The investment objectives of the Money Fund are to seek current income, preservation of capital and
liquidity
.
The Money Fund tries to achieve its objectives by investing in a diversified portfolio of U.S. dollar-denominated
short term securities
. These securities consist primarily of short term
U.S. Government securities
,
U.S. Government agency securities
, securities issued by
U.S. Government sponsored enterprises
and
U.S. Government instrumentalities
, bank obligations, commercial paper, including asset backed commercial
paper, corporate notes and
repurchase agreements
. The Fund may also invest in obligations of domestic and foreign banks and other short term debt securities issued by U.S. and foreign entities. The Fund may invest up to 25% of its
total assets in foreign bank money instruments. The Funds dollar-weighted average
maturity
will not exceed 90 days.
Other than U.S. Government and certain U.S. Government agency securities and certain securities issued by U.S. Government sponsored enterprises or instrumentalities, the Money Fund only invests in short term securities that have one of the two
highest short term ratings from a nationally recognized rating agency or unrated instruments that Fund management determines, pursuant to authority delegated by the Board of Trustees, are of similar credit quality. Certain short term securities are
entitled to the benefit of guarantees, letters of credit or similar arrangements provided by a financial institution. When this is the case, Fund management may consider the obligation of the financial institution and its creditworthiness in
determining whether the security is an appropriate investment for the Fund.
Fund management, as delegated by the Funds Board of Trustees, decides which securities to buy and sell based on its assessment of the relative values of different securities and future interest rates. Fund management seeks to improve the Money
Funds yield by taking advantage of yield differentials that regularly occur between securities of a similar kind.
The Money Fund is a feeder fund that invests all of its assets in a master fund, Master Money LLC (the Money LLC), that has the same investment objectives and strategies as the Money Fund. All investments are made
at the Money LLC level. This structure is sometimes called a master/feeder structure. The Money Funds investment results will correspond directly to the investment results of the Money LLC. For simplicity, this Prospectus uses the
term Money Fund to include the Money LLC.
The Money Fund cannot guarantee that it will achieve its objectives.
An investment in the Money Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Money Fund may lose money if the issuer of an instrument held by the Fund defaults or if short term
interest rates rise sharply in a manner not anticipated by Fund management. Although the Money Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
Shares of the Money Fund are offered to subscribers in the Cash Management Account (CMA) financial service (CMA service), which includes a CMA account and an optional Beyond Banking (Beyond Banking) account; investors in certain other Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch) central asset account programs and investors maintaining accounts directly with Financial Data Services, Inc. (the Transfer Agent).
The bar chart and table below provide an indication of the risks
of investing in the Money Fund. The bar chart shows changes in the Money Funds
performance for the past ten calendar years. Information for the periods before
February 2003 was prior to the Money Funds change to a master/feeder
structure. The table shows the average annual total returns of the Money Fund
for the periods shown. How the Fund performed in the past is not necessarily
an indication of how the Money Fund will perform in the future.
During the period shown in the bar chart, the highest return for a quarter was 1.53% (quarter ended December 31, 2000) and the lowest return for a quarter was 0.14% (quarter ended December 31, 2003). The year-to-date return as of June 30, 2008 was 1.57%.
This table shows the different fees and expenses that you may pay if you buy
and hold shares of the Money Fund. Future expenses may be greater or less than
those indicated below.
This example is intended to help you compare the cost of investing in the Money Fund with the cost of investing in other money market funds.
This example assumes that you invest $10,000 in the Money Fund for the time periods indicated, that your investment has a 5% return each year and that the Funds operating expenses remain the same. These assumptions are not meant to indicate that you will receive a 5% annual rate of return. Your annual return may be more or less than the 5% used in this example. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
This example does not take into account the fees charged by Merrill Lynch to CMA service subscribers or other Merrill Lynch central asset account program subscribers. See the relevant account disclosures and agreements for details. Shareholders of the Money Fund whose accounts are maintained directly with the Funds Transfer Agent and who are not subscribers to the CMA service or other Merrill Lynch central asset account programs will not be charged a program fee but will not receive any of the additional services available to subscribers.
The Government Funds investment objectives are to seek preservation of capital, current income and
liquidity
.
The Government Fund tries to achieve its objectives by investing exclusively in a diversified portfolio made up only of
short term U.S. Government securities
, including variable rate securities, and
repurchase agreements
with banks and securities dealers that involve direct U.S. Government obligations. The Fund will provide shareholders with at least 60 days prior written notice before changing this strategy.
Fund management, as delegated by the Funds Board of Trustees, decides which of these securities to buy and sell based on its assessment of the relative values of various short term U.S. Government securities and repurchase agreements, as well
as future interest rates. The Funds dollar-weighted average
maturity
will not exceed 90 days.
The Government Fund is a feeder fund that invests all of its assets in a master fund, Master Government LLC (the Government LLC), that has the same investment objectives and strategies as the Government Fund. All
investments will be made at the Government LLC level. This structure is sometimes called a master/feeder structure. The Government Funds investment results will correspond directly to the investment results of the Government LLC.
For simplicity, this Prospectus uses the term Government Fund to include the Government LLC.
The Government Fund cannot guarantee that it will achieve its objectives.
An investment in the Government Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Government Fund may lose money if short term interest rates rise sharply in a manner not anticipated
by Fund management. Although the Government Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
Shares of the Government Fund are offered to subscribers in the CMA service, which includes a CMA account and an optional Beyond Banking account, investors in certain other Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch) central asset account programs and investors maintaining accounts directly with Financial Data Services, Inc. (the Transfer Agent).
The bar chart and table below provide an indication of the risks of investing in the Government Fund. The bar chart shows changes in the Government Funds performance for the past ten calendar years. Information for the periods before February 2003 was prior to the Government Funds change to a master/feeder structure. The table shows the average annual total returns of the Government Fund for the periods shown. How the Fund performed in the past is not necessarily an indication of how the Government Fund will perform in the future.
During the period shown in the bar chart, the highest return for a quarter was 1.48% (quarter ended December 31, 2000) and the lowest return for a quarter was 0.12% (quarter ended June 30, 2004). The year-to-date return as of June 30, 2008 was 0.90%.
This table shows the different fees and expenses that you may pay if you buy
and hold shares of the Government Fund. Future expenses may be greater or less
than those indicated below.
This example is intended to help you compare the cost of investing in the Government Fund with the cost of investing in other money market funds.
This example assumes that you invest $10,000 in the Government Fund for the time periods indicated, that your investment has a 5% return each year and that the Funds operating expenses remain the same. These assumptions are not meant to indicate that you will receive a 5% annual rate of return. Your annual return may be more or less than the 5% used in this example. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
This example does not take into account the fees charged by Merrill Lynch to CMA service subscribers or other Merrill Lynch central asset account program subscribers. See the relevant account disclosures and agreements for details. Shareholders of the Government Fund whose accounts are maintained directly with the Funds Transfer Agent and who are not subscribers to the CMA service or other Merrill Lynch central asset account programs will not be charged a program fee but will not receive any of the additional services available to subscribers.
The Treasury Funds investment objectives are to seek preservation of capital,
liquidity
and current income.
The Treasury Fund tries to achieve its objectives by investing exclusively in a diversified portfolio made up only of
short term U.S. Treasury securities
that are direct obligations of the U.S. Treasury. The Fund will provide
shareholders with at least 60 days prior written notice before changing this strategy.
Fund management, as delegated by the Funds Board of Trustees, decides which U.S. Treasury securities to buy and sell based on its assessment of their relative values and future interest rates. The Funds dollar-weighted average
maturity
will not exceed 90 days.
The Treasury Fund is a feeder fund that invests all of its assets in a master fund, Master Treasury LLC (the Treasury LLC), which has the same investment objectives and strategies as the Treasury Fund. All
investments will be made at the Treasury LLC level. This structure is sometimes called a master/feeder structure. The Treasury Funds investment results will correspond directly to the investment results of the Treasury LLC. For
simplicity, this Prospectus uses the term Treasury Fund to include the Treasury LLC.
The Treasury Fund cannot guarantee that it will achieve its objectives.
An investment in the Treasury Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund may lose money if short term interest rates rise sharply in a manner not anticipated by Fund
management. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
Shares of the Treasury Fund are offered to subscribers in the CMA service, which includes a CMA account and an optional Beyond Banking account; investors in certain other Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch) central asset account programs and investors maintaining accounts directly with Financial Data Services, Inc. (the Transfer Agent).
The bar chart and table below provide an indication of the risks of investing in the Treasury Fund. The bar chart shows changes in the Treasury Funds performance for the past ten calendar years. Information for the periods before February 2003 was prior to the Treasury Funds change to a master/feeder structure. The table shows the average annual total returns of the Treasury Fund for the periods shown. How the Fund performed in the past is not necessarily an indication of how the Treasury Fund will perform in the future.
During the period shown in the bar chart, the highest return for a quarter was 1.40% (quarter ended December 31, 2000) and the lowest return for a quarter was 0.08% (quarter ended March 31, 2004). The Funds year-to-date return as of June 30, 2008 was 0.82%.
This example is intended to help you compare the cost of investing in the Treasury Fund with the cost of investing in other money market funds.
This example assumes that you invest $10,000 in the Treasury Fund for the time periods indicated, that your investment has a 5% return each year and that the Funds operating expenses remain the same. These assumptions are not meant to
indicate that you will receive a 5% annual rate of return. Your annual return may be more or less than the 5% used in this example. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
This example does not take into account the fees charged by Merrill Lynch to CMA service subscribers or other Merrill Lynch central asset account program subscribers. See the relevant account disclosures and agreements for details. Shareholders of
the Fund whose accounts are maintained directly with the Transfer Agent and who are not subscribers to the CMA service or other Merrill Lynch central asset account programs will not be charged a program fee but will not receive any of the additional
services available to subscribers.
The yield on a Funds shares normally will fluctuate on a daily basis. Therefore, yields for any given past periods are not an indication or representation of future yields. Each Funds yield is affected by changes in interest rates,
average portfolio maturity, the types and quality of portfolio securities held and operating expenses. Current yield information may not provide the basis for a comparison with bank deposits or other investments, which pay a fixed yield over a
stated period of time, and may not be comparable to the yield on shares of other money market funds. To obtain each Funds current 7-day yield, call 1-800-441-7762.
The Money Fund seeks current income, preservation of capital and liquidity.
The Fund tries to achieve its objectives by investing in a diversified portfolio of short term securities. These instruments are U.S. dollar-denominated short term securities that mature or reset to a new interest rate within 13 months. The
Funds dollar-weighted average maturity will not exceed 90 days.
Other than U.S. Government and certain U.S. Government agency securities and certain securities issued by U.S. Government sponsored enterprises or instrumentalities, the Fund only invests in short term securities that have one of the two highest
short term ratings from a nationally recognized rating agency or unrated instruments that Fund management determines, pursuant to authority delegated by the Board of Trustees, are of similar credit quality. Certain short term securities are entitled
to the benefit of guarantees, letters of credit or similar arrangements provided by a financial institution. When this is the case, Fund management may consider the obligation of the financial institution and its creditworthiness in determining
whether the security is an appropriate investment for the Fund.
Fund management will vary the types of short term securities in the Money Funds portfolio, as well as the Funds average maturity. Fund management decides which securities to buy and sell based on its assessment of the relative value of
different securities and future interest rates. Fund management seeks to improve the Funds yield by taking advantage of differences in yield that regularly occur among similar kinds of securities.
Obligations of commercial banks or
other depository institutions, such as certificates of deposit, bankers
acceptances, bank notes and time deposits. The Fund may invest only in obligations
of savings banks and savings and loan associations organized and operating in
the United States. The obligations of commercial banks may be
. The Money Fund
may invest in Eurodollar obligations only if they, by their terms, are general
obligations of the U.S. parent bank.
The Money Fund also may invest up to 25% of its total assets in bank money instruments issued by foreign depository institutions and their foreign branches and subsidiaries.
The Money Fund may invest up to 10% of its net assets in illiquid securities.
The Money Fund may also lend its portfolio securities.
The Government Fund seeks preservation of capital, current income and liquidity.
The Fund tries to achieve its objectives by investing in a diversified portfolio of short term marketable securities that are direct U.S. Government obligations. This policy is a non-fundamental policy of the Government Fund and may not be changed
without 60 days prior written notice to shareholders. The Fund also enters into repurchase agreements with banks and securities dealers that involve direct obligations of the U.S. Government.
In seeking to achieve the Funds objectives, Fund management varies the kinds of short term U.S. Government securities held in the Funds portfolio as well as its average maturity. Fund management decides on which securities to buy and
sell, as well as whether to enter into repurchase agreements, based on its assessment of their relative values and future interest rates.
The Fund may only invest in short term U.S. Government securities that are issued or guaranteed by U.S. Government entities and are backed by the full faith and credit of the United States, such as:
The Government Fund may invest in short term U.S. Government securities with maturities of up to 397 days (13 months). The Funds dollar-weighted average maturity will not exceed 90 days.
The Fund may also enter into repurchase agreements involving U.S. Government securities described above. The Fund may also invest in the U.S. Government securities described above pursuant to purchase and sale contracts.
The Government Fund may buy and sell U.S. Government securities on a when issued, delayed delivery or forward commitment basis. In these transactions, the Fund buys or sells a security at an established price with payment and delivery taking place
in the future. The value of the security on the delivery date may be more or less than its purchase or sale price.
The Treasury Fund seeks preservation of capital, liquidity and current income.
The Fund tries to achieve its objectives by investing exclusively in a diversified portfolio of short term marketable securities that are direct obligations of the U.S. Treasury. This policy is a non-fundamental policy of the Treasury Fund and will
not be changed without at least 60 days prior written notice to shareholders.
The Fund may invest in short term U.S. Treasury securities with maturities of up to 397 days (13 months). The Funds dollar-weighted average maturity will not exceed 90 days.
In seeking to achieve the Funds objectives, Fund management varies the kinds of short term U.S. Treasury securities held in the Funds portfolio and its average maturity. Fund management decides which U.S. Treasury securities to buy and
sell based on its assessment of their relative values and future interest rates.
The Treasury Fund may buy or sell U.S. Treasury securities on a when issued, delayed delivery or a forward commitment basis. In these transactions, the Fund buys or sells a security at an established price with payment and delivery taking place in
the future. The value of the security on the delivery date may be more or less than the purchase or sale price.
This section contains a summary discussion of the general risks of investing in the Funds. As with any fund, there can be no guarantee that a Fund will meet its objective or that a Funds performance will be positive for any period of time.
Additionally, securities issued or guaranteed by the U.S. Government, its agencies, instrumentalities and sponsored enterprises have historically involved little risk of loss of principal if held to maturity. However, due to fluctuations in interest
rates, the market value of such securities may vary during the period shareholders own shares of the Funds.
Restricted securities may be illiquid. A Fund may be unable to sell them on short notice or may be able to sell them only at a price below current value. Also, a Fund may get only limited information about the issuer of a restricted security, so it
may be less able to predict a loss. In addition, if Fund management receives material nonpublic information about the issuer, the Fund may as a result be unable to sell the securities.
If you would like further information about the Funds, including how each Fund invests, please see the Statement of Additional Information.
For a discussion of each Funds policies and procedures regarding the selective disclosure of its portfolio holdings, please see the Statement of Additional Information.
The CMA service includes a CMA account and an optional Beyond Banking account. The CMA account and the Beyond Banking account are conventional Merrill Lynch cash securities or margin securities accounts that are linked to money market deposit accounts maintained with banks, certain money market funds and a card/check account.
Subscribers to the CMA service are charged an annual program participation fee, and may also be subject to applicable subaccount fees and certain transaction fees, optional services fees, and/or miscellaneous fees depending upon the account
activities, features and services selected. Automatic deposit or investment of free cash balances in CMA and Beyond Banking accounts into certain bank accounts or, if applicable, money market funds is a feature of the CMA service commonly known as a sweep.
Free cash balances held in CMA accounts and Beyond Banking accounts may be swept into one or more bank deposit accounts at affiliated banks of Merrill Lynch or, for eligible accounts, into shares of other money market funds not offered by this prospectus. Free cash
balances in CMA accounts and Beyond Banking accounts may not be swept into the Money Fund, the Government Fund or the Treasury Fund (collectively referred to in this Prospectus as the Funds); however CMA service subscribers may make manual investments
in the Funds as described in this Prospectus. The Funds, together with other money market funds linked to the CMA service, are collectively referred to as the CMA Funds.
The CMA service is offered by Merrill Lynch (not the Funds). This Prospectus provides information concerning the Funds, but is not intended to provide detailed information concerning the CMA service. If you want more information about the CMA
service, applicable terms and conditions and associated fees, please review the CMA
®
Financial Service, Cash Management Account
®
, Beyond Banking
®
Account disclosures and account agreement.
Shares of the Funds may also be offered to subscribers in certain other Merrill Lynch central asset account programs that may have different sweep features and annual participation fees. For more information about other Merrill Lynch central asset
account programs, consult the relevant program description brochure provided to investors in those programs.
The Funds are money market funds, shares of which are offered to participants in the CMA service as well as certain other Merrill Lynch central asset account programs. Each CMA Fund is a money market fund that seeks current income, preservation of
capital and liquidity available from investing in short term securities.
Each Fund has its own investment objectives, investment strategies and risks. We cannot guarantee that any Fund will achieve its objectives.
The chart on the following pages summarizes how to buy, sell and transfer shares of each Fund through Merrill Lynch or other securities dealers. You may also buy, sell and transfer shares through the Transfer Agent. To learn more about buying,
selling and transferring shares through the Transfer Agent, call 1-800-441-7762. Because the selection of a mutual fund involves many considerations, your Merrill Lynch Financial Advisor may help you with this decision.
Because of the high cost of maintaining smaller accounts, each Fund may redeem shares in your account if the net asset value of your account falls below $1,000 due to redemptions you have made. You will be notified that the value of your account
is less than $1,000 before a Fund makes an involuntary redemption. You will then have 60 days to make an additional investment to bring the value of your account to at least $1,000 before the Fund takes any action. This involuntary
redemption does not apply to Uniform Gifts or Transfers to Minors Act accounts.
For more information, see the Statement of Additional Information.
Market timing is an investment technique involving frequent short-term trading of mutual fund shares designed to exploit market movements or inefficiencies in the way a mutual fund prices its shares. The Board of Trustees has evaluated the risks of
market timing activities by each Funds shareholders and has determined that due to (i) each Funds policy of seeking to maintain the Funds net asset value per share at $1.00 each day, (ii) the nature of each Funds
portfolio holdings, and (iii) the nature of each Funds shareholders, it is unlikely that (a) market timing would be attempted by a Funds shareholders or (b) any attempts to market time a Fund by shareholders would result in a negative
impact to the Fund or its shareholders. As a result, the Boards of Trustees have not adopted policies and procedures to deter short-term trading in the Funds.
Each Fund is subject to the USA PATRIOT Act (the Patriot Act). The Patriot Act is intended to prevent the use of the U.S. financial system in furtherance of money laundering, terrorism or other illicit activities. Pursuant to
requirements under the Patriot Act, a Fund may request information from shareholders to enable it to form a reasonable belief that it knows the true identity of its shareholders. This information will be used to verify the identity of investors or,
in some cases, the status of financial advisers; it will be used only for compliance with the requirements of the Patriot Act. Each Fund reserves the right to reject purchase orders from persons who have not submitted information sufficient to allow
the Fund to verify their identity. Each Fund also reserves the right to redeem any amounts in the Fund from persons whose identity it is unable to verify on a timely basis. It is each Funds policy to cooperate fully with appropriate regulators
in any investigations conducted with respect to potential money laundering, terrorism or other illicit activities.
BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, Clients) and to safeguarding their nonpublic personal information. The following information is provided to
help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.
If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws,
rules or regulations.
BlackRock obtains or verifies personal nonpublic information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other
documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.
BlackRock does not sell or disclose to nonaffiliated third parties any nonpublic personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These
nonaffiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to nonpublic personal
information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the nonpublic personal information of its
Clients, including procedures relating to the proper storage and disposal of such information.
Each Fund has adopted a plan (the Plan) that allows the Fund to pay distribution fees for the sale of its shares under Rule 12b-1 of the Investment Company Act of 1940, as amended.
Under each Plan, Fund shares pay a fee (distribution fee) to Merrill Lynch, Pierce, Fenner & Smith Incorporated (the Distributor), and/or affiliates of The PNC Financial Services Group, Inc. (PNC) or Merrill
Lynch & Co., Inc. (including BlackRock) for distribution and sales support services. The distribution fee may be used to pay the Distributor for distribution services and to pay the Distributor and affiliates of PNC or Merrill Lynch & Co.,
Inc. (including BlackRock) for sales support services provided in connection with the sale of shares. The distribution fee may also be used to pay brokers, dealers, financial institutions and industry professionals (including BlackRock, PNC, Merrill
Lynch & Co., Inc. and their affiliates) (Service Organizations) for sales support services and related expenses. Fund shares pay a maximum distribution fee per year that is a percentage of the average daily net asset value of the
Fund attributable to such shares.
Because the fees paid by a Funds shares under the Plan are paid out of Fund
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
The Plans permit BlackRock, the Distributor and their affiliates to make payments relating to distribution and sales support activities out of their past profits or other sources available to them (and not as an additional charge to the Fund).
BlackRock, the Distributor and their affiliates may compensate affiliated and unaffiliated Service Organizations for the sale and distribution of shares of a Fund. These payments would be in addition to the Fund payments described in this Prospectus
and may be a fixed dollar amount, may be based on the number of customer accounts maintained by the Service Organization, or may be based on a percentage of the value of shares sold to, or held by, customers of the Service Organization. The
aggregate amount of these payments by BlackRock, the Distributor and their affiliates may be substantial. Payments by BlackRock may include amounts that are sometimes referred to as revenue sharing payments. In some circumstances, these
revenue sharing payments may create an incentive for a Service Organization, its employees or associated persons to recommend or sell shares of a Fund to you. Please contact your Service Organization for details about payments it may receive from a
Fund or from BlackRock, the Distributor or their affiliates.
You will pay tax on dividends from a Fund whether you receive them in cash or additional shares. If you redeem shares of a Fund or exchange them for shares of another fund, you generally will be treated as having sold your shares, and any gain on
the transaction may be subject to tax. Certain dividend income and long term capital gains are eligible for taxation at a
reduced rate that applies to individual shareholders. However, to the extent that a Funds distributions are derived from income on debt securities and short term capital gains, such distributions will generally not be eligible for taxation at
the reduced rate.
If the value of assets held by a Fund declines, the Trustees may authorize a reduction in the number of outstanding shares in shareholders accounts so as to preserve a net asset value of $1.00 per share. After such a reduction, the basis
of your eliminated shares would be added to the basis of your remaining Fund shares, and you could recognize a capital loss if you disposed of your shares at that time. Dividends from the Funds, including dividends reinvested in additional shares of
an affected Fund, will nonetheless be fully taxable, even if the number of shares in your account has been reduced as described above.
If you are neither a tax resident nor a citizen of the United States, or if you are a foreign entity, a Funds ordinary income dividends (which include distributions of net short term capital gain) will generally be subject to a 30% U.S.
withholding tax, unless a lower treaty rate applies.
Dividends and interest received by a Fund may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes.
By law, your dividends will be subject to a withholding tax if you have not provided a taxpayer identification number or social security number or the number you have provided is incorrect.
This section summarizes some of the consequences under current Federal tax law of an investment in each Fund. It is not a substitute for personal tax advice. Consult your personal tax adviser about the potential tax consequences of an investment in
each Fund under all applicable tax laws.
Electronic copies of most financial reports and prospectuses are available on the Funds website. Shareholders can sign up for e-mail notifications of quarterly statements, annual and semiannual reports and prospectuses by enrolling in the
Funds electronic delivery program. To enroll:
Each Fund delivers only one copy of shareholder documents, including prospectuses, shareholder reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is known as householding and is
intended to eliminate duplicate mailings and reduce expenses. 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 Funds at 1-800-441-7762.
BlackRock Advisors, LLC, each Master LLCs Manager, manages each Master LLCs investments and its business operations subject to the oversight of each Funds Board of Trustees and the Board of Directors of each Master LLC. While the Manager is ultimately responsible for the management of the Master LLCs, it is able to draw upon the research and expertise of its asset management affiliates for portfolio decisions and management with respect to certain portfolio securities. The Manager is an indirect, wholly owned subsidiary of BlackRock, Inc.
The Manager has the responsibility for making all investment decisions for each Master LLC. Each Master LLC pays the Manager a management fee at the annual rate of 0.250% of that Master LLCs average daily net assets not exceeding $500 million; 0.175% of its average daily net assets exceeding $500 million but not exceeding $1 billion; and 0.125% of its average daily net assets exceeding $1 billion.
For each Funds fiscal year ended March 31, 2008, the Manager received management fees from each Master LLC at the annual rate as follows:
The Manager has a subadvisory agreement with BlackRock Institutional Management Corporation, each Master LLCs Sub-Adviser and an affiliate, pursuant to which the Sub-Adviser is responsible for the day-to-day management of each Master LLCs portfolio. With respect to each Master LLC, the Manager pays the Sub-Adviser, for the services it provides, a monthly fee at an annual rate equal to a percentage of the management fee the Manager receives from that Master LLC.
A discussion of the basis for each Funds Board of Trustees and each Master LLCs Board of Directors approval of each management agreement with the Manager and each sub-advisory agreement between the Manager and the Sub-Adviser is included in each Funds semi-annual shareholder report for the fiscal period ended September 30, 2006.
BlackRock Advisors, LLC also acts as each Funds administrator. Each Fund pays BlackRock Advisors, LLC, as the Administrator, an administration fee at the annual rate of 0.25% of the average daily net assets of the Fund.
The Manager was organized in 1994 to perform advisory services for investment companies. BlackRock Institutional Management Corporation is a registered investment adviser organized in 1977. The Manager and its affiliates had approximately $1.428 trillion in investment company and other portfolio assets under management as of June 30, 2008.
From time to time, a manager, analyst, or other employee of the Manager or its affiliates may express views regarding a particular asset class, company, security, industry, or market sector. The views expressed by any such person are the views of only that individual as of the time expressed and do not necessarily represent the views of the Manager or any other person within the BlackRock organization. Any such views are subject to change at any time based upon market or other conditions and the Manager disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for each Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of the Fund.
The investment activities of BlackRock and its affiliates (including, for these purposes, Merrill Lynch & Co., Inc., BlackRock, Inc., PNC and their affiliates, directors, partners, trustees, managing members, officers and employees (collectively, the Affiliates)) in the management of, or their interest in, their own accounts and other accounts they manage, may present conflicts of interest that could disadvantage a Fund and its shareholders. BlackRock and its Affiliates provide investment management services to other funds and discretionary managed accounts that follow an investment program similar to that of a Fund. BlackRock and its Affiliates are involved worldwide with a broad spectrum of financial services and asset management activities and may engage in the ordinary course of business in activities in which their interests or the interests of their clients may conflict with those of a Fund. One or more
Affiliates act or may act as an investor, investment banker, research provider, investment manager, financier, advisor, market maker, trader, prime broker, lender, agent and/or principal, and have other direct and indirect interests, in securities
and other instruments in which a Fund directly and indirectly invests. Thus, it is likely that a Fund will have multiple business relationships with and will invest in, engage in transactions with, make voting decisions with respect to, or obtain
services from entities for which an Affiliate performs or seeks to perform investment banking or other services. One or more Affiliates may engage in proprietary trading and advise accounts and funds that have investment objectives similar to those
of a Fund and/or that engage in and compete for transactions in the same types of securities and other instruments as the Funds. The trading activities of these Affiliates are carried out without reference to positions held directly or indirectly by
the Funds and may result in an Affiliate having positions that are adverse to those of the Fund. No Affiliate is under any obligation to share any investment opportunity, idea or strategy with a Fund. As a result, an Affiliate may compete with a
Fund for appropriate investment opportunities. The results of a Funds investment activities, therefore, may differ from those of an Affiliate and of other accounts managed by an Affiliate, and it is possible that the Fund could sustain losses
during periods in which one or more Affiliates and other accounts achieve significant profits on their trading for proprietary or other accounts. The opposite result is also possible. In addition, a Fund may, from time to time, enter into
transactions in which an Affiliate or its other clients have an adverse interest. Furthermore, transactions undertaken by an Affiliate or an Affiliate-advised client may adversely impact a Fund. Transactions by one or more Affiliate-advised clients
or BlackRock may have the effect of diluting or otherwise disadvantaging the values, prices or investment strategies of a Fund. A Funds activities may be limited because of regulatory restrictions applicable to one or more Affiliates, and/or
their internal policies designed to comply with such restrictions. In addition, the Funds may invest in securities of companies with which an Affiliate has or is trying to develop investment banking relationships or in which an Affiliate has
significant debt or equity investments. A Fund also may invest in securities of companies for which an Affiliate provides or may some day provide research coverage. An Affiliate may have business relationships with and purchase or distribute or sell
services or products from or to distributors, consultants or others who recommend a Fund or who engage in transactions with or for a Fund and may receive compensation for such services. A Fund may also make brokerage and other payments to an
Affiliate in connection with the Funds portfolio investment transactions.
Under a securities lending program approved by the Money Funds Board of Trustees, the Money Fund has retained an Affiliate of BlackRock to serve as the securities lending agent for the Money Fund to the extent that the Money Fund participates
in the securities lending program. For these services, the lending agent may receive a fee from the Money Fund, including a fee based on the returns earned on the Money Funds investment of the cash received as collateral for the loaned
securities. In addition, one or more Affiliates may be among the entities to which the Money Fund may lend its portfolio securities under the securities lending program.
The activities of BlackRock and its Affiliates may give rise to other conflicts of interest that could disadvantage a Fund and its shareholders. BlackRock has adopted policies and procedures designed to address these potential conflicts of interest.
See the Statement of Additional Information for further information.
Each of the Money Fund, the Government Fund and the Treasury Fund is a feeder fund that invests all of its assets in the Money LLC, the Government LLC or the Treasury LLC, respectively. Investors in a Fund will acquire an indirect
interest in its corresponding Master LLC.
Each Master LLC may accept investments from other feeder funds, and all the feeder funds of a Master LLC bear that Master LLCs expenses in proportion to their assets. This structure may enable each Fund to reduce costs through economies of
scale. If a Master LLC has a larger investment portfolio, certain transaction costs may be reduced to the extent that contributions to and redemptions from that Master LLC from different feeder funds may offset each other and produce a lower net
cash flow.
Whenever a Master LLC holds a vote of its feeder funds, each Fund will pass the vote through to its own shareholders. Smaller feeder funds may be harmed by the actions of larger feeder funds. For example, a larger feeder fund could have more voting
power than a Fund over the operations of a Master LLC.
A Fund may withdraw from a Master LLC at any time and may invest all of its assets in another pooled investment vehicle or retain an investment adviser to directly manage the Funds assets.
The following Financial Highlight tables are intended to help you understand each Funds financial performance for the past five years. Certain information reflects the financial results for a single Fund share. The total returns in the tables represent the rate an investor would have earned or lost on an investment in the respective Fund (assuming reinvestment of all dividends). The information has been audited by Deloitte & Touche LLP, whose reports, along with each Funds financial statements, are included in each Funds Annual Report, which is available upon request.
Additional information about each Funds investments is available in the Funds Annual and Semi-Annual Reports. In each Funds Annual Report you will find a discussion of the market conditions and investment strategies that
significantly affected the Funds performance during its last fiscal year. You may obtain these reports at no cost at www.blackrock.com/moneymarketreports or by calling 1-800-441-7762.
Each Fund will send you one copy of each shareholder report and certain other mailings, regardless of the number of Fund accounts you have. To receive separate shareholder reports for each account, call your financial adviser or other financial
intermediary or write to the Transfer Agent at its mailing address on the inside back cover. Include your name, address, tax identification number and brokerage or mutual fund account number. If you have any questions, please call your financial
adviser or other financial intermediary or call 1-800-441-7762.
General fund information and specific fund information, including the Statement of Additional Information and Annual/Semi-Annual reports, can be accessed free of charge at www.blackrock.com. Mutual fund prospectus and literature can also be
requested via this website.
The Statement of Additional Information contains further information about the Funds. The portions of the Statement of Additional Information relating to the Funds are incorporated by reference into (legally considered part of) this Prospectus. The
portions of the Statement of Additional Information that do not relate to a Fund are not incorporated by reference, are not part of this Prospectus, and should not be relied on by investors in that Fund. You may obtain a free copy at
www.blackrock.com/moneymarketreports or by writing to the Funds at Financial Data Services, Inc., P.O. Box 45289, Jacksonville, Florida 32232-5289 or by calling 1-800-441-7762.
Information about the Fund (including the Statement of Additional Information) can be reviewed and copied at the Securities and Exchange Commissions (SEC) Public Reference Room in Washington, D.C. Call 1-202-551-8090 for
information on the operation of the public reference room. This information is also available on the SECs Internet site at http://www.sec.gov and copies may be obtained upon payment of a duplicating fee, by electronic request at the following
e-mail address: publicinfo@sec.gov, or by writing the Public Reference Section of the SEC, Washington, D.C. 20549-0102.
INVESTMENT COMPANY ACT FILE No. 811-02752, 811-03205, 811-06196
©BlackRock Advisors, LLC
Except with respect to the Treasury
Funds and Treasury LLCs borrowing restriction if a percentage
restriction on the investment or use of assets set forth above is adhered
to at the time a transaction is effected, later changes in percentages resulting
from changing values will not be considered a violation.
III. Information on Trustees and Officers
The Board of Trustees of each
Fund consists of thirteen individuals, eleven of whom are not interested
persons of the Fund as defined in the Investment Company Act (the non-interested
Trustees). The same individuals serve as Directors of each Master LLC.
The Trustees of each Fund are responsible for the oversight of the operations
of each Fund and perform the various duties imposed on the directors of investment
companies by the Investment Company Act.
Each Board has four standing
committees: an Audit Committee, a Governance and Nominating Committee, a Compliance
Committee and a Performance Oversight Committee.
The members of the Audit Committee
(the Audit Committee) are Kenneth L. Urish (Chair), Herbert I.
London and Frederick W. Winter, all of whom are non-interested Trustees. The
principal responsibilities of the Audit Committee are to approve the selection,
retention, termination and compensation of each Funds independent registered
public accounting firm (the independent auditors) and to oversee
the independent auditors work. The Audit Committees responsibilities
include, without limitation, to (1) evaluate the qualifications and independence
of the independent auditors; (2) approve all audit engagement terms and fees
for a Fund; (3) review the conduct and results of each independent audit of
each Funds financial statements; (4) review with the independent auditors
any audit problems or difficulties encountered during or related to the conduct
of the audit; (5) review the internal controls of a Fund and its service providers
with respect to accounting and financial matters; (6) oversee the performance
of each Funds internal audit function provided by its investment adviser,
administrator, pricing agent or other service provider; (7) oversee policies,
procedures and controls regarding valuation of each Funds investments;
and (8) resolve any disagreements between Fund management and the independent
auditors regarding financial reporting. Each Board has adopted a written charter
for the Audit Committee.
The members of the Governance
and Nominating Committee (the Governance Committee) are Matina
Horner (Chair), Cynthia A. Montgomery, Robert C. Robb, Jr. and Frederick W.
Winter, all of whom are non-interested Trustees. The principal responsibilities
of the Governance Committee are to (1) identify individuals qualified to serve
as non-interested Trustees of the Funds, as applicable, and recommend non-interested
Trustee nominees for election by shareholders or appointment by the Board;
(2) advise the Board with respect to Board composition, procedures and committees
(other than the Audit Committee); (3) oversee periodic self-assessments of
the Board and committees of the Board (other than the Audit Committee); (4)
review and make recommendations regarding non-interested Trustee compensation;
and (5) monitor corporate governance matters and develop appropriate recommendations
to the Board. The Governance Committee may consider nominations for the office
of Trustee made by Fund shareholders as it deems appropriate. Fund shareholders
who wish to recommend a nominee should send nominations to the Secretary of
each Fund, as applicable, that include biographical information and set forth
the qualifications of the proposed nominee. Each Board has adopted a written
charter for the Governance Committee.
