ASSETS
OF COMMON SHAREHOLDERS:
Operating expenses (d) 0.43% (c) 0.51% 0.54% 1.15% 10.78%(c)**
Net investment income (loss) (d) (6.76)(c) 6.64% 31.04% 33.17% (13.15)%(c)**
SUPPLEMENTAL DATA:
Average net assets of
common shareholders (in thousands) $165,773 $221,827 $500,489 $206,466 $ 47,282
Portfolio turnover -- -- 71% -- 27%
Net assets of common shareholders,
end of period (in thousands) $116,154 $173,038 $243,124 $359,236 $ 100,991
Asset coverage per share of preferred stock,
end of period (in thousands) $57 $85 $119 $176 --
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of investment operations.
** Restated to conform to 1996 presentation.
(a) Calculated based on average shares.
(b) The Fund is not a publicly traded entity, therefore, total investment
return is calculated assuming a purchase of a common share at net asset
value per share on the first day and a sale at net asset value per share on
tha last day of the period reported. Total investment return for periods of
less than one full year are not annualized.
(c) Annualized.
(d) The ratio of expenses and net investment income to total investor capital
commitments of $560,267,692 is 0.13% and (2.00)%, respectively, for the six
months ended June 30, 1999. The ratio of expenses and net investment income
to total investor capital commitments of $560,267,692 is 0.20% and 2.63%,
respectively, for the year ended December 31, 1998. The ratio of expenses
and net investment income to total investor capital commitments of
$560,267,692 is 0.48% and 27.73%, respectively, for the year ended December
31, 1997. The ratio of expenses and net investment income to total investor
capital commitments of $560,267,692 is 0.90% and 12.22%, respectively, for
the year ended December 31, 1996. The ratio of expenses and net investment
income to total investor capital commitments of $560,267,692 on an
annualized basis is 0.90% and (1.11)%, respectively, for the year ended
December 31, 1995.
Contained above is the unaudited operating performance based on an average
common share of beneficial interest outstanding, total investment return,
ratios to average net assets and other supplemental data, for the period
indicated. This information has been determined based upon financial
information provided in the financial statements.
See Notes to Consolidated Financial Statements.
<PAGE>
BLACKROCK ASSET INVESTORS (IN LIQUIDATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
BACKGROUND: BlackRock Asset Investors ("BAI" or the "Trust") is a
non-diversified closed-end investment company organized as a Delaware business
trust registered under the Investment Company Act of 1940. The Declaration of
Trust permits the Trustees to create a limited number of series (or "Funds"),
each of which issues a separate class of shares. The Trustees have established
BlackRock Fund Investors I, BlackRock Fund Investors II, and BlackRock Fund
Investors III. The Trust will seek to achieve high total returns primarily from
its investments in subordinated commercial mortgage-backed securities and other
investment securities and from its investment in its wholly-owned affiliate,
BlackRock Capital Finance L.P. ("BCF"), and other mortgage affiliates, which
will engage primarily in the business of pooling and repackaging performing
commercial mortgage loans as commercial mortgage-backed securities for
distribution to the Trust and its strategic coinvestors (Note 3) and for sale in
capital markets. In addition, BCF will work out distressed commercial and
residential mortgage loans. BCF is a Delaware limited partnership, with BAI as
the 99% General Partner, and Asset Investors Inc. ("AII") as the 1% Limited
Partner as of December 31, 1996. On January 1, 1997 BAI purchased 80% of AII's
BCF ownership. As of December 31, 1998 BAI owns a 99.8% general partnership
interest in BCF and AII owns a 0.2% limited partnership interest in BCF. BAI
consolidates AII under generally accepted accounting principals as it owns 100%
of AII outstanding shares.
The Trust and BCF invest in debt securities and the ability of issuers of
such debt securities held by the Trust and BCF to meet their obligations may be
affected by economic developments in a specific industry or region. No assurance
can be given that the Trust's investment objective will be achieved.
