Investment Outlook

Bob DollGlobal Equity CIO

The opinions presented are those of Bob Doll, BlackRock Vice Chairman and Global CIO of Equities as of February 2009 and may change as subsequent conditions vary. Individual portfolio managers for BlackRock may have opinions and/or make investment decisions that may, in certain respects, not be consistent with the information contained in this presentation. This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all inclusive and are not guaranteed as to accuracy. Past performance does not guarantee future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.

2

2008: A Year to be Both Forgotten and Remembered

1) Beginning of year consensus – global decoupling would “save the world” (and markets)

2) The U.S. and global economy sputtered along, but collapsed late in the year

3) Credit market “froze” and nearly brought the system down

4) Risk asset prices collapsed (including stocks, low quality bonds, and commodities)

5) U.S. Treasury instruments soared in price and collapsed in yields

6) Global monetary authorities engaged with record and unconventional force

7) Financial stocks were crushed as defensive sectors outperformed

8) Oil prices soared, then collapsed

9) Growth outperformed value, and small outperformed large

10)U.S. dollar fell initially, but then had a significant rally

3

2009 Main Theme

Deflation vs. Reflation

Debt induced Deflation vs. Policy induced Reflation

4

The U.S. economy faces its first nominal GDP decline in 50 years.1

Source: ISI Group

U.S. Nominal GDP

-4-202468

101214161820

1948 1958 1968 1978 1988 1998 2008

Real GDP

GDP Deflator

Nominal GDP

20081.2 2.2 3.4

2009-

2.0 1.0-

1.0

20101.8 1.4 3.2

5

The U.S. economy faces its first nominal GDP decline in 50 years.1

Source: FRB, Dresdner Kleinwort

Household Net Worth

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

53 56 59 62 65 68 71 74 77 80 83 86 89 92 95 98 01 04 07

Year-

over-

Year

Chan

ge

6

Global growth falls below 2% for the first time since 1991.2

Source: Brown Brothers Harriman

35

40

45

50

55

60

65

Mar

-06

Jun-

06

Sep-

06

Dec-

06

Mar

-07

Jun-

07

Sep-

07

Dec-

07

Mar

-08

Jun-

08

Sep-

08

Dec-

08

Eurozone Manufacturing PMI China Manufacturing PMI

(values greater than 50 indicate expansion)

US Manufacturing PMI

Decoupling has been proven false

7

Global growth falls below 2% for the first time since 1991.

GDP

2

2008 2009 2010

Global 2.8% 1.6% 3.0%

U.S. 1.2 -2.0 1.8

Euro Area 1.0 -1.5 1.0

Japan 0.2 -1.5 0.8

Emerging Markets

5.6 3.5 5.0

Source: Citigroup, Deutsche Bank, Goldman Sachs, BlackRock

8

Inflation falls close to zero in many developed countries, but widespread deflation is avoided.

3

Source:Source: Citigroup, Deutsche Bank, Goldman Sachs, BlackRock

2008 2009 2010

Global 5.4% 2.2% 2.6%

U.S. 3.8 0.0 0.8

Japan 1.4 -0.2 -0.2

Euro Area 3.3 1.0 1.5

Emerging Markets

8.6 5.0 5.5

CPI Inflation

9

Inflation falls close to zero in many developed countries, but widespread deflation is avoided.

Source: ISI

Deflation / Inflation?

US Monetary Base Y/Y%Money MultiplierMZM divided by Monetary Base

0

20

40

60

80

100

120

Oct-03 Oct-04 Oct-05 Oct-06 Oct-07 Oct-08

4.5

5.5

6.5

7.5

8.5

9.5

10.5

11.5

'89 '92 '95 '98 '01 '04 '07

3

10

The U.S. Treasury curve ends 2009 higher and steeper than where it began.

Reasons why treasury rates will move up in 2009

• Fear will lessen/confidence will pick up

• Monetary and fiscal policy will begin to reflate the economy

• Risk of dollar depreciation

• “Helicopter Ben” will print money as necessary

Fed release — December 16• “Stimulate the economy through open market operations

and other measures”

• “Use its balance sheet to further support economic activity”

4

11

Earnings fall by a double-digit percentage again in 2009, the first back-to-back years since the 1930s.

5

Source: Sanford Bernstein, Goldman Sachs, JPMorgan, BlackRock

Reported Earnings

2007 $66.18 -

2008 $52.00 -21%

2009 $46.00 -12%

2010

Operating Earnings

Bottom-Up Consensus

$82.54 - - -

$68.00 -18% $72 -13%

$55 – 60 -15% $82 +14%

$70 - 75 +26% $96 +17%

12

High yield, municipal, and investment grade corporate bond spreads narrow in 2009.