I-9
The members of the Compliance Committee
are Joseph P. Platt, Jr. (Chair), Cynthia A. Montgomery and Robert C. Robb,
Jr., all of whom are non-interested Trustees. The Compliance Committees
purpose is to assist the Board in fulfilling its responsibility to oversee
regulatory and fiduciary compliance matters involving the Tax-Exempt Fund
and the Trust, as applicable, the fund-related activities of BlackRock and
each Funds third party service providers. The Compliance Committees
responsibilities include, without limitation, to (1) oversee the compliance
policies and procedures of each Fund and its service providers; (2) review
information on and, where appropriate, recommend policies concerning each
Funds compliance with applicable law; and (3) review reports from and
make certain recommendations regarding the Chief Compliance Officer of the
Funds, as applicable. Each Board has adopted a written charter for the Compliance
Committee.
The members of the Performance Oversight
Committee (the Performance Committee) are David O. Beim (Chair),
Toby Rosenblatt (Vice Chair), Ronald W. Forbes, Rodney D. Johnson and Herbert
I. London, all of whom are non-interested Trustees, and Richard S. Davis,
who is an interested Trustee. The Performance Committees purpose is
to assist the Board in fulfilling its responsibility to oversee each Funds
investment performance relative to its agreed-upon performance o bjectives.
The Performance Committees responsibilities include, without limitation,
to (1) review a Funds investment objectives, policies and practices,
(2) recommend to the Board specific investment tools and techniques employed
by BlackRock, (3) recommend to the Board appropriate investment performance
objectives based on its review of appropriate benchmarks and competitive universes,
(4) review a Funds investment performance relative to agreed-upon performance
objectives and (5) review information on unusual or exceptional investment
matters. The Board has adopted a written charter for the Performance Committee.
For the period from November 1,
2007 to March 31, 2008, the current Audit, Governance, Compliance and Performance
Committees each met twice.
Prior to November 1, 2007, each
Board then in office had two standing committees, an Audit Committee and a
Nominating Committee, each of which consisted of all of the non-interested
Trustees then in office. For the period from April 1, 2007 to November 1,
2007, the Audit Committee met twice and the Nominating Committee met once.
Biographical Information
Certain biographical and other information
relating to the Trustees is set forth below, including their address, year
of birth, principal occupations for at least the last five years, the term
of office and length of time served, the total number of investment companies
overseen in the complex of funds advised by the Manager or its affiliates
(BlackRock-advised funds) and any public directorships.
Name, Address
and Year of Birth
|
|
Position(s)
Held with
the Funds
|
|
Length of
Time Served
as a Trustee(b)
|
|
Principal Occupation(s)
During Past Five Years
|
|
Number of
BlackRock-
Advised Funds
and Portfolios
Overseen
|
|
Public
Directorships
|
Non-Interested Trustees(a)
|
|
|
|
|
|
|
|
David O. Beim(c)
|
|
Trustee
|
|
2007 to
|
|
Professor of Finance and Economics at
|
|
35 Funds
|
|
None
|
40 East 52nd Street
|
|
|
|
present
|
|
the Columbia University Graduate
|
|
81 Portfolios
|
|
|
New York, NY
10022
|
|
|
|
|
|
School of Business since 1991;
|
|
|
|
|
|
|
|
|
|
|
Trustee, Phillips Exeter Academy since
|
|
|
|
|
1940
|
|
|
|
|
|
2002; Formerly Chairman, Wave Hill
|
|
|
|
|
|
|
|
|
|
|
Inc. (public garden and cultural center)
|
|
|
|
|
|
|
|
|
|
|
from 1990 to 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald W. Forbes(d)
|
|
Trustee
|
|
2002 to
|
|
Professor Emeritus of Finance, School
|
|
35 Funds
|
|
None
|
40 East 52nd Street
|
|
|
|
present
|
|
of Business, State University of New
|
|
81 Portfolios
|
|
|
New York, NY
10022
|
|
|
|
|
|
York at Albany since 2000.
|
|
|
|
|
|
1940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Matina Horner(e)
|
|
Trustee
|
|
2007 to
|
|
Formerly Executive Vice President of
|
|
35 Funds
|
|
NSTAR
|
40 East 52nd Street
|
|
|
|
present
|
|
Teachers Insurance and Annuity
|
|
81 Portfolios
|
|
(electric and
|
New York, NY
10022
|
|
|
|
|
|
Association and College Retirement
|
|
|
|
gas utility)
|
|
|
|
|
|
|
Equities Fund from 1989 to 2003.
|
|
|
|
|
1939
|
|
|
|
|
|
|
|
|
|
|
I-10
Name, Address
and Year of Birth
|
|
Position(s)
Held with
the Funds
|
|
Length of
Time Served
as a Trustee(b)
|
|
Principal Occupation(s)
During Past Five Years
|
|
Number of
BlackRock-
Advised Funds
and Portfolios
Overseen
|
|
Public
Directorships
|
Rodney D.
Johnson(d)
|
|
Trustee
|
|
2007 to
|
|
President, Fairmount Capital Advisors,
|
|
35 Funds
|
|
None
|
40 East 52nd Street
|
|
|
|
present
|
|
Inc. since 1987; Director, Fox Chase
|
|
81 Portfolios
|
|
|
New York, NY
10022
|
|
|
|
|
|
Cancer Center since 2002; Member of
|
|
|
|
|
|
|
|
|
|
|
the Archdiocesan Investment
|
|
|
|
|
1941
|
|
|
|
|
|
Committee of the Archdiocese of
|
|
|
|
|
|
|
|
|
|
|
Philadelphia since 2003; Director, the
|
|
|
|
|
|
|
|
|
|
|
Committee of Seventy (civic) since
|
|
|
|
|
|
|
|
|
|
|
2006.
|
|
|
|
|
|
Herbert I. London
|
|
Trustee
|
|
2007 to
|
|
Professor Emeritus, New York
|
|
35 Funds
|
|
AIMS
|
40 East 52nd Street
|
|
|
|
present
|
|
University since 2005; John M. Olin
|
|
81 Portfolios
|
|
Worldwide,
|
New York, NY
10022
|
|
|
|
|
|
Professor of Humanities, New York
|
|
|
|
Inc.
|
|
|
|
|
|
|
University from 1993 to 2005 and
|
|
|
|
(marketing)
|
1939
|
|
|
|
|
|
Professor thereof from 1980 to 2005;
|
|
|
|
|
|
|
|
|
|
|
President, Hudson Institute (policy
|
|
|
|
|
|
|
|
|
|
|
research organization) since 1997 and
|
|
|
|
|
|
|
|
|
|
|
Trustee thereof since 1980; Chairman
|
|
|
|
|
|
|
|
|
|
|
of the Board of Trustees for Grantham
|
|
|
|
|
|
|
|
|
|
|
University since 2006; Director,
|
|
|
|
|
|
|
|
|
|
|
InnoCentive, Inc. (strategic solutions
|
|
|
|
|
|
|
|
|
|
|
company) since 2005; Director of
|
|
|
|
|
|
|
|
|
|
|
Cerego, LLC (software development
|
|
|
|
|
|
|
|
|
|
|
and design) since 2005.
|
|
|
|
|
|
Cynthia A.
Montgomery
|
|
Trustee
|
|
2002 to
|
|
Professor, Harvard Business School
|
|
35 Funds
|
|
Newell
|
40 East 52nd Street
|
|
|
|
present
|
|
since 1989; Director, Harvard Business
|
|
81 Portfolios
|
|
Rubbermaid,
|
New York, NY
10022
|
|
|
|
|
|
School Publishing since 2005;
|
|
|
|
Inc.
|
|
|
|
|
|
|
Director, McLean Hospital since 2005.
|
|
|
|
(manufacturing)
|
1952
|
|
|
|
|
|
|
|
|
|
|
|
Joseph P. Platt, Jr.(f)
|
|
Trustee
|
|
2007 to
|
|
Director, The West Penn Allegheny
|
|
35 Funds
|
|
Greenlight
|
40 East 52nd Street
|
|
|
|
present
|
|
Health System (a not-for-profit health
|
|
81 Portfolios
|
|
Capital Re,
|
New York, NY
10022
|
|
|
|
|
|
system) since 2008; Partner, Amarna
|
|
|
|
Ltd.
|
|
|
|
|
|
|
Corporation, LLC (private investment
|
|
|
|
(reinsurance
|
1947
|
|
|
|
|
|
company) since 2002; Director,
|
|
|
|
company)
|
|
|
|
|
|
|
WQED Multimedia (PBS and
|
|
|
|
|
|
|
|
|
|
|
Multimedia, a not-for-profit company)
|
|
|
|
|
|
|
|
|
|
|
since 2002; Director, Jones and Brown
|
|
|
|
|
|
|
|
|
|
|
(Canadian insurance broker) since
|
|
|
|
|
|
|
|
|
|
|
1998; General Partner, Thorn Partner,
|
|
|
|
|
|
|
|
|
|
|
LP (private investment) since 1998.
|
|
|
|
|
|
Robert C. Robb, Jr.
|
|
Trustee
|
|
2007 to
|
|
Partner, Lewis, Eckert, Robb and
|
|
35 Funds
|
|
None
|
40 East 52nd Street
|
|
|
|
present
|
|
Company (management and financial
|
|
81 Portfolios
|
|
|
New York, NY
10022
|
|
|
|
|
|
consulting firm) since 1981.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1945
|
|
Toby Rosenblatt(g)
|
|
Trustee
|
|
2007 to
|
|
President, Founders Investments Ltd.
|
|
35 Funds
|
|
A.P. Pharma,
|
40 East 52nd Street
|
|
|
|
present
|
|
(private investments) since 1999;
|
|
81 Portfolios
|
|
Inc. (specialty
|
New York, NY
10022
|
|
|
|
|
|
Director, Forward Management, LLC
|
|
|
|
pharmaceuticals)
|
|
|
|
|
|
|
since 2007; Director, The James Irvine
|
|
|
|
|
1938
|
|
|
|
|
|
Foundation (philanthropic foundation)
|
|
|
|
|
|
|
|
|
|
|
since 1997; Formerly Trustee, State
|
|
|
|
|
|
|
|
|
|
|
Street Research Mutual Funds from
|
|
|
|
|
|
|
|
|
|
|
1990 to 2005; Formerly, Trustee,
|
|
|
|
|
|
|
|
|
|
|
Metropolitan Series Funds, Inc. from
|
|
|
|
|
|
|
|
|
|
|
2001 to 2005.
|
|
|
|
|
I-11
Name, Address
and Year of Birth
|
|
Position(s)
Held with
the Funds
|
|
Length of
Time Served
as a Trustee(b)
|
|
Principal Occupation(s)
During Past Five Years
|
|
Number of
BlackRock-
Advised Funds
and Portfolios
Overseen
|
|
Public
Directorships
|
Kenneth L. Urish(h)
|
|
Trustee
|
|
2007 to
|
|
Managing Partner, Urish Popeck &
|
|
35 Funds
|
|
None
|
40 East 52nd Street
|
|
|
|
present
|
|
Co., LLC (certified public accountants
|
|
81 Portfolios
|
|
|
New York, NY
10022
|
|
|
|
|
|
and consultants) since 1976; Member
|
|
|
|
|
|
|
|
|
|
|
of External Advisory Board, The
|
|
|
|
|
1951
|
|
|
|
|
|
Pennsylvania State University
|
|
|
|
|
|
|
|
|
|
|
Accounting Department since 2001;
|
|
|
|
|
|
|
|
|
|
|
Trustee, The Holy Family Foundation
|
|
|
|
|
|
|
|
|
|
|
since 2001; Committee
|
|
|
|
|
|
|
|
|
|
|
Member/Professional Ethics
|
|
|
|
|
|
|
|
|
|
|
Committee of the Pennsylvania
|
|
|
|
|
|
|
|
|
|
|
Institute of Certified Public
|
|
|
|
|
|
|
|
|
|
|
Accountants since 2007; President and
|
|
|
|
|
|
|
|
|
|
|
Trustee, Pittsburgh Catholic Publishing
|
|
|
|
|
|
|
|
|
|
|
Associates since 2003; Formerly
|
|
|
|
|
|
|
|
|
|
|
Director, Inter-Tel from 2006 to 2007.
|
|
|
|
|
|
Frederick W. Winter
|
|
Trustee
|
|
2007 to
|
|
Professor and Dean Emeritus of the
|
|
35 Funds
|
|
None
|
40 East 52nd Street
|
|
|
|
present
|
|
Joseph M. Katz School of Business,
|
|
81 Portfolios
|
|
|
New York, NY
10022
|
|
|
|
|
|
University of Pittsburgh since 2005
|
|
|
|
|
|
|
|
|
|
|
and Dean thereof from 1997 to 2005.
|
|
|
|
|
1945
|
|
|
|
|
|
Director, Alkon Corporation
|
|
|
|
|
|
|
|
|
|
|
(pneumatics) since 1992; Director,
|
|
|
|
|
|
|
|
|
|
|
Indotronix International (IT services)
|
|
|
|
|
|
|
|
|
|
|
since 2004; Director, Tippman Sports
|
|
|
|
|
|
|
|
|
|
|
(recreation) since 2005.
|
|
|
|
|
Interested Trustees(a)(i)
|
|
|
|
|
|
|
|
Richard S. Davis
|
|
Trustee
|
|
2007 to
|
|
Managing Director, BlackRock, Inc.
|
|
185 Funds
|
|
None
|
40 East 52nd Street
|
|
|
|
present
|
|
since 2005; Formerly Chief Executive
|
|
295 Portfolios
|
|
|
New York, NY
10022
|
|
|
|
|
|
Officer, State Street Research &
|
|
|
|
|
|
|
|
|
|
|
Management Company from 2000 to
|
|
|
|
|
1945
|
|
|
|
|
|
2005; Formerly Chairman of the Board
|
|
|
|
|
|
|
|
|
|
|
of Trustees, State Street Research
|
|
|
|
|
|
|
|
|
|
|
Mutual Funds from 2000 to 2005;
|
|
|
|
|
|
|
|
|
|
|
Formerly Chairman, SSR Realty from
|
|
|
|
|
|
|
|
|
|
|
2000 to 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Henry Gabbay
|
|
Trustee
|
|
2007 to
|
|
Consultant, BlackRock, Inc. since
|
|
184 Funds
|
|
None
|
40 East 52nd Street
|
|
|
|
present
|
|
2007; Formerly Managing Director,
|
|
294 Portfolios
|
|
|
New York, NY
10022
|
|
|
|
|
|
BlackRock, Inc. from 1989 to 2007;
|
|
|
|
|
|
|
|
|
|
|
Formerly Chief Administrative Officer,
|
|
|
|
|
1947
|
|
|
|
|
|
BlackRock Advisors, LLC from 1998
|
|
|
|
|
|
|
|
|
|
|
to 2007; Formerly President of
|
|
|
|
|
|
|
|
|
|
|
BlackRock Funds and BlackRock
|
|
|
|
|
|
|
|
|
|
|
Bond Allocation Target Shares from
|
|
|
|
|
|
|
|
|
|
|
2005 to 2007 and Treasurer of certain
|
|
|
|
|
|
|
|
|
|
|
closed-end funds in the BlackRock
|
|
|
|
|
|
|
|
|
|
|
fund complex from 1989 to 2006.
|
|
|
|
|
|
(a)
|
Trustees serve until their resignation, removal or death,
or until December 31 of the year in which they turn 72.
|
|
(b)
|
Following the combination of Merrill Lynch Investment Managers,
L.P. (MLIM) and BlackRock, Inc. in September 2006, the various
legacy MLIM and legacy BlackRock fund boards were realigned and consolidated
into three new fund boards in 2007. As a result, although the chart shows
certain Trustees as joining the Funds Boards in 2007, each Trustee
first became a member of the board of directors/trustees of other legacy
MLIM or legacy BlackRock funds as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Matina
Horner, 1977; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1995; Joseph P. Platt,
1999; Robert C. Robb, Jr., 1999; Toby Rosenblatt, 2005; Kenneth L. Urish,
1999 and Frederick W. Winter, 1999.
|
|
(c)
|
Chair of the Performance Committee.
|
|
(d)
|
Co-Chair of the Board of Trustees.
|
|
(e)
|
Chair of the Governance Committee.
|
|
(f)
|
Chair of the Compliance Committee.
|
|
(g)
|
Vice Chair of the Performance Committee.
|
|
(h)
|
Chair of the Audit Committee.
|
|
(i)
|
Messrs. Davis and Gabbay are both interested persons,
as defined in the Investment Company Act of 1940, of the Funds based on
their positions with BlackRock, Inc. and its affiliates.
|
|
I-12
Certain biographical and other information
relating to the officers of the Funds is set forth below, including their
year of birth, their principal occupations for at least the last five years,
the term of office and length of time served, the total number of BlackRock-advised
funds overseen and any public directorships:
Name, Address
and Year of Birth
|
|
Position(s)
Held with
the Funds
|
|
Length of
Time Served
|
|
Principal Occupation(s)
During Past Five Years
|
|
Number of
BlackRock-
Advised Funds
and Portfolios
Overseen
|
|
Public
Directorships
|
Fund Officers(a)
|
|
|
|
|
|
|
|
|
|
|
Donald C. Burke
|
|
President and
|
|
2007 to
|
|
Managing Director of BlackRock, Inc.
|
|
195 Funds
|
|
None
|
40 East 52nd Street
|
|
Chief
|
|
present
|
|
since 2006; Formerly Managing
|
|
305 Portfolios
|
|
|
New York, NY
10022
|
|
Executive
|
|
|
|
Director of Merrill Lynch Investment
|
|
|
|
|
|
|
Officer
|
|
|
|
Managers, L.P. (MLIM) and Fund
|
|
|
|
|
1960
|
|
|
|
|
|
Asset Management, L.P. (FAM) in
|
|
|
|
|
|
|
|
|
|
|
2006; First Vice President thereof from
|
|
|
|
|
|
|
|
|
|
|
1997 to 2005; Treasurer thereof from
|
|
|
|
|
|
|
|
|
|
|
1999 to 2006 and Vice President
|
|
|
|
|
|
|
|
|
|
|
thereof from 1990 to 1997.
|
|
|
|
|
|
Anne F. Ackerley
|
|
Vice
|
|
2007 to
|
|
Managing Director of BlackRock, Inc.
|
|
185 Funds
|
|
None
|
40 East 52nd Street
|
|
President
|
|
present
|
|
since 2000; Chief Operating Officer of
|
|
295 Portfolios
|
|
|
New York, NY
10022
|
|
|
|
|
|
BlackRocks U.S. Retail Group since
|
|
|
|
|
|
|
|
|
|
|
2006; Head of BlackRocks Mutual
|
|
|
|
|
1962
|
|
|
|
|
|
Fund Group from 2000 to 2006;
|
|
|
|
|
|
|
|
|
|
|
Merrill Lynch & Co., Inc. from 1984
|
|
|
|
|
|
|
|
|
|
|
to 1986 and from 1988 to 2000, most
|
|
|
|
|
|
|
|
|
|
|
recently as First Vice President and
|
|
|
|
|
|
|
|
|
|
|
Operating Officer of the Mergers and
|
|
|
|
|
|
|
|
|
|
|
Acquisitions Group.
|
|
|
|
|
|
Neal J. Andrews
|
|
Chief
|
|
2007 to
|
|
Managing Director of BlackRock, Inc.
|
|
185 Funds
|
|
None
|
40 East 52nd Street
|
|
Financial
|
|
present
|
|
since 2006; Formerly Senior Vice
|
|
295 Portfolios
|
|
|
New York, NY
10022
|
|
Officer
|
|
|
|
President and Line of Business Head of
|
|
|
|
|
|
|
|
|
|
|
Fund Accounting and Administration
|
|
|
|
|
1966
|
|
|
|
|
|
at PFPC Inc. from 1992 to 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jay M. Fife
|
|
Treasurer
|
|
2007 to
|
|
Managing Director of BlackRock, Inc.
|
|
185 Funds
|
|
None
|
40 East 52nd Street
|
|
|
|
present
|
|
since 2007 and Director in 2006;
|
|
295 Portfolios
|
|
|
New York, NY
10022
|
|
|
|
|
|
Formerly Assistant Treasurer of the
|
|
|
|
|
|
|
|
|
|
|
MLIM/FAM advised funds from 2005
|
|
|
|
|
1970
|
|
|
|
|
|
to 2006; Director of MLIM Fund
|
|
|
|
|
|
|
|
|
|
|
Services Group from 2001 to 2006.
|
|
|
|
|
|
Brian P. Kindelan
|
|
Chief
|
|
2007 to
|
|
Chief Compliance Officer of the
|
|
185 Funds
|
|
None
|
40 East 52nd Street
|
|
Compliance
|
|
present
|
|
BlackRock-advised funds since 2007;
|
|
295 Portfolios
|
|
|
New York, NY
10022
|
|
Officer
|
|
|
|
Anti-Money Laundering Compliance
|
|
|
|
|
|
|
|
|
|
|
Officer of the BlackRock-advised
|
|
|
|
|
1959
|
|
|
|
|
|
funds since 2007; Managing Director
|
|
|
|
|
|
|
|
|
|
|
and Senior Counsel of BlackRock, Inc.
|
|
|
|
|
|
|
|
|
|
|
since 2005; Director and Senior
|
|
|
|
|
|
|
|
|
|
|
Counsel of BlackRock from 2001 to
|
|
|
|
|
|
|
|
|
|
|
2004 and Vice President and Senior
|
|
|
|
|
|
|
|
|
|
|
Counsel thereof from 1998 to 2000;
|
|
|
|
|
|
|
|
|
|
|
Senior Counsel of The PNC Bank
|
|
|
|
|
|
|
|
|
|
|
Corp. from 1995 to 1998.
|
|
|
|
|
|
Howard Surloff
|
|
Secretary
|
|
2007 to
|
|
Managing Director of BlackRock, Inc.
|
|
185 Funds
|
|
None
|
40 East 52nd Street
|
|
|
|
present
|
|
and General Counsel of US Funds at
|
|
295 Portfolios
|
|
|
New York, NY
10022
|
|
|
|
|
|
BlackRock, Inc. since 2006; Formerly
|
|
|
|
|
|
|
|
|
|
|
General Counsel (US) of Goldman
|
|
|
|
|
1965
|
|
|
|
|
|
Sachs Asset Management, LP from
|
|
|
|
|
|
|
|
|
|
|
1993 to 2006.
|
|
|
|
|
|
(a)
|
Officers of the Funds serve at the pleasure of the Boards
of Trustees.
|
|
I-13
Share Ownership
Information relating to each
Trustees share ownership in the Funds and in all registered funds in
the BlackRock-advised funds that are overseen by the respective Trustee (Supervised
Funds) as of December 31, 2007 is set forth in the chart below.
|
|
Aggregate
|
|
Aggregate
|
|
Aggregate
|
|
Aggregate
|
|
|
Dollar Range
|
|
Dollar Range
|
|
Dollar Range
|
|
Dollar Range
|
|
|
of Equity
|
|
of Equity
|
|
of Equity
|
|
of Equity
|
|
|
Securities in
|
|
Securities in
|
|
Securities in
|
|
Securities in
|
Name
|
|
CMA Money
|
|
CMA Government
|
|
CMA Treasury
|
|
Supervised Funds
|
Interested Trustees:
|
|
|
|
|
|
|
|
|
Richard S. Davis
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
Henry Gabbay
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
Non-Interested Trustees:
|
|
|
|
|
|
|
|
|
David O. Beim
|
|
None
|
|
None
|
|
None
|
|
$50,001$100,000
|
Ronald W. Forbes
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
Dr. Matina Horner
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
Rodney D. Johnson
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
Herbert I. London
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
Cynthia A. Montgomery
|
|
$50,001$100,000
|
|
None
|
|
None
|
|
Over $100,000
|
Joseph P. Platt, Jr.
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
Robert C. Robb, Jr.
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
Toby Rosenblatt
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
Kenneth L. Urish
|
|
None
|
|
None
|
|
None
|
|
None
|
Frederick W. Winter
|
|
None
|
|
None
|
|
None
|
|
None
|
As of July 1, 2008, the Trustees
and officers of each Fund as a group owned an aggregate of less than 1% of
the outstanding shares of each Fund. As of December 31, 2007, none of the
non-interested Trustees immediate family members owned beneficially or of
record any securities in affiliates of the Manager.
Compensation of Trustees
Each non-interested Trustee is
paid as compensation an annual retainer of $150,000 per year for his or
her services as Trustee to the BlackRock-advised funds, including the Funds,
and a $25,000 Board meeting fee to be paid for each Board meeting attended,
up to five Board meetings held in a calendar year (compensation for meetings
in excess of this number to be determined on a case-by-case basis), together
with out-of-pocket expenses in accordance with a Board policy on travel and
other business expenses relating to attendance at meetings. In addition, the
Co-Chairs of the Boards of Trustees are each paid an additional annual retainer
of $45,000. The Chairs of the Audit Committee, Compliance Committee, Governance
Committee and Performance Committee are paid an additional annual retainer
of $25,000. The Vice-Chair of the Performance Committee is paid an additional
annual retainer of $25,000. The Funds compensate the Chief Compliance
Officer for his services as their Chief Compliance Officer. The Funds may
also pay a portion of the compensation of certain members of the staff of
the Chief Compliance Officer.
I-14
The following table sets forth the
compensation earned by the non-interested Trustees for the fiscal year ended
March 31, 2008, and the aggregate compensation paid to them by all BlackRock-advised
funds for the calendar year ended December 31, 2007.
Name of Trustee
|
|
Compensation
from CMA
Money
Money/LLC(h)
|
Compensation
from CMA
Government
Government/LLC(h)
|
Compensation
from CMA
Treasury
Treasury/LLC(h)
|
|
Aggregate
Compensation
from the Funds/
Master LLCs and
other BlackRock-
Advised Funds(a)
|
David O. Beim(b)
|
|
$
8,361
|
|
$
1,032
|
|
$
1,266
|
|
$
180,570
|
Ronald W. Forbes(c)
|
|
$
17,016
|
|
$
5,549
|
|
$
5,810
|
|
$
235,183
|
Dr. Matina Horner(d)
|
|
$
8,176
|
|
$ 847
|
|
$
1,081
|
|
$
226,015
|
Rodney D. Johnson(c)
|
|
$
9,246
|
|
$
1,079
|
|
$
1,341
|
|
$
143,151
|
Herbert I. London
|
|
$
7,255
|
|
$ 973
|
|
$
1,174
|
|
$
250,136
|
Cynthia A. Montgomery
|
|
$
13,922
|
|
$
4,339
|
|
$
4,540
|
|
$
171,433
|
Joseph P. Platt, Jr.(e)
|
|
$
8,361
|
|
$1,032
|
|
$1,266
|
|
$139,817
|
Robert C. Robb, Jr
.
|
|
$
7,255
|
|
$ 973
|
|
$1,174
|
|
$128,151
|
Toby Rosenblatt(
f
)
|
|
$
8,361
|
|
$1,032
|
|
$1,266
|
|
$226,015
|
Kenneth L. Urish
(
g)
|
|
$
8,361
|
|
$1,032
|
|
$1,266
|
|
$139,817
|
Frederick W. Wi
n
ter
|
|
$
7,255
|
|
$
973
|
|
$1,174
|
|
$128,151
|
|
(a)
|
For the number of BlackRock-advised funds from which each
Trustee receives compensation, see the Biographical Information chart
beginning on page I-10.
|
|
(b)
|
Chair of the Performance Committee.
|
|
(c)
|
Co-Chair of the Board of Trustees.
|
|
(d)
|
Chair of the Governance Committee.
|
|
(e)
|
Chairman of the Compliance Committee.
|
|
(f)
|
Vice-Chair of the Performance Committee.
|
|
(g)
|
Chair of the Audit Committee.
|
|
(h)
|
For the fiscal year ended March 31, 2008, CMA Money and
the Money LLC paid $123,569, CMA Government and the Government LLC paid
$28,961 and CMA Treasury and Treasury LLC paid $31,458 to all Trustees
then holding such office.
|
|
Mr. Kindelan assumed office as Chief
Compliance Officer and Anti-Money Laundering Compliance Officer of the Funds
on November 1, 2007. From November 1, 2007 through March 31, 2008. Mr. Kindelan
received $5,079 from CMA Money and the Money LLC, $269 from CMA Government
and the Government LLC and $460 from CMA Treasury and the Treasury LLC.
IV. Management and Advisory Arrangements
Management Arrangements
Management Services.
Each
Fund invests all of its assets in its corresponding Master LLC. Accordingly,
each Fund does not invest directly in portfolio securities and does not require
management services. All portfolio management occurs at the Master LLC level.
Each Master LLC has entered into a separate management agreement with BlackRock
Advisors, LLC as Manager (each, a Management Agreement). The Manager
is responsible for the overall management of each Master LLC. For its services
to each Master LLC, the Manager receives compensation according to the fee
rates shown below. Prior to September 29, 2006, Fund Asset Management, L.P.
(FAM) acted as each Master LLCs manager, and was compensated
according to the same fee rate schedule.
Management Fee.
The Manager receives a monthly fee from
each Master LLC at the annual rates set forth below:
Portion of average daily value of net assets
|
Rate
|
|
|
Not exceeding $500 million
|
0.250%
|
In excess of $500 million but not
exceeding $1 billion
|
0.175%
|
In excess of $1 billion
|
0.125%
|
I-15
The table below sets forth information
about the total management fees paid by each Master LLC to the Manager and
to FAM, each Master LLCs previous manager, for the past three fiscal
years:
|
Money LLC
|
Government LLC
|
Treasury LLC
|
|
|
|
|
|
Paid to
FAM
|
Paid to the
Manager
|
Paid to
FAM
|
Paid to the
Manager
|
Paid to
FAM
|
Paid to the
Manager
|
Fiscal Year Ended March 31,
|
2008
|
|
N/A
|
|
$
|
25,264,811
|
|
|
N/A
|
|
$
|
2,194,232
|
|
|
N/A
|
|
$
|
2,779,861
|
|
2007
|
$
|
10,205,183
|
(a)
|
$
|
11,308,684
|
(b)
|
$
|
990,744
|
(a)
|
$
|
1,012,660
|
(b)
|
$
|
919,954
|
(a)
|
$
|
933,505
|
(b)
|
2006
|
$
|
19,257,521
|
|
|
N/A
|
|
$
|
1,949,335
|
|
|
N/A
|
|
$
|
1,913,838
|
|
|
N/A
|
|
|
(a)
|
For the period April 1, 2006 to September 29, 2006.
|
|
(b)
|
For the period September 29, 2006 to March 31, 2007.
|
Pursuant to the Management Agreement,
the Manager may from time to time, in its sole discretion to the extent permitted
by applicable law, appoint one or more sub-advisers, including, without limitation,
affiliates of BlackRock, Inc., to perform management services with respect
to each Master LLCs portfolio. In addition, the Manager may delegate
certain of its investment advisory functions under the Management Agreement
to one or more of its affiliates to the extent permitted by applicable law.
The Manager may terminate any or all sub-advisers or such delegation arrangements
in its sole discretion at any time to the extent permitted by applicable law.
Effective September 29, 2006, the
Manager has entered into separate sub-advisory agreements with respect to
each Master LLC with BlackRock Institutional Management Corporation (the Sub-Adviser).
The Sub-Adviser is responsible for the day-to-day management of each Master
LLCs portfolio. For its services to each Master LLC, the Manager pays
the Sub-Adviser a monthly fee at an annual rate equal to a percentage of the
management fee paid to the Manager by each Master LLC.
The table below sets forth information
about the sub-advisory fees paid by the Manager to the Sub-Adviser with respect
to each applicable Master LLC:
|
|
Sub-Adviser
|
|
|
|
|
|
CMA
Money
|
CMA
Government
|
CMA
Treasury
|
Fiscal Year Ended March 31,
|
|
|
|
|
2008
|
|
$
|
20,063,193
|
$
|
1,570,071
|
$
|
2,117,521
|
2007
(a)
|
|
$
|
6,709,036
|
$
|
600,351
|
$
|
553,302
|
|
(a)
|
For the period September 29, 2006 to March 31, 2007.
|
|
Administrative Arrangements
Administrative Services and Administrative
Fee.
Each Fund has entered into a separate administration agreement (each,
an Administration Agreement) with BlackRock, as administrator
(in such capacity, the Administrator). For its services to each
Fund, the Administrator receives monthly compensation at the annual rate of
0.25% of the average daily net assets of each Fund. Prior to September 29,
2006, FAM acted as each Funds administrator, and was compensated according
to the same fee rate.
The table below sets forth information
about the administration fees paid by each Fund to the Administrator and to
FAM, each Funds previous administrator for the past three fiscal years:
|
CMA Money
|
CMA Government
|
CMA Treasury
|
|
|
|
|
Fiscal Year
Ended March 31,
|
Paid to
FAM
|
Paid to the
Administrator
|
Paid to
FAM
|
Paid to the
Administrator
|
Paid to
FAM
|
Paid to the
Administrator
|
2008
|
|
N/A
|
|
$
|
28,957,488
|
|
|
N/A
|
|
$
|
1,453,549
|
|
|
N/A
|
|
$
|
2,249,456
|
|
2007
|
$
|
10,354,042
|
(a)
|
$
|
11,946,636
|
(b)
|
$
|
592,178
|
(a)
|
$
|
608,974
|
(b)
|
$
|
568,512
|
(a)
|
$
|
554,839
|
(b)
|
2006
|
$
|
17,868,613
|
|
|
N/A
|
|
$
|
1,178,924
|
|
|
N/A
|
|
$
|
1,223,899
|
|
|
N/A
|
|
|
(a)
|
For the period April 1, 2006 to September 29, 2006.
|
|
(b)
|
For the period September 29, 2006 to March 31, 2007.
|
|
I-16
Transfer Agency Services
The table below sets forth information
about the total amounts paid by each Fund to Financial Data Services, Inc.
(the Transfer Agent) for the past three fiscal years:
Fiscal Year Ended March 31,
|
CMA Money
|
CMA Government
|
CMA Treasury
|
2008
|
$
|
4,694,652
|
|
$
|
71,717
|
|
$
|
63,320
|
|
2007
|
$
|
4,112,966
|
|
$
|
100,468
|
|
$
|
59,048
|
|
2006
|
$
|
3,126,015
|
|
$
|
50,693
|
|
$
|
56,395
|
|
Accounting Services
The tables below show the amounts
paid by each Master LLC to State Street Bank and Trust Company (State
Street), to the Manager and to FAM, each Funds previous manager,
for accounting services for the past three fiscal years:
|
Money LLC
|
Government LLC
|
Treasury LLC
|
Fiscal Year
Ended March 31,
|
Paid to
State
Street(a)
|
Paid to
FAM
|
Paid to
the
Manager
|
Paid to
State
Street(a)
|
Paid to
FAM
|
Paid to
the
Manager
|
Paid to
State
Street(a)
|
Paid to
FAM
|
Paid to
the
Manager
|
2008
|
$
|
1,257,592
|
|
N/A
|
|
$
|
345,127
|
|
$
|
165,117
|
|
|
N/A
|
|
$
|
19,232
|
|
$
|
199,142
|
|
|
N/A
|
|
$
|
25,517
|
|
2007
|
$
|
1,032,503
|
$
|
178,427
|
(b)
|
$
|
158,916
|
(c)
|
$
|
195,256
|
|
$
|
10,015
|
(b)
|
$
|
9,084
|
(c)
|
$
|
192,285
|
|
$
|
11,283
|
(b)
|
$
|
7,920
|
(c)
|
2006
|
$
|
1,486,961
|
$
|
335,557
|
|
|
N/A
|
|
$
|
215,625
|
|
$
|
20,535
|
|
|
N/A
|
|
$
|
203,197
|
|
$
|
19,874
|
|
|
N/A
|
|
|
(a)
|
For providing services to the Fund and Master LLC.
|
|
(b)
|
For the period April 1, 2006 to September 29, 2006.
|
|
(c)
|
For the period September 29, 2006 to March 31, 2007.
|
|
V. Distribution Related Expenses
The Trustees believe that each Funds
expenditures under its Amended and Restated Unified Distribution and Shareholder
Servicing Plan pursuant to Rule 12b-1 under the Investment Company Act (the
Distribution Plans) benefit such Fund and is in the best interests
of Fund shareholders. All of the amounts expended under the Distribution Plans
for the fiscal year ended March 31, 2008 were allocated to Merrill Lynch Financial
Advisors, other personnel of Merrill Lynch, Pierce, Fenner & Smith Incorporated
(Merrill Lynch) and related administrative costs.