The following is a summary of significant accounting policies followed by
the Trust.
PLAN OF LIQUIDATION: On September 18, 1997 the Board of Trustees of BAI
("Trustees") approved a plan of liquidation ("Plan") and a technical amendment
to the terms of BAI's Preferred Shares to facilitate the Plan which was adopted
by the Shareholders on October 6, 1997 (Adoption Date). The Plan term runs two
years from the Adoption Date. The Plan requires the Trustees to oversee the
complete and orderly liquidation of BAI and wind-up the Trust. Any remaining
assets and liabilities may be deposited in a voting trust at any time before the
end of the Plan term. The liquidation of BAI in accordance with the Plan, will
result in distributions paid subsequent to the adoption date being characterized
for tax purposes first as a return of capital until a shareholder's basis is
reduced to zero, and then as capital gain. The character of distributions paid
prior to the adoption date are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
<PAGE>
INVESTMENT VALUATION: In valuing the Trust's assets, quotations of foreign
securities in a foreign currency are converted to U.S. dollar equivalents at the
then current currency value. The Trust values mortgage-backed and other debt
securities on the basis of current market quotations provided by dealers or
pricing services approved by the Trust's Board of Trustees. In determining the
value of a particular security, pricing services may use certain information
with respect to transactions in such securities, quotations from dealers, market
transactions in comparable securities, various relationships observed in the
market between securities, and calculated yield measures based on valuation
technology commonly employed in the market for such securities.
The Trust's investment in BCF is valued based on the equity of such entity
which entity reports on a fair value basis (see Note 3). BCF generally invests
in mortgage loans acquired as distressed or nonperforming which are valued at
current cost from the date of acquisition to the date on which a significant
event occurs, such as revaluation of the collateral, resolution of legal
impediments, bankruptcy of the borrower or restructuring of the loan. When a
significant event affecting valuation occurs, the mortgage loan is revalued on
the basis of such event and, if possible, is thereafter, valued on an analytical
basis rather than at cost basis.
Any securities or other assets, held by the Trust, for which current market
quotations are not readily available are valued at fair value as determined in
good faith under the Valuation Policy and Guidelines established by and under
the general supervision and responsibility of the Trust's Valuation Committee.
Short-term securities which mature in 60 days or less are valued at
amortized cost, if their term to maturity from date of purchase was 60 days or
less. Short-term securities with a term to maturity greater than 60 days from
the date of purchase are valued at current market quotations until maturity.
In connection with transactions in repurchase agreements, the Trust's
custodian takes possession of the underlying collateral securities, the value of
which at least equals the principal amount of the repurchase transaction,
including accrued interest. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked to market on a
daily basis to ensure the adequacy of the collateral. If the seller defaults and
the value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of the collateral by the
Trust may be delayed or limited.
FORWARD CURRENCY CONTRACTS: The Trust enters into forward currency contracts
primarily to hedge foreign currency risk. A forward contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. Risks may arise as a result of the potential inability of the counterparts
to meet the terms of their contract.
Forward currency contracts, when used by the Trust, help to manage the
overall exposure to the foreign currency backing many of the investments held by
the Trust. Forward currency contracts are not meant to be used to eliminate all
of the exposure to foreign currency, rather they allow the Trust to limit its
exposure to foreign currency.
Details of open forward currency sell contracts at June 30, 1999 are as
follows:
<TABLE>
<CAPTION>
VALUE AT
SETTLEMENT CONTRACT SETTLEMENT VALUE AT UNREALIZED
DATE TO SELL (000) DATE 06/30/99 APPRECIATION
---------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
08/18/99 FRF $ 4,127,088 $ 3,974,486 $ 152,602
============ ============= ==============
</TABLE>
<PAGE>
FOREIGN CURRENCY TRANSLATION: The books and records of the Trust are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(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 relevant rates of exchange prevailing on the respective
dates of such transactions
The Trust isolates that portion of gains and losses on investment
securities which is due to changes in the foreign exchange rates from that which
is due to changes in market prices of such securities.