6

Source: Federal Reserve Bank of St. Louis, JP Morgan

Corporate High Grade Spreads to Ten-Year Treasuries

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

'19 '24 '29 '34 '39 '44 '49 '54 '59 '64 '69 '74 '79 '84 '89 '94 '99 '04 '09

Moody's BAA less Treasuries

13

U.S. stocks record a double-digit percentage gainin 2009.

The case for an equity market bottomFundamental• Record monetary stimulus• Record fiscal stimulus• Massive impact of ⅔ decline in price of oil

Valuation• Stocks selling at 60% of GDP• ⅔ of stocks with P/E ratios <10x• Stocks yielding more than Treasury bonds (first time in 50 years)

Technical/Sentiment• October 10/November 21 bottoming sequence• Record cash as a percentage of equity market value on sidelines• Insider buy/sell ratio

7

14Source: Morgan Stanley

7

Valuations – Back to Recession LevelsS&P 500 Close to 60-year Trough P/E Valuations

5

10

15

20

25

30

35

40

45

1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006

Graham-Dodd P/ E (10yr rolling

earnings)

U.S. stocks record a double-digit percentage gainin 2009.

15

U.S. stocks record a double-digit percentage gainin 2009.

0

2

4

6

8

10

12

14

16

18

20

Avera

ge L

TM

P/E

P/E multiples fluctuate with inflation

14.7x 14.9x13.7x

17.0x17.8x

16.6x

14.9x

13.3x

11.1x

9.5x

Headline CPI Band

-2% &below

-2% -to -1%

-1% toto 0%

0% to1%

1% to 2%

2% to3%

3% to4%

4% to5%

5% to6%

6% &above

Data 1927-2008Source: Robert Shiller, Standard & Poor’s, Goldman Sachs Research

(x)

7

16

U.S. stocks record a double-digit percentage gainin 2009.

7

Source: Merrill Lynch

-4%-3%-2%-1%0%1%2%3%4%5%6%7%

2/ 76 5/ 78 8/ 80 11/ 82 2/ 85 5/ 87 8/ 89 11/ 91 2/ 94 5/ 96 8/ 98 11/ 00 2/ 03 5/ 05 8/ 07

US Stocks Look Attractive Relative to BondsFed Model - S&P 500 Earnings Yield Minus 10-Year Treasury Yield

17

U.S. stocks record a double-digit percentage gainin 2009.

7

Source: JP Morgan, AMG and Federal Reserve

Money Market Funds as % Wilshire 5000

0%5%

10%15%20%25%30%35%40%45%50%

3/ 74 3/ 79 3/ 84 3/ 89 3/ 94 3/ 99 3/ 04 3/ 09

18

U.S. stocks record a double-digit percentage gainin 2009.

7

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

Feb-03 Sep-03 Apr-04 Nov-04 J un-05 J an-06 Aug-06 Mar-07 Oct-07 May-08 Dec-08

Data: 8-week moving average

Source: Argus Vickers, Credit Suisse

Insider Buy/Sell ratio

19

U.S. stocks record a double-digit percentage gainin 2009.

7

Source: Bloomberg, Compustat and Goldman Sachs Research

S & P 500 Bear Markets Returns AFTER the Trough

Peak Trough

Lengthin

MonthsTotal

Decline

1 month after

Trough

3 months

afterTrough

6 months after

Trough

12 months

afterTrough

Years toRecover

7-Sept-29

1-June-32 33 (86)% 5% 93% 53% 121% 22.3

10-Mar-37

28-Apr-42 62 (60)% 10% 15% 25% 54% 3.8

29-May-46

13-Jun-49 37 (30)% 9% 16% 23% 42% 1.0

2-Aug-56 22-Oct-57 15 (22)% 5% 6% 10% 31% 0.9

12-Dec-61

26-Jun-62 6 (28)% 9% 7% 20% 33% 1.2

9-Feb-66 7-Oct-66 8 (22)% 10% 12% 22% 33% 0.6

29-Nov-68

26-May-70

18 (36)% 6% 17% 23% 44% 1.8

11-Jan-73

3-Oct-74 21 (48)% 19% 14% 31% 38% 5.8

28-Nov-80

12-Aug-82

20 (27)% 18% 36% 44% 58% 0.2

25-Aug-87

4-Dec-87 3 (34)% 14% 19% 19% 21% 1.6

16-Jul-90 11-Oct-90 3 (20)% 6% 7% 28% 29% 0.3

24-Mar-00

9-Oct-02 31 (49)% 15% 19% 11% 34% 4.6

9-Oct-0720-Nov-08

13 (52)% 7%

HistoricalAverage

21 (38)% 10% 22% 26% 45% 1.4

After a bear market, the S&P 500 has typically rebounded quickly

Median

Past performance is no guarantee of future results

20

U.S. stocks record a double-digit percentage gainin 2009.