The table below sets forth information
about the total distribution fees paid to Merrill Lynch by each Fund, including
amounts waived, if any, for the fiscal year ended March 31, 2008:
Fund
|
Amount Paid
|
CMA Money
|
$
|
14,385,054
|
CMA Government
|
$
|
721,679
|
CMA Treasury
|
$
|
1,115,213
|
VI. Yield Information
The yield on each Funds shares
normally will fluctuate on a daily basis. Therefore, the yield for any given
past period is not an indication or representation by any Fund of future yields
or rates of return on its shares. The yield is affected by such factors as
changes in interest rates on the Funds portfolio securities, average
portfolio maturity, the types and quality of portfolio securities held and
operating expenses. Current yield information may not provide a basis for
comparison with bank deposits or other investments that pay a fixed yield
over a stated period of time. The yield on CMA Money, CMA Government and CMA
Treasury shares may not, for various reasons, be comparable to the yield on
shares of other money market funds or other investments.
Fund
|
Seven-Day Period
ended March 31, 2008
(Excluding gains and losses)
|
CMA Money
|
2.85
|
%
|
CMA Government
|
1.28
|
%
|
CMA Treasury
|
1.31
|
%
|
I-17
VII. Computation of Offering Price Per Share
An illustration of the computation
of the offering price for shares of each Fund based on the value of the respective
Funds net assets and number of shares outstanding on March 31, 2008
is set forth below:
CMA Money
|
As of
March 31, 2008
|
|
|
Net Assets
|
$
|
14,873,008,994
|
Number of Shares Outstanding
|
|
14,872,298,428
|
Net Asset Value Per Share (net
assets divided
|
|
|
by number of shares outstanding)
|
$
|
1.00
|
Offering Price
|
$
|
1.00
|
|
CMA Government
|
|
|
|
As of
March 31, 2008
|
|
Net Assets
|
$
|
797,803,152
|
Number of Shares Outstanding
|
|
797,761,629
|
Net Asset Value Per Share (net
assets divided
|
|
|
by number of shares outstanding)
|
$
|
1.00
|
Offering Price
|
$
|
1.00
|
|
CMA Treasury
|
|
|
|
As of
March 31, 2008
|
|
Net Assets
|
$
|
2,434,583,231
|
Number of Shares Outstanding
|
|
2,434,504,159
|
Net Asset Value Per Share (net
assets divided
|
|
|
by number of shares outstanding)
|
$
|
1.00
|
Offering Price
|
$
|
1.00
|
VIII. Portfolio Transactions
See Part II Portfolio Transactions of this Statement
of Additional Information for further information.
The table below sets forth information
about the principal transactions with Merrill Lynch Government Securities,
Inc. and Merrill Lynch Money Markets, Inc. by each Master LLC pursuant to
an exemptive order for the past three fiscal years:
|
Money LLC
|
Government LLC
|
Treasury LLC
|
Fiscal year ended March 31,
|
Number of
Transactions
|
Aggregate
Amount
(millions)
|
Number of
Transactions
|
Aggregate
Amount
(millions)
|
Number of
Transactions
|
Aggregate
Amount
(millions)
|
2008
|
36
|
$
|
2,637.6
|
57
|
$
|
2,852.6
|
2
|
$
|
12.9
|
2007
|
19
|
$
|
2,309.9
|
62
|
$
|
2,610.4
|
5
|
$
|
96.4
|
2006
|
22
|
$
|
1,668.4
|
51
|
$
|
2,181.4
|
3
|
$
|
72.9
|
The table below sets forth information
about the fees paid by the Money LLC to the securities lending agent for the
past three fiscal years:
Fiscal year ended March 31,
|
Securities Lending Agent Fees
|
2008
|
$
|
4,962
|
|
2007
|
$
|
19,247
|
|
2006
|
$
|
25,045
|
|
I-18
The value of each Master LLCs
aggregate holdings of the securities of its regular brokers or dealers (as
defined in Rule 10b-1 of the Investment Company Act) if any portion of such
holdings were purchased during the fiscal year ended March 31, 2008 are as
follows:
Money LLC
|
Regular Broker-Dealer
|
Debt (D) / Equity (E)
|
Aggregate Holdings (000s)
|
|
UBS AG
|
D
|
$536,580
|
|
Chase Bank USA, NA
|
D
|
$421,425
|
|
JP Morgan Chase & Co.
|
D
|
$248,818
|
|
UBS Finance (Delaware), LLC
|
D
|
$234,249
|
|
Goldman Sachs Group, Inc.
|
D
|
$202,600
|
|
Citigroup Funding, Inc.
|
D
|
$198,725
|
|
Morgan Stanley
|
D
|
$ 24,980
|
Government LLC
Regular Broker-Dealer
|
Debt (D) / Equity
(E)
|
Aggregate Holdings (000s)
|
None
|
|
|
Treasury LLC
Regular Broker-Dealer
|
Debt (D) / Equity (E)
|
Aggregate Holdings (000s)
|
None
|
|
|
IX. General Information
CMA Money and CMA Government
are unincorporated business trusts organized on June 5, 1989 under the laws
of Massachusetts. CMA Money is the successor to a Massachusetts business trust
organized on September 19, 1977, and CMA Government is the successor to a
Massachusetts business trust organized on August 3, 1981. CMA Treasury is
an unincorporated business trust organized on October 24, 1990 under the laws
of Massachusetts. Each Fund is a diversified, open-end investment company.
Each of CMA Money, CMA Government
and CMA Treasury is a feeder fund that invests in a corresponding
Master LLC: the Money LLC, the Government LLC and the Treasury LLC, respectively.
Investors in a Fund have an indirect interest in that Funds corresponding
Master LLC. The Master LLCs accept investments from other feeder funds, and
all of the feeder funds of a Master LLC bear that Master LLCs expenses
in proportion to their assets. This structure permits the pooling of assets
of two or more feeder funds in each Master LLC in an effort to achieve potential
economies of scale and efficiencies in portfolio management while preserving
separate identities, management, pricing structures, and/or distribution channels
at the feeder fund level. If a Master LLC has a larger investment portfolio,
certain transaction costs may be reduced to the extent that contributions
to and redemptions from that Master LLC from different feeder funds may offset
each other and produce a lower net cash flow. However, each feeder fund can
set its own transaction minimums, fund-specific expenses, and other conditions.
This means that one feeder fund could offer access to a Master LLC on more
attractive terms, or could experience better performance, than another feeder
fund. Each Master LLC is organized as a Delaware limited liability company.
Whenever a Fund is requested
to vote on any matter relating to the Master LLC, the Fund will hold a meeting
of the Funds shareholders and will cast its vote as instructed by the
Funds shareholders. Smaller feeder funds may be harmed by the actions
of larger feeder funds. For example, a larger feeder fund could have more
voting power than a Fund over the operations of a Master LLC. A Fund may withdraw
from a Master LLC at any time and may invest all of its assets in another
pooled investment vehicle or retain an investment adviser to manage the Funds
assets directly.
Description of Shares
The Declaration of Trust of each
Fund permits the Trustees to issue an unlimited number of full and fractional
shares of beneficial interest in one or more classes and to divide or combine
the shares into a greater or lesser number of shares without thereby changing
the proportionate beneficial interest in the Fund. Each share represents an
equal proportionate interest in the Fund with each other share. Upon liquidation
of the Fund, shareholders are
I-19
entitled to share pro rata in the net assets of the Fund available
for distribution to shareholders. Shares have no pre-emptive or conversion
rights. The rights of redemption and exchange are described elsewhere herein
and in the Prospectus of the Funds. Shares of each Fund are fully paid and
non-assessable by the Fund.
Principal Shareholders
To the knowledge of each Fund,
the following person owned beneficially or of record 5% or more of the Funds
shares as of July 1, 2008.
Name
|
|
Address
|
Percent
|
CMA Money Fund
|
|
|
MERRILL LYNCH, PIERCE, FENNER
|
4800 E. Deerlake Dr., 3rd Floor
|
100%
|
& SMITH INCORPORATED*
|
Jacksonville, FL 32246-6484
|
|
|
CMA Government Securities Fund
|
|
|
MERRILL LYNCH, PIERCE, FENNER
|
4800 E. Deerlake Dr., 3rd Floor
|
100%
|
& SMITH INCORPORATED*
|
Jacksonville, FL 32246-6484
|
|
|
CMA Treasury Fund
|
|
|
MERRILL LYNCH, PIERCE, FENNER
|
4800 E. Deerlake Dr., 3rd Floor
|
100%
|
& SMITH INCORPORATED*
|
Jacksonville, FL 32246-6484
|
|
|
*
|
Record but not beneficial holders of the shares.
|
|
X. Financial Statements
Each Funds and each Master
LLCs audited financial statements, along with their respective independent
registered public accounting firms report, are incorporated into this
Statement of Additional Information by reference to that Funds 2008
Annual Report. You may request a copy of the Annual Report at no charge by
calling 1-800-441-7762 between 8:00 a.m. and 6:00 p.m. Eastern time on any
business day.
I-20
PART II
Part II of this statement of
additional information contains information about the following funds: CMA Arizona
Municipal Money Fund (CMA Arizona), CMA California Municipal Money Fund
(CMA California), CMA Connecticut Municipal Money Fund (CMA
Connecticut), CMA Florida Municipal Money Fund (CMA Florida), CMA
Massachusetts Municipal Money Fund (CMA Massachusetts), CMA Michigan Municipal
Money Fund (CMA Michigan), CMA New Jersey Municipal Money Fund (CMA New
Jersey), CMA New York Municipal Money Fund (CMA New York), CMA North
Carolina Municipal Money Fund (CMA North Carolina), CMA Ohio Municipal Money
Fund (CMA Ohio), and CMA Pennsylvania Municipal Money Fund (CMA
Pennsylvania), each a series of the CMA Multi-State Municipal Series Trust
(collectively, the CMA State Funds); CMA Government Securities Fund (CMA
Government Securities); CMA Money Fund (CMA Money); CMA Tax-Exempt Fund
(CMA Tax-Exempt); CMA Treasury Fund (CMA Treasury); WCMA
Government Securities Fund (WCMA Government Securities); WCMA Money Fund
(WCMA Money); WCMA Tax-Exempt Fund (WCMA Tax-Exempt); WCMA
Treasury Fund (WCMA Treasury); Merrill Lynch Ready Assets Trust (Ready
Assets Trust); Merrill Lynch Retirement Reserves Money Fund of Merrill Lynch
Retirement Series Trust (Retirement Reserves); Merrill Lynch U.S.A. Government
Reserves (U.S.A. Government Reserves); and Merrill Lynch U.S. Treasury Money
Fund (U.S. Treasury Money).
Throughout this Statement of
Additional Information, each of the above listed funds may be referred to as a
Fund or collectively as the Funds. The CMA State Funds, CMA Money,
CMA Government Securities, CMA Tax-Exempt and CMA Treasury may be collectively referred to
herein as the CMA Funds. The CMA State Funds and CMA Tax-Exempt may be
collectively referred to herein as the CMA Tax-Exempt Funds. WCMA Government
Securities, WCMA Money, WCMA Tax-Exempt and WCMA Treasury may be collectively referred to
herein as the WCMA Funds.
Each Fund is organized as a
Massachusetts business trust. For ease and clarity of presentation, common shares of
beneficial interest are referred to herein as shares and the trustees of each
Fund are referred to herein as Trustees. BlackRock Advisors, LLC is the
manager of each Fund and is referred to as BlackRock or the
Manager, and the management agreement applicable to each Fund is referred to
as the Management Agreement. The Investment Company Act of 1940, as amended,
is referred to herein as the Investment Company Act. The Securities Act of
1933 is referred to herein as the Securities Act. The Securities and Exchange
Commission is referred to herein as the Commission.
CMA Money, CMA Government Securities,
CMA Tax-Exempt and CMA Treasury as well as all of the WCMA Funds are feeder
funds (each, a Feeder Fund) that invest all of their assets in a corresponding
master portfolio (each, a Master Portfolio) of a master limited
liability company organized in Delaware (each, a Master LLC), a mutual fund
that has the same objective and strategies as the applicable Feeder Fund. All investments
will be made at the level of the Master LLC. This structure is sometimes called a
master/feeder structure. A Feeder Funds investment results will
correspond directly to the investment results of the underlying Master LLC in which it
invests. For simplicity, unless the context otherwise requires, this Statement of
Additional Information uses the terms Fund or Feeder Fund to
include both a Feeder Fund and its Master LLC.
I
NVESTMENT
R
ISKS AND
C
ONSIDERATIONS
Set forth below are descriptions of
some of the types of investments and investment strategies that one or more of the Funds
may use, and the risks and considerations associated with those investments and investment
strategies. Please see each Funds Prospectus and the Investment Objectives and
Policies section of this Statement of Additional Information for further information
on each Funds investment policies and risks. Information contained in this section
about the risks and considerations associated with a Funds investments and/or
investment strategies applies only to those Funds specifically identified as making each
type of investment or using each investment strategy (each, a Covered Fund).
Information that does not apply to a Covered Fund does not form a part of that Covered
Funds Statement of Additional Information and should not be relied upon by investors
in that Covered Fund. Only information that is clearly identified as applicable to a
Covered Fund is considered to form a part of that Covered Funds Statement of
Additional Information.
|
CMA
Arizona
|
CMA
California
|
CMA
Connecticut
|
CMA
Florida
|
CMA
Massachusetts
|
CMA
Michigan
|
CMA
New Jersey
|
Rule 2a-7 Requirements
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
Bank Money Instruments
|
|
|
|
|
|
|
|
Commercial Paper
and
Other Short Term Obligations
|
|
|
|
|
|
|
|
Foreign Bank Money
Instruments
|
|
|
|
|
|
|
|
Foreign Short Term
Debt Instruments
|
|
|
|
|
|
|
|
Forward Commitments
|
|
|
|
|
|
|
|
Municipal Investments
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
Municipal Securities
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
Municipal Securities
Derivative Products
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
Municipal Notes
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
Municipal Commercial
Paper
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
Municipal Lease
Obligations
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
Municipal Securities
Short Term Maturity
Standards
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
Municipal Securities
- Quality Standards
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
Municipal Securities
- Other Factors
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
Single State Risk
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
Variable Rate Demand
Obligations (VRDOs)
and Participating VRDOs
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
Purchase of Securities
with Fixed Price Puts
|
|
|
|
|
|
|
|
Taxable Money Market
Securities
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
Repurchase Agreements
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
Repurchase Agreements
and Purchase and
Sale Contracts
|
|
|
|
|
|
|
|
Reverse Repurchase
Agreements
|
|
|
|
|
|
|
|
Securities Lending
|
|
|
|
|
|
|
|
When-Issued Securities
and Delayed Delivery
Securities and Forward
Commitments
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
|
CMA
New York
|
CMA
North Carolina
|
CMA
Ohio
|
CMA
Pennsylvania
|
CMA
Government
Securities
|
CMA
Money
|
CMA
Tax-Exempt
|
CMA
Treasury
|
Rule 2a-7 Requirements
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
Bank Money Instruments
|
|
|
|
|
|
X
|
|
|
Commercial Paper
and
Other Short Term Obligations
|
|
|
|
|
|
X
|
|
|
Foreign Bank Money
Instruments
|
|
|
|
|
|
X
|
|
|
Foreign Short Term
Debt Instruments
|
|
|
|
|
|
X
|
|
|
Forward Commitments
|
|
|
|
|
X
|
X
|
|
X
|
Municipal Investments
|
X
|
X
|
X
|
X
|
|
|
X
|
|
Municipal Securities
|
X
|
X
|
X
|
X
|
|
|
X
|
|
Municipal Securities
Derivative Products
|
X
|
X
|
X
|
X
|
|
|
X
|
|
Municipal Notes
|
X
|
X
|
X
|
X
|
|
|
X
|
|
Municipal Commercial
Paper
|
X
|
X
|
X
|
X
|
|
|
X
|
|
Municipal Lease
Obligations
|
X
|
X
|
X
|
X
|
|
|
X
|
|
Municipal Securities
Short Term Maturity
Standards
|
X
|
X
|
X
|
X
|
|
|
X
|
|
Municipal Securities
- Quality Standards
|
X
|
X
|
X
|
X
|
|
|
X
|
|
Municipal Securities
- Other Factors
|
X
|
X
|
X
|
X
|
|
|
X
|
|
Single State Risk
|
X
|
X
|
X
|
X
|
|
|
|
|
Variable Rate Demand
Obligations (VRDOs)
and Participating VRDOs
|
X
|
X
|
X
|
X
|
|
|
X
|
|
Purchase of Securities
with Fixed Price Puts
|
|
|
|
|
|
|
X
|
|
Taxable Money Market
Securities
|
X
|
X
|
X
|
X
|
X
|
|
|
|
Repurchase Agreements
|
X
|
X
|
X
|
X
|
|
|
|
|
Repurchase Agreements
and Purchase and
Sale Contracts
|
|
|
|
|
X
|
X
|
|
|
Reverse Repurchase
Agreements
|
|
|
|
|
|
X
|
|
|
Securities Lending
|
|
|
|
|
|
X
|
|
|
When-Issued Securities
and Delayed Delivery
Securities and Forward
Commitments
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
|
WCMA
Government
Securities
|
WCMA
Money
|
WCMA
Tax-Exempt
|
WCMA
Treasury
|
Ready
Assets
Trust
|
Retirement
Reserves
Money
Fund
|
U.S.A.
Government
Reserves
|
U.S.
Treasury
Money
Fund
|
Rule 2a-7 Requirements
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
Bank Money Instruments
|
|
X
|
|
|
X
|
X
|
|
|
Commercial Paper
and
Other Short Term Obligations
|
|
X
|
|
|
X
|
X
|
|
|
Foreign Bank Money
Instruments
|
|
X
|
|
|
X
|
X
|
|
|
Foreign Short Term
Debt Instruments
|
|
X
|
|
|
X
|
X
|
|
|
Forward Commitments
|
X
|
X
|
|
X
|
X
|
X
|
X
|
X
|
Municipal Investments
|
|
|
X
|
|
|
|
|
|
Municipal Securities
|
|
|
X
|
|
|
|
|
|
Municipal Securities
Derivative Products
|
|
|
X
|
|
|
|
|
|
Municipal Notes
|
|
|
X
|
|
|
|
|
|
Municipal Commercial
Paper
|
|
|
X
|
|
|
|
|
|
Municipal Lease
Obligations
|
|
|
X
|
|
|
|
|
|
Municipal Securities
Short Term Maturity
Standards
|
|
|
X
|
|
|
|
|
|
Municipal Securities
- Quality Standards
|
|
|
X
|
|
|
|
|
|
Municipal Securities
- Other Factors
|
|
|
X
|
|
|
|
|
|
Single State Risk
|
|
|
|
|
|
|
|
|
Variable Rate Demand
Obligations (VRDOs)
and Participating VRDOs
|
|
|
X
|
|
|
|
|
|
Purchase of Securities
with Fixed Price Puts
|
|
|
X
|
|
|
|
|
|
Taxable Money Market
Securities
|
|
|
|
|
|
|
|
|
Repurchase Agreements
|
|
|
|
|
|
|
|
|
Repurchase Agreements
and Purchase and
Sale Contracts
|
X
|
X
|
|
|
X
|
X
|
X
|
|
Reverse Repurchase
Agreements
|
|
X
|
|
|
X
|
X
|
|
|
Securities Lending
|
|
X
|
|
|
X
|
X
|
|
|
When-Issued Securities
and Delayed Delivery
Securities and Forward
Commitments
|
X
|
X
|
X
|
X
|
|
|
X
|
X
|
Rule 2a-7
Requirements
. Rule 2a-7 under the Investment Company Act sets forth
portfolio diversification requirements applicable to all money market funds.
Rule 2a-7 currently requires that each Fund (other than the CMA State Funds) limit
its investments in securities issued by any one issuer ordinarily to not more than 5% of
its total assets, or, in the event that such securities are not First Tier Securities (as
defined in the Rule), not more than 1% of its total assets (in the case of each of CMA
Tax-Exempt and WCMA Tax-Exempt only, this 1% limit applies only to Conduit Securities
as defined in the Rule that are not First Tier Securities). In addition,
Rule 2a-7 requires that not more than 5% of each such Funds (other than CMA
Tax-Exempt and WCMA Tax-Exempt) total assets be invested in Second Tier Securities (as
defined in the Rule) or, in the case of CMA Tax-Exempt and WCMA Tax-Exempt, Second Tier
Conduit Securities (as defined in the Rule). Rule 2a-7 requires each CMA State Fund
with respect to 75% of its total assets to limit its investments in securities issued by
any one issuer ordinarily to not more than 5% of its total assets, or, in the event that
such securities are Conduit Securities that are not First Tier Securities, not more than
1% of its total assets. With respect to 25% of its total assets, each CMA State Fund may
invest more than 5% of its total assets in securities issued by a single issuer provided
those securities are First Tier Securities. In addition, Rule 2a-7 requires that not
more than 5% of each CMA State Funds total assets be invested in Second Tier Conduit
Securities. The Rule requires each Fund to be diversified (as defined in the Rule) other
than with respect to Government Securities and securities subject to a Guarantee Issued by
a Non-Controlled Person (as defined in the Rule), although the Rule contains separate
diversification requirements for guarantees and demand features.
Bank Money
Instruments
. Certain Funds may invest in U.S. dollar-denominated
obligations of U.S. and foreign depository institutions, including commercial and savings
banks, savings and loan associations, and other institutions. Such obligations include but
are not limited to certificates of deposit, bankers acceptances, time deposits, bank
notes and deposit notes. For example, the obligations may be issued by (i) U.S. or
foreign depository institutions, (ii) foreign branches or subsidiaries of U.S.
depository institutions (Eurodollar obligations), (iii) U.S. branches or
subsidiaries of foreign depository institutions (Yankeedollar obligations) or
(iv) foreign branches or subsidiaries of foreign depository institutions. Eurodollar
and Yankeedollar obligations and obligations of branches or subsidiaries of foreign
depository institutions may be general obligations of the parent bank or may be limited to
the issuing branch or subsidiary by the terms of the specific obligations or by government
regulation. Investments in obligations of foreign depository institutions and their
foreign branches and subsidiaries will only be made if determined to be of comparable
quality to other investments permissible for each Fund. CMA Money, WCMA Money and
Retirement Reserves may invest only in Eurodollar obligations that, by their terms, are
general obligations of the U.S. parent bank. CMA Money and WCMA Money may only invest in
Yankeedollar obligations issued by U.S. branches or subsidiaries of foreign banks that are
subject to state or Federal banking regulations in the U.S. and that by their terms are
general obligations of the foreign parent. No Fund will invest more than 25% of its total
assets (taken at market value at the time of each investment) in obligations of foreign
depository institutions and their foreign branches and subsidiaries or in obligations of
foreign branches or subsidiaries of U.S. depository institutions that are not backed by
the U.S. parent. The Funds treat bank money instruments issued by U.S. branches or
subsidiaries of foreign banks as obligations issued by domestic banks (not subject to the
25% limitation) if the branch or subsidiary is subject to the same bank regulation as U.S.
banks.
Eurodollar and Yankeedollar
obligations, as well as other obligations of foreign depository institutions and short
term obligations issued by other foreign entities, may involve additional investment
risks, including adverse political and economic developments, the possible imposition of
withholding taxes on interest income payable on such obligations, the possible seizure or
nationalization of foreign deposits and the possible establishment of exchange controls or
other foreign governmental laws or restrictions that might adversely affect the repayment
of principal and the payment of interest. The issuers of such obligations may not be
subject to U.S. regulatory requirements. Foreign branches or subsidiaries of U.S. banks
may be subject to less stringent reserve requirements than U.S. banks. U.S. branches or
subsidiaries of foreign banks are subject to the reserve requirements of the states in
which they are located. There may be less publicly available information about a U.S.
branch or subsidiary of a foreign bank or other issuer than about a U.S. bank or other
issuer, and such entities may not be subject to the same accounting, auditing and
financial record keeping standards and requirements as U.S. issuers. Evidence of ownership
of Eurodollar and foreign obligations may be held outside the United States, and the Funds
may be subject to the risks associated with the holding of such property overseas.
Eurodollar and foreign obligations of the Funds held overseas will be held by foreign
branches of each Funds custodian or by other U.S. or foreign banks under
subcustodian arrangements complying with the requirements of the Investment Company Act.
The Manager will carefully consider
the above factors in making investments in Eurodollar obligations, Yankeedollar
obligations of foreign depository institutions and other foreign short term obligations,
and will not knowingly purchase obligations that, at the time of purchase, are subject to
exchange controls or withholding taxes. Generally, a Fund will limit its Yankeedollar
investments to obligations of banks organized in Canada, France, Germany, Japan, the
Netherlands, Switzerland, the United Kingdom or other industrialized nations.
Bank money instruments in which a
Fund invests must be issued by depository institutions with total assets of at least $1
billion, except that a Fund may invest in certificates of deposit of smaller institutions
if such certificates of deposit are Federally insured and if, as a result of such
purchase, no more than 10% of total assets (taken at market value), are invested in such
certificates of deposit.
Commercial Paper and Other
Short Term Obligations
. Commercial paper (including variable amount master
demand notes and other variable rate securities, with or without forward features) refers
to short term unsecured promissory notes issued by corporations, partnerships, trusts or
other entities to finance short term credit needs and non-convertible debt securities
(
e.g.
, bonds and debentures) with no more than 397 days (13 months) remaining to maturity
at the date of purchase. Short term obligations issued by trusts, corporations,
partnerships or other entities include mortgage-related or asset-backed instruments,
including pass-through certificates such as participations in, or bonds and notes backed
by, pools of mortgage, automobile, manufactured housing or other types of consumer loans;
credit card or trade receivables or pools of mortgage-backed or asset-backed securities.
These structured financings will be supported by sufficient collateral and other credit
enhancements, including letters of credit, insurance, reserve funds and guarantees by
third parties, to enable such instruments to obtain the requisite quality rating by a
Nationally Recognized Statistical Rating Organization (NRSRO). Some structured
financings also use various types of swaps, among other things, to issue instruments that
have interest rate, quality or maturity characteristics necessary or desirable for a Fund.
These swaps may include so-called credit default swaps that might depend for payment not
only on the credit of a counterparty, but also on the obligations of another entity, the
reference entity.
Foreign Bank Money
Instruments
. Foreign bank money instruments refer to U.S.
dollar-denominated obligations of foreign depository institutions and their foreign
branches and subsidiaries, such as, but not limited to, certificates of deposit,
bankers acceptances, time deposits, bank notes and deposit notes. The obligations of
such foreign depository institutions and their foreign branches and subsidiaries may be
the general obligations of the parent bank or may be limited to the issuing branch or
subsidiary by the terms of the specific obligation or by government regulation. Such
investments will only be made if determined to be of comparable quality to other
investments permissible for a Fund. A Fund will not invest more than 25% of its total
assets (taken at market value at the time of each investment) in these obligations.
Investments in foreign entities generally involve the same risks as those described above
in connection with investments in Eurodollar and Yankeedollar obligations and obligations
of foreign depository institutions and their foreign branches and subsidiaries.
Foreign Short term Debt
Instruments
. Foreign short term debt instruments refer to U.S.
dollar-denominated commercial paper and other short term obligations issued by foreign
entities. Such investments are subject to quality standards similar to those applicable to
investments in comparable obligations of domestic issuers. These investments generally
involve the same risks as those described above in connection with investments in
Eurodollar and Yankeedollar obligations and obligations of foreign depository institutions
and their foreign branches and subsidiaries.
Forward
Commitments
. Certain Funds may purchase or sell money market securities on
a forward commitment basis at fixed purchase terms. The purchase or sale will be recorded
on the date a Fund enters into the commitment, and the value of the security will
thereafter be reflected in the calculation of the Funds net asset value. The value
of the security on the delivery date may be more or less than its purchase price. A Fund
will segregate assets consisting of cash or liquid money market securities having a market
value at all times at least equal to the amount of the forward purchase commitment.
Although a Fund generally will enter into forward commitments with the intention of
acquiring securities for its portfolio, a Fund may dispose of a commitment prior to
settlement if the Manager deems it appropriate to do so.
There can be no assurance that a
security purchased or sold through a forward commitment will be delivered. The value of
securities in these transactions on the delivery date may be more or less than a Funds
purchase price. The
Fund may bear the risk of a decline
in the value of the security in these transactions and may not benefit from an
appreciation in the value of the security during the commitment period.
Municipal
Investments
Municipal Securities
. Certain
Funds invest primarily in a portfolio of short term municipal obligations issued by or on
behalf of the states, their political subdivisions, agencies and instrumentalities and
obligations of other qualifying issuers, such as issuers located in Puerto Rico, the U.S.
Virgin Islands and Guam, the interest on which (and/or, in the case of property taxes, the
value of which) is excludable, in the opinion of bond counsel to the issuer, from gross
income for purposes of Federal income taxes and the applicable states taxes
(State Taxes). Obligations that pay interest that is excludable from gross
income for Federal income tax purposes are referred to herein as Municipal
Securities, and obligations that pay interest that is excludable from gross income
for Federal income tax purposes and are exempt from the applicable State Taxes are
referred to as State Municipal Securities. Unless otherwise indicated,
references to Municipal Securities shall be deemed to include State Municipal Securities.
Municipal Securities include debt
obligations issued to obtain funds for various public purposes, including construction of
a wide range of public facilities, refunding of outstanding obligations and obtaining
funds for general operating expenses and loans to other public institutions and
facilities. In addition, certain types of bonds are issued by or on behalf of public
authorities to finance various facilities operated for private profit. Such obligations
are included within the term Municipal Securities if the interest paid thereon is
excludable from gross income for Federal income tax purposes.
The two principal classifications of
Municipal Securities are general obligation bonds and revenue or
special obligation bonds. General obligation bonds are secured by the
issuers pledge of its faith, credit and taxing power for the repayment of principal
and the payment of interest. Revenue or special obligation bonds are payable only from the
revenues derived from a particular facility or class of facilities or, in some cases, from
the proceeds of a special excise tax or other specific revenue source such as from the
user of the facility being financed. Private activity bonds (or industrial
development bonds under pre-1986 law) are in most cases revenue bonds and do not
generally constitute the pledge of the credit or taxing power of the issuer of such bonds.
The repayment of the principal and the payment of interest on such private activity bonds
depends solely on the ability of the user of the facilities financed by the bonds to meet
its financial obligation and the pledge, if any, of real and personal property so financed
as security for such payment. In addition, private activity bonds may pay interest that is
subject to the Federal alternative minimum tax. A Funds portfolio may include
moral obligation bonds, which are normally issued by special purpose public
authorities. If an issuer of moral obligation bonds is unable to meet its debt service
obligations from current revenues, it may draw on a reserve fund, the restoration of which
is a moral commitment but not a legal obligation of a state or municipality.
Yields on Municipal Securities are
dependent on a variety of factors, including the general condition of the money market and
of the municipal bond market, the size of a particular offering, the maturity of the
obligation, and the rating of the issuer. The ability of a Fund to achieve its investment
objective is also dependent on the continuing ability of the issuers of the Municipal
Securities in which the Fund invests to meet their obligations for the payment of interest
and the repayment of principal when due. There are variations in the risks involved in
holding Municipal Securities, both within a particular classification and between
classifications, depending on numerous factors. Furthermore, the rights of holders of
Municipal Securities and the obligations of the issuers of such Municipal Securities may
be subject to applicable bankruptcy, insolvency and similar laws and court decisions
affecting the rights of creditors generally, and such laws, if any, which may be enacted
by Congress or state legislatures affecting specifically the rights of holders of
Municipal Securities.
A Funds ability to distribute
dividends exempt from Federal income tax will depend on the exclusion from gross income of
the interest income that it receives on the Municipal Securities in which it invests. A
Fund will only purchase a Municipal Security if it is accompanied by an opinion of counsel
to the issuer, which is delivered on the date of issuance of that security, that interest
on such securities is excludable from gross income for Federal income tax purposes (the
tax exemption opinion).
Events occurring after the date of
issuance of the Municipal Securities, however, may cause the interest on such securities
to be includable in gross income for Federal income tax purposes. For example, the
Internal Revenue
Code of 1986, as amended (the Code)
establishes certain requirements, such as restrictions as to the investment of the
proceeds of the issue, limitations as to the use of proceeds of such issue and the
property financed by such proceeds, and the payment of certain excess earnings to the
Federal government, that must be met after the issuance of the Municipal Securities for
interest on such securities to remain excludable from gross income for Federal income tax
purposes. The issuers and the conduit borrowers of the Municipal Securities generally
covenant to comply with such requirements and the tax exemption opinion generally assumes
continuing compliance with such requirements. Failure to comply with these continuing
requirements, however, may cause the interest on such Municipal Securities to be
includable in gross income for Federal income tax purposes retroactive to their date of
issue.
In addition, the Internal Revenue
Service (IRS) has an ongoing enforcement program that involves the audit of
tax exempt bonds to determine whether an issue of bonds satisfies all of the requirements
that must be met for interest on such bonds to be excludable from gross income for Federal
income tax purposes. From time to time, some of the Municipal Securities held by a Fund
may be the subject of such an audit by the IRS, and the IRS may determine that the
interest on such securities is includable in gross income for Federal income tax purposes
either because the IRS has taken a legal position adverse to the conclusion reached by the
counsel to the issuer in the tax exemption opinion or as a result of an action taken or
not taken after the date of issue of such obligation.
If interest paid on a Municipal
Security in which a Fund invests is determined to be taxable subsequent to the Funds
acquisition of such security, the IRS may demand that such Fund pay taxes on the affected
interest income and, if the Fund agrees to do so, its yield could be adversely affected.
If the interest paid on any Municipal Security held by a Fund is determined to be taxable,
such Fund will dispose of the security as soon as practicable. A determination that
interest on a security held by a Fund is includable in gross income for Federal or state
income tax purposes retroactively to its date of issue may, likewise, cause a portion of
prior distributions received by shareholders to be taxable to those shareholders in the
year of receipt.
From time to time, proposals have
been introduced before Congress for the purpose of restricting or eliminating the Federal
income tax exclusion for interest on Municipal Securities. Similar proposals may be
introduced in the future. If such a proposal were enacted, the ability of each Fund to pay
exempt-interest dividends would be affected adversely and the Fund would
re-evaluate its investment objectives and policies and consider changes in structure. See
Dividends and Taxes Taxes.