The Trust reports certain foreign currency related transactions as
components of realized and unrealized gains for financial reporting purposes,
whereas such components are treated as ordinary income for federal income tax
purposes.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized and unrealized gains and losses are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis and the Trust amortizes premium or accretes discount on securities
purchased using the interest method. Net investment income and loss and net
realized gain and loss realized by BCF are recorded on a flow through basis by
the Trust.
TAXES: It is the Trust's intention to continue to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to shareholders. Therefore,
no federal income or excise tax provision is required for the Trust.
INVESTMENT ADVISORY, ADMINISTRATION AND OTHER EXPENSES: Investment advisory,
administration and other expenses are recorded on the accrual basis. Performance
fees, if any, are determined and recorded annually.
ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 2. AGREEMENTS
The Trust has an Investment Advisory Agreement with BlackRock Financial
Management, Inc. (the "Advisor") which provides that during the Commitment
Period the Trust will pay to the Advisor for its services a semi-annual fee, in
arrears, in an amount equal to .75% of the aggregate Capital Commitments, on an
annualized basis. Subsequent to the Commitment Period, the semi-annual fee
payable in arrears to the Advisor is reduced to .50% of the weighted average
capital invested during the relevant period on an annualized basis. In addition
to its management fee, the Trust will pay to the Advisor as of the first
anniversary of the commencement of the Trust's operations, as of each December
31 thereafter and as of the Trust's termination date a performance fee payable
only if certain criteria, as described in the Trust's Investment Advisory
Agreement, are met.
On December 6, 1996, the Board of Directors approved an amendment
(approved retroactive to January 1, 1996) to the Investment Advisory Agreement
which provided that during the Commitment Period the Trust and BCF each will pay
to the Advisor for its services a semi-annual fee, in arrears, in an amount
equal to .375% of the aggregate Capital Commitments on an annualized basis and
that subsequent to the Commitment Period, the semi-annual fee payable in arrears
to the Advisor, each by the Trust and BCF, is reduced to .25% of the weighted
average
<PAGE>
capital invested during the relevant period on an annualized basis and the
performance fee will be allocated between BCF and the Trust as determined by the
Trust.
The Trust has also entered into an Administration Agreement with State
Street Bank and Trust Company ("State Street") which provides that State Street
will receive an annual fee equal to .06% of the Trust's average net asset value
up to $225 million, .04% of the next $225 million and .02% thereafter, subject
to certain minimum requirements.
Pursuant to the agreements, the Advisor provides continuous supervision of
the investment portfolio and pays the compensation of officers of the Trust, who
are affiliated persons of the Advisor. State Street pays occupancy and certain
clerical and accounting costs of the Trust. The Trust bears all other costs and
expenses.
Certain trustees of the Trust and the Funds, who are not interested
parties, are paid a fee, which is split ratably between BAI and the Funds, for
their services in the amount of $40,000 each on an annual basis plus telephonic
meeting fees not to exceed $500 annually and certain out-of-pocket expenses.
NOTE 3. INVESTMENTS
Purchases and proceeds from sales of investment securities, other than
short-term investments, for the six months ended June 30, 1999, aggregated $0
and $51,841,725, respectively. The federal income tax basis of the investments
at June 30, 1999 was substantially the same as the basis for financial
reporting.
The Trust may invest without limit in securities which are not readily
marketable, including those which are restricted as to disposition under
securities law. At June 30, 1999 the Trust's direct and indirect investment in
BCF is illiquid.