Y/E 2009 Target

2010 Earnings Estimate $70 – 75

Target Multiple 14x

S&P 500 Target 1000 - 1050

7

21

U.S. stocks outperform European stocks while emerging markets outperform developed ones.

Percent of Markets Outperforming the U.S. Market(%

)

5

5245

17

71

50 5260 62

74

93

7671

20

0

10

20

30

40

50

60

70

80

90

100

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: Merrill Lynch Investment Strategy, MSCI

8

Past performance is no guarantee of future results

22

U.S. stocks outperform European stocks while emerging markets outperform developed ones.

Europe in worse shape than U.S• Later to experience economic weakness

• Much later to lower rates

• Household indebtedness high

• Banks slower to clean up balance sheets

• Disunity in fiscal policy plans

U.S. has better growth prospects• Population/work force growth

• Better capital allocation

• Easier fluidity of capital

• More transparent capital markets

8

23

U.S. stocks outperform European stocks while emerging markets outperform developed ones.

Emerging Markets to Outperform• Downturn more cyclical inventory related, less secular

credit related

• The long-term story

— Growing population, growing middle class/consumer class, improving productivity, rising education levels/standards of living, faster economic growth, net savers/not net spenders

• Stock markets down by ½ to ⅔ (compared to approximately 50% for developed world)

8

24

Energy, Healthcare, and Information Technology to outperform Utilities, Financials, and Materials.

9

OVERWEIGHTS UNDERWEIGHTS

Energy Utilities

• Valuations cheap• Geopolitical insurance• Long-term supply/demand problem

• Cash flow deteriorating, no dividend growth

• Expensive relative to market• Diversification questions marks

Healthcare Financials

• Defensive characteristics/predictability

• Earnings growth/attractive valuations• Political risks to back burner

• Ongoing credit market turmoil• Excess capacity/consolidation• Structural

uncertainties/regulatory changes

Information Technology Materials

• Conservative management (cash, cash flow, earnings)

• Fewer cutbacks than usual• Relatively inexpensive

• Too leveraged to global growth• Earnings risk high• Deteriorating balance sheets

25

Stock market volatility remains elevated as periodic double-digit percentage rallies and declines occur.

10

Source: The Leuthold Group

Annual Occurrence of 3% or Greater Moves

0%

5%

10%

15%

20%

25%

30%

35%

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

1900 To Date

Note: 1900-1925 DJIA, 1926 to present S&P 500

26

Stock market volatility remains elevated as periodic double-digit percentage rallies and declines occur.

Diversification Failed in 2008!

Source: Strategas Research Partners

Rolling 12-Month Correlations to S&P 500

S&PSmall-

Cap

S&PMid-Cap

MSCIEAFE

MSCIEmergin

gMarkets

CrudeOil

12/31/2003 85.3% 86.3% 87.6% 74.2% -21.5%

12/31/2004 83.3% 93.8% 72.1% 61.9% -55.5%

12/31/2005 92.6% 95.9% 71.0% 77.1% 3.3%

12/31/2006 74.6% 81.2% 80.7% 83.8% -2.6%

12/31/2007 89.3% 89.6% 87.7% 51.4% -8.0%

Current 96.0% 98.1% 92.5% 83.5% 68.4%

10

Past performance is no guarantee of future results

27

Oil and other commodities bottom and move higher by year end as emerging market economies begin to recover.

Commodities to bottom and go up• Commodity bubble has been deflated with prices back to

cash production costs

• Exploration/development will be curtailed at current prices (supply curtailed) while demand will be re-stimulated (demand is renewed)

• Commodity markets generally in contango

11

28

The U.S. Federal budget deficit soars past$1 trillion as the government continues to grow.

12

Source: Office of Management and Budget, Merrill Lynch

-12

-10

-8

-6

-4

-2

0

2

4

'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09

Federal Budget Deficit to SoarFederal budget deficit / surplus as a share of GDP

29

The U.S. Federal budget deficit soars past$1 trillion as the government continues to grow.