Municipal Securities
Derivative Products
. Derivative Products are typically structured by a bank,
broker-dealer or other financial institution. A Derivative Product generally consists of a
trust or partnership through which a Fund holds an interest in one or more underlying
bonds coupled with a right to sell (put) that Funds interest in the
underlying bonds at par plus accrued interest to a financial institution (a
Liquidity Provider). Typically, a Derivative Product is structured as a trust
or partnership that provides for pass-through tax-exempt income. There are currently three
principal types of derivative structures: (1) Tender Option Bonds, which
are instruments that grant the holder thereof the right to put an underlying bond at par
plus accrued interest at specified intervals to a Liquidity Provider; (2) Swap
Products, in which the trust or partnership swaps the payments due on an underlying
bond with a swap counterparty who agrees to pay a floating municipal money market interest
rate; and (3) Partnerships, which allocate to the partners portions of
income, expenses, capital gains and losses associated with holding an underlying bond in
accordance with a governing agreement. A Fund may also invest in other forms of short term
Derivative Products eligible for investment by money market funds.
Investments in Derivative Products
raise certain tax, legal, regulatory and accounting issues that may not be presented by
investments in other municipal bonds. There is some risk that certain issues could be
resolved in a manner that could adversely impact the performance of a Fund. For example,
the tax-exempt treatment of the interest paid to holders of Derivative Products is
premised on the legal conclusion that the holders of such Derivative Products have an
ownership interest in the underlying bonds. Were the IRS or any state taxing authority to
issue an adverse ruling or take an adverse position with respect to the taxation of
Derivative Products, there is a risk that the interest paid on such Derivative Products
or, in the case of property taxes, the value of such Fund to the extent represented by
such Derivative Products, would be deemed taxable at the Federal and/or state level.
Municipal Notes
. Municipal
notes are shorter term municipal debt obligations. They may provide interim financing in
anticipation of tax collection, bond sales or revenue receipts. If there is a shortfall in
the anticipated proceeds, the note may not be fully repaid and a Fund may lose money.
Municipal Commercial Paper
.
Municipal commercial paper is generally unsecured and issued to meet short term financing
needs. The lack of security presents some risk of loss to a Fund since, in the event of an
issuers bankruptcy, unsecured creditors are repaid only after the secured creditors
are paid out of the assets, if any, that remain.
Municipal Lease Obligations
.
Also included within the general category of the State Municipal Securities are
Certificates of Participation (COPs) issued by governmental authorities as
entities to finance the acquisition or construction of equipment, land and/or facilities.
The COPs represent participations in a lease, an installment purchase contract or a
conditional sales contract (hereinafter collectively called lease obligations)
relating to such equipment, land or facilities. Although lease obligations do not
constitute general obligations of the issuer for which the issuers unlimited taxing
power is pledged, a lease obligation is frequently backed by the issuers covenant to
budget for, appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain non-appropriation clauses that provide that
the issuer has no obligation to make lease or installment purchase payments in future
years unless money is appropriated for such purpose on a yearly basis. Although
non-appropriation lease obligations are secured by the leased property,
disposition of the property in the event of foreclosure might prove difficult. The
securities represent a type of financing that has not yet developed the depth of
marketability associated with more conventional securities. Certain investments in lease
obligations may be illiquid. A Fund may not invest in illiquid lease obligations if such
investments, together with all other illiquid investments, would exceed 10% of such
Funds net assets. A Fund may, however, invest without regard to such limitation in
lease obligations that the Manager, pursuant to guidelines adopted by the Board of
Trustees and subject to the supervision of the Board, determines to be liquid. The Manager
will deem lease obligations to be liquid if they are publicly offered and have received an
investment grade rating of Baa or better by Moodys Investor Service, Inc.
(Moodys), or BBB or better by Standard & Poors
(S&P) or Fitch Ratings (Fitch). Unrated lease obligations, or
those rated below investment grade, will be considered liquid if the obligations come to
the market through an underwritten public offering and at least two dealers are willing to
give competitive bids. In reference to the latter, the Manager must, among other things,
also review the creditworthiness of the entity obligated to make payment under the lease
obligation and make certain specified determinations based on such factors as the
existence of a rating or credit enhancement, such as insurance, the frequency of trades or
quotes for the obligation and the willingness of dealers to make a market in the
obligation.
Municipal Securities
Short-Term Maturity Standards
. All of the investments of a Fund in Municipal
Securities will be in securities with remaining maturities of 397 days (13 months) or
less. The dollar-weighted average maturity of each Funds portfolio will be 90 days
or less. For purposes of this investment policy, an obligation will be treated as having a
maturity earlier than its stated maturity date if such obligation has technical features
that, in the judgment of the Manager, will result in the obligation being valued in the
market as though it has such earlier maturity.
The maturities of Variable Rate
Demand Obligations (VRDOs) (including Participating VRDOs) are deemed to be
the longer of (i) the notice period required before a Fund is entitled to receive
payment of the principal amount of the VRDOs on demand or (ii) the period remaining
until the VRDOs next interest rate adjustment. If not redeemed by a Fund through the
demand feature, VRDOs mature on a specified date, which may range up to 30 years from the
date of issuance. See VDROs and Participating VDROs below.
Municipal Securities Quality
Standards
. A Funds portfolio investments in municipal notes and short term
tax-exempt commercial paper will be limited to those obligations that are (i) secured
by a pledge of the full faith and credit of the United States or (ii) rated, or
issued by issuers that have been rated, in one of the two highest rating categories for
short term municipal debt obligations by an NRSRO or, if not rated, of comparable quality
as determined under procedures approved by the Trustees. A Funds investments in
municipal bonds will be in issuers that have received from the requisite NRSROs a rating,
with respect to a class of short term debt obligations that is comparable in priority and
security with the investment, in one of the two highest rating categories for short term
obligations or, if not rated, will be of comparable quality as determined under
procedures approved by the Trustees. Certain tax-exempt obligations (primarily VRDOs and
Participating VRDOs) may be entitled to the benefit of letters
of credit or similar credit
enhancements issued by financial institutions. In such instances, in assessing the
quality of such instruments, the Trustees and the Manager will take into account not only
the creditworthiness of the issuers, but also the creditworthiness and type of obligation
of the financial institution. The type of obligation of the financial institution
concerns, for example, whether the letter of credit or similar credit enhancement being
issued is conditional or unconditional. Certain Funds also may purchase other types of
municipal instruments if, in the opinion of the Trustees or the Manager (as determined in
accordance with the procedures established by the Trustees), such obligations are
equivalent to securities that have the ratings described above. For a description of debt
ratings, see Appendix A Description of Debt Ratings.
A Fund may not invest in any security
issued by a depository institution unless such institution is organized and operating in
the United States, has total assets of at least $1 billion and is federally insured.
Preservation of capital is a prime investment objective of the Funds, and while the types
of money market securities in which the Funds invest generally are considered to have low
principal risk, such securities are not completely risk free. There is a risk of the
failure of issuers or credit enhancers to meet their principal and interest obligations.
With respect to repurchase agreements and purchase and sale contracts, there is also the
risk of the failure of the parties involved to repurchase at the agreed-upon price, in
which event each Fund may suffer time delays and incur costs or possible losses in
connection with such transactions.
Municipal Securities Other
Factors
. Management of the Funds will endeavor to be as fully invested as reasonably
practicable in order to maximize the yield on each Funds portfolio. Not all short
term municipal securities trade on the basis of same day settlements and, accordingly, a
portfolio of such securities cannot be managed on a daily basis with the same flexibility
as a portfolio of money market securities, which can be bought and sold on a same day
basis. There may be times when a Fund has uninvested cash resulting from an influx of cash
due to large purchases of shares or the maturing of portfolio securities. A Fund also may
be required to maintain cash reserves or incur temporary bank borrowings to make
redemption payments, which are made on the same day the redemption request is received.
Such inability to be invested fully would lower the yield on such Funds portfolio.
Because certain Funds may at times
invest a substantial portion of their assets in Municipal Securities secured by bank
letters of credit or guarantees, an investment in a Fund should be made with an
understanding of the characteristics of the banking industry and the risks that such an
investment in such credit enhanced securities may entail. Banks are subject to extensive
governmental regulations that may limit both the amounts and types of loans and other
financial commitments that may be made and interest rates and fees that may be charged.
The profitability of the banking industry is largely dependent on the availability and
cost of capital funds for the purpose of financing lending operations under prevailing
money market conditions. Furthermore, general economic conditions play an important part
in the operations of this industry and exposure to credit losses arising from possible
financial difficulties of borrowers might affect a banks ability to meet its
obligations under a letter of credit.
Changes to the Code limit the types
and volume of securities qualifying for the Federal income tax exemption of interest,
which may affect the availability of Municipal Securities for investment by the Funds,
which could, in turn, have a negative impact on the yield of the portfolios. A Fund
reserves the right to suspend or otherwise limit sales of its shares if, as a result of
difficulties in acquiring portfolio securities or otherwise, it is determined that it is
not in the interests of the Funds shareholders to issue additional shares.
Single State Risk
. Because
certain Funds invest primarily in the Municipal Securities of a single state, each such
Fund is more susceptible to factors adversely affecting issuers of Municipal Securities in
such state than is a fund that is not concentrated in issuers of a single states
State Municipal Securities to this degree. Because each Funds portfolio will be
comprised primarily of short term, high quality securities, each Fund is expected to be
less subject to market and credit risks than a fund that invests in longer term or lower
quality State Municipal Securities.
A Fund may invest more than 25% of
the value of its total assets in Municipal Securities that are related in such a way that
an economic, business or political development or change affecting one such security also
would affect the other securities such as, for example, securities the interest on which
is paid from revenues of similar types of projects. As a result, each Fund may be subject
to greater risk than funds that do not follow this practice.
VRDOs and Participating VRDOs
.
VRDOs are tax-exempt obligations that contain a floating or variable interest rate
adjustment formula and right of demand on the part of the holder thereof to receive
payment of the unpaid
balance plus accrued interest upon a
short notice period not to exceed seven days. There is, however, the possibility that
because of default or insolvency the demand feature of VRDOs and Participating VRDOs may
not be honored. The interest rates are adjustable at intervals (ranging from daily to one
year) to some prevailing market rate of the VRDOs at approximately the par value of the
VRDOs on the adjustment date. The adjustment may be based upon the Public Securities
Index or some other appropriate interest rate adjustment index. Each Fund may invest in
all types of tax-exempt instruments currently outstanding or to be issued in the future
that satisfy its short term maturity and quality standards.
Participating VRDOs provide a Fund
with a specified undivided interest (up to 100%) of the underlying obligation and the
right to demand payment of the unpaid principal balance plus accrued interest on the
Participating VRDOs from the financial institution upon a specified number of days notice,
not to exceed seven days. In addition, a Participating VRDO is backed by an irrevocable
letter of credit or guaranty of the financial institution. A Fund would have an undivided
interest in an underlying obligation and thus participate on the same basis as the
financial institution in such obligation except that the financial institution typically
retains fees out of the interest paid on the obligation for servicing the obligation,
providing the letter of credit or issuing the repurchase commitment. Certain Funds have
been advised by counsel that they should be entitled to treat the income received on
Participating VRDOs as interest from tax-exempt obligations. It is contemplated that no
Fund will invest more than a limited amount of its total assets in Participating VRDOs.
Neither CMA Tax-Exempt nor WCMA Tax-Exempt currently intends to invest more than 20% of
its total assets in Participating VRDOs.
VRDOs that contain a right of demand
to receive payment of the unpaid principal balance plus accrued interest on a notice
period exceeding seven days may be deemed to be illiquid securities. A VRDO with a demand
notice period exceeding seven days will, therefore, be subject to each Funds
restrictions on illiquid investments unless, in the judgment of the Trustees, such VRDO is
liquid. The Trustees may adopt guidelines and delegate to the Manager the daily function
of determining and monitoring liquidity of such VRDOs. The Trustees, however, will retain
sufficient oversight and be ultimately responsible for such determinations.
Because of the interest rate
adjustment formula on VRDOs (including Participating VRDOs), the VRDOs are not comparable
to fixed rate securities. A Funds yield on VRDOs will decline and its shareholders
will forego the opportunity for capital appreciation during periods when prevailing
interest rates have declined. On the other hand, during periods where prevailing interest
rates have increased, a Funds yield on VRDOs will increase and its shareholders will
have a reduced risk of capital depreciation.
Purchase of Securities with
Fixed Price Puts
.
Certain Funds have authority to purchase fixed rate
Municipal Securities and, for a price, simultaneously acquire the right to sell such
securities back to the seller at an agreed-upon rate at any time during a stated period or
on a certain date. Such a right is generally denoted as a fixed price put. Puts with
respect to fixed rate instruments are to be distinguished from the demand or repurchase
features of VRDOs and Participating VRDOs that enable certain Funds to dispose of such a
security at a time when the market value of the security approximates its par value.
Taxable Money Market
Securities
.
Certain Funds may invest in a variety of taxable money market
securities (Taxable Securities). The Taxable Securities in which certain Funds
may invest consist of U.S. Government securities, U.S. Government agency securities,
domestic bank certificates of deposit and bankers acceptances, short term corporate
debt securities such as commercial paper and repurchase agreements. These investments must
have a stated maturity not in excess of 397 days (13 months) from the date of purchase.
The standards applicable to Taxable
Securities in which certain Funds invest are essentially the same as those described above
with respect to Municipal Securities. Certain Funds may not invest in any security issued
by a depository institution unless such institution is organized and operating in the
United States, has total assets of at least $1 billion and is federally insured.
Taxable Securities in which certain
Funds may invest will be rated, or will be issued by issuers that have been rated, in one
of the two highest rating categories for short term debt obligations by an NRSRO or, if
not rated, will be of comparable quality as determined under procedures approved by the
Trustees. Certain Funds will not invest in taxable short term money market securities.
Repurchase Agreements and
Purchase and Sale Contracts
. Funds may invest in Taxable Securities
pursuant to repurchase agreements. Repurchase agreements may be entered into only with a
member bank of the Federal Reserve System or primary dealer in U.S. Government securities
or an affiliate thereof that meets the creditworthiness standards adopted by the Board of
Trustees. Under such agreements, the bank or primary dealer or an affiliate thereof
agrees, upon entering into the contract, to repurchase the security at a mutually agreed
upon time and price, thereby determining the yield during the term of the agreement. This
results in a fixed rate of return insulated from market fluctuations during such period.
Repurchase agreements may be construed to be collateralized loans by the purchaser to the
seller secured by the securities transferred to the purchaser. In the case of a repurchase
agreement, a Fund will require the seller to provide additional collateral if the market
value of the securities falls below the repurchase price at any time during the term of
the repurchase agreement. In the event of default by the seller under a repurchase
agreement construed to be a collateralized loan, the underlying securities are not owned
by the Fund but only constitute collateral for the sellers obligation to pay the
repurchase price. Therefore, a Fund may suffer time delays and incur costs or possible
losses in connection with the disposition of the collateral. In the event of a default
under a repurchase agreement that is construed to be a collateralized loan, instead of the
contractual fixed rate of return, the rate of return to a Fund will depend upon
intervening fluctuations of the market value of such security and the accrued interest on
the security. In such event, a Fund would have rights against the seller for breach of
contract with respect to any losses arising from market fluctuations following the failure
of the seller to perform.
In general, for Federal income tax
purposes, repurchase agreements are treated as collateralized loans secured by the
securities sold. Therefore, amounts earned under such agreements, even if the
underlying securities are tax-exempt securities, will not be considered tax-exempt
interest.
From time to time, a Fund also may
invest in money market securities pursuant to purchase and sale contracts. While purchase
and sale contracts are similar to repurchase agreements, purchase and sale contracts are
structured so as to be in substance more like a purchase and sale of the underlying
security than is the case with repurchase agreements and, with purchase and sale
contracts, the purchaser receives any interest on the security paid during the period of
the contract.
Reverse Repurchase
Agreements
. A Fund may enter into reverse repurchase agreements with the
same parties with whom it may enter into repurchase agreements. Under a reverse repurchase
agreement, a Fund sells securities to another party and agrees to repurchase them at a
mutually agreed-upon date and price. At the time a Fund enters into a reverse repurchase
agreement, it will segregate liquid assets with a value not less than the repurchase price
(including accrued interest). Reverse repurchase agreements involve the risk that
(i) the market value of the securities retained in lieu of sale by a Fund may decline
below the price of the securities the Fund has sold but is obligated to repurchase and
(ii) the price of the securities sold will decline below the price at which the Fund
is required to repurchase them. In addition, if the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee
or receiver may receive an extension of time to determine whether to enforce a Funds
obligations to repurchase the securities and the Funds use of the proceeds of the
reverse repurchase agreement may effectively be restricted pending such decision.
Securities
Lending
. Each Fund may lend portfolio securities with a value not exceeding
33
1
/
3
% of its total assets or the limit prescribed by applicable law to banks, brokers and
other financial institutions. In return, the Fund receives collateral in cash or
securities issued or guaranteed by the U.S. Government, which will be maintained at all
times in an amount equal to at least 100% of the current market value of the loaned
securities. Each Fund maintains the ability to obtain the right to vote or consent on
proxy proposals involving material events affecting securities loaned. A Fund receives the
income on the loaned securities. Where a Fund receives securities as collateral, the Fund
receives a fee for its loans from the borrower and does not receive the income on the
collateral. Where a Fund receives cash collateral, it may invest such collateral and
retain the amount earned, net of any amount rebated to the borrower. As a result, the
Funds yield may increase. Loans of securities are terminable at any time and the
borrower, after notice, is required to return borrowed securities within the standard time
period for settlement of securities transactions. The Fund is obligated to return the
collateral to the borrower at the termination of the loan. A Fund could suffer a loss in
the event the Fund must return the cash collateral and there are losses on investments
made with the cash collateral. In the event the borrower defaults on any of its
obligations with respect to a securities loan, a Fund could suffer a loss where there are
losses on investments made with the cash collateral or where the value of the securities
collateral falls below the market value of the borrowed securities. A Fund could also
experience delays and costs in gaining access to the collateral. Each Fund may pay
reasonable finders, lending agent, administrative and custodial fees in connection
with its loans. Each Fund has received an exemptive order from the Commission permitting
it to lend portfolio securities to affiliates of the Fund and to retain an affiliate of
the Fund as lending agent.
When Issued Securities, Delayed
Delivery Securities and Forward Commitments
.
A Fund may purchase or sell
securities that it is entitled to receive on a when issued basis. A Fund may also purchase
or sell securities on a delayed delivery basis or through a forward commitment. These
transactions involve the purchase or sale of securities by a Fund at an established price
with payment and delivery taking place in the future. The Fund enters into these
transactions to obtain what is considered an advantageous price to the Fund at the time of
entering into the transaction. When a Fund purchases securities in these transactions, the
Fund segregates liquid securities in an amount equal to the amount of its purchase
commitments.
There can be no assurance that a
security purchased on a when issued basis will be issued or that a security purchased or
sold on a delayed delivery basis or through a forward commitment will be delivered. Also,
the value of securities in these transactions on the delivery date may be more or less
than the price paid by the Fund to purchase the securities. The Fund will lose money if
the value of the security in such a transaction declines below the purchase price and will
not benefit if the value of the security appreciates above the sale price during the
commitment period.
Diversification Status
Each Funds investments will be
limited in order to allow the Fund to continue to qualify as a regulated investment
company (RIC) under the Code. To qualify, among other requirements, each Fund
will limit its investments so that at the close of each quarter of the taxable year (i) at
least 50% of the market value of each Funds assets is represented by cash,
securities of other RICs, U.S. government securities and other securities, with such other
securities limited, in respect of any one issuer, to an amount not greater than 5% of the
Funds assets and not greater than 10% of the outstanding voting securities of such
issuer and (ii) not more than 25% of the value of its assets is invested in the securities
(other than U.S. government securities or securities of other RICs) of any one issuer, any
two or more issuers that the fund controls and that are determined to be engaged in the
same or similar trades or businesses or related trades or businesses or in the securities
of one or more qualified publicly traded partnerships (
i.e.
, partnerships that are
traded on an established securities market or tradable on a secondary market, other than
partnerships that derive 90% of their income from interest, dividends, capital gains, and
other traditional permitted mutual fund income). For purposes of this restriction, the CMA
State Funds, CMA Tax-Exempt and WCMA Tax-Exempt generally will regard each state and each
of its political subdivisions, agencies or instrumentalities, and each multi-state agency
of which the state is a member as a separate issuer. Each public authority that issues
securities on behalf of a private entity generally will also be regarded as a separate
issuer, except that if the security is backed only by the assets and revenues of a
non-government entity, then the entity with the ultimate responsibility for the payment of
interest and principal may be regarded as the sole issuer. These tax-related limitations
may be changed by the Board of Trustees of CMA State Funds, CMA Tax-Exempt and WCMA
Tax-Exempt to the extent necessary to comply with changes to the Federal tax requirements.
See Dividends and Taxes Taxes.
Each Fund other than the CMA State
Funds elects to be classified as diversified under the Investment Company Act
and must satisfy the foregoing 5% and 10% requirements with respect to 75% of its total
assets.
M
ANAGEMENT AND
O
THER
S
ERVICE
A
RRANGEMENTS
Trustees and Officers
See Part I, Section III
Information on Trustees and Officers Biographical Information,
Share Ownership and Compensation of Trustees of each
Funds Statement of Additional Information for biographical and certain other
information relating to the Trustees and officers of your Fund, including Trustees
compensation.
Management
Arrangements
Management Services
. The
Manager provides each Fund with investment advisory and management services. Subject to
the supervision of the Board of Trustees, the Manager is responsible for the actual
management of a Funds portfolio and reviews the Funds holdings in light of its
own research analysis and that from other relevant sources. The responsibility for making
decisions to buy, sell or hold a particular security rests with the Manager. The Manager
performs certain of the other administrative services and provides all the office space,
facilities, equipment and necessary personnel for management of each Fund.
Each Feeder Fund invests all or a
portion of its assets in shares of a Master Portfolio. To the extent a Feeder Fund invests
all of its assets in a Master Portfolio, it does not invest directly in portfolio
securities and does not require management services. For such Feeder Funds, portfolio
management occurs at the Master Portfolio level.
Management Fee
. Each Fund has
entered into a management agreement with the Manager pursuant to which the Manager
receives for its services to the Fund monthly compensation at an annual rate based on the
average daily net assets of the Fund. For information regarding specific fee rates for
your Fund and the fees paid by your Fund to the Manager for the Funds last three
fiscal years or other applicable periods, see Part I, Section IV
Management and Advisory Arrangements of each Funds Statement of
Additional Information. Each Management Agreement obligates the Manager to provide
investment advisory services and to pay, or cause an affiliate to pay, for maintaining its
staff and personnel and to provide office space, facilities and necessary personnel for
the Fund. Each Manager is also obligated to pay, or cause an affiliate to pay, the fees of
all officers and Trustees of the Fund who are affiliated persons of the Manager or any
affiliate.
For Funds that do not have an
administration agreement with the Manager, each Management Agreement obligates the Manager
to provide management services and to pay all compensation of and furnish office space for
officers and employees of a Fund connected with investment and economic research, trading
and investment management of the Fund, as well as the fees of all Trustees of the Fund who
are interested persons of the Fund. Each Fund pays all other expenses incurred in the
operation of that Fund, including among other things: taxes; expenses for legal and
auditing services; costs of preparing, printing and mailing proxies, shareholder reports,
prospectuses and statements of additional information, except to the extent paid by FAM
Distributors, Inc. or BlackRock Distributors, Inc., or in the case of the CMA Funds and
WCMA Funds, Merrill Lynch, Pierce, Fenner & Smith Incorporated (each a
Distributor, and collectively the Distributors), as applicable,
charges of the custodian and sub-custodian, and the transfer agent; expenses of redemption
of shares; Commission fees; expenses of registering the shares under Federal, state or
foreign laws; fees and expenses of Trustees who are not interested persons of a Fund as
defined in the Investment Company Act; accounting and pricing costs (including the daily
calculations of net asset value); insurance; interest; brokerage costs; litigation and
other extraordinary or non-recurring expenses; and other expenses properly payable by the
Fund. Certain accounting services are provided to each Fund by State Street Bank and Trust
Company (State Street) pursuant to an agreement between State Street and each
Fund. Each Fund pays a fee for these services. In addition, the Manager provides certain
accounting services to each Fund and the Fund pays the Manager a fee for such services.
The Distributors pay certain promotional expenses of the Funds incurred in connection with
the offering of shares of the Funds. Certain expenses are financed by each Fund pursuant
to distribution plans in compliance with Rule 12b-1 under the Investment Company Act.
See Purchase of Shares Distribution Plans.
Sub-Advisory Fee
. The Manager
of each Fund has entered into one or more sub-advisory agreements (the Sub-Advisory
Agreements) with the sub-adviser or sub-advisers identified in each such Funds
prospectus (the Sub-Adviser) pursuant to which the Sub-Adviser provides
sub-advisory services to the Manager with respect to the Fund. For information relating to
the fees, if any, paid by the Manager to the Sub-Adviser pursuant to the Sub-Advisory
Agreement for the Funds last three fiscal years or other applicable periods, see
Part I, Section IV Management and Advisory Arrangements of each Funds
Statement of Additional Information.
Organization of the Manager
.
The Manager, BlackRock Advisors, LLC, is a Delaware limited liability company and an
indirect, wholly owned subsidiary of BlackRock, Inc. On September 29, 2006, BlackRock,
Inc. and Merrill Lynch & Co., Inc. (ML & Co.) combined Merrill Lynch
Investment Managers, L.P. (MLIM) and certain affiliates with BlackRock, Inc.
to create a new asset management company that is one of the worlds largest asset
management firms with over $1 trillion in assets under management. As a result of that
transaction, ML & Co., a
financial services holding company
and the parent of Merrill Lynch, Pierce, Fenner & Smith Incorporated, owns
approximately 49% of BlackRock, Inc., The PNC Financial Services Group, Inc. (PNC)
owns approximately 34%, and approximately 17% is held by employees and public
shareholders. ML & Co. and PNC may be deemed to be controlling persons of
the Manager (as defined under the Investment Company Act) because of their ownership of
BlackRock Inc.s voting securities or their power to exercise a controlling
influence over BlackRock, Inc.s management or policies. Each Sub-Adviser is an
affiliate of the Manager and is an indirect wholly owned subsidiary of BlackRock, Inc.
Duration and Termination
.
Unless earlier terminated as described below, each Management Agreement and each
Sub-Advisory Agreement will remain in effect from year to year if approved annually (a) by
the Trustees or by a vote of a majority of the outstanding voting securities of the Fund
and (b) by a majority of the Trustees who are not parties to such agreement or interested
persons (as defined in the Investment Company Act) of any such party. Each Agreement is
not assignable and may be terminated without penalty on 60 days written notice at
the option of either party thereto or by the vote of the shareholders of the Fund.
Other Service
Arrangements
Administrative Services and
Administrative Fee
. Certain Funds have entered into an administration agreement (the
Administration Agreement) with an administrator identified in the Funds
Prospectus and Part I of the Funds Statement of Additional Information (each,
an Administrator). For its services to a Fund, the Administrator receives
monthly compensation at the annual rate set forth in each applicable Funds
prospectus. For information regarding any administrative fees paid by your Fund to the
Administrator for the periods indicated, see Part I, Section IV Management
and Advisory Arrangements of that Funds Statement of Additional Information.
For Funds that have an Administrator,
the Administration Agreement obligates the Administrator to provide certain administrative
services to the Fund and to pay, or cause its affiliates to pay, for maintaining its staff
and personnel and to provide office space, facilities and necessary personnel for the
Fund. Each Administrator is also obligated to pay, or cause its affiliates to pay, the
fees of those officers and Trustees of the Fund who are affiliated persons of the
Administrator or any of its affiliates.
Duration and Termination of
Administration Agreement
. Unless earlier terminated as described below, each
Administration Agreement will continue from year to year if approved annually (a) by
the Board of Trustees of each applicable Fund or by a vote of a majority of the
outstanding voting securities of such Fund and (b) by a majority of the Trustees of
the Fund who are not parties to such contract or interested persons (as defined in the
Investment Company Act) of any such party. Such contract is not assignable and may be
terminated without penalty on 60 days written notice at the option of either party
thereto or by the vote of the shareholders of the Fund.
Transfer Agency Services
.
Financial Data Services, Inc. (the Transfer Agent), a subsidiary of ML &
Co., acts as each Funds Transfer Agent pursuant to a Unified Transfer Agency,
Dividend Disbursing Agency and Shareholder Servicing Agency Agreement (the Transfer
Agency Agreement). Pursuant to the Transfer Agency Agreement, the Transfer Agent is
responsible for the issuance, transfer and redemption of shares and the opening and
maintenance of shareholder accounts. Ready Assets Trust, U.S.A. Government Reserves and
U.S. Treasury Money each pay a fee of $15.00 per account. The CMA Funds and WCMA Funds
each pay a fee of $10.00 per account. Retirement Reserves pays a fee of $6.50 per account
with less than $1 million in assets and $6.00 per account for each account with greater
than $1 million in assets thereafter. Each Fund reimburses the Transfer Agents
reasonable out-of-pocket expenses. Additionally, with respect to each Fund, a $0.20
monthly closed account charge will generally be assessed on all accounts that close during
the calendar year. Application of this fee will commence the month following the month the
account is closed. At the end of the calendar year, no further fees will be due. For
purposes of each Transfer Agency Agreement, the term account includes a
shareholder account maintained directly by the Transfer Agent and any other account
representing the beneficial interest of a person in the relevant share class on a
recordkeeping system provided the recordkeeping system is maintained by a subsidiary of ML
& Co. See Part I, Section IV Management and Advisory Arrangements
Transfer Agency Fees of each Funds Statement of Additional Information
for information on the transfer agency fees paid by your Fund for the periods indicated.
With regard to the WCMA Funds, see Fee Waiver/Expense Reimbursement in
Part I of the WCMA Funds Statement of Additional Information.
Independent Registered Public
Accounting Firm
. The Audit Committee of each Fund, which is comprised solely of
non-interested Trustees, has selected an independent registered public accounting firm for
that Fund that audits the Funds financial statements. Please see the inside back
cover page of your Funds Prospectus for information on your Funds independent
registered public accounting firm.
Custodian Services
. The name
and address of the custodian (the Custodian) of each Fund are identified on
the inside back cover page of the Funds Prospectus. The Custodian is responsible for
safeguarding and controlling the Funds cash and securities, handling the receipt and
delivery of securities and collecting interest and dividends on the Funds
investments. The Custodian is authorized to establish separate accounts in foreign
currencies and to cause foreign securities owned by the Fund to be held in its offices
outside the United States and with certain foreign banks and securities depositories.
Accounting Services
. Each Fund
has entered into an agreement with State Street Bank and Trust Company (State
Street), pursuant to which State Street provides certain accounting services to the
Fund. Each Fund pays a fee for these services. State Street provides similar accounting
services to the Master LLCs. The Manager or the Administrator also provides certain
accounting services to each Fund and each Fund reimburses the Manager or the Administrator
for these services. With regard to the WCMA Funds, see Fee Waiver/Expense
Reimbursement in Part I of the WCMA Funds Statement of Additional
Information.
See Part I, Section IV
Management and Advisory Arrangements Accounting Services of each
Funds Statement of Additional Information for information on the amounts paid by
your Fund and, if applicable, Master LLC, to State Street, the Manager and/or the
Administrator for the periods indicated.
Distribution Expenses
. Each
Fund has entered into a distribution agreement with the applicable Distributors in
connection with the continuous offering of each class of shares of the Fund (the
Distribution Agreement). See the cover page to Part I of each Funds
Statement of Additional Information for the identity of your Funds Distributors. The
Distribution Agreements obligate each Distributor to pay certain expenses in connection
with the offering of each class of shares of the Funds. After the prospectuses, statements
of additional information and periodic reports have been prepared, set in type and mailed
to shareholders, each Distributor pays for the printing and distribution of these
documents used in connection with the offering to dealers and investors. The Distributors
also pay for other supplementary sales literature and advertising costs. Each Distribution
Agreement is subject to the same renewal requirements and termination provisions as the
Management Agreement described above. With regard to the WCMA Funds, see Fee
Waiver/Expense Reimbursement in Part I of the WCMA Funds Statement of
Additional Information.
Code of Ethics
Each Fund, the Manager, each
Sub-Adviser and each Distributor has adopted a Code of Ethics pursuant to Rule 17j-1 under
the Investment Company Act. The Code of Ethics establishes procedures for personal
investing and restricts certain transactions. Employees subject to the Code of Ethics may
invest in securities for their personal investment accounts, including securities that may
be purchased or held by a Fund.
Selective Disclosure
of Portfolio Holdings
Pursuant to policies and procedures
adopted by each Fund and the Manager, each Fund and the Manager may, under certain
circumstances as set forth below, make selective disclosure with respect to the
Funds portfolio holdings. The Board of Trustees of each Fund has approved the
adoption by the Fund of the policies and procedures set forth below, and has delegated to
the Manager the responsibility for ongoing monitoring and supervision to ensure compliance
with these policies and procedures. The Board provides ongoing oversight of the
Funds and Managers compliance with the policies and procedures. As part of
this oversight function, the Trustees receive from the Funds Chief Compliance
Officer at least quarterly and more often, as necessary, reports on compliance with these
policies and procedures, including reports on any violations of these policies and
procedures that may occur. In addition, the Trustees receive an annual assessment of the
adequacy and effect of the policies and procedures with respect to the Fund, and any
changes thereto, and an annual review of the operation of the policies and procedures.
Examples of the information that may
be disclosed pursuant to the Funds policies and procedures would include (but is not
limited to) specific portfolio holdings including the number of shares held,
weightings of particular holdings, specific sector and industry weightings, trading
details, and the portfolio managers discussion of Fund performance and reasoning for
significant changes in portfolio composition. This information may be both material
non-public information (Confidential Information) and proprietary information
of the firm. The Fund may disclose such information to individual investors, institutional
investors, financial advisers and other financial intermediaries that sell the Funds
shares, affiliates of the Fund, third party service providers to the Fund, lenders to the
Fund, and independent rating agencies and ranking organizations. The Fund, the Manager and
its affiliates receive no compensation or other consideration with respect to such
disclosures.
Subject to the exceptions set forth
below, Confidential Information relating to a Fund may not be disclosed to persons not
employed by the Manager or its affiliates unless such information has been publicly
disclosed via a filing with the Commission (
e.g.
, Fund annual report), a press
release or placement on a publicly-available internet website, including our website at
www.blackrock.com
. If the Confidential Information has not been publicly disclosed,
an employee of the Manager who wishes to distribute Confidential Information relating to
the Fund
must
first do the following: (i) require the person or company
receiving the Confidential Information to sign,
before
the Manager will provide
disclosure of any such information, a confidentiality agreement approved by an attorney in
the Managers Legal Department in which the person or company (a) agrees to use
the Confidential Information solely in connection with a legitimate business use
(
i.e.
, due diligence, etc.) and (b) agrees not to trade on the basis of the
information so provided; (ii) obtain the authorization of an attorney in the
Managers Legal Department prior to disclosure; and (iii) only distribute
Confidential Information that is
at least thirty (30) calendar days old
unless a
shorter period has specifically been approved by an attorney in the Managers Legal
Department. Prior to providing any authorization for such disclosure of Confidential
Information, an attorney in the Managers Legal Department must review the proposed
arrangement and make a determination that it is in the best interests of the Funds
shareholders. In connection with day-to-day portfolio management, the Fund may disclose
Confidential Information to executing broker-dealers that is less than thirty days old in
order to facilitate the purchase and sale of portfolio holdings. The Fund has adopted
policies and procedures, including a Code of Ethics, Code of Conduct, and various policies
regarding securities trading and trade allocations, to address potential conflicts of
interest that may arise in connection with disclosure of Confidential Information. These
procedures are designed, among other things, to prohibit personal trading based on
Confidential Information, to ensure that portfolio transactions are conducted in the best
interests of each Fund and its shareholders and to prevent portfolio management from using
Confidential Information for the benefit of one fund or account at the expense of another.