BCF's summary financial information as of June 30, 1999 and for the six
months then ended is as follows:
ASSETS:
Performing and distressed real estate
and related assets $ 58,634,326
Cash, deposits and other real estate
related assets 30,240,423
Other assets 401,454
----------------
Total assets 89,276,203
LIABILITIES:
Accounts payable and accrued expenses (1,517,257)
PARTNERS' CAPITAL $ 87,758,946
================
REVENUE:
Investment income $ (3,043,767)
EXPENSES:
Expenses (2,497,244)
----------------
NET INVESTMENT LOSS (5,541,011)
----------------
NET REALIZED GAIN 12,103
NET CHANGE IN UNREALIZED DEPRECIATION (15,941,152)
----------------
NET DECREASE IN NET ASSETS
FROM OPERATIONS $ (21,470,060)
================
<PAGE>
On November 5, 1996, the Trust purchased warrants of Annington Homes Ltd. (AHL).
Each warrant is convertible into one share of AHL's common stock. On December
29, 1997 the Trust received approximately $34,778,642 on the warrants and
recorded income of approximately $32 million. The payment increased the
subscription price on the warrants from a nominal amount to approximately $6,350
per warrant. On March 3, 1999, the warrants were sold generating a realized gain
of $51,841,725.
NOTE 4. NOTES
The Trust has issued notes in the aggregate principal amount of $192,500 to
the Funds. The Notes pay interest at a per annum rate of 2.50% over the yield of
the one-year constant maturity Treasury, redeemable annually by the holder and
due on dissolution of the Trust
NOTE 5. CAPITAL
There are 200 million shares of $.01 par value common stock authorized. The
Trust may classify or reclassify any unissued shares of common stock into one or
more series of preferred stock. On December 26, 1996 the Trust reclassified and
issued 2,040 shares of preferred stock. The preferred stock has a liquidation
value of $500 per share plus any accumulated but unpaid dividends. Dividends are
cumulative and are paid annually at a rate which is equal to the treasury bill
rate as of the preceding December 1 plus 3.5%.
The Trust may not declare dividends or make other distributions on shares
of common stock or purchase any such shares if, at the time of the declaration,
distribution, or purchase, asset coverage with respect to the outstanding
Preferred Stock would be less than 200%.
The Preferred Stock is redeemable at the option of the Trust, in whole or
in part, at any time, for $500 per share plus any accumulated or unpaid
dividends whether or not declared.
The holders of Preferred Stock have voting rights equal to the holder of
common stock (one vote per share) and will vote together with holders of shares
of common stock as a single class. However, holders of Preferred Stock are also
entitled to elect two of the Trust's directors. In addition, the Investment
Company Act of 1940 requires that, along with approval by stockholders that
might otherwise be required, the approval of the holders of a majority of any
outstanding preferred shares, voting separately as a class would be required to
(a) adopt any plan of reorganization that would adversely affect the preferred
shares, and (b) take any action requiring a vote of security holders, including,
among other things, changes in the Trust's sub-classification as a closed-end
investment company or changes in its fundamental investment restrictions.
<PAGE>
TRUSTEES
Laurence D. Fink, CHAIRMAN
John C. Deterding
Donald G. Drapkin
Wesley R. Edens
Charles Froland
James Grosfeld
Laurence E. Hirsch
Thomas Ruggels
Kendrick R. Wilson, III
OFFICERS
Ralph L. Schlosstein, PRESIDENT
Wesley R. Edens, CHIEF OPERATING OFFICER
Robert I. Kauffman, MANAGING DIRECTOR
Randal A. Nardone, MANAGING DIRECTOR AND ASSISTANT SECRETARY
Erik P. Nygaard, MANAGING DIRECTOR
Henry Gabbay, TREASURER
Susan L. Wagner, SECRETARY
James Kong, ASSISTANT TREASURER
MASTER ADMINISTRATOR
BlackRock Financial Management, Inc.
345 Park Avenue
New York, NY 10154
ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
Two Heritage Drive
North Quincy, MA 02171
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281-1431
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
The accompanying financial statements as of June 30, 1999 were not audited and,
accordingly, no opinion is expressed on them.
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of BAI shares.
BLACKROCK ASSET INVESTORS
Two Heritage Drive
North Quincy, MA 02171