Risks to financing the spending!• Dollar

• Interest Rates

• Inflation (running the printing press)

Note• Aside from short-term crisis in spending, ……….

— Social Security, Medicare, and Medicaid now comprise almost half of non-interest spending (and are all growing faster than tax revenues)

— National debt will pass 100% of GDP within 25 years (now less than 40%) if structural changes are not made

— This limits Obama administration’s plans to increase health insurance coverage, build infrastructure, increase energy research, add to education spending, etc, etc, etc

— Tax rates

12

30

Economic recovery and subsequent growth is muted as consumer spending shrinks as a percentage of the U.S. economy.

Anemic Recovery and Below-Trend Growth• Residential real estate losses reduce borrowing capability by

consumer

• Consumption will come more from income and less from asset appreciation

• Savings rate will rise

• Corporations reluctant to raise capital to invest at higher costs/lower prices

• Reluctant banking system/additional regulation

• Leveraging took years/de-leveraging will too

LT-1

31

U.S. Today U.S. 1930s

Money Supply • Being raised significantly

• Contracted by one-third

Fiscal Stimulus • Record stimulus coming next year

• WPA not established until 1935

Trade Barriers • Reasonably low (hopefully to stay)

• Tariff War (Smoot-Hawley)

Bank Failures • So far, only several hundred failures

• Nearly 10,000 failed banks

Unemployment • Worst forecasts ≈10% • Peaked at 25% in 1933

Evidence accumulates that the U.S. is not following the script for the 1930s or the Japan one of the 1990s.

LT-2

U.S. Today Japan 1990s

Monetary Policy • Accommodative/Reflationary

• Tight/Deflationary

Fiscal Policy • Significant stimulus coming

• Taxes were raised

Corporate Adjustment Process

• Significant cost cutting • Little change made

Bad Debt Problems • Massive write-offs • Little action taken

Residential Real Estate Price Declines

• 20% (to date) • More than 50%

32

5 Year Periods of Negative Returns

Returns Next 5 Years

1927-31 -5.1% 22.5%

1928-32 -12.5% 14.3%

1929-33 -11.2% 10.7%

1930-34 -9.9% 10.9%

1937-41 -7.5% 17.9%

1970-74 -2.4% 14.8%

1973-77 -0.2% 14.1%

1998-02 -0.6% 12.8%

Average 14.8%

Worst 10.7%

S&P 500 History

LT-3After ten years of stock market stagnation, equities begin a stronger ten-year period.

Past performance is no guarantee of future results

33

Worst Ten Year S&P 500 Periods

Prior 10 Year Next 10 Years

-3.65% Q2 1939 to Q2 1949 8.62%-2.79 Q1 1939 to Q1 1949 9.12-2.74 Q3 1939 to Q3 1949 7.74-2.54 Q1 1938 to Q1 1948 11.76-1.42 Q1 1940 to Q1 1950 9.65-1.42 Q2 1940 to Q2 1950 12.19-0.65 Q4 1938 to Q4 1948 7.21-0.10 Q3 1938 to Q3 1948 8.120.18 Q3 1940 to Q3 1950 12.570.20 Q4 1937 to Q4 1947 9.610.23 Q4 1939 to Q4 1949 9.090.44 Q2 1938 to Q2 1948 9.520.49 Q3 1974 to Q3 1984 15.580.71 Q1 1941 to Q1 1951 14.471.24 Q4 1974 to Q4 1984 14.76

Average 10.67Worst 7.21

S&P 500 History

Source: The Leuthold Group

LT-3After ten years of stock market stagnation, equities begin a stronger ten-year period.

Past performance is no guarantee of future results

34

2009 Investment Outlook

Probability

RecoveryEvident

Y/E 09Fed Funds

2009S&P 500

EPSY/ES&P

Normal Recession 10% Mid-Year 09

50 - 100 b.p.

$70 – 751150 - 1250

Nasty Recession 70% 2H 09 0 - 50 b.p. $55 – 601000 - 1050

Deflation/Depression

20% 2010+ 0 $40 - 50500 - 700

Scenario Forecasting

Normal Recession• Monetary and fiscal policy stimulus work well• Credit markets thaw quickly• Residential real estate prices stop falling 1H09

Nasty Recession• Policy impacts help irregularly and with a lag• Credit markets improve slowly• Systemic deflation is avoided

Deflation/Depression• Deflation permeates• Credit markets do not improve• Real and nominal growth stays negative

Prepared by BlackRock Investments, Inc., member FINRA.©2009 BlackRock, Inc. All Rights reserved.BlackRock is a registered trademark of BlackRock, Inc.