In addition, as noted, an attorney in the Managers Legal Department must determine
that disclosure of Confidential Information is for a legitimate business purpose and is in
the best interests of the Funds shareholders, and that any conflicts of interest
created by release of the Confidential Information have been addressed by the
Managers existing policies and procedures. For more information with respect to
potential conflicts of interest, see the section entitled Management and Other
Service Arrangements Potential Conflicts of Interest in this Statement of
Additional Information.
Confidential Information
whether or not publicly disclosed may be disclosed to Fund Trustees, the
independent Trustees counsel, the Funds outside counsel, accounting services
provider and independent registered public accounting firm without meeting the conditions
outlined above. Confidential Information may, with the prior approval of the Funds
Chief Compliance Officer or the Managers General Counsel, also be disclosed to any
auditor of the parties to a service agreement involving the Fund, or as required by
judicial or administrative process or otherwise by applicable law or regulation. If
Confidential Information is disclosed to such persons, each such person will be subject to
restrictions on trading in the subject securities under either the Funds and
Managers Code of Ethics or an applicable confidentiality agreement, or under
applicable laws or regulations or court order.
The Manager and its affiliates have
entered into ongoing arrangements to provide selective disclosure of Fund portfolio
holdings to the following persons or entities:
The Manager has entered into ongoing
arrangements to provide monthly and quarterly selective disclosure of Fund portfolio
holdings to the following persons or entities:
Funds Board of Trustees and, if
necessary, independent Trustees counsel and Fund counsel
Funds Transfer Agent
Funds independent registered
public accounting firm
Funds accounting services
provider State Street Bank and Trust Company
Fund Custodian
Independent rating agencies
Morningstar, Inc. and Lipper Inc.
Information
aggregators Wall Street on Demand, Thomson Financial, eVestment Alliance and
Informa
PSN Investment
Solutions
Sponsors of 401(k) plans that include
BlackRock-advised funds E.I. Dupont de Nemours and Company, Inc.
Consultants for pension plans that
invest in BlackRock-advised funds Rocaton Investment Advisors, LLC; Mercer
Investment Consulting; Watson Wyatt Investment Consulting; Towers Perrin HR Services;
Pinnacle West; Callan Associates; Brockhouse & Cooper; Cambridge Associates; Mercer;
Morningstar/Investorforce; Russell Investments (Mellon Analytical Solutions) and Wilshire
Associates
Portfolio Compliance Consultants
i-Flex Solutions, Inc.
Other than with respect to the Board
of Trustees, each of the persons or entities set forth above is subject to an agreement to
keep the information disclosed confidential and to use it only for legitimate business
purposes. Each Director has a fiduciary duty as a director to act in the best interests of
the Fund and its shareholders. Selective disclosure is made to the Funds Board of
Trustees and independent registered public accounting firm at least quarterly and
otherwise as frequently as necessary to enable such persons or entities to provide
services to the Fund. Selective disclosure is made to the Funds Transfer Agent,
accounting services provider, and Custodian as frequently as necessary to enable such
persons or entities to provide services to the Fund, typically on a daily basis.
Disclosure is made to Lipper Inc. and Wall Street on Demand on a monthly basis and to
Morningstar and Thomson Financial on a quarterly basis, and to each such firm upon
specific request with the approval of the Managers Legal Department. Disclosure is
made to 401(k) plan sponsors on a yearly basis and pension plan consultants on a quarterly
basis.
The Fund and the Manager monitor, to
the extent possible, the use of Confidential Information by the individuals or firms to
which it has been disclosed. To do so, in addition to the requirements of any applicable
confidentiality agreement and/or the terms and conditions of the Funds and
Managers Code of Ethics and Code of Conduct all of which require persons or
entities in possession of Confidential Information to keep such information confidential
and not to trade on such information for their own benefit the Managers
compliance personnel under the supervision of the Funds Chief Compliance Officer,
monitor the Managers securities trading desks to determine whether individuals or
firms who have received Confidential Information have made any trades on the basis of that
information. In addition, the Manager maintains an internal restricted list to prevent
trading by the personnel of the Manager or its affiliates in securities including
securities held by the Fund about which the Manager has Confidential Information.
There can be no assurance, however, that the Funds policies and procedures with
respect to the selective disclosure of Fund portfolio holdings will prevent the misuse of
such information by individuals or firms that receive such information.
Potential Conflicts of
Interest
Activities of the Manager;
BlackRock, Inc. and its affiliates (collectively, BlackRock); The PNC
Financial Services Group, Inc. and its affiliates (collectively, PNC); Merrill
Lynch & Co., Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and their
affiliates (collectively, Merrill Lynch); and Other Accounts Managed by
BlackRock, PNC or Merrill Lynch.
BlackRock is one of the worlds
largest asset management firms with over $1 trillion in assets under management. Merrill
Lynch is a full service investment banking, broker-dealer, asset management and financial
services organization. PNC is a diversified financial services organization spanning the
retail, business and corporate markets. BlackRock, Merrill Lynch and PNC are affiliates
of one another. BlackRock, PNC, Merrill Lynch and their affiliates (including, for these
purposes, their directors, partners, trustees, managing members, officers and employees),
including the entities and personnel who may be involved in the investment activities and
business operations of a Fund (collectively, Affiliates), are engaged
worldwide in businesses, including equity, fixed income, cash management and alternative
investments, and have interests other than that of managing the Fund. These are
considerations of which investors in a Fund should be aware, and which may cause
conflicts of interest
that could disadvantage the Fund and
its shareholders. These activities and interests include potential multiple advisory,
transactional, financial and other interests in securities and other instruments, and
companies that may be purchased or sold by a Fund.
BlackRock and its Affiliates,
including, without limitation, PNC and Merrill Lynch, have proprietary interests in, and
may manage or advise with respect to, accounts or funds (including separate accounts and
other funds and collective investment vehicles) that have investment objectives similar to
those of a Fund and/or that engage in transactions in the same types of securities,
currencies and instruments as the Fund. One or more Affiliates are also major participants
in the global currency, equities, swap and fixed income markets, in each case both on a
proprietary basis and for the accounts of customers. As such, one or more Affiliates are
or may be actively engaged in transactions in the same securities, currencies, and
instruments in which a Fund invests. Such activities could affect the prices and
availability of the securities, currencies, and instruments in which a Fund invests, which
could have an adverse impact on the Funds performance. Such transactions,
particularly in respect of most proprietary accounts or customer accounts, will be
executed independently of a Funds transactions and thus at prices or rates that may
be more or less favorable than those obtained by the Fund. When the Manager and its
advisory affiliates seek to purchase or sell the same assets for their managed accounts,
including a Fund, the assets actually purchased or sold may be allocated among the
accounts on a basis determined in their good faith discretion to be equitable. In some
cases, this system may adversely affect the size or price of the assets purchased or sold
for a Fund.
In addition, transactions in
investments by one or more other accounts managed by BlackRock, PNC, Merrill Lynch or
another Affiliate may have the effect of diluting or otherwise disadvantaging the values,
prices or investment strategies of a Fund, particularly, but not limited to, with respect
to small capitalization, emerging market or less liquid strategies. This may occur when
investment decisions regarding a Fund are based on research or other information that is
also used to support decisions for other accounts. When BlackRock, PNC, Merrill Lynch or
another Affiliate implements a portfolio decision or strategy on behalf of another account
ahead of, or contemporaneously with, similar decisions or strategies for a Fund, market
impact, liquidity constraints, or other factors could result in the Fund receiving less
favorable trading results and the costs of implementing such decisions or strategies could
be increased or the Fund could otherwise be disadvantaged. BlackRock, PNC or Merrill Lynch
may, in certain cases, elect to implement internal policies and procedures designed to
limit such consequences, which may cause a Fund to be unable to engage in certain
activities, including purchasing or disposing of securities, when it might otherwise be
desirable for it to do so.
Conflicts may also arise because
portfolio decisions regarding a Fund may benefit other accounts managed by BlackRock, PNC,
Merrill Lynch or another Affiliate. For example, the sale of a long position or
establishment of a short position by a Fund may impair the price of the same security sold
short by (and therefore benefit) one or more Affiliates or their other accounts, and the
purchase of a security or covering of a short position in a security by a Fund may
increase the price of the same security held by (and therefore benefit) one or more
Affiliates or their other accounts.
BlackRock, PNC, Merrill Lynch, other
Affiliates and their clients may pursue or enforce rights with respect to an issuer in
which a Fund has invested, and those activities may have an adverse effect on the Fund. As
a result, prices, availability, liquidity and terms of the Funds investments may be
negatively impacted by the activities of BlackRock, PNC, Merrill Lynch, other Affiliates
or their clients, and transactions for the Fund may be impaired or effected at prices or
terms that may be less favorable than would otherwise have been the case.
The results of a Funds
investment activities may differ significantly from the results achieved by the Manager
and its Affiliates for their proprietary accounts or other accounts (including investment
companies or collective investment vehicles) managed or advised by them. It is possible
that one or more Affiliates and such other accounts will achieve investment results that
are substantially more or less favorable than the results achieved by a Fund. Moreover, it
is possible that a Fund will sustain losses during periods in which one or more Affiliates
achieve significant profits on their trading for proprietary or other accounts. The
opposite result is also possible. The investment activities of one or more Affiliates for
their proprietary accounts and accounts under their management may also limit the
investment opportunities for a Fund in certain emerging and other markets in which
limitations are imposed upon the amount of investment, in the aggregate or in individual
issuers, by affiliated foreign investors.
From time to time, a Funds
activities may also be restricted because of regulatory restrictions applicable to one or
more Affiliates, and/or their internal policies designed to comply with such restrictions.
As a result, there may be periods, for example, when the Manager, and/or one or more
Affiliates, will not initiate or recommend certain types of transactions in certain
securities or instruments with respect to which the Manager and/or one or more Affiliates
are performing services or when position limits have been reached.
In connection with its management of
a Fund, the Manager may have access to certain fundamental analysis and proprietary
technical models developed by one or more Affiliates (including Merrill Lynch). The
Manager will not be under any obligation, however, to effect transactions on behalf of a
Fund in accordance with such analysis and models. In addition, neither BlackRock nor any
of its Affiliates (including Merrill Lynch and PNC) will have any obligation to make
available any information regarding their proprietary activities or strategies, or the
activities or strategies used for other accounts managed by them, for the benefit of the
management of a Fund and it is not anticipated that the Manager will have access to such
information for the purpose of managing the Fund. The proprietary activities or portfolio
strategies of BlackRock and its Affiliates (including Merrill Lynch and PNC) or the
activities or strategies used for accounts managed by them or other customer accounts
could conflict with the transactions and strategies employed by the Manager in managing a
Fund.
In addition, certain principals and
certain employees of the Manager are also principals or employees of BlackRock, Merrill
Lynch, PNC or another Affiliate. As a result, the performance by these principals and
employees of their obligations to such other entities may be a consideration of which
investors in a Fund should be aware.
The Manager may enter into
transactions and invest in securities, instruments and currencies on behalf of a Fund in
which customers of BlackRock, PNC, Merrill Lynch or another Affiliate, or, to the extent
permitted by the Commission, BlackRock, PNC or Merrill Lynch or another Affiliate, serve
as the counterparty, principal or issuer. In such cases, such partys interests in
the transaction will be adverse to the interests of the Fund, and such party may have no
incentive to assure that the Fund obtains the best possible prices or terms in connection
with the transactions. In addition, the purchase, holding and sale of such investments by
a Fund may enhance the profitability of BlackRock, Merrill Lynch and/or PNC or another
Affiliate. One or more Affiliates may also create, write or issue Derivatives for their
customers, the underlying securities, currencies or instruments of which may be those in
which a Fund invests or which may be based on the performance of the Fund. A Fund may,
subject to applicable law, purchase investments that are the subject of an underwriting or
other distribution by one or more Affiliates and may also enter into transactions with
other clients of an Affiliate where such other clients have interests adverse to those of
the Fund. At times, these activities may cause departments of BlackRock or its Affiliates
to give advice to clients that may cause these clients to take actions adverse to the
interests of the Fund. To the extent affiliated transactions are permitted, a Fund will
deal with BlackRock and its Affiliates on an arms-length basis. BlackRock, PNC or Merrill
Lynch or another Affiliate may also have an ownership interest in certain trading or
information systems used by a Fund. A Funds use of such trading or information
systems may enhance the profitability of BlackRock and its Affiliates.
One or more Affiliates may act as
broker, dealer, agent, lender or advisor or in other commercial capacities for a Fund. It
is anticipated that the commissions, mark-ups, mark-downs, financial advisory fees,
underwriting and placement fees, sales fees, financing and commitment fees, brokerage
fees, other fees, compensation or profits, rates, terms and conditions charged by an
Affiliate will be in its view commercially reasonable, although each Affiliate, including
its sales personnel, will have an interest in obtaining fees and other amounts that are
favorable to the Affiliate and such sales personnel.
Subject to applicable law, the
Affiliates (and their personnel and other distributors) will be entitled to retain fees
and other amounts that they receive in connection with their service to the Funds as
broker, dealer, agent, lender, advisor or in other commercial capacities and no accounting
to the Funds or their shareholders will be required, and no fees or other compensation
payable by the Funds or their shareholders will be reduced by reason of receipt by an
Affiliate of any such fees or other amounts. When an Affiliate acts as broker, dealer,
agent, adviser or in other commercial capacities in relation to the Funds, the Affiliate
may take commercial steps in its own interests, which may have an adverse effect on the
Funds.
A Fund will be required to establish
business relationships with its counterparties based on the Funds own credit
standing. Neither BlackRock nor any of the Affiliates will have any obligation to allow
their credit to be used in
connection with a Funds
establishment of its business relationships, nor is it expected that the Funds
counterparties will rely on the credit of BlackRock or any of the Affiliates in
evaluating the Funds creditworthiness.
Purchases and sales of securities for
a Fund may be bunched or aggregated with orders for other BlackRock client accounts. The
Manager and its advisory affiliates, however, are not required to bunch or aggregate
orders if portfolio management decisions for different accounts are made separately, or if
they determine that bunching or aggregating is not practicable, required or with cases
involving client direction.
Prevailing trading activity
frequently may make impossible the receipt of the same price or execution on the entire
volume of securities purchased or sold. When this occurs, the various prices may be
averaged, and the Funds will be charged or credited with the average price. Thus, the
effect of the aggregation may operate on some occasions to the disadvantage of the Funds.
In addition, under certain circumstances, the Funds will not be charged the same
commission or commission equivalent rates in connection with a bunched or aggregated
order.
The Manager may select brokers
(including, without limitation, Affiliates of the Manager) that furnish the Manager, the
Funds, other BlackRock client accounts or other Affiliates or personnel, directly or
through correspondent relationships, with research or other appropriate services which
provide, in the Managers view, appropriate assistance to the Manager in the
investment decision-making process (including with respect to futures, fixed-price
offerings and over-the-counter transactions). Such research or other services may include,
to the extent permitted by law, research reports on companies, industries and securities;
economic and financial data; financial publications; proxy analysis; trade industry
seminars; computer data bases; quotation equipment and services; and research-oriented
computer hardware, software and other services and products. Research or other services
obtained in this manner may be used in servicing any or all of the Funds and other
BlackRock client accounts, including in connection with BlackRock client accounts other
than those that pay commissions to the broker relating to the research or other service
arrangements. Such products and services may disproportionately benefit other BlackRock
client accounts relative to the Funds based on the amount of brokerage commissions paid by
the Funds and such other BlackRock client accounts. For example, research or other
services that are paid for through one clients commissions may not be used in
managing that clients account. In addition, other BlackRock client accounts may
receive the benefit, including disproportionate benefits, of economies of scale or price
discounts in connection with products and services that may be provided to the Funds and
to such other BlackRock client accounts. To the extent that the Manager uses soft dollars,
it will not have to pay for those products and services itself. The Manager may receive
research that is bundled with the trade execution, clearing, and/or settlement services
provided by a particular broker-dealer. To the extent that the Manager receives research
on this basis, many of the same conflicts related to traditional soft dollars may exist.
For example, the research effectively will be paid by client commissions that also will be
used to pay for the execution, clearing, and settlement services provided by the
broker-dealer and will not be paid by the Manager.
The Manager may endeavor to execute
trades through brokers who, pursuant to such arrangements, provide research or other
services in order to ensure the continued receipt of research or other services the
Manager believes are useful in their investment decision-making process. The Manager may
from time to time choose not to engage in the above described arrangements to varying
degrees.
The Manager may utilize certain
electronic crossing networks (ECNs) in executing client securities
transactions for certain types of securities. These ECNs may charge fees for their
services, including access fees and transaction fees. The transaction fees, which are
similar to commissions or markups/markdowns, will generally be charged to clients and,
like commissions and markups/markdowns, would generally be included in the cost of the
securities purchased. Access fees may be paid by the Manager even though incurred in
connection with executing transactions on behalf of clients, including the Funds. In
certain circumstances, ECNs may offer volume discounts that will reduce the access fees
typically paid by the Manager. This would have the effect of reducing the access fees paid
by the Manager. The Manager will only utilize ECNs consistent with its obligation to seek
to obtain best execution in client transactions.
BlackRock has adopted policies and
procedures designed to prevent conflicts of interest from influencing proxy voting
decisions that it makes on behalf of advisory clients, including the Funds, and to help
ensure that such decisions are made in accordance with BlackRocks fiduciary
obligations to its clients. Nevertheless, notwithstanding such proxy voting policies and
procedures, actual proxy voting decisions of BlackRock may have
the effect of favoring the interests
of other clients or businesses of other divisions or units of BlackRock, PNC, Merrill
Lynch and/or other Affiliates, provided that BlackRock believes such voting decisions to
be in accordance with its fiduciary obligations. For a more detailed discussion of these
policies and procedures, see Proxy Voting Policies and Procedures.
It is also possible that, from time
to time, BlackRock or any of its affiliates may, although they are not required to,
purchase and hold shares of a Fund. Increasing a Funds assets may enhance investment
flexibility and diversification and may contribute to economies of scale that tend to
reduce the Funds expense ratio. BlackRock and its affiliates reserve the right to
redeem at any time some or all of the shares of a Fund acquired for their own accounts. A
large redemption of shares of a Fund by BlackRock or its affiliates could significantly
reduce the asset size of the Fund, which might have an adverse effect on the Funds
investment flexibility, portfolio diversification and expense ratio. BlackRock will
consider the effect of redemptions on a Fund and other shareholders in deciding whether to
redeem its shares.
It is possible that a Fund may invest
in securities of companies with which an Affiliate has or is trying to develop investment
banking relationships as well as securities of entities in which BlackRock, PNC, Merrill
Lynch or another Affiliate has significant debt or equity investments or in which an
Affiliate makes a market. A Fund also may invest in securities of companies to which an
Affiliate provides or may some day provide research coverage. Such investments could cause
conflicts between the interests of a Fund and the interests of other clients of BlackRock
or another Affiliate. In making investment decisions for a Fund, the Manager is not
permitted to obtain or use material non-public information acquired by any division,
department or Affiliate of BlackRock in the course of these activities. In addition, from
time to time, the activities of Merrill Lynch or another Affiliate may limit a Funds
flexibility in purchases and sales of securities. When Merrill Lynch or another Affiliate
is engaged in an underwriting or other distribution of securities of an entity, the
Manager may be prohibited from purchasing or recommending the purchase of certain
securities of that entity for a Fund.
BlackRock, PNC, Merrill Lynch, other
Affiliates, their personnel and other financial service providers have interests in
promoting sales of the Funds. With respect to BlackRock, PNC, Merrill Lynch, other
Affiliates and their personnel, the remuneration and profitability relating to services to
and sales of the Funds or other products may be greater than remuneration and
profitability relating to services to and sales of certain funds or other products that
might be provided or offered. BlackRock, PNC, Merrill Lynch, other Affiliates and their
sales personnel may directly or indirectly receive a portion of the fees and commissions
charged to the Funds or their shareholders. BlackRock and its advisory or other personnel
may also benefit from increased amounts of assets under management. Fees and commissions
may also be higher than for other products or services, and the remuneration and
profitability to BlackRock, PNC, Merrill Lynch, other Affiliates and such personnel
resulting from transactions on behalf of or management of the Funds may be greater than
the remuneration and profitability resulting from other funds or products.
BlackRock, PNC, Merrill Lynch, other
Affiliates and their personnel may receive greater compensation or greater profit in
connection with an account for which BlackRock serves as an adviser than with an account
advised by an unaffiliated investment adviser. Differentials in compensation may be
related to the fact that BlackRock may pay a portion of its advisory fee to its Affiliate,
or relate to compensation arrangements, including for portfolio management, brokerage
transactions or account servicing. Any differential in compensation may create a financial
incentive on the part of BlackRock, PNC, Merrill Lynch, other Affiliates and their
personnel to recommend BlackRock over unaffiliated investment advisers or to effect
transactions differently in one account over another.
BlackRock, PNC, Merrill Lynch or
their Affiliates may provide valuation assistance to certain clients with respect to
certain securities or other investments and the valuation recommendations made for their
clients accounts may differ from the valuations for the same securities or
investments assigned by a Funds pricing vendors, especially if such valuations are
based on broker-dealer quotes or other data sources unavailable to the Funds pricing
vendors. While BlackRock will generally communicate its valuation information or
determinations to a Funds pricing vendors, there may be instances where the
Funds pricing vendors assign a different valuation to a security or other investment
than the valuation for such security or investment determined or recommended by BlackRock.
BlackRock may also have
relationships with, and purchase, or distribute or sell, services or products from or to,
distributors, consultants and others who recommend the Funds, or who engage in
transactions with or for the Funds.
For example, BlackRock may
participate in industry and consultant sponsored conferences and may purchase
educational, data related or other services from consultants or other third parties that
it deems to be of value to its personnel and its business. The products and services
purchased from consultants may include, but are not limited to, those that help BlackRock
understand the consultants points of view on the investment management process.
Consultants and other parties that provide consulting or other services to potential
investors in the Funds may receive fees from BlackRock or the Funds in connection with
the distribution of shares in the Funds or other BlackRock products. For example,
BlackRock may enter into revenue or fee sharing arrangements with consultants, service
providers, and other intermediaries relating to investments in mutual funds, collective
trusts, or other products or services offered or managed by the Manager. BlackRock may
also pay a fee for membership in industry-wide or state and municipal organizations or
otherwise help sponsor conferences and educational forums for investment industry
participants including, but not limited to, trustees, fiduciaries, consultants,
administrators, state and municipal personnel and other clients. BlackRocks
membership in such organizations allows BlackRock to participate in these conferences and
educational forums and helps BlackRock interact with conference participants and to
develop an understanding of the points of view and challenges of the conference
participants. In addition, BlackRocks personnel, including employees of BlackRock,
may have board, advisory, brokerage or other relationships with issuers, distributors,
consultants and others that may have investments in the Funds or that may recommend
investments in the Funds. In addition, BlackRock, including the Manager, may make
charitable contributions to institutions, including those that have relationships with
clients or personnel of clients. BlackRocks personnel may also make political
contributions. As a result of the relationships and arrangements described in this
paragraph, consultants, distributors and other parties may have conflicts associated with
their promotion of the Funds or other dealings with the Funds that create incentives for
them to promote the Funds or certain portfolio transactions.
To the extent permitted by applicable
law, BlackRock may make payments to authorized dealers and other financial intermediaries
(Intermediaries) from time to time to promote the Funds and/or other BlackRock
products. In addition to placement fees, sales loads or similar distribution charges, such
payments may be made out of BlackRocks assets, or amounts payable to BlackRock
rather than a separately identified charge to the Funds or other products. Such payments
may compensate Intermediaries for, among other things: marketing the Funds and other
products; access to the Intermediaries registered representatives or salespersons,
including at conferences and other meetings; assistance in training and education of
personnel; marketing support; and/or other specified services intended to assist in the
distribution and marketing of the Funds and other products. The payments may also, to the
extent permitted by applicable regulations, contribute to various non-cash and cash
incentive arrangements to promote certain products, as well as sponsor various educational
programs, sales contests and/or promotions. The additional payments by BlackRock may also
compensate Intermediaries for sub-accounting, administrative and/or shareholder processing
services that are in addition to the fees paid for these services by such products. See
also, Purchase of Shares Other Compensation to Selling Dealers in this
Statement of Additional Information.
The payments made by BlackRock may be
different for different Intermediaries. The presence of these payments and the basis on
which an Intermediary compensates its registered representatives or salespersons may
create an incentive for a particular Intermediary, registered representative or
salesperson to highlight, feature or recommend certain products based, at least in part,
on the level of compensation paid.
To the extent permitted by applicable
law, a Fund may invest all or some of its short term cash investments in any money market
fund or similarly managed fund advised or managed by BlackRock. In connection with any
such investments, a Fund, to the extent permitted by the Investment Company Act, may pay
its share of expenses of a money market fund in which it invests, which may result in a
Fund bearing some additional expenses.
The Manager, its affiliates and
their directors, officers and employees, may buy and sell securities or other investments
for their own accounts, and may have conflicts of interest with respect to investments
made on behalf of a Fund. As a result of differing trading and investment strategies or
constraints, positions may be taken by directors, officers, employees and affiliates of
the Manager that are the same, different from or made at different times than positions
taken for the Fund. To lessen the possibility that a Fund will be adversely affected by
this personal trading, the Fund and the Manager each has adopted a Code of Ethics in
compliance with Section 17(j) of the Investment Company Act that restricts securities
trading in the personal accounts of investment professionals and others who normally come
into possession of information regarding the Funds portfolio transactions. The Code
of Ethics can be reviewed and copied at the Commissions Public Reference Room in
Washington, D.C. Information on the
operation of the Public Reference
Room may be obtained by calling the Commission at (202) 551-8090. The Code of Ethics is
also available on the EDGAR Database on the Commissions Internet site at
http://www.sec.gov, and copies may be obtained, after paying a duplicating fee, by e-mail
at publicinfo@sec.gov or by writing the Commissions Public Reference Section,
Washington, DC 20549-0102.
The Manager and its affiliates will
not purchase securities or other property from, or sell securities or other property to, a
Fund, except that the Fund may in accordance with rules adopted under the Investment
Company Act engage in transactions with accounts that are affiliated with the Fund as a
result of common officers, directors, or investment advisers or pursuant to exemptive
orders granted to the Funds and/or the Manager by the Commission. These transactions would
be effected in circumstances in which the Manager determined that it would be appropriate
for the Fund to purchase and another client to sell, or the Fund to sell and another
client to purchase, the same security or instrument on the same day.
From time to time, the activities of
a Fund may be restricted because of regulatory requirements applicable to BlackRock, PNC
or Merrill Lynch or another Affiliate and/or BlackRocks internal policies designed
to comply with, limit the applicability of, or otherwise relate to such requirements. A
client not advised by BlackRock would not be subject to some of those considerations.
There may be periods when the Manager may not initiate or recommend certain types of
transactions, or may otherwise restrict or limit their advice in certain securities or
instruments issued by or related to companies for which an Affiliate is performing
investment banking, market making or other services or has proprietary positions. For
example, when an Affiliate is engaged in an underwriting or other distribution of
securities of, or advisory services for, a company, the Funds may be prohibited from or
limited in purchasing or selling securities of that company. Similar situations could
arise if personnel of BlackRock or its Affiliates serve as directors of companies the
securities of which the Funds wish to purchase or sell. However, if permitted by
applicable law, the Funds may purchase securities or instruments that are issued by such
companies or are the subject of an underwriting, distribution, or advisory assignment by
an Affiliate, or in cases in which personnel of BlackRock or its Affiliates are directors
or officers of the issuer.
The investment activities of one or
more Affiliates for their proprietary accounts and for client accounts may also limit the
investment strategies and rights of the Funds. For example, in regulated industries, in
certain emerging or international markets, in corporate and regulatory ownership
definitions, and in certain futures and derivative transactions, there may be limits on
the aggregate amount of investment by affiliated investors that may not be exceeded
without the grant of a license or other regulatory or corporate consent or, if exceeded,
may cause BlackRock, the Funds or other client accounts to suffer disadvantages or
business restrictions. If certain aggregate ownership thresholds are reached or certain
transactions undertaken, the ability of the Manager on behalf of clients (including the
Funds) to purchase or dispose of investments, or exercise rights or undertake business
transactions, may be restricted by regulation or otherwise impaired. As a result, the
Manager on behalf of clients (including the Funds) may limit purchases, sell existing
investments, or otherwise restrict or limit the exercise of rights (including voting
rights) when the Manager, in its sole discretion, deems it appropriate.
A Funds custody arrangements
could give rise to a potential conflict of interest with the Manager where the Manager has
agreed to waive fees and/or reimburse ordinary operating expenses in order to cap a
Funds expenses. This is because a Funds custody arrangements may provide for a
reduction in custody fees as a result, for example, of a Funds leaving cash balances
uninvested. When a Funds actual operating expense ratio exceeds a stated cap, a
reduction in custody fees reduces the amount of waivers and/or reimbursements the Manager
would be required to make to the Fund. This could be viewed as having the potential to
provide the Manager with an incentive to keep high positive cash balances for Funds with
expense caps in order to offset custody fees that the Manager might otherwise reimburse.
However, the Managers portfolio managers do not intentionally keep uninvested
balances high, but rather make investment decisions that they anticipate will be
beneficial to Fund performance.
Present and future activities of
BlackRock and its Affiliates, including the Manager, in addition to those described in
this section, may give rise to additional conflicts of interest.
P
URCHASE OF
S
HARES
Each Fund offers its shares without a
sales charge at a price equal to the net asset value next determined after a purchase
order becomes effective. Each Fund attempts to maintain a net asset value per share of
$1.00. Share purchase orders are effective on the date Federal Funds become available to a
Fund. If Federal Funds are available to a Fund prior to the determination of net asset
value on any business day, the order will be effective on that day. Shares purchased will
begin accruing dividends on the day following the date of purchase. Federal Funds are a
commercial banks deposits in a Federal Reserve Bank and can be transferred from one
member banks account to that of another member bank on the same day and thus are
considered to be immediately available funds. Any order may be rejected by a Fund or the
Distributors.
Shareholder Services
Each Fund offers a number of
shareholder services described below that are designed to facilitate investment in shares
of the Fund. Full details as to each of such services and copies of the various plans and
instructions as to how to participate in the various services or plans, or how to change
options with respect thereto, can be obtained from each Fund, by calling the telephone
number on the cover page to Part I of your Funds Statement of Additional
Information, or from the Distributors.
The types of shareholder service
programs offered to Ready Assets Trust shareholders include: Investment Account; Fee-Based
Programs; Automatic Investment Plan; Accrued Monthly Payout Plan; Systematic Withdrawal
Plan; and Retirement and Education Savings Plans.
Purchase of Shares by all
Investors other than CMA service (or other Merrill Lynch central asset account program)
Subscribers, WCMA service (or other Merrill Lynch business account program) Subscribers
and Shareholders of Retirement Reserves
The minimum initial purchase is
$5,000 and the minimum subsequent purchase is $1,000, except that lower minimums apply in
the case of purchases made under certain retirement plans. Each Fund may, at its
discretion, establish reduced minimum initial and subsequent purchase requirements with
respect to various types of accounts. For pension, profit sharing, individual retirement
and certain other retirement plans, including self-directed retirement plans for which
Merrill Lynch acts as passive custodian and the various retirement plans available from
the Distributors, the minimum initial purchase is $100 and the minimum subsequent purchase
is $1. The minimum initial or subsequent purchase requirements may be waived for certain
employer-sponsored retirement or savings plans, such as tax-qualified retirement plans
within the meaning of Section 401(a) of the Code, deferred compensation plans within
the meaning of Section 403(b) and Section 457 of the Code, other deferred
compensation arrangements, Voluntary Employee Benefits Association plans, and
non-qualified After Tax Savings and Investment programs, maintained on the Merrill Lynch
Group Employee Services system. For accounts advised by banks and registered investment
advisers, the minimum initial purchase is $300 and the minimum subsequent purchase is
$100.
If you are not a CMA service (or
other Merrill Lynch central asset account program) subscriber, you may purchase shares of
a CMA Fund directly through the Transfer Agent in the manner described below under
Methods of PaymentPayment to the Transfer Agent. Shareholders of the CMA
Funds who do not subscribe to the CMA service (or other Merrill Lynch central asset
account program) will not pay the applicable program fee, and will not receive any of the
services available to program subscribers such as the card/check account or automatic
investment of free cash balances.
Rights of Accumulation.
Under
the Right of Accumulation, the current value of an investors existing shares in any
BlackRock-advised fund, including the Funds, may be combined with the amount of the
investors current purchase in determining the applicable sales charge. In order to
receive the cumulative quantity reduction, previous purchases of shares must be called to
the attention of the Transfer Agent, financial adviser or other financial intermediary by
the investor at the time of the current purchase.
Letter of Intent.
An investor
may qualify for a reduced sales charge for purchases of BlackRock-advised funds
immediately by signing a Letter of Intent stating the investors intention to invest
during the next 13 months a specified amount in shares of BlackRock-advised funds,
including the Funds, which, if made at one time, would qualify for a reduced sales charge.
The 13-month period begins on the day the Transfer Agent receives the Letter of Intent.
The investor must instruct the Transfer Agent upon making subsequent purchases that such
purchases are subject to a Letter of Intent.
Methods of Payment
Payment Through Securities
Dealers
. You may purchase shares of a Fund through securities dealers, including
Merrill Lynch, who have entered into selected dealer agreements with a Distributor. In
such a case, the dealer will transmit payment to the Fund on your behalf and will supply
the Fund with the required account information. Generally, purchase orders placed through
Merrill Lynch will be made effective on the day the order is placed. Merrill Lynch has an
order procedure pursuant to which you can have the proceeds from the sale of listed
securities invested in shares of a Fund on the day you receive the proceeds in your
Merrill Lynch securities accounts. If you have a free cash balance (
i.e.
,
immediately available funds) in securities accounts of Merrill Lynch, your funds will not
be invested in a Fund until the day after the order is placed with Merrill Lynch.
Shareholders of the CMA Funds not subscribing to the CMA service (or other Merrill Lynch
central asset account program) can purchase shares of a CMA fund only through the Transfer
Agent.
Payment by Wire
. If you
maintain an account directly with the Transfer Agent, you may invest in a Fund through
wire transmittal of Federal Funds to the Transfer Agent. A Fund will not be responsible
for delays in the wiring system. Payment should be wired to First Union National Bank of
Florida. You should give your financial institution the following wiring instructions: ABA
#063000021, DDA #2112600061186, Financial Data Services, Inc. The wire should identify the
name of the Fund, and should include your name and account number. Failure to submit the
required information may delay investment. We urge you to make payment by wire in Federal
Funds. If you do not maintain an account directly with the Transfer Agent, you should
contact your Financial Advisor.
Payment to the Transfer Agent
.
Payment made by check may be submitted directly by mail or otherwise to the Transfer
Agent. Purchase orders by mail should be sent to Financial Data Services, Inc., P.O. Box
45290, Jacksonville, Florida 32232-5290. Purchase orders sent by hand should be delivered
to Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida
32246-6484. If you are opening a new account, you must enclose a completed Purchase
Application. If you are an existing shareholder, you should enclose the detachable stub
from a monthly account statement. Checks should be made payable to the Distributor.
Certified checks are not necessary, but checks are accepted subject to collection at full
face value in U.S. funds and must be drawn in U.S. dollars on a U.S. bank. Payments for
the accounts of corporations, foundations and other organizations may not be made by third
party checks. Since there is a three day settlement period applicable to the sale of most
securities, delays may occur when an investor is liquidating other investments for
investment in one of the Funds.
Purchases of Shares of
U.S.A. Government Reserves Through Merrill Lynch Plans
Shares of U.S.A. Government Reserves
are also offered to participants in certain retirement plans for which Merrill Lynch acts
as custodian (Custodial Plans). Shares of the Fund are no longer available for
purchase in an individual retirement account (IRA), individual retirement
rollover account (IRRA
®
), Roth individual retirement account
(Roth IRA), simplified employee pension plan (SEP), simple
retirement account (SRA) and Coverdell Education Savings Accounts
(ESAs) (formerly known as Education IRAs) established after
December 6, 1999. Accounts opened prior to December 6, 1999 may continue to purchase
shares as set forth below. Accounts for the Retirement Selector Account (RSA)
or the Basic
SM
Plans may continue to purchase shares of the Fund, regardless of
the date the account was established. Information concerning the establishment and
maintenance of Custodial Plans and investments by Custodial Plan accounts is contained in
the Custodial Plan documents available from Merrill Lynch.
Special purchase procedures apply in
the case of the Custodial Plans. The minimum initial purchase for participants in
Custodial Plans is $100, and the minimum subsequent purchase is $1. In addition,
participants in certain of the Custodial Plans may elect to have cash balances in their
Custodial Plan account automatically invested in the Fund.
Cash balances of participants who
elect to have funds automatically invested in U.S.A. Government Reserves will be invested
as follows: Cash balances arising from the sale of securities held in the Custodial Plan
account that do not settle on the day of the transaction (such as most common and
preferred stock transactions) become available to the Fund and will be invested in shares
of the Fund on the business day following the day that proceeds with respect thereto are
received in the Custodial Plan account. Proceeds giving rise to cash balances from the
sale of securities held in the Custodial Plan account settling on a same day basis and
from principal repayments on debt securities held in the account become available to the
Fund and will be invested in shares of the Fund on the next business day following
receipt. Cash balances arising from dividends or interest payments on securities held in
the Custodial Plan account or from a contribution to the Custodial Plan are invested in
shares of the Fund on the business day following the date the payment is received in the
Custodial Plan account.
If you do not elect to have cash
balances automatically invested in shares of U.S.A. Government Reserves you may enter a
purchase order through your Financial Advisor or service representative.
Purchase of Shares by
CMA Service Subscribers
Merrill Lynch Programs
. Shares
of the CMA Funds are offered to participants in the CMA service, to participants in
certain other Merrill Lynch central asset account programs and to individual investors
maintaining accounts directly with the Funds Transfer Agent. If you participate in
the CMA service, you generally will have free cash balances invested in shares of the Fund
you designated as the primary investment account (Money Account) as described
below.
The CMA service has different sweep
features and annual participation fees than a WCMA account.
You may also elect to have free cash
balances invested in individual money market deposit accounts pursuant to the Insured
Savings Account or in one or more bank deposit accounts at Merrill Lynch Bank USA and/or
Merrill Lynch Bank & Trust Co. (the Merrill Lynch Banking Advantage
Program), Merrill Lynchs affiliated FDIC insured depository institution. For
more information about these alternatives, you should contact your Financial Advisor.
If you subscribe to the CMA service,
you have the option to change the designation of your Money Account at any time by
notifying your Financial Advisor. At that time, you may instruct your Financial Advisor to
redeem shares of a Fund designated as the Money Account and to transfer the proceeds to
the newly designated Money Account. Each CMA Fund has reserved the right to suspend or
otherwise limit sales of its shares if, as a result of difficulties in obtaining portfolio
securities, it is determined that it is not in the interests of the CMA Funds
shareholders to issue additional shares. If sales of shares of the CMA Tax-Exempt are
suspended and you have designated this Fund as your Money Account, you may designate one
of the CMA State Funds (if available) as the Money Account and vice versa. Alternatively,
you may designate the Insured Savings Account or an account at the Merrill Lynch Banking
Advantage Program as your Money Account. Pending such an election, Merrill Lynch will
consider various alternatives with respect to automatic investments for such accounts,
including the investment of free cash balances in such accounts in an account at the
Merrill Lynch Banking Advantage Program.
Automatic Purchases
(
CMA
Tax-Exempt and CMA State Funds
): Free cash balances in a program account are
automatically invested in shares of the Fund designated as your Money Account not later
than the first business day of each week on which the New York Stock Exchange (the
NYSE) or New York banks are open, which normally will be Monday. Free cash
balances from the following transactions will be invested automatically prior to the
automatic weekly sweeps on the next business day following receipt of the proceeds:
(i) proceeds from the sale of securities that do not settle on the day of the
transaction (such as most common and preferred stock transactions) and from principal
repayments on debt securities, (ii) from the sale of securities settling on a same
day basis; and (iii) free cash balances of $1,000 or more arising from cash deposits
into a subscribers account, dividend and interest payments or any other source
unless such balance results from a cash deposit made after the cashiering deadline of the
Merrill Lynch office in which the deposit is made. In that case, the resulting free cash
balances are invested on the second following business day. If you wish to make a cash
deposit, you should contact your Merrill Lynch Financial Advisor for information
concerning the local offices cashiering deadline. Free cash balances of less than
$1,000 are invested in shares in the automatic weekly sweep.
(
All CMA Funds except for CMA
Tax-Exempt Funds
): In limited circumstances, free cash balances in certain Merrill
Lynch central asset account programs may be swept into CMA Money; however, generally new
cash balances in program accounts will be swept automatically into one or more bank
deposit accounts established through the Merrill Lynch Banking Advantage Program chosen by
the participant as his or her Money Account. Debits in CMA accounts will be paid from
balances in CMA Money, CMA Government Securities and CMA Treasury until those balances are
depleted. Free cash balances in CMA accounts electing the tax-exempt sweep options will
continue to be swept into one of CMA Tax-Exempt Funds.
Manual Purchases
(
All CMA
Funds
): If you subscribe to the CMA service, you may make manual investments of $1,000
or more at any time in shares of a CMA Fund not selected as your Money Account. Manual
purchases take effect on the day following the day the order is placed by Merrill Lynch
with the Fund, except that orders involving cash deposits made on the date of a manual
purchase take effect on the second business day thereafter, if they are placed with the
Fund after the cashiering deadline of the Merrill Lynch office in which the deposit is
made. As a result, if you enter manual purchase orders that include cash deposits made on
that day after the cashiering deadline, you will not receive the daily dividend which you
would have received had your order been entered prior to the deadline. In addition, manual
purchases of $500,000 or more can be made effective on the same day the order is placed
with Merrill Lynch provided that requirements as to timely notification and transfer of a
Federal Funds wire in the proper amount are met. If you desire further information on this
method of purchasing shares, you should contact your Financial Advisor.
Merrill Lynch reserves the right to
terminate a subscribers participation in the CMA service (or other Merrill Lynch
central asset account program) for any reason.
All purchases of Fund shares and
dividend reinvestments will be confirmed to CMA service (or other Merrill Lynch central
asset account program) subscribers (rounded to the nearest share) in the monthly
transaction statement.
Working Capital
Management
SM
Account
. Merrill Lynch, in conjunction with another subsidiary
of ML & Co., offers a modified version of the CMA service designed for
corporations and other businesses. This account, the Working Capital
Management
SM
Account (WCMA) financial service (WCMA
service), provides participants with the features of a regular CMA account plus
optional lines of credit. The WCMA service has sweep features and annual participation
fees different from those of a CMA account. A brochure describing the WCMA service as well
as information concerning charges for participation in the program is available from
Merrill Lynch.
Certain participants in the WCMA
service are able to invest funds in one or more designated CMA Funds. Checks and other
funds transmitted to a WCMA service account generally will be applied in the following
order: (i) to the payment of pending securities transactions or other charges in the
participants securities account, (ii) to reduce outstanding balances in the
lines of credit available through such program and (iii) to purchase shares of the
designated CMA Fund. To the extent not otherwise applied, funds transmitted by Federal
Funds wire or an automated clearinghouse service will be invested in shares of the
designated CMA Fund on the business day following receipt of such funds by Merrill Lynch.
Funds received in a WCMA service account from the sale of securities will be invested in
the designated CMA Fund as described above. The amount received in a WCMA service account
prior to the cashiering deadline of the Merrill Lynch office in which the deposit is made
will be invested on the second business day following Merrill Lynchs receipt of the
check. Redemptions of CMA Fund shares will be effected as described below under
Redemption of Shares Redemption of Shares by CMA Service Subscribers
Automatic Redemptions to satisfy debit balances, such as those created by purchases
of securities or by checks written against a bank providing checking services to WCMA
service subscribers. WCMA service subscribers that have a line of credit will, however, be
permitted to maintain a minimum CMA Fund balance. For subscribers who elect to maintain
such a balance, debits from check use will be satisfied through the line of credit so that
such balance is maintained. However, if the full amount of available credit is not
sufficient to satisfy the debit, it will be satisfied from the minimum balance.
From time to time, Merrill Lynch also
may offer certain CMA Funds to participants in other Merrill Lynch-sponsored programs.
Some or all of the features of the CMA service may not be available in such programs and
program participation and other fees may be higher. You can obtain more information on the
services and fees associated with such programs by contacting your Financial Advisor.
Purchase of Shares of
WCMA Funds by WCMA Service Subscribers
Eligibility
. Shares
of the WCMA Funds are offered to certain subscribers in the WCMA service and in
certain other Merrill Lynch business account programs. WCMA service or other
business account program subscribers generally will have available cash
balances invested in the Fund designated by the subscriber as the primary
investment account (the Primary Money Account). A subscriber also
may elect to have available cash balances deposited in certain other money
market funds or individual money market accounts pursuant to the Insured Savings
SM
Account.
The WCMA service and certain other
Merrill Lynch business account programs have sweep features and annual participation fees
different from those of a CMA account.
Purchases of shares of a WCMA Fund
designated as the Primary Money Account will be made pursuant to the automatic or manual
purchase procedures described below.
WCMA Tax-Exempt has reserved the
right to suspend or otherwise limit sales of its shares if, as a result of difficulties in
obtaining portfolio securities, it is determined that it is not in the interests of the
Funds shareholders to issue additional shares. If sales of shares of WCMA Tax-Exempt
are suspended, a shareholder who has designated such Fund as its Primary Money Account
will be permitted to designate another eligible money fund (if available) as the primary
account. A WCMA Tax-Exempt Fund shareholder may alternatively designate the Insured
Savings Account as its Primary Money Account. Pending such an election, Merrill Lynch will
consider various alternatives with respect to automatic investments for such accounts.
Subscribers in the WCMA service or
other business account program have the option to change the designation of their Primary
Money Account at any time by notifying their Merrill Lynch Financial Advisor. At that
time, a subscriber may instruct its Financial Advisor to redeem shares of a WCMA Fund
designated as the Primary Money Account and to transfer the proceeds to the share class
that the subscriber is eligible to own in the newly-designated Primary Money Account.
Automatic Purchases
. The delay
with respect to the automatic investment of cash balances in a subscribers account
in shares of the Fund designated as the subscribers Primary Money Account is
determined by the subscribers WCMA service or other business account program tier
assignment. For further information regarding the timing of sweeps for each tier, a
subscriber should consult with its Merrill Lynch Financial Advisor or the relevant service
account agreement and program description.
Manual Purchases
. Subscribers
in the WCMA service or other business account program may make manual investments of
$1,000 or more at any time in shares of a WCMA Fund not selected as that investors
Primary Money Account. Manual purchases shall be effective on the day following the day
the order is placed with Merrill Lynch, except that orders involving cash deposits made on
the date of a manual purchase shall become effective on the second business day thereafter
if they are placed after the cashiering deadline of the Merrill Lynch office in which the
deposit is made. As a result, WCMA service or other business account program subscribers
who enter manual purchase orders that include cash deposits made on that day after such
cashiering deadline will not receive the daily dividend which would have been received had
their orders been entered prior to the deadline. In addition, manual purchases of
$1,000,000 or more can be made effective on the same day the order is placed with Merrill
Lynch provided that requirements as to timely notification and transfer of a Federal Funds
wire in the proper amount are met. A WCMA service or other business account program
subscriber desiring further information on this method of purchasing shares should contact
its Merrill Lynch Financial Advisor.
Merrill Lynch reserves the right to
terminate a subscribers participation in the relevant service for any reason.
All purchases of the WCMA Funds
shares and dividend reinvestments will be confirmed to WCMA service or other business
account program subscribers (rounded to the nearest share) in the monthly transaction
statement.
WCMA Multiple Class Structure
.
Each WCMA Fund offers four share classes, each with its own ongoing fees, expenses and
other features. A subscriber must be eligible to own a particular class of shares.
Reference is made to
Your Account WCMA
Multiple Class Structure in the Prospectus for certain information with respect to
the eligibility requirements to own Class 1, Class 2, Class 3 and Class 4
shares of each WCMA Fund.
Each Class 1, Class 2,
Class 3 or Class 4 share of a WCMA Fund represents an identical interest in that
Fund and has the same rights, except that each class of shares bears to a different degree
the expenses of the service fees and distribution fees and the additional incremental
transfer agency costs resulting from the conversion of shares. See Your Account
WCMA Multiple Class Structure in the Prospectus. The distribution fees and
service fees that are imposed on each class of shares, are imposed directly against that
class and not against all assets of the WCMA Fund and, accordingly, the differing fee rate
for each class does not affect the net asset value or have any impact on any other class
of shares. Dividends paid by a WCMA Fund for each class of shares are calculated in the
same manner at the same time and differ only to the extent that service fees and
distribution fees and any incremental transfer agency costs relating to a particular class
are borne exclusively by that class. Each class may be subject to monthly automatic
conversions. See Your Account WCMA Multiple Class Structure in the
Prospectus.
WCMA subscribers should understand
the purpose and function of different fee rates with respect to each class, which is to
provide for the financing of the distribution of each class of shares of the WCMA Funds.
Class 4 shares bear the lowest service and distribution fees because larger accounts cost
less to service and distribute and those economies are passed on to the subscriber.
Class 1 shares bear the highest service and distribution fees because smaller
accounts cost more to service and distribute and there are fewer economies to pass on to
the subscriber. The distribution-related revenues paid with respect to a class will not be
used to finance the distribution expenditures of another class. Sales personnel may
receive different compensation for selling different classes of shares.
Purchase of Shares of
Retirement Reserves
Purchases of Retirement Reserves
shares by pension, profit-sharing and annuity plans are made by the trustee or sponsor of
such plan by payments directly to Merrill Lynch.
Retirement Reserves offers two
classes of shares, Class I and Class II shares. Each Class I and Class II share of the
Fund represents an identical interest in the investment portfolio of the Fund and has the
same rights, except that Class II shares bear the expenses of the ongoing distribution
fees.
Class I shares of Retirement Reserves
are offered to certain Custodial Plans with an active custodial retirement account as of
September 30, 1998, any Custodial Plan purchasing shares of the Fund through a Merrill
Lynch fee-based program, certain independent pension, profit-sharing, annuity and other
qualified plans, and qualified tuition programs established under Section 529 of the
Code (collectively, the Plans).
Class II shares are offered to any
Plan that did not have an active custodial retirement account as of September 30, 1998 and
does not otherwise qualify to purchase Class I shares.
There are nine types of Custodial
Plans: (1) a traditional IRA, (2) a Roth IRA, (3) an IRRA
®
, (4) a
SEP, (5) an SRA, (6) a Basic
SM
(Keogh Plus) profit sharing plan and
(7) a Basic
SM
(Keogh Plus) money purchase pension plan (together with the
profit sharing plan, the Basic
SM
Plans), (8) a 403(b)(7) RSA,
and (9) the education account. Although the amount that may be contributed to a Plan
account in any one year is subject to certain limitations, assets already in a Plan
account may be invested in the Fund without regard to such limitations.
If you are considering transferring a
tax-deferred retirement account such as an IRA from Merrill Lynch to another securities
dealer or other financial intermediary, you should be aware that if the firm will not take
delivery of shares of Retirement Reserves, you must either redeem the shares so that the
cash proceeds can be transferred to the account at the new firm, or you must continue to
maintain a retirement account at Merrill Lynch for those shares.
Plan Investments
. If you are a
Plan participant, an investment in shares of Retirement Reserves can be made as follows:
If participants elect to have their
contributions invested in the Fund, the contributions will be invested automatically on
the business day following the date they are received in the account. There will be no
minimum initial or
subsequent purchase requirement
pursuant to these types of plans. The amount that may be contributed to a Plan in any one
year is subject to certain limitations under the Code; however, assets already in a Plan
account may be invested without regard to such limitations on contributions. Cash
balances of less than $1.00 will not be invested.
Participants in Custodial Plans who
opened their accounts prior to December 6, 1999 had two options concerning cash balances
that may arise in their accounts. First, participants could have elected to have such
balances automatically invested on a daily basis in shares of the Fund or, in some cases,
in another money market mutual fund advised by the Manager. Second, participants (except
for RSAs) could have elected to have such balances deposited in an FDIC-insured money
market account with one or more commercial banks. After December 6, 1999, certain
Custodial Plan accounts no longer have the first option for cash balances.
Participants who have elected to have
cash balances automatically invested in the Fund will have such funds invested as follows:
Cash balances arising from the sale of securities held in the Plan account that do not
settle on the day of the transaction (such as most common and preferred stock
transactions) will be invested in shares of the Fund on the business day following the day
that the proceeds are received in the Plan account. Proceeds giving rise to cash balances
from the sale of securities held in the Plan account settling on a same day basis and from
principal repayments on debt securities held in the account will be invested in shares of
the Fund on the next business day following receipt. Cash balances arising from dividends
or interest payments on securities held in the Plan account or from a contribution to the
Plan are invested in shares of the Fund on the business day following the date the payment
is received in the Plan account.
All purchases and redemptions of Fund
shares and dividend reinvestments are confirmed (rounded to the nearest share) to
participants in Plans in the monthly or quarterly statement sent to all participants in
these Plans. The Fund and the Distributor have received an exemptive order from the
Commission that permits the Fund to omit sending out more frequent confirmations with
respect to certain transactions. These transactions include purchases resulting from
automatic investments in shares of the Fund and redemptions that are effected
automatically to purchase other securities that the participant has selected for
investment in his account. Shareholders who are not participants in the Plans receive
quarterly statements reflecting all purchases, redemptions and dividend reinvestments of
Fund shares.
You should read materials concerning
the Plans, including copies of the Plans and the forms necessary to establish a Plan
account, which are available from Merrill Lynch. You should read such materials carefully
before establishing a Plan account and should consult with your attorney or tax adviser to
determine if any of the Plans are suited to your needs and circumstances. The laws
applicable to the Plans, including the Employee Retirement Income Security Act of 1974, as
amended (ERISA), and the Code, are complex and include a variety of
transitional rules, which may be applicable to some investors. These laws should be
reviewed by your attorney to determine their applicability. You are further advised that
the tax treatment of the Plans under applicable state law may vary.
Distribution Plans
Each Fund has adopted a shareholder
servicing plan and/or a distribution plan (with respect to Class II shares, in the case
of Retirement Reserves) (each, a Distribution Plan) in compliance with Rule 12b-1
under the Investment Company Act. Each Fund other than Retirement Reserves and the WCMA
Funds is authorized to pay a Distributor a fee at an annual rate based on the average
daily net asset value of Fund accounts maintained through such Distributor. Retirement
Reserves pays each Distributor a fee at an annual rate based on the average daily net
assets attributable to Class II shares maintained through such Distributor. The
Distribution Plan for each class of shares of the WCMA Funds provides that the Funds pay
the applicable Distributor a service fee relating to the shares of the relevant class,
accrued daily and paid monthly, at an annual rate based on the average daily net assets
of a WCMA Fund attributable to Class 1, Class 2, Class 3 and Class 4
shares. The service fee is not compensation for the administrative and operational
services rendered to shareholders by affiliates of the Manager that are covered by any
other agreement between each Fund and the Manager. Each class has exclusive voting rights
with respect to the Distribution Plan adopted with respect to such class pursuant to
which service and/or distribution fees are paid. The fee paid by each Fund other than
Retirement Reserves and the WCMA Funds compensates the Distributors for providing, or
arranging for the provision of, shareholder servicing and sales and promotional
activities and services with respect to shares of each Fund. The Distributors then
determine, based on a number of criteria, how to allocate such fee among financial
advisors, selected dealers and affiliates of the Distributors. The fee paid by Retirement
Reserves compensates the Distributors for the expenses associated with marketing
activities and services related to
Class II shares. The WCMA
Distribution Plans for each of the Class 1, Class 2, Class 3 and Class 4
shares each provide that a Fund also pays the applicable Distributor a distribution fee
based on the average daily net assets of the Fund attributable to the shares of the
relevant class. These fees are set forth in the WCMA Fund Prospectus.
Each Funds Distribution Plans
are subject to the provisions of Rule 12b-1 under the Investment Company Act. In
their consideration of a Distribution Plan, the Trustees must consider all factors they
deem relevant, including information as to the benefits of the Distribution Plan to the
Fund and the related class of shareholders. In approving a Distribution Plan in accordance
with Rule 12b-1, the non-interested Trustees concluded that there is reasonable
likelihood that the Distribution Plan will benefit the Fund and its related class of
shareholders.
Each Distribution Plan provides that,
so long as the Distribution Plan remains in effect, the non-interested Trustees then in
office will select and nominate other non-interested Trustees. Each Distribution Plan can
be terminated at any time, without penalty, by the vote of a majority of the
non-interested Trustees or by the vote of the holders of a majority of the outstanding
related class of voting securities of a Fund. A Distribution Plan cannot be amended to
increase materially the amount to be spent by the Fund without the approval of the related
class of shareholders. All material amendments are required to be approved by the vote of
Trustees, including a majority of the non-interested Trustees who have no direct or
indirect financial interest in the Distribution Plan, cast in person at a meeting called
for that purpose. Rule 12b-1 further requires that each Fund preserve copies of each
Distribution Plan and any report made pursuant to such plan for a period of not less than
six years from the date of the Distribution Plan or such report, the first two years of
which should be stored in an easily accessible place.
Among other things, each Distribution
Plan provides that the Trustees will review quarterly reports of the shareholder servicing
and/or distribution expenditures paid to the Distributors. With respect to each Fund other
than Retirement Reserves, in the event that the aggregate payments received by the
Distributors under the Distribution Plan in any year exceeds the amount of the
distribution and shareholder servicing expenditures incurred by the Distributors, the
Distributors are required to reimburse the Fund the amount of such excess. With respect to
Retirement Reserves, payments under the Class II Distribution Plan are based on a
percentage of average daily net assets attributable to Class II shares, regardless of the
amount of expenses incurred. As a result, the distribution related revenues from the
Distribution Plan with respect to Retirement Reserves may be more or less than
distribution related expenses of the Class II shares. Information with respect to the
distribution-related revenues and expenses is presented to the Trustees for their
consideration on a quarterly basis. Distribution-related expenses consist of financial
advisor compensation, branch office and regional operation center selling and transaction
processing expenses, advertising, sales promotion and marketing expenses and interest
expense. With respect to Retirement Reserves, the distribution-related revenues paid with
respect to one class will not be used to finance the distribution expenditures of another
class. Sales personnel may receive different compensation for selling different classes of
shares.
See Part 1, Section V
Distribution Related Expenses of each Funds Statement of Additional
Information for information relating to the fees paid by your Fund to the Distributors
under each Distribution Plan during the Funds most recent fiscal year.
Limitations on the Payment of
Asset Based Sales Charges
. The maximum sales charge rule in the Conduct Rules of the
NASD imposes a limitation on certain asset-based sales charges such as the distribution
fee borne by each class of Shares in the case of the WCMA Funds, and Class II shares in
the case of Retirement Reserves. The maximum sales charge rule limits the aggregate of
distribution fee payments payable by a Fund to (1) 7.25% of eligible gross sales of
the applicable shares (excluding shares issued pursuant to dividend reinvestments and
exchanges), plus (2) interest on the unpaid balance for the applicable shares at the
prime rate plus 1% (the unpaid balance being the maximum amount payable minus amounts
received from the payment of the distribution fee).
In the case of the WCMA Funds, the
Distributor has voluntarily agreed to waive interest charges on the unpaid balance in
excess of 0.50% of eligible gross sales. Consequently, the maximum amount payable to the
Distributor (referred to as the voluntary maximum) is 7.75% of eligible gross
sales. The Distributor retains the right to stop waiving the interest charges at any
time. To the extent payments would exceed the voluntary maximum, a WCMA Fund will not
make further payments of the distribution fee with respect to its shares; however, a WCMA
Fund will continue to make payments of the service fee. In certain circumstances the
amount payable pursuant to the
voluntary maximum may exceed the
amount payable under the NASD formula. In such circumstances, payment in excess of the
amount payable under the NASD formula will not be made.
Other Compensation to
Selling Dealers
Pursuant to each Funds
Distribution Plans, each Fund may pay FAM Distributors, Inc. (FAMD), BlackRock
Distributors, Inc. (BDI) and/or BlackRock or any other affiliate of BlackRock
fees for distribution and sales support services. In addition, each Fund may pay to
brokers, dealers, financial institutions and industry professionals (including BlackRock,
Merrill Lynch, Hilliard Lyons and their affiliates) (collectively, Service
Organizations) fees for the provision of personal services to shareholders. From
time to time FAMD, BDI and/or BlackRock and their affiliates may voluntarily waive receipt
of distribution fees under the Plans, which waivers may be terminated at any time.
The Plans permit FAMD, BDI, BlackRock
and their affiliates to make payments relating to distribution and sales support
activities out of their past profits or other sources available to them (and not as an
additional charge to a Fund). From time to time, FAMD, BDI, BlackRock or their affiliates
may compensate affiliated and unaffiliated Service Organizations for the sale and
distribution of shares of a Fund or for services to a Fund and its shareholders. These
non-Plan payments would be in addition to the Fund payments described in this Statement of
Additional Information for distribution. These non-Plan payments may take the form of,
among other things, due diligence payments for a dealers examination of
a Fund and payments for providing extra employee training and information relating to a
Fund; listing fees for the placement of the Funds on a dealers list of
mutual funds available for purchase by its customers; finders or
referral fees for directing investors to a Fund; marketing support
fees for providing assistance in promoting the sale of the Fund shares; payments for the
sale of shares and/or the maintenance of share balances; CUSIP fees; maintenance fees; and
set-up fees regarding the establishment of new accounts. The payments made by FAMD, BDI,
BlackRock and their affiliates may be a fixed dollar amount or may be based on a
percentage of the value of shares sold to, or held by, customers of the Service
Organization involved, and may be different for different Service Organizations. The
payments described above are made from FAMDs, BDIs, BlackRocks or their
affiliates own assets pursuant to agreements with Service Organizations and do not
change the price paid by investors for the purchase of a Funds shares or the amount
a Fund will receive as proceeds from such sales.
The payments described above may be
made, at the discretion of FAMD, BDI, BlackRock or their affiliates, to Service
Organizations in connection with the sale and distribution of Fund shares. Pursuant to
applicable Financial Industry Regulatory Authority regulations, the details of certain of
these payments, including the Service Organizations receiving such payments in connection
with the sale and distribution of Fund shares, are required to be disclosed. As of the
date of this Statement of Additional Information, as amended or supplemented from time to
time, the following Service Organizations are receiving such payments: Merrill Lynch
and/or broker-dealers under common control such organization.
In lieu of payments pursuant to the
foregoing, FAMD, BDI, BlackRock, PFPC or their affiliates may make payments to the
above-named Service Organizations of an agreed-upon amount that will not exceed the amount
that would have been payable pursuant to the above, and may also make similar payments to
other Service Organizations.
If investment advisers, distributors
or affiliates of mutual funds pay bonuses and incentives in differing amounts, financial
firms and their financial consultants may have financial incentives for recommending a
particular mutual fund over other mutual funds. In addition, depending on the arrangements
in place at any particular time, a financial firm and its financial consultants may also
have a financial incentive for recommending a particular share class over other share
classes.
You should consult your financial adviser and review carefully any disclosure
by the financial firm as to compensation received by your financial adviser for more
information about the payments described above.
Furthermore, FAMD, BDI, BlackRock
and their affiliates may contribute to various non-cash and cash incentive arrangements
to promote the sale of shares, and may sponsor various contests and promotions subject to
applicable FINRA regulations in which participants may receive prizes such as travel
awards, merchandise and cash. Subject to applicable FINRA regulations, FAMD, BDI,
BlackRock and their affiliates may also (i) pay for the travel expenses,
meals, lodging and entertainment of
broker/dealers, financial institutions and their salespersons in connection with
educational and sales promotional programs, (ii) sponsor speakers, educational seminars
and charitable events and (iii) provide other sales and marketing conferences and other
resources to broker-dealers, financial institutions and their salespersons.
BlackRock, Inc., the parent company
of BlackRock, has agreed to pay PNC Bank, National Association and PNC Bank, Delaware
(including Hilliard Lyons Asset Management, Wealth Management, Hawthorn and Institutional
Investment Group) fees for administration and servicing with respect to assets of a Fund
attributable to shares held by customers of such entities. These assets are predominantly
in the share class of a Fund, with respect to which the Fund does not pay shareholder
servicing fees under a Plan.
Service Organizations may charge
their clients additional fees for account-related services. Service Organizations may
charge their customers a service fee in connection with the purchase or redemption of Fund
shares. The amount and applicability of such a fee is determined and disclosed to its
customers by each individual Service Organization. Service fees typically are fixed,
nominal dollar amounts and are in addition to the sales and other charges described in the
Prospectuses and this Statement of Additional Information. Your Service Organization will
provide you with specific information about any service fees you will be charged.
Pursuant to the Plans, each Fund may
enter into service arrangements with Service Organizations pursuant to which Service
Organizations will render certain support services to their customers
(Customers) who are the beneficial owners of shares of each Fund. Such
services will be provided to Customers who are the beneficial owners of such shares and
are intended to supplement the services provided by a Funds Manager, Administrator
and/or transfer agent to the Funds shareholders of record. In consideration for
payment of a service fee on shares owned beneficially by their Customers, Service
Organizations may provide general shareholder liaison services, including, but not limited
to (i) answering customer inquiries regarding account status and history, the manner in
which purchases, exchanges and redemptions of shares may be effected and certain other
matters pertaining to the Customers investments; and (ii) assisting Customers in
designating and changing dividend options, account designations and addresses. To the
extent a shareholder is not associated with a Service Organization, the shareholder
servicing fees will be paid to BlackRock, and BlackRock will provide services.
In addition to, rather than in lieu
of, distribution fees that a Fund may pay to a Service Organization pursuant to the Plans
and fees the Fund pays to its transfer agent, a Fund may enter into non-Plan agreements
with Service Organizations pursuant to which the Fund will pay a Service Organization for
administrative, networking, recordkeeping, sub-transfer agency and shareholder services.
These non-Plan payments are generally based on either (1) a percentage of the average
daily net assets of Fund shareholders serviced by a Service Organization or (2) a fixed
dollar amount for each account serviced by a Service Organization. The aggregate amount of
these payments may be substantial. From time to time, BlackRock, FAMD, BDI or their
affiliates also may pay a portion of the fees for administrative, networking,
recordkeeping, sub-transfer agency and shareholder services described above at its or
their own expense and out of its or their legitimate profits.
R
EDEMPTION OF
S
HARES
Each Fund is required to redeem for
cash all shares of the Fund as described in accordance with one of the procedures set
forth below.
If notice is received by the Transfer
Agent or Merrill Lynch, as applicable, prior to the determination of net asset value on
that day, the redemption will be effective on such day. If the notice is received after
the determination of net asset value has been made, the redemption will be effective on
the next business day and payment will be made on the second business day after receipt of
the notice.
Redemption of
Shares by All Funds except the CMA Funds and the WCMA Funds
At various times, a Fund may be
requested to redeem shares, in manual or automatic redemptions, with respect to which
good payment has not yet been received by Merrill Lynch. A Fund may delay for up to 10
days the payment of redemption proceeds until good payment (that is, cash, Federal Funds
or certified check drawn on a U.S. bank)
has been collected for the purchase
of Fund shares. In addition, each Fund reserves the right not to honor redemption checks
or requests for Federal Funds redemptions where the shares to be redeemed have been
purchased by check within 10 days prior to the date the redemption request is received by
the Transfer Agent.
The right to redeem shares may be
suspended for seven days only (i) for any period during which trading on the NYSE is
restricted as determined by the Commission or during which the NYSE is closed (other than
customary weekend and holiday closings), (ii) for any period during which an
emergency exists, as defined by the Commission, as a result of which disposal of portfolio
securities or determination of the net asset value of the Fund is not reasonably
practicable, or (iii) for such other periods as the Commission may by order permit
for the protection of shareholders of the Fund.
Methods of
Redemption
All five methods set forth below
apply to each Fund other than Retirement Reserves. Only the methods described under
Redemption by Check, Regular Redemption and Automatic
Redemption also apply to Retirement Reserves. In certain instances, the Transfer
Agent may require additional documents in connection with redemptions.
Redemption by Check
. You may
redeem shares by check in an amount not less than $500. At your request, the Transfer
Agent will provide you with checks drawn on the custody account. These checks can be made
payable to the order of any person; however, these checks may not be used to purchase
securities in transactions with Merrill Lynch. The payee of the check may cash or deposit
it like any check drawn on a bank. When such a check is presented to the Transfer Agent
for payment, the Transfer Agent will present the check to the Fund as authority to redeem
a sufficient number of full and fractional shares in your account to cover the amount of
the check. This enables you to continue earning daily dividends until the day prior to the
day the check is cleared. Canceled checks will be returned to you by the Transfer Agent
upon request.
You will be subject to the Transfer
Agents rules and regulations governing such checking accounts, including the right
of the Transfer Agent not to honor checks in amounts exceeding the value of your account
at the time the check is presented for payment. A Fund or the Transfer Agent may modify or
terminate the check redemption privilege at any time on 30 days notice. In order to
be eligible for the privilege, you should check the box under the caption Check
Redemption Privilege in the Purchase Application. The Transfer Agent will then send
you checks. Retirement Reserves does not accept new applications for check writing
privileges.
Federal Funds Redemption
. If
you maintain an account directly with the Transfer Agent, you may also arrange to have
redemption proceeds of $5,000 or more wired in Federal Funds to a pre-designated bank
account. In order to be eligible for Federal Funds redemption, you must designate on your
Purchase Application the domestic commercial bank and account number to receive the
proceeds of your redemption and must have your signature on the Purchase Application
guaranteed. The request for Federal Funds redemption may be made by telephone, wire or
letter (no signature guarantee required) to the Transfer Agent. If your request is
received before the determination of net asset value of a Fund on any business day, the
redemption proceeds will be wired to your pre-designated bank account on the next business
day. You may request Federal Funds redemptions by calling the Transfer Agent toll-free at
1-800-441-7762. Each Fund will employ reasonable procedures to confirm that telephone
instructions are genuine to prevent any losses from fraudulent or unauthorized
instructions. Among other things, redemption proceeds may only be wired into the bank
account designated on the Purchase Application. You must independently verify this
information at the time the redemption request is made. If you do not maintain an account
directly with the Transfer Agent, you should contact your Financial Advisor.
Repurchase Through Securities
Dealers
. Each Fund will repurchase shares through securities dealers. A Fund normally
will accept orders to repurchase shares by wire or telephone from dealers for customers
at the net asset value next computed after receipt of the order from the dealer, provided
that the request is received from the dealer prior to the determination of net asset
value of the Fund, on any business day. These repurchase arrangements are for your
convenience and do not involve a charge by the Fund; however, dealers may impose a charge
for transmitting the notice of repurchase to a Fund. Each Fund reserves the right to
reject any order for repurchase through a securities dealer, but it may not reject
properly submitted requests for redemption as described below. A
Fund will promptly notify you of any
rejection of a repurchase with respect to your shares. If you effect a repurchase through
your securities dealer, payment will be made by the Transfer Agent to the dealer.
Regular Redemption
. If you
hold shares with the Transfer Agent you may redeem by writing to the Transfer Agent,
Financial Data Services, Inc., P.O. Box 45290, Jacksonville, Florida 32232-5290.
Redemption requests that are sent by mail should be delivered to Financial Data Services,
Inc., 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484. Redemption requests
should not be sent to the Fund. A redemption request requires the signatures of all
persons in whose name(s) the shares are registered, signed exactly as such name(s) appear
on the Transfer Agents register. The signature(s) on the redemption request may
require a guarantee by an eligible guarantor institution as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the 1934
Act) whose existence and validity may be verified by the Transfer Agent through the
use of industry publications. In the event a signature guarantee is required, notarized
signatures are not sufficient. In general, signature guarantees are waived on redemptions
of less than $50,000 as long as the following requirements are met: (i) the request
contains the signature(s) of all persons in whose name(s) shares are recorded on the
Transfer Agents register; (ii) the check is mailed to the stencil address of
record on the Transfer Agents register and (iii) the stencil address has not
changed within 30 days. Certain rules may apply regarding certain types of accounts,
including, but not limited to, UGMA/UTMA accounts, Joint Tenancies with Rights of
Survivorship, contra broker transactions, and institutional accounts. In certain
instances, the Transfer Agent may require additional documents such as, but not limited
to, trust instruments, death certificates, appointments as executor or administrator, or
certificates of corporate authority. Payments will be mailed within seven days of receipt
by the Transfer Agent of a proper redemption request.
You may also redeem shares held with
the Transfer Agent by calling 1-800-441-7762. You must be the shareholder of record and
the request must be for an amount less than $50,000. Before telephone requests will be
honored, signature approval from all shareholders of record on the account must be
obtained. The shares being redeemed must have been held for at least 15 days. Telephone
redemption requests will not be honored if: (i) the account holder is deceased,
(ii) the proceeds are to be sent to someone other than the shareholder of record,
(iii) funds are to be wired to the clients bank account, (iv) a Systematic
Withdrawal Plan is in effect, (v) the request is by an individual other than the
account holder of record, (vi) the account is held by joint tenants who are divorced,
(vii) the address on the account has changed within the last 30 days or share
certificates have been issued on the account or (viii) to protect against fraud, if
the caller is unable to provide the account number, the name and address registered on the
account and the social security number registered on the account. The Funds or the
Transfer Agent may temporarily suspend telephone transactions at any time.
Shareholders of Retirement Reserves
and participants in Custodial Plans that invest in U.S.A. Government Reserves may redeem
shares by writing directly to Merrill Lynch. Shareholders of Retirement Reserves and
participants in Custodial Plans that invest in U.S.A. Government Reserves should not send
redemption requests to the Fund or to its Transfer Agent. If you inadvertently send the
redemption request to the Fund or the Transfer Agent, the request will be forwarded to
Merrill Lynch. The notice must bear the signature of the person in whose name the Plan is
maintained, signed exactly as his or her name appears on the Plan adoption agreement.
Automatic Redemption
. Merrill
Lynch has instituted an automatic redemption procedure, which applies to you if you
maintain a securities account with Merrill Lynch. This procedure, which does not apply to
margin accounts, may be used by Merrill Lynch to satisfy amounts you owe to Merrill Lynch
or one of its affiliates as a result of account fees and expenses or as a result of
purchases of securities or other transactions in your securities account. Under this
procedure, unless you notify Merrill Lynch to the contrary, your Merrill Lynch securities
account will be scanned each business day prior to the determination of net asset value of
the Fund. After application of any cash balances in the account, a sufficient number of
Fund shares may be redeemed at net asset value, as determined that day, to satisfy any
amounts you owe to Merrill Lynch or one of its affiliates. Redemptions will be effected on
the business day preceding the date you are obligated to make such payment, and Merrill
Lynch or its affiliate will receive the redemption proceeds on the day following the
redemption date. You will receive all dividends declared and reinvested through the date
of redemption.
Unless otherwise requested, if you
request transactions that settle on a same-day basis (such as Federal Funds
wire redemptions, branch office checks, transfers to other Merrill Lynch accounts and
certain securities transactions) the Fund shares necessary to effect such transactions
will be deemed to have been transferred to Merrill Lynch prior to
the Funds declaration of
dividends on that day. In such instances, you will receive all dividends declared and
reinvested through the date immediately preceding the date of redemption.
If your account held directly with
the Transfer Agent contains a fractional share balance, such fractional share balance will
be automatically redeemed by a Fund.
Because of the high cost of
maintaining smaller accounts, a Fund may redeem shares in your account if the net asset
value of your account falls below $500 due to redemptions you have made. You will be
notified that the value of your account is less than $500 before the Fund makes an
involuntary redemption. You will then have 60 days to make an additional investment to
bring the value of your account to at least $500 before the Fund takes any action. This
involuntary redemption does not apply to retirement plans or Uniform Gifts or Transfers to
Minors Act accounts.
U.S.A. Government Reserves
has instituted an automatic redemption procedure for participants in the
Custodial Plans who have elected to have cash balances in their accounts
automatically invested in shares of the Fund. In the case of such participants,
unless directed otherwise, Merrill Lynch will redeem a sufficient number of
shares of the Fund to purchase other securities (such as common stocks) that
the participant has selected for investment in his or her Custodial Plan
account.
CMA Funds Redemption of Shares
by CMA Service Subscribers
CMA Funds Automatic
Redemptions
. Redemptions will be effected automatically by Merrill Lynch to satisfy
debit balances in the CMA service or other Merrill Lynch central asset account program, or
the WCMA service created by securities transaction activity within the account or to
satisfy debit balances created by card purchases, cash advances or checks. Each account
will be scanned automatically for debits each business day prior to 12:00 noon, Eastern
time. After applying any free cash balances in the account to such debits, shares of the
designated Fund will be redeemed at net asset value at the 12:00 noon pricing, and funds
deposited pursuant to a bank deposit program will be withdrawn, to the extent necessary to
satisfy any remaining debits in the account. Automatic redemptions or withdrawals will be
made first from your Money Account. Unless otherwise requested, when you request a
transaction that settles on a same-day basis (such as Federal funds wire
redemptions, branch office checks, transfers to other Merrill Lynch accounts and certain
securities transactions) the Fund shares necessary to effect such a transaction will be
deemed to have been transferred to Merrill Lynch prior to the Funds declaration of
dividends on that day. In such instances, you will receive all dividends declared and
reinvested through the date immediately preceding the date of redemption. Margin loans
through the Investor CreditLine
SM
service will be used to satisfy debits
remaining after the liquidation of all funds invested in or deposited through the Money
Account CMA service (or other Merrill Lynch central asset account). Shares of the CMA
Funds may not be purchased, nor may deposits be made pursuant to a bank deposit program
until all debits and margin loans in the account are satisfied.
Shares of each CMA Fund also may be
automatically redeemed to satisfy debits or make investments in connection with special
features offered to CMA service or other Merrill Lynch central asset account program
subscribers. For more information regarding these features, you should consult the
relevant program disclosure.
CMA Funds Manual
Redemptions
. If you are a CMA service (or other Merrill Lynch central asset account)
subscriber or if you hold shares of a CMA Fund in a Merrill Lynch securities account, you
may redeem shares of a CMA Fund directly by writing to Merrill Lynch, which will submit
your request to the Transfer Agent. Cash proceeds from the manual redemption of Fund
shares ordinarily will be mailed to you at your address of record or, on request, mailed
or wired (if $10,000 or more) to your bank account. Redemption requests should not be sent
to a Fund or the Transfer Agent. If you inadvertently send the request to a Fund or the
Transfer Agent, the request will be forwarded to Merrill Lynch. The signature requirements
of the redemption request are described above under Redemption of Shares
Redemptions of Shares by All Funds except the CMA Funds and the WCMA Funds Regular
Redemption. CMA service (or other Merrill Lynch central asset account) subscribers
desiring to effect manual redemptions should contact their Financial Advisors. All
redemptions of Fund shares will be confirmed to service subscribers in the monthly
transaction statement.
WCMA Funds Redemption
of Shares by WCMA Service Subscribers
WCMA Funds Automatic
Redemptions
. Redemptions will be effected automatically by Merrill Lynch to satisfy
debit balances in a WCMA service or other business account program account created by
securities transactions therein or to satisfy debit balances created by credit card
purchases, cash advances (which may be obtained through participating banks and automated
teller machines) or checks written against the credit card account or electronic fund
transfers or other debits. Each WCMA service or other business account program account
will be scanned automatically for debits each business day prior to 12 noon, Eastern time.
After application of any free cash balances in the account to such debits, shares of the
designated WCMA Fund will be redeemed at net asset value at the 12 noon pricing, and funds
deposited pursuant to the Insured Savings Account will be withdrawn, to the extent
necessary to satisfy any remaining debits in the account. Automatic redemptions or
withdrawals will be made first from the subscribers Primary Money Account and then,
to the extent necessary, from accounts not designated as the Primary Money Account. Unless
otherwise requested, in those instances where shareholders request transactions that
settle on a same-day basis (such as Federal funds wire redemptions, branch
office checks, transfers to other Merrill Lynch accounts and certain securities
transactions) the Fund shares necessary to effect such transactions will be deemed to have
been transferred to Merrill Lynch prior to the Funds declaration of dividends on
that day. In such instances, shareholders will receive all dividends declared and
reinvested through the date immediately preceding the date of redemption. Unless otherwise
requested by the subscriber, redemptions or withdrawals from non-Primary Money Accounts
will be made in the order the non-Primary Money Accounts were established; thus,
redemptions or withdrawals will first be made from the non-Primary Money Account that the
subscriber first established. Margin loans through the Investor CreditLine
SM
service will be used to satisfy debits remaining after the liquidation of all funds
invested in or deposited through non-Primary Money Accounts, and shares of the WCMA Funds
may not be purchased, nor may deposits be made pursuant to the Insured Savings Account,
until all debits and margin loans in the account are satisfied.
Shares of the WCMA Funds also may be
automatically redeemed to satisfy debits or make investments in connection with special
features offered to service subscribers. The redemption of shares of the WCMA Funds also
may be modified for investors that participate in certain fee-based programs. For more
information regarding these features, a WCMA service subscriber should consult the
Business Investor Account
SM
(BIA
SM
) Financial Service and Working
Capital Management Account
®
(WCMA
®
) Financial Service
Account Agreement Program Description Booklet.
From time to time, Merrill Lynch also
may offer the WCMA Funds to subscribers in certain other programs sponsored by Merrill
Lynch. Some or all of the features of the WCMA service may not be available in such
programs and program participation and other fees may be higher. More information on the
services and fees associated with such other programs is set forth in the Program
Description Booklet that is furnished in connection with such other programs, which may be
obtained by contacting a Merrill Lynch Financial Advisor.
WCMA Funds Manual
Redemptions
. Merrill Lynch will satisfy requests for cash by wiring cash to the
shareholders bank account or arranging for the shareholders Merrill Lynch
Financial Advisor to provide the shareholder with a check. Redemption requests should not
be sent to the WCMA Fund or its Transfer Agent. If inadvertently sent to the WCMA Fund or
the Transfer Agent, redemption requests will be forwarded to Merrill Lynch. Any required
shareholder signature(s) must be guaranteed by an eligible guarantor
institution as such is defined in Rule 17Ad-15 under the 1934 Act, the
existence and validity of which may be verified by the Transfer Agent through the use of
industry publications. Notarized signatures are not sufficient. In certain instances,
additional documents such as, but not limited to, trust instruments, death certificates,
appointments as executor or administrator, or certificates of corporate authority may be
required. Subscribers in the WCMA service or other business account program desiring to
effect manual redemptions should contact their Merrill Lynch Financial Advisor.
All redemptions of WCMA Fund shares
will be confirmed to WCMA service subscribers (rounded to the nearest share) in the
monthly transaction statement.
CMA Funds Redemption
of Shares by Non-Service Subscribers
Shareholders who are not CMA service
(or other Merrill Lynch central asset account) subscribers may redeem shares of a CMA Fund
held in a Merrill Lynch securities account directly as described above under
Redemption of Shares Redemption of Shares by Service Subscribers
Manual Redemptions.
Shareholders maintaining an account
directly with the Transfer Agent, who are not CMA service (or other Merrill Lynch central
asset account) subscribers, may redeem shares of a CMA Fund by submitting a written notice
by mail directly to the Transfer Agent, Financial Data Services, Inc., P.O. Box 45290,
Jacksonville, Florida 32232-5290.
Redemption requests that are sent by
hand should be delivered to Financial Data Services, Inc., 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484. Cash proceeds from the manual redemption of Fund shares
will be mailed to the shareholder at his or her address of record. Redemption requests
should not be sent to a Fund or Merrill Lynch. If inadvertently sent to a Fund or Merrill
Lynch such redemption requests will be forwarded to the Transfer Agent. The notice
requires the signatures of all persons in whose names the shares are registered, signed
exactly as their names appear on their monthly statement. The signature(s) on the
redemption request must be guaranteed by an eligible guarantor institution as
such is defined in Rule 17Ad-15 under the 1934 Act, the existence and validity of
which may be verified by the Transfer Agent through the use of industry publications.
Notarized signatures are not sufficient. In certain instances, additional documents such
as, but not limited to, trust instruments, death certificates, appointments as executor or
administrator, or certificates of corporate authority may be required.
The right to receive payment with
respect to any redemption of Fund shares may be suspended by each Fund for a period of up
to seven days. Suspensions of more than seven days may not be made except (1) for any
period (A) during which the NYSE is closed other than customary weekend and holiday
closings or (B) during which trading on the NYSE is restricted; (2) for any
period during which an emergency exists as a result of which (A) disposal by the Fund
of securities owned by it is not reasonably practicable or (B) it is not reasonably
practicable for the Fund fairly to determine the value of its net assets; or (3) for
such other periods as the Commission may by order permit for the protection of
shareholders of the Fund. The Commission shall by rules and regulations determine the
conditions under which (i) trading shall be deemed to be restricted and (ii) an
emergency shall be deemed to exist within the meaning of clause (2) above.
The value of a Funds shares at
the time of redemption may be more or less than the shareholders cost, depending on
the market value of the securities held by the Fund at such time.
Participants in the WCMA service or
certain other business account program are able to invest funds in one or more of the CMA
Funds. Checks and other funds transmitted to a WCMA service or other business account
program account generally will be applied first to the payment of pending securities
transactions or other charges in the participants securities account, second to
reduce outstanding balances in the lines of credit available through such program and,
third, to purchase shares of the designated Fund. To the extent not otherwise applied,
funds transmitted by Federal Funds wire or an automated clearinghouse service will be
invested in shares of the designated Fund on the business day following receipt of such
funds by Merrill Lynch. Funds received in a WCMA service or other business account program
account from the sale of securities will be invested in the designated Fund as described
above. The amount payable on a check received in a WCMA service or other business account
program account prior to the cashiering deadline referred to above will be invested on the
second business day following receipt of the check by Merrill Lynch. Redemptions of Fund
shares will be effected as described above to satisfy debit balances, such as those
created by purchases of securities or by checks written against a bank providing checking
services to WCMA service or other business account program subscribers. Service
subscribers that have a line of credit will, however, be permitted to maintain a minimum
Fund balance; for subscribers who elect to maintain such a balance, debits from check
usage will be satisfied through the line of credit so that such balance is maintained.
However, if the full amount of available credit is not sufficient to satisfy the debit, it
will be satisfied from the minimum balance.
From time to time, Merrill Lynch
also may offer the Funds to participants in certain other programs sponsored by Merrill
Lynch. Some or all of the features of the CMA service may not be available in such
programs and program participation and other fees may be higher. More information on the
services and fees associated with such
programs, is set forth in the
relevant program disclosures, which may be obtained by contacting a Merrill Lynch
Financial Advisor.
S
HAREHOLDER
S
ERVICES
Shareholder Services
for All Funds other than CMA Funds, WCMA Funds and Retirement Reserves
Each Fund offers one or more of the
shareholder services described below that are designed to facilitate investment in its
shares. Certain of these services are available only to U.S. investors. You can obtain
more information about these services from each Fund by calling the telephone number on
the cover page, or from the Distributors.
Investment Account
If your account is maintained at the
Transfer Agent (an Investment Account) you will receive a monthly report
showing the activity in your account for the month. You may make additions to your
Investment Account at any time by purchasing shares at the applicable public offering
price either through your securities dealer, by wire or by mail directly to the Transfer
Agent. You may ascertain the number of shares in your Investment Account by calling the
Transfer Agent toll-free at 1-800-441-7762. The Transfer Agent will furnish this
information only after you have specified the name, address, account number and social
security number of the registered owner or owners. You may also maintain an account
through Merrill Lynch. If you transfer shares out of a Merrill Lynch brokerage account, an
Investment Account in your name may be opened at the Transfer Agent. If you are
considering transferring a tax-deferred retirement account such as an IRA from Merrill
Lynch to another brokerage firm or financial institution you should be aware that if the
firm to which the retirement account is to be transferred will not take delivery of shares
of a Fund, you must either redeem the shares so that the cash proceeds can be transferred
to the account at the new firm, or you must continue to maintain a retirement account at
Merrill Lynch for those shares.
In the interest of economy and
convenience and because of the operating procedures of each Fund, share certificates will
not be issued physically. Shares are maintained by each Fund on its register maintained by
the Transfer Agent and the holders thereof will have the same rights and ownership with
respect to such shares as if certificates had been issued.
Fee-Based Programs
Fund shares may be held in certain
fee-based programs offered by the Manager or its affiliates, including pricing
alternatives for securities transactions (each referred to in this paragraph as a
Program). These Programs generally prohibit such shares from being transferred
to another account at Merrill Lynch, to another broker-dealer or to the Transfer Agent.
Except in limited circumstances, such shares must be redeemed and new shares purchased in
order for the investment not to be subject to Program fees. Additional information
regarding a specific Program (including charges and limitations on transferability
applicable to shares that may be held in such Program) is available in such Programs
client agreement and from the Transfer Agent at 1-800-441-7762.
Automatic Investment
Plans
If you maintain an account directly
with the Transfer Agent, each Fund offers an Automatic Investment Plan whereby the
Transfer Agent is authorized through preauthorized checks of $50 or more to charge your
regular bank account on a regular basis to provide systematic additions to the Investment
Account. Your Automatic Investment Plan may be terminated at any time without charge or
penalty by you, the Fund, the Transfer Agent or the Distributors. If you do not maintain
an account directly with the Transfer Agent, you should contact your Financial Advisor.
Accrued Monthly Payout
Plan
The dividends paid by each Fund are
generally reinvested automatically in additional shares. If you maintain an account at
the Transfer Agent and desire cash payments, you may enroll in the Accrued Monthly Payout
Plan. Under this plan, shares equal in number to shares credited through the automatic
reinvestment of dividends during
each month are redeemed at net asset
value on the last Friday of such month in order to meet the monthly distribution
(provided that, in the event that a payment on an account maintained with the Transfer
Agent would be $10.00 or less, the payment will be automatically reinvested in additional
shares). You may open an Accrued Monthly Payout Plan by completing the appropriate
portion of the Purchase Application. Your Accrued Monthly Payout Plan may be terminated
at any time without charge or penalty by you, a Fund, the Transfer Agent or the
Distributor. If you do not maintain an account directly with the Transfer Agent, you
should contact your Financial Advisor.
Systematic Withdrawal
Plans
If you maintain an account with the
Transfer Agent, you may elect to receive systematic withdrawals from your Investment
Account by check or through automatic payment by direct deposit to your bank account on
either a monthly or quarterly basis as provided below. Quarterly withdrawals are available
if you have acquired shares of a Fund that have a value, based on cost or the current
offering price, of $5,000 or more, and monthly withdrawals are available if your shares
have a value of $10,000 or more.
At the time of each withdrawal
payment, sufficient shares are redeemed from your Investment Account to provide the
withdrawal payment specified by you, which may be a dollar amount or a percentage of the
value of your shares. Redemptions will be made at net asset value as determined as of the
close of business on the NYSE on the 24
th
day of each month or the
24
th
day of the last month of each quarter, whichever is applicable. If the
NYSE is not open for business on such date, the shares will be redeemed at the net asset
value determined as of the close of business on the NYSE on the following business day.
The check for the withdrawal payment will be mailed or the direct deposit will be made, on
the next business day following redemption. When you make systematic withdrawals,
dividends and distributions on all shares in the Investment Account are reinvested
automatically in Fund shares. Your systematic withdrawal plan may be terminated at any
time, without charge or penalty, by you, a Fund, the Transfer Agent or the Distributors.
You may not elect to make systematic withdrawals while you are enrolled in the Accrued
Monthly Payout Plan. A Fund is not responsible for any failure of delivery to the
shareholders address of record and no interest will accrue on amounts represented by
uncashed distribution or redemption checks.
Withdrawal payments should not be
considered as dividends. Withdrawals generally are treated as sales of shares and may
result in taxable gain or loss. If periodic withdrawals continuously exceed reinvested
dividends, the original investment will be reduced correspondingly. You are cautioned not
to designate withdrawal programs that result in an undue reduction of principal. There are
no minimums on amounts that may be systematically withdrawn. Periodic investments may not
be made into an Investment Account in which a shareholder has elected to make systematic
withdrawals.
If your account is not maintained
directly with the Transfer Agent, you should contact your Financial Advisor. If your
account is currently maintained at a branch office, redemptions via the Systematic
Withdrawal Plan will be credited directly to your Investment Account. If you wish to
receive a redemption by check, you should contact your Financial Advisor.
Retirement and
Education Accounts
Individual retirement accounts, Roth
IRAs and other retirement plan accounts (together, retirement accounts) are
available from your financial intermediary. Under these plans, investments may be made in
a Fund and certain other mutual funds sponsored by the Manager or its affiliates as well
as in other securities. There may be fees associated with investing through these
accounts. Information with respect to these accounts is available on request from your
financial intermediary.
Dividends received in each of the
accounts referred to above are exempt from Federal taxation until distributed from the
accounts and, in the case of Roth IRAs and education accounts, may be exempt from taxation
when distributed as well. Investors considering participation in any retirement or
education account should review specific tax laws relating to the account and should
consult their attorneys or tax advisers with respect to the establishment and maintenance
of any such account.
D
ETERMINATION OF
N
ET
A
SSET
V
ALUE
Each Fund seeks to maintain a net
asset value of $1.00 per share for purposes of purchase and redemptions and values their
portfolio securities on the basis of the amortized cost method of valuation.
Under this method portfolio
securities are valued at cost when purchased and thereafter, a constant proportionate
accretion of any discount or amortization of premium is recorded until the maturity of the
security. The effect of changes in the market value of a security as a result of
fluctuating interest rates is not taken into account.
As indicated, the amortized cost
method of valuation may result in the value of a security being higher or lower than its
market price, the price a Fund would receive if the security were sold prior to maturity.
Each Funds Board has established procedures for the purpose of maintaining a
constant net asset value of $1.00 per share for each Fund, however, there can be no
assurance that a constant net asset value will be maintained for any Fund. Such procedures
include a review of the extent of any deviation of net asset value per share, based on
available market quotations, from the $1.00 amortized cost per share. Should that
deviation exceed ½ of 1% for a Fund, the Funds Board will promptly consider
whether any action should be initiated to eliminate or reduce material dilution or other
adverse impact to shareholders. Such action may include redeeming shares in kind, selling
portfolio securities prior to maturity, reducing or withholding dividends, shortening the
average portfolio maturity, reducing the number of outstanding shares without monetary
consideration, and utilizing a net asset value per share as determined by using available
market quotations.
Each Fund will maintain a
dollar-weighted average portfolio maturity of 90 days or less, will not purchase any
instrument with a deemed maturity under Rule 2a-7 of the Investment Company Act greater
than 397 days, and will limit portfolio investments, including repurchase agreements, to
those instruments that the adviser or sub-adviser determines present minimal credit risks
pursuant to guidelines adopted by the Funds Boards.
Y
IELD
I
NFORMATION
Each Fund computes its annualized
yield in accordance with regulations adopted by the Commission by determining the net
changes in value, exclusive of capital changes and income other than investment income,
for a seven-day base period for a hypothetical pre-existing account having a balance of
one share at the beginning of the base period, subtracting a hypothetical shareholder
account charge, and dividing the difference by the value of the account at the beginning
of the base period to obtain the base period return, and then multiplying the result by
365 and then dividing by seven. This yield calculation does not take into consideration
any realized or unrealized gains or losses on portfolio securities. The Commission also
permits the calculation of a standardized effective or compounded yield. This is computed
by compounding the unannualized base period return, which is done by adding one to the
base period return, raising the sum to a power equal to 365 divided by seven, and
subtracting one from the result. This compounded yield calculation also excludes realized
and unrealized gains or losses on portfolio securities.
The tax equivalent yield of the
shares of each of CMA Tax-Exempt, WCMA Tax-Exempt and the CMA State Funds is computed by
dividing that portion of the yield of the Fund (computed as described above) that is
tax-exempt by an amount equal to one minus the stated tax rate (normally assumed to be the
maximum applicable marginal tax rate) and adding the result to that portion, if any, of
the yield of the Fund that is not tax-exempt. The tax equivalent effective yield of the
shares of each of CMA Tax-Exempt, WCMA Tax-Exempt and the CMA State Funds is computed in
the same manner as the tax equivalent yield, except that the effective yield is
substituted for yield in the calculation.
The yield on each Funds shares
normally will fluctuate on a daily basis. Therefore, the yield for any given past period
is not an indication or representation by a Fund of future yields or rates of return on
its shares. The yield is affected by such factors as changes in interest rates on a
Funds portfolio securities, average portfolio maturity, the types and quality of
portfolio securities held and operating expenses. The yield on Fund shares for various
reasons may not be comparable to the yield on bank deposits, shares of other money market
funds or other investments.
See Part I, Section VI
Yield Information of each Funds Statement of Additional Information for
recent seven-day yield information relating to your Fund.
On occasion, each Fund may compare
its yield to (1) an industry average compiled by Donoghues Money Fund Report, a
widely recognized independent publication that monitors the performance of money market
mutual funds, (2) the average yield reported by the Bank Rate Monitor National
Index
TM
for money market deposit accounts offered by the 100 leading banks and
thrift institutions in the ten largest standard metropolitan statistical areas,
(3) yield data published by industry publications, including Lipper Inc.,
Morningstar, Inc.,
Money Magazine, U.S. News & World Report, BusinessWeek, CDA
Investment Technology, Inc., Forbes Magazine and Fortune Magazine
, (4) the yield
on an investment in 90-day Treasury bills on a rolling basis, assuming quarterly
compounding, or (5) historical yield data relating to other central asset accounts
similar to the CMA service, in the case of the CMA Funds. As with yield quotations, yield
comparisons should not be considered indicative of a Funds yield or relative
performance for any future.
A Fund may provide information
designed to help investors understand how the Fund is seeking to achieve its investment
objective. This may include information about past, current or possible economic, market,
political, or other conditions, descriptive information on general principles of investing
such as asset allocation, diversification and risk tolerance; a discussion of a
Funds portfolio composition, investment philosophy, strategy or investment
techniques; comparisons of a Funds performance or portfolio composition to that of
other funds or types of investments, to indices relevant to the comparison being made, or
to a hypothetical or model portfolio. Each Fund may also quote various measures of
volatility and benchmark correlation in advertising and other materials, and may compare
these measures to those of other funds or types of investments.
P
ORTFOLIO
T
RANSACTIONS
Subject to policies established by
the Board of each Fund, the Manager is primarily responsible for the execution of a
Funds portfolio transactions. The Manager does not execute transactions through any
particular broker or dealer, but seeks to obtain the best net results for the Fund, taking
into account such factors as price (including the applicable dealer spread), size of
order, difficulty of execution, operational facilities of the firm and the firms
risk and skill in positioning blocks of securities. While the Manager generally seeks
reasonable trade execution costs, a Fund does not necessarily pay the lowest spread or
commission available. Each Funds policy of investing in securities with short
maturities will result in high portfolio turnover.
Subject to obtaining the best net
results, dealers who provide supplemental investment research (such as economic data and
market forecasts) to the Manager may receive orders for transactions of the Fund.
Information received will be in addition to and not in lieu of the services required to be
performed by the Manager under each Management Agreement and the expenses of the Manager
will not necessarily be reduced as a result of the receipt of such supplemental
information.
The portfolio securities in which
each Fund invests are traded primarily in the over-the-counter (OTC) market.
Bonds and debentures usually are traded OTC, but may be traded on an exchange. Where
possible, a Fund will deal directly with the dealers who make a market in the securities
involved except in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principals for their own accounts. On
occasion, securities may be purchased directly from the issuer. Money market securities
are generally traded on a net basis and do not normally involve either brokerage
commissions or transfer taxes. The cost of executing portfolio securities transactions of
a Fund primarily will consist of dealer spreads. Under the Investment Company Act, persons
affiliated with a Fund and persons who are affiliated with such affiliated persons are
prohibited from dealing with the Fund as principals in the purchase and sale of securities
unless an exemptive order allowing such transactions is obtained from the Commission.
Since transactions in the OTC market usually involve transactions with the dealers acting
as principals for their own accounts, the Funds will not deal with affiliated persons,
including Merrill Lynch and its affiliates, in connection with such transactions, except
pursuant to the exemptive order described below. However, an affiliated person of a Fund
may serve as its broker in OTC transactions conducted on an agency basis.
The Manager does not consider sales
of shares of the mutual funds it advises as a factor in the selection of brokers or
dealers to execute portfolio transactions for a Fund; however, whether or not a particular
broker or dealer sells shares of the mutual funds advised by the Manager neither qualifies
nor disqualifies such broker or dealer to execute transactions for those mutual funds.
The Commission has issued an
exemptive order permitting each Fund to conduct principal transactions with Merrill Lynch
Government Securities, Inc. (GSI) in U.S. Government and U.S. Government
agency securities, with Merrill Lynch Money Markets, Inc., a subsidiary of GSI
(MMI) in certificates of deposit and other short-term money market instruments
and commercial paper, and with Merrill Lynch in fixed income securities, including
medium-term notes, and municipal securities with remaining maturities of one year or less.
This order contains a number of conditions, including conditions designed to ensure that
the price to each Fund from GSI, MMI or Merrill Lynch is equal to or better than that
available from other sources. GSI, MMI and Merrill Lynch have informed each Fund that they
will in no way, at any time, attempt to influence or control the activities of the Fund or
the Manager in placing such principal transactions. The exemptive order allows GSI, MMI or
Merrill Lynch to receive a dealer spread on any transaction with a Fund no greater than
its customary dealer spread from transactions of the type involved. Generally, such
spreads do not exceed 0.25% of the principal amount of the securities involved.
See Part I, Section VIII
Portfolio Transactions of each Funds Statement of Additional Information
for information relating to portfolio transactions engaged in by your Fund for its three
most recently completed fiscal years or other relevant periods.
The Board of each Fund has considered
the possibility of seeking to recapture for the benefit of the Fund expenses of possible
portfolio transactions, such as dealer spreads and underwriting commissions, by conducting
portfolio transactions through affiliated entities, including GSI, MMI and Merrill Lynch.
For example, dealer spreads received by GSI, MMI or Merrill Lynch on transactions
conducted pursuant to the exemptive order described above could be offset against the
management fee payable by each Fund to the Manager. After considering all factors deemed
relevant, the Board of each Fund made a determination not to seek such recapture. The
Board of each Fund will reconsider this matter from time to time.
Each Fund has received an exemptive
order from the Commission permitting it to lend portfolio securities to Merrill Lynch or
its affiliates. Pursuant to that order, each Fund may retain an affiliated entity of the
Manager (the lending agent) as the securities lending agent for a fee,
including a fee based on a share of the returns on investment of cash collateral. The
lending agent may, on behalf of a Fund, invest cash collateral received by the Fund for
such loans, among other things, in a private investment company managed by the lending
agent or in registered money market funds advised by the Manager or its affiliates. See
Part I, Section VII Portfolio Transactions of each Funds
Statement of Additional Information for the securities lending agent fees, if any, paid by
your Fund to the lending agent for the periods indicated.
Because of different objectives or
other factors, a particular security may be bought for one or more funds or clients
advised by the Manager or its affiliates (collectively, clients) when one or
more clients of the Manager or its affiliates are selling the same security. If purchases
or sales of securities arise for consideration at or about the same time that would
involve a Fund or other clients or funds for which the Manager or an affiliate acts as
investment manager, transactions in such securities will be made, insofar as feasible, for
the respective funds and clients in a manner deemed equitable to all. To the extent that
transactions on behalf of more than one client of the Manager or its affiliates during the
same period may increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price.
D
IVIDENDS AND
T
AXES
Dividends
Each Fund declares dividends daily.
Dividends of each Fund are reinvested daily in additional shares of that Fund at net asset
value. Shares purchased will begin accruing dividends on the day following the date of
purchase. Dividends that are declared but unpaid will remain in the gross assets of each
Fund and will therefore continue to earn income for the Funds shareholders.
Shareholders will receive monthly statements as to such reinvestments. For shareholders of
the CMA Funds and the WCMA Funds who request transactions that settle on a same
day basis (such as Federal Funds wire redemptions, branch office checks, transfers
to other Merrill Lynch accounts and certain securities transactions), the Fund shares
necessary to effect such transactions will be deemed to have been transferred to Merrill
Lynch prior to the Funds declaration of dividends on that day.
Net income (from the time of the
immediately preceding determination thereof) consists of (i) interest accrued and/or
discount earned (including both original issue and market discount), (ii) less
amortization of premiums and the estimated expenses of a Fund applicable to that dividend
period. Net realized capital gains (including net short-term capital gain), if any, will
be distributed by the Funds at least annually.
Retirement Accounts.
Investment in certain Funds is
offered to participants in retirement accounts for which Merrill Lynch acts as custodian,
participants in Merrill Lynch Basic Plans and RSAs and certain independent qualified
plans. Accordingly, the general description of the tax treatment of RICs and their
shareholders as set forth below is qualified for retirement accountholders with respect to
the special tax treatment afforded such accounts under the Code. Under the Code, neither
ordinary income dividends nor capital gain dividends represent current income to
retirement accountholders.
Generally, distributions from a
retirement account (other than certain distributions from a Roth IRA) will be taxable as
ordinary income at the rate applicable to the participant at the time of the distribution.
For most retirement accounts, such distributions would include (i) any pre-tax
contributions to the retirement account (including pre-tax contributions that have been
rolled over from another IRA or qualified retirement plan), and (ii) earnings
(whether such earnings are classified as ordinary income or as capital gains). In addition
to Federal income tax, participants may be subject to the imposition of a 10% (or, in the
case of certain SRA-IRA distributions, 25%) additional tax on any amount withdrawn from a
retirement account prior to the participants attainment of age 59½ unless one
of the exceptions listed below applies.
Depending on the type of retirement
plan, the exceptions to the early withdrawal penalty may include: 1) distributions
after the death of the shareholder; 2) distributions attributable to disability;
3) distributions used to pay certain medical expenses; 4) distributions that are
part of a scheduled series of substantially equal periodic payments for the life (or life
expectancy) of the shareholder or the joint lives (or joint life and last survivor
expectancy) of the shareholder and the shareholders beneficiary; 5) withdrawals
for medical insurance if the shareholder has received unemployment compensation for 12
weeks and the distribution is made in the year such unemployment compensation is received
or the following year; 6) distributions to pay qualified higher education expenses of
the shareholder or certain family members of the shareholder; and 7) distributions
used to buy a first home (subject to a $10,000 lifetime limit).
For Roth IRA participants,
distributions, including accumulated earnings on contributions, will not be includable in
income if such distribution is made five or more years after the first tax year of
contribution and the account holder either is age 59½ or older, has become
disabled, is purchasing a first home (subject to the $10,000 lifetime limit) or has died.
As with other retirement accounts, a 10% excise tax applies to amounts withdrawn from the
Roth IRA prior to reaching age 59 ½ unless one of the exceptions applies. Such a
withdrawal would also be included in income to the extent of earnings on contributions,
with distributions treated as made first from contributions and then from earnings.
Under certain limited circumstances
(for example, if an individual for whose benefit a retirement account is established
engages in any transaction prohibited under Section 4975 of the Code with respect to
such account), a retirement account could cease to qualify for the special treatment
afforded certain retirement accounts under the Code as of the first day of the taxable
year in which the transaction that caused the disqualification occurred. If a retirement
account through which a shareholder holds Fund shares becomes ineligible for special tax
treatment, the shareholder will be treated as having received a distribution on the first
day of such taxable year from the retirement account in an amount equal to the fair
market value of all assets in the account. Thus, a shareholder would be taxed currently
on the amount of any pre-tax contributions and previously untaxed dividends held within
the account, and would be taxed on the ordinary income and capital gain dividends paid by
a Fund subsequent to the disqualification event, whether such dividends were received in
cash or reinvested in additional shares. These ordinary income and capital gain dividends
also might be subject to state and local taxes. In the event of retirement account
disqualification, shareholders also could be subject to the early withdrawal excise tax
described above. Additionally, retirement account disqualification may subject a
nonresident alien shareholder to a 30% United States withholding tax on ordinary income
dividends paid by a Fund unless a reduced rate of withholding is provided under
applicable treaty law or such
dividends are designated as interest-related dividends or short-term capital
gain dividends, as described in TaxesGeneral Treatment of Fund Shareholders.
In certain circumstances, account
holders also may be able to make nondeductible contributions to their retirement accounts.
As described above, ordinary income dividends and capital gain dividends received with
respect to such contributions will not be taxed currently. Unlike the Roth IRA, described
above, earnings with respect to these amounts will be taxed when distributed.
Qualified Tuition
Program and ESAs.
Investment in Retirement Reserves is
also offered to participants in Qualified Tuition Program accounts and ESAs (together,
education accounts). The general description of the tax treatment of RICs and
their shareholders as set forth below is qualified for education accountholders with
respect to the special tax treatment afforded education accounts. Under the Code, neither
ordinary income dividends nor capital gain dividends represent current income to
shareholders holding shares through an education account.
Distributions from a Qualified
Tuition Program account or ESA, including amounts representing earnings on amounts
contributed, will not be included in income to the extent they do not exceed the
beneficiarys qualified education expenses, as defined in the Code for purposes of
the particular type of account. Education account holders may be subject to a Federal
penalty as well as ordinary income tax and any applicable state income tax on the portion
of a distribution representing earnings on contributed amounts, if the distribution is not
used for qualified education expenses, as defined in the Code for purposes of the
particular type of account. Exceptions to the Federal penalty include distributions made
on account of the death or disability of the beneficiary of the account and distributions
made on account of a scholarship received by the beneficiary, provided the distributions
do not exceed the amount of the scholarship. Numerous provisions affecting ESAs are
scheduled to expire after December 31, 2010. Unless such provisions are extended, the tax
treatment of ESAs and their investors will be significantly altered.
If an education account becomes
ineligible for the special tax treatment described above, the shareholder will be taxed
currently on amounts representing accumulated earnings on contributions made to the
account. Likewise, dividends paid by the Fund subsequently will be currently taxable,
whether received in cash or reinvested, and could be subject to state and local taxes. It
is possible that the Federal penalty applicable to withdrawals not used for qualified
education expenses might also apply. Disqualification of an education account may subject
a nonresident alien shareholder to a 30% United States withholding tax on ordinary income
dividends paid by a Fund, unless a reduced rate of withholding is provided under
applicable treaty law or such dividends are designated as interest-related
dividends or short-term capital gain dividends, as described in
Taxes General Treatment of Fund Shareholders.
The foregoing is a general and
abbreviated summary of the applicable provisions of the Code and Treasury regulations
presently in effect, as applied to the particular types of Funds and accounts being
described. For the complete provisions, reference should be made to the pertinent Code
sections and the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative, judicial or administrative action either
prospectively or retroactively.
Shareholders are urged to consult
their tax advisers regarding specific questions as to Federal, foreign, state or local
taxes. Foreign investors should consider applicable foreign taxes in their evaluation of
investment in each Fund. Shareholders investing through a retirement account or education
account, likewise, should consult a tax advisor with respect to the tax consequences of
investing through such an account.
Taxes
Each Fund intends to elect and to
qualify or to continue to qualify, as appropriate, for the special tax treatment afforded
regulated investment companies (RICs) under the Code. As long as a Fund so
qualifies, the Fund (but not its shareholders) will not be subject to Federal income tax
on the part of its investment company taxable income and net capital gain that is
distributed to shareholders. Each Fund intends to distribute substantially all of such
income and gains. If, in any taxable
year, a Fund fails to qualify as a RIC under the Code, such Fund would be taxed in the
same manner as an ordinary corporation and all distributions from earnings and profits
(as determined under U.S. Federal income tax principles) to its shareholders would be
taxable as ordinary dividend income eligible for the maximum 15% tax rate for
non-corporate shareholders (for taxable years beginning prior to January 1, 2011) and the
dividends-received deduction for corporate shareholders. However, distributions from a
CMA Tax-Exempt Fund or from WCMA Tax-Exempt that are derived from income on tax-exempt
obligations, as defined herein, would no longer qualify for treatment as exempt interest.
Each Fund that is a series of a RIC
that consists of multiple series is treated as a separate corporation for Federal income
tax purposes, and, therefore, is considered to be a separate entity in determining its
treatment under the rules for RICs. Losses in one series of a RIC do not offset gains in
another, and the requirements (other than certain organizational requirements) for
qualifying for RIC status will be determined at the level of the individual series. In the
following discussion, the term Fund means each individual series, if
applicable.
The Code requires a RIC to pay a
nondeductible 4% excise tax to the extent the RIC does not distribute, during each
calendar year, 98% of its ordinary income, determined on a calendar year basis, and 98% of
its capital gain net income, determined, in general, as if the RICs taxable year
ended on October 31, plus certain undistributed amounts from the preceding year. While
each Fund intends to distribute its income and capital gains in the manner necessary to
minimize imposition of the 4% excise tax, there can be no assurance that sufficient
amounts of a Funds taxable income and capital gains will be distributed to avoid
entirely the imposition of the tax. In such event, a Fund will be liable for the tax only
on the amount by which it does not meet the foregoing distribution requirements. The
required distributions are based only on the taxable income of a RIC. The excise tax,
therefore, generally will not apply to the tax-exempt income of RICs, such as the CMA
Tax-Exempt Funds and WCMA Tax-Exempt, that pay exempt-interest dividends.
General Treatment of
Fund Shareholders
Dividends paid by a Fund from its
ordinary income or from an excess of net short-term capital gain over net long-term
capital loss (together referred to hereafter as ordinary income dividends) are
taxable to shareholders as ordinary income. Distributions made from an excess of net
long-term capital gain over net short-term capital loss (capital gain
dividends) are taxable to shareholders as long-term capital gain, regardless of the
length of time the shareholder has owned Fund shares. Distributions paid by a Fund that
are designated as exempt-interest dividends will not be subject to regular federal income
tax. The tax rate on certain dividend income and long term capital gain applicable to
non-corporate shareholders has been reduced for taxable years beginning prior to January
1, 2011. Under these rules, a certain portion of ordinary income dividends constituting
qualified dividend income when paid by a RIC to non-corporate shareholders may
be taxable to such shareholders at long-term capital gain rates. However, to the extent a
Funds distributions are derived from income on debt securities and short-term
capital gains, such distributions will not constitute qualified dividend
income. Thus, ordinary income dividends paid by the Funds generally will not be
eligible for taxation at the reduced rate.
Any loss upon the sale or exchange of
Fund shares held for six months or less will be treated as long-term capital loss to the
extent of any capital gain dividends received by the shareholder. Distributions in excess
of a Funds earnings and profits will first reduce the shareholders adjusted
tax basis in his shares and any amount in excess of such basis will constitute capital
gains to such shareholder (assuming the shares are held as a capital asset). Long-term
capital gains (
i.e.,
gains from a sale or exchange of capital assets held for more
than one year) are generally taxed at preferential rates to non-corporate taxpayers.
Generally not later than 60 days after the close of its taxable year, each Fund will
provide its shareholders with a written notice designating the amounts of its dividends
paid during the year that qualify as capital gain dividends or exempt-interest dividends,
as applicable, as well as the portion of an exempt-interest dividend that constitutes an
item of tax preference, as discussed below.
Ordinary income and capital gain
dividends are taxable to shareholders even if they are reinvested in additional shares of
a Fund. Distributions by a Fund, whether from ordinary income or capital gains, generally
will not be eligible for the dividends received deduction allowed to corporations under
the Code. If a Fund pays a dividend in January that was declared in the previous October,
November or December to shareholders of record on a specified date in one of such months,
then such dividend will be treated for tax purposes as being paid by the Fund and received
by its shareholders on December 31 of the year in which such dividend was declared.
If the value of assets held by a Fund
declines, the Trustees of a Fund may authorize a reduction in the number of outstanding
shares in shareholders accounts so as to preserve a net asset value of $1.00 per
share. After such a reduction, the basis of eliminated shares would be added to the basis
of shareholders remaining Fund shares, and any shareholders disposing of shares at
that time may recognize a capital loss. Except for the exempt-interest dividends paid by
CMA Tax-Exempt Funds and WCMA Tax-Exempt, dividends, including dividends reinvested in
additional shares of a Fund, will nonetheless be fully taxable, even if the number of
shares in shareholders accounts has been reduced as described above.
A loss realized on a sale or exchange
of shares of a Fund will be disallowed if other shares of the Fund are acquired (whether
through the automatic reinvestment of dividends or otherwise) within a 61-day period
beginning 30 days before and ending 30 days after the date on which the shares are sold or
exchanged. In such a case, the basis of the shares acquired will be adjusted to reflect
the disallowed loss.
Under certain provisions of the Code,
some shareholders may be subject to a withholding tax on ordinary income dividends and
capital gain dividends (backup withholding). Backup withholding may also be
required on distributions paid by WCMA Tax-Exempt or a CMA Tax-Exempt Fund, unless such
Fund reasonably estimates that at least 95% of its distributions during the taxable year
are comprised of exempt-interest dividends. Generally, shareholders subject to backup
withholding will be those for whom no certified taxpayer identification number is on file
with a Fund or who, to a Funds knowledge, have furnished an incorrect number. When
establishing an account, an investor must certify under penalty of perjury that such
number is correct and that the investor is not otherwise subject to backup withholding.
Backup withholding is not an additional tax. Any amount withheld generally may be allowed
as a refund or a credit against a shareholders Federal income tax liability provided
that the required information is timely provided to the IRS.
If a shareholder recognizes a loss
with respect to a Funds shares of $2 million or more for an individual shareholder
or $10 million or more for a corporate shareholder in any single taxable year (or a
greater amount in a combination of taxable years), the shareholder must file a disclosure
statement on Form 8886 with the IRS. Direct shareholders of portfolio securities are in
many cases exempted from this reporting requirement, but under current guidance,
shareholders of a RIC are not exempted. That a loss is reportable under these regulations
does not affect the legal determination of whether the taxpayers treatment of the
loss is proper. Shareholders should consult their tax advisers to determine the
applicability of these regulations in light of their individual circumstances.
Interest received by a Fund may give
rise to withholding and other taxes imposed by foreign countries. Tax conventions between
certain countries and the United States may reduce or eliminate such taxes.
Ordinary income dividends paid to
shareholders who are nonresident aliens or foreign entities will be subject to a 30% U.S.
withholding tax under existing provisions of the Code applicable to foreign individuals
and entities unless a reduced rate of withholding is provided under applicable treaty law.
Nonresident shareholders are urged to consult their own tax advisers concerning
applicability of the United States withholding tax. Dividends derived by a RIC from
short-term capital gains and qualified net interest income (including income from original
issue discount and market discount) and paid to stockholders who are nonresident aliens
and foreign entities, if and to the extent properly designated as interest-related
dividends or short-term capital gain dividends, generally will not be
subject to U.S. withholding tax. Where possible, each Fund intends to make such
designations. However, depending on its circumstances, a Fund may designate all, some or
none of its potentially eligible dividends as interest-related dividends or as short-term
capital gain dividends, and/or treat such dividends, in whole or in part, as ineligible
for this exemption from withholding. In order to qualify for this exemption from
withholding, a non-U.S. shareholder must comply with applicable certification requirements
relating to its non-U.S. status (including, in general, furnishing an IRS Form W-8BEN or
substitute form). In the case of shares held through an intermediary, the intermediary may
withhold even if the Fund designates the payment as an interest-related dividend or
short-term capital gain dividend. Non-U.S. shareholders should contact their
intermediaries with respect to the application of these rules to their accounts. It is not
possible to predict what portion, if any, of a Funds distributions will be
designated as consisting of qualified short-term gain or qualified net interest income
exempt from withholding in the hands of nonresident and foreign shareholders. Unless
extended by Congress, this provision regarding interest-related dividends and short-term
capital gain dividends generally would apply to distributions with respect to only taxable
years of a Fund beginning before January 1, 2008.
Ordinary income and capital gain
dividends paid by the Funds may also be subject to state and local taxes. However, certain
states exempt from state income taxation dividends paid by RICs that are derived from
interest on United States Treasury obligations. State law varies as to whether dividend
income attributable to United States Treasury obligations is exempt from state income tax.
CMA Tax-Exempt Funds,
WCMA Tax-Exempt and Their Shareholders
The CMA Tax-Exempt Funds and WCMA Tax
Exempt intend to qualify to pay exempt-interest dividends as defined in
Section 852(b)(5) of the Code. Under such section if, at the close of each quarter of a
Funds taxable year, at least 50% of the value of its total assets consists of
obligations exempt from Federal income tax (tax-exempt obligations) under
Section 103(a) of the Code (relating generally to obligations of a state or local
governmental unit), the Fund will be qualified to pay exempt-interest dividends to its
shareholders. Exempt-interest dividends are dividends or any part thereof paid by a Fund
which are attributable to interest on tax-exempt obligations and designated as
exempt-interest dividends in a written notice mailed to the Funds shareholders
within 60 days after the close of the Funds taxable year.
Exempt-interest dividends will be
excludable from a shareholders gross income for Federal income tax purposes.
Exempt-interest dividends are included, however, in determining the portion, if any, of a
shareholders social security benefits and railroad retirement benefits subject to
Federal income taxes. Interest on indebtedness incurred or continued to purchase or carry
shares of a RIC paying exempt-interest dividends, such as the CMA Tax-Exempt Funds and
WCMA Tax Exempt, will not be deductible by a shareholder for Federal income tax purposes
to the extent attributable to exempt-interest dividends. Shareholders are advised to
consult their tax advisers with respect to whether exempt-interest dividends retain the
exclusion under Code Section 103(a) if a shareholder would be treated as a
substantial user or related person under Code Section 147(a) with
respect to property financed with the proceeds of an issue of private activity bonds, if
any, held by one of the CMA Tax-Exempt Funds and WCMA Tax Exempt.
All or a portion of the CMA
Tax-Exempt Funds and WCMA Tax Exempts gain from the sale or redemption of
tax-exempt obligations purchased at a market discount will be treated as ordinary income
rather than capital gain. This rule may increase the amount of ordinary income dividends
received by shareholders. Any loss upon the sale or exchange of Fund shares held for six
months or less will be disallowed to the extent of any exempt-interest dividends received
on such shares by a shareholder. In addition, any such loss that is not disallowed under
the rule stated above will be treated as long-term capital loss to the extent of any
capital gain dividends received on such shares by a shareholder.
The Code subjects interest received
on certain otherwise tax-exempt securities to a Federal alternative minimum tax. The
Federal alternative minimum tax applies to interest received on certain private activity
bonds issued after August 7, 1986. Private activity bonds are bonds which, although
tax-exempt, are used for purposes other than those generally performed by governmental
units and which benefit non-governmental entities (
e.g.,
bonds used for industrial
development or housing purposes). Income received on such bonds is classified as an item
of tax preference, which could subject certain investors in such bonds,
including shareholders of a Fund, to a Federal alternative minimum tax. WCMA Tax Exempt
and each CMA Tax-Exempt Fund will purchase such private activity bonds and will report to
shareholders within 60 days after calendar year-end the portion of its dividends declared
during the year which constitutes an item of tax preference for alternative minimum tax
purposes. The Code further provides that corporations are subject to a Federal alternative
minimum tax based, in part, on certain differences between taxable income as adjusted for
other tax preferences and the corporations adjusted current earnings,
which more closely reflect a corporations economic income. Because an
exempt-interest dividend paid by WCMA Tax Exempt or a CMA Tax-Exempt Fund will be included
in adjusted current earnings, a corporate shareholder may be required to pay alternative
minimum tax on exempt-interest dividends paid by such a Fund.
CMA State Funds State
Taxes
Dividends paid by each CMA State Fund
are subject to the tax laws of the specific state in which a shareholder resides. For a
summary discussion of the state tax laws of the State in which the CMA State Funds invest,
please see State Fund Tax Summaries in Part I of each CMA State Funds
Statement of Additional Information.
The Appendices to each CMA State
Funds Statement of Additional Information contain a general and abbreviated summary
of the state tax laws relevant to each CMA State Fund as presently in effect. For the
complete provisions, reference should be made to the applicable state tax laws. The state
tax laws described in the appendices are subject to change by legislative, judicial, or
administrative action either prospectively or retroactively. Shareholders of each CMA
State Fund should consult their tax advisers about other state and local tax consequences
of investment in such CMA State Fund.
The Code provides that every person
required to file a tax return must include for information purposes on such return the
amount of exempt-interest dividends received from all sources (including WCMA Tax-Exempt
or any of the CMA Tax-Exempt Funds) during the taxable year.
Master Feeder
Funds
In the case of a Feeder Fund, such
Fund is entitled to look to the underlying assets of the Master Portfolio in which it has
invested for purposes of satisfying various qualification requirements of the Code
applicable to RICs. Each Master Portfolio is classified as a partnership for U.S. Federal
income tax purposes. If applicable tax provisions should change, then the Board of a
Feeder Fund will determine, in its discretion, the appropriate course of action for the
Feeder Fund. One possible course of action would be to withdraw the Feeder Funds
investments from the Master Portfolio and to retain an investment manager to manage the
Feeder Funds assets in accordance with the investment policies applicable to the
Feeder Fund.
P
ROXY
V
OTING
P
OLICIES AND
P
ROCEDURES
The Board of Trustees of the Funds
has delegated the voting of proxies for the Funds securities to the Manager pursuant
to the Managers proxy voting guidelines. Under these guidelines, the Manager will
vote proxies related to Fund securities in the best interests of the Fund and its
stockholders. From time to time, a vote may present a conflict between the interests of
the Funds stockholders, on the one hand, and those of the Manager, or any affiliated
person of the Fund or the Manager, on the other. In such event, provided that the
Managers Equity Investment Policy Oversight Committee, or a sub-committee thereof
(the Committee) is aware of a real or potential conflict or material
non-routine matter and if the Committee does not reasonably believe it is able to follow
its general voting guidelines (or if the particular proxy matter is not addressed in the
guidelines) and vote impartially, the Committee may retain an independent fiduciary to
advise the Committee on how to vote or to cast votes on behalf of the Managers
clients. If the Manager determines not to retain an independent fiduciary, or does not
desire to follow the advice of such independent fiduciary, the Committee shall determine
how to vote the proxy after consulting with the Managers Portfolio Management Group
and/or the Managers Legal and Compliance Department and concluding that the vote
cast is in its clients best interest notwithstanding the conflict. A copy of the
Funds Proxy Voting Policy and Procedures are attached as Appendix B. Information on
how each Fund voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available without charge, (i) at www.blackrock.com and
(ii) on the Commissions website at http://www.sec.gov.
G
ENERAL
I
NFORMATION
Shareholders are entitled to one vote
for each full share held and fractional votes for fractional shares held and vote in the
election of Trustees and generally on other matters submitted to the vote of shareholders.
In the case of Retirement Reserves and the WCMA Funds, each class represents an interest
in the same assets of the respective Fund and are identical in all respects, except that
each class of shares bears certain expenses related to the distribution of such shares and
have exclusive voting rights with respect to matters relating to such distribution
expenditures. Voting rights are not cumulative, so that the holders of more than 50% of
the shares voting in the election of Trustees can, if they choose to do so, elect all
Trustees of the Fund. No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the Fund except under certain
limited circumstances set forth in the Funds Declaration of Trust, as amended (the
Declaration).
There normally will be no meeting of
shareholders for the purpose of electing Trustees unless and until such time as less than
a majority of the Trustees holding office have been elected by the shareholders, at which
time the Trustees then in office will call a shareholders meeting for the election
of Trustees. Shareholders may cause a meeting of shareholders to be held in accordance
with the terms of the Funds Declaration or by-laws, as the case may be.
Also, each Fund will be required to
call a special meeting of shareholders in accordance with the requirements of the
Investment Company Act to seek approval of new advisory arrangements, of a material
increase in distribution fees or of a change in fundamental policies, objectives or
restrictions. Except as set forth above, the Trustees shall continue to hold office from
year to year and appoint successor Trustees. Each issued and outstanding share is
entitled to participate equally in dividends and distributions declared and in net assets
upon liquidation or dissolution remaining after satisfaction of outstanding liabilities
except for any expenses which may be attributable to only one class, in the case of
Retirement Reserves or the CMA Funds. Shares issued are fully-paid and non-assessable by
each Fund.
The Declaration establishing each
Fund, a copy of which, together with all amendments thereto, is on file in the office of
the Secretary of the Commonwealth of Massachusetts. The Declaration provides that the name
of each Fund refers to the Trustees under the Declaration collectively as Trustees, but
not as individuals or personally, and no Trustee, shareholder, officer, employee or agent
of the Fund shall be held to any personal liability, nor shall resort be had to their
property for the satisfaction of any obligation or claim of the Fund but the Trust
Property (as defined in the Declaration) only shall be liable.
Additional Information
Under a separate agreement, BlackRock
has granted the Funds, as applicable, the right to use the BlackRock name and
has reserved the right to withdraw its consent to the use of such name by a Fund if the
Fund ceases to retain BlackRock as investment adviser or to grant the use of such name to
any other company.
See Part I, Section VIII
General Information of each Funds Statement of Additional Information
for other general information about your Fund.
A
PPENDIX
A
D
ESCRIPTION OF
D
EBT
R
ATINGS
Commercial Paper and
Bank Money Instruments
Commercial paper with the greatest
capacity for timely payment is rated A by Standard & Poors
(S&P). Issues within this category are further redefined with designations
1, 2 and 3 to indicate the relative degree of safety; A-1 or A-1+ the highest of the
three, indicates the degree of safety regarding timely payment is strong; A-2 indicates
that the capacity for timely repayment is satisfactory; A-3 indicates that capacity for
timely payment is adequate, however, they are more vulnerable to the adverse changes of
circumstances than obligations rated A-1 or A-2.
Moodys Investors Service, Inc.
(Moodys) employs the designations of Prime-1, Prime-2 and Prime-3 to
indicate the relative capacity of the rated issuers to repay punctually. Prime-1 issues
have a superior capacity for repayment. Prime-2 issues have a strong capacity for timely
repayment, but to a lesser degree than Prime-1, Prime-3 issues have an acceptable capacity
for repayment.
Fitch Ratings (Fitch)
employs the rating F-1 or F-1+ to indicate issues regarded as having the strongest
capacity for timely payment. The rating F-2 indicates a satisfactory capacity for timely
payment. The rating F-3 indicates an adequate capacity for timely payment.
Corporate Bonds
Bonds rated AAA have the highest
rating assigned by S&P to a debt obligation. Capacity to pay interest and repay
principal is extremely strong. Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the highest rated issues only in a small degree.
Bonds rated Aaa by Moodys are
judged to be of the best quality. Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. Bonds rated Aa are judged to be of
high quality by all standards. They are rated lower than the best bonds because margins of
protection may not be as large or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities. Moodys applies numerical modifiers, 1, 2 and
3 in each generic rating classification from Aa through Caa in its corporate bond rating
system. The modifier 1 indicates that the obligation ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.
Bonds rated AAA by Fitch are
considered to be investment grade and of the highest credit quality. The obligor has an
exceptionally strong ability to pay interest and repay principal, which is unlikely to be
affected by reasonably foreseeable events. Bonds rated AA are considered to be investment
grade and of very high credit quality. The obligors ability to pay interest and
repay principal is very strong, although not quite as strong as bonds rated AAA.
Ratings of Municipal
Notes and Short-term Tax-Exempt Commercial Paper
Commercial paper with the greatest
capacity for timely payment is rated A by Standard & Poors. Issues within
this category are further redefined with designations 1, 2 and 3 to indicate the relative
degree of safety; A-1 indicates the obligors capacity to meet its financial
obligation is strong; issues that possess extremely strong safety characteristics will be
given an A-1+ designation; A-2 indicates that the obligors capacity to meet its
financial obligation is satisfactory. A Standard & Poors rating with
respect to certain municipal note issues with a maturity of less than three years
reflects the liquidity factors and market access risks unique to notes. SP-1, the highest
note rating, indicates a strong capacity to pay principal and interest. Issues that
possess a very strong capacity to pay debt service will be given an SP-1+ designation.
SP-2,
the second highest note rating,
indicates a satisfactory capacity to pay principal and interest, with some vulnerability
to adverse financial and economic changes over the term of the notes.
Moodys employs the designations
of Prime-1, Prime-2 and Prime-3 with respect to commercial paper to indicate the relative
capacity of the rated issuers (or related supporting institutions) to repay punctually.
Prime-l issues have a superior capacity for repayment. Prime-2 issues have a strong
capacity for repayment, but to a lesser degree than Prime-1. Moodys highest rating
for short-term notes and VRDOs is MIG1/VMIG1; MIG-1/VMIG-1 denotes superior credit
quality, enjoying highly reliable liquidity support or
demonstrated broad-based access to the market for refinancing; MIG2/VMIG2
denotes strong credit quality with margins of protection that are ample
although not so large as MIG1/VMIG1.
Fitch employs the rating F-1+ to
indicate short-term debt issues regarded as having the strongest degree of assurance
determined by established cash flow for timely payment. The rating F-1 reflects an
assurance of timely payment only slightly less in degree than issues rated F-1+. The
rating F-2 indicates a satisfactory degree of assurance for timely payment, although the
margin of safety is not as indicated by the F-1+ and F-1 categories.
Ratings of Municipal
Bonds
Bonds rated AAA have the highest
rating assigned by Standard & Poors to a debt obligation. The
obligors capacity to meet its financial obligation is extremely strong. Bonds rated
AA differ from the highest rated obligations only in a small degree. The obligors
capacity to meet its financial commitment on the obligation is very strong. A
Standard & Poors municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This assessment may
take into consideration obligors such as guarantors and insurers of lessees.
Bonds rated Aaa by Moodys are
judged to be of the best quality. Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. Bonds rated Aa are judged to be of
high quality by all standards. They are rated lower than the best bonds because the
margins of protection may not be as large or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities. Moodys applies the numerical modifier
1 to the classifications Aa through Caa to indicate that Moodys believes the issue
possesses the strongest investment attributes in its rating category. Bonds for which the
security depends upon the completion of some act or the fulfillment of some condition are
rated conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operating experience,
(c) rentals that begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of condition.
Bonds rated AAA by Fitch denote the
lowest expectation of credit risk. Bonds rated AA denote a very low expectation of credit
risk. Both ratings indicate a strong capacity for timely payment of financial commitments.
This capacity is not significantly vulnerable to reasonably foreseeable events. The
ratings take into consideration special features of the issue, its relationship to other
obligations of the issuer, the current and prospective financial condition and operative
performance of the issuer and of any guarantor, as well as the economic and political
environment that might affect the issuers future financial strength and credit
quality. Bonds that have the same rating are of similar but not necessarily identical
credit quality since the rating categories do not fully reflect small differences in the
degrees of credit risk.
Appendix B
Proxy Voting
Policies
For The
BlackRock-Advised Funds
June, 2008
Table of Contents
|
Page
|
Introduction
|
|
1
|
|
|
|
Proxy Voting Policies
|
|
2
|
|
|
|
Boards of Directors
|
|
2
|
|
|
|
Auditors
|
|
2
|
|
|
|
Compensation and Benefits
|
|
2
|
|
|
|
Capital Structure
|
|
2
|
|
|
|
Corporate Charter and By-Laws
|
|
2
|
|
|
|
Corporate Meetings
|
|
2
|
|
|
|
Investment Companies
|
|
2
|
|
|
|
Environmental and Social Issues
|
|
3
|
|
|
|
Reports to the Board
|
|
3
|
|
|
|
Introduction
The
Trustees/Directors (Directors) of the BlackRock-Advised Funds (the
Funds) have the responsibility for voting proxies relating to portfolio
securities of the Funds, and have determined that it is in the best interests of the Funds
and their shareholders to delegate that responsibility to BlackRock Advisors, LLC and its
affiliated U.S. registered investment advisers (BlackRock), the investment
adviser to the Funds, as part of BlackRocks authority to manage, acquire and dispose
of account assets. The Directors hereby direct BlackRock to vote such proxies in
accordance with this Policy, and any proxy voting guidelines that the Adviser determines
are appropriate and in the best interests of the Funds shareholders and which are
consistent with the principles outlined in this Policy. The Directors have authorized
BlackRock to utilize an unaffiliated third-party as its agent to vote portfolio proxies in
accordance with this Policy and to maintain records of such portfolio proxy voting.
When
BlackRock votes proxies for an advisory client that has delegated to BlackRock proxy
voting authority, BlackRock acts as the clients agent. Under the Investment Advisers
Act of 1940 (the Advisers Act), an investment adviser is a fiduciary that owes
each of its clients a duty of care and loyalty with respect to all services the adviser
undertakes on the clients behalf, including proxy voting. BlackRock is therefore
subject to a fiduciary duty to vote proxies in a manner BlackRock believes is consistent
with the clients best interests.(1) When voting proxies for the Funds,
BlackRocks primary objective is to make voting decisions solely in the best
interests of the Funds shareholders. In fulfilling its obligations to shareholders,
BlackRock will seek to act in a manner that it believes is most likely to enhance the
economic value of the underlying securities held in client accounts.
(2)
It is
imperative that BlackRock considers the interests of Fund shareholders, and not the
interests of BlackRock, when voting proxies and that real (or perceived) material
conflicts that may arise between BlackRocks interest and those of BlackRocks
clients are properly addressed and resolved.
Advisers
Act Rule 206(4)-6 was adopted by the SEC in 2003 and requires, among other things, that an
investment adviser that exercises voting authority over clients proxy voting adopt
policies and procedures reasonably designed to ensure that the adviser votes proxies in
the best interests of clients, discloses to its clients information about those policies
and procedures and also discloses to clients how they may obtain information on how the
adviser has voted their proxies.
BlackRock
has adopted separate but substantially similar guidelines and procedures that are
consistent with the principles of this Policy. BlackRocks Equity Investment Policy
Oversight Committee, or a sub-committee thereof (the Committee), addresses
proxy voting issues on behalf of BlackRock and its clients, including the Funds. The
Committee is comprised of senior members of BlackRocks Portfolio Management and
Administration Groups and is advised by BlackRocks Legal and Compliance Department.
1
Letter from Harvey L. Pitt, Chairman, SEC, to John P.M. Higgins, President, Ram
Trust Services (February 12, 2002) (Section 206 of the Investment Advisers Act
imposes a fiduciary responsibility to vote proxies fairly and in the best
interests of clients); SEC Release No. IA-2106 (February 3, 2003).
2
Other considerations, such as social, labor, environmental or other policies,
may be of interest to particular clients. While BlackRock is cognizant of the
importance of such considerations, when voting proxies it will generally take
such matters into account only to the extent that they have a direct bearing on
the economic value of the underlying securities. To the extent that a BlackRock
client, such as the Funds, desires to pursue a particular social, labor,
environmental or other agenda through the proxy votes made for its securities
held through BlackRock as investment adviser, BlackRock encourages the client to
consider retaining direct proxy voting authority or to appoint independently a
special proxy voting fiduciary other than BlackRock.
Proxy
Voting Policies
A. Boards
of Directors
These
proposals concern those issues submitted to shareholders relating to the composition of
the board of directors of companies other than investment companies. As a general matter,
the Funds believe that a companys board of directors (rather than shareholders) is
most likely to have access to important, nonpublic information regarding a companys
business and prospects, and is therefore best-positioned to set corporate policy and
oversee management. The Funds therefore believe that the foundation of good corporate
governance is the election of qualified, independent corporate directors who are likely
to diligently represent the interests of shareholders and oversee management of the
corporation in a manner that will seek to maximize shareholder value over time. In
individual cases, consideration may be given to a director nominees history of
representing shareholder interests as a director of other companies, or other factors to
the extent deemed relevant by the Committee.
B. Auditors
These
proposals concern those issues submitted to shareholders related to the selection of
auditors. As a general matter, the Funds believe that corporate auditors have a
responsibility to represent the interests of shareholders and provide an independent view
on the propriety of financial reporting decisions of corporate management. While the
Funds anticipate that the Committee will generally defer to a corporations choice
of auditor, in individual cases, consideration may be given to an auditors history
of representing shareholder interests as auditor of other companies, to the extent deemed
relevant.
C. Compensation
and Benefits
These
proposals concern those issues submitted to shareholders related to management
compensation and employee benefits. As a general matter, the Funds favor disclosure of a
companys compensation and benefit policies and oppose excessive compensation, but
believe that compensation matters are normally best determined by a corporations
board of directors, rather than shareholders. Proposals to micro-manage a
companys compensation practices or to set arbitrary restrictions on compensation or
benefits should therefore generally not be supported by the Committee.
D. Capital
Structure
These
proposals relate to various requests, principally from management, for approval of
amendments that would alter the capital structure of a company, such as an increase in
authorized shares. As a general matter, the Funds expect that the Committee will support
requests that it believes enhance the rights of common shareholders and oppose requests
that appear to be unreasonably dilutive.
E. Corporate
Charter and By-Laws
These
proposals relate to various requests for approval of amendments to a corporations
charter or by-laws, principally for the purpose of adopting or redeeming poison
pills. As a general matter, the Funds expect that the Committee will oppose poison
pill provisions unless, after consultation with the portfolio managers, it is determined
that supporting the poison pill is in the best interest of shareholders.
F. Corporate
Meetings
These
are routine proposals relating to various requests regarding the formalities of corporate
meetings. As a general matter, the Funds expect that the Committee will support company
management except where the proposals are substantially duplicative or serve no
legitimate business purpose.
G. Investment
Companies
These
proposals relate to proxy issues that are associated solely with holdings of shares of
investment companies, including, but not limited to, investment companies for which
BlackRock provides investment advisory,
administrative and/or other
services. As with other types of companies, the Funds believe that an investment companys
board of directors (rather than its shareholders) is best-positioned to set fund policy
and oversee management. However, the Funds oppose granting boards of directors authority
over certain matters, such as changes to a funds investment objective, that the
Investment Company Act of 1940 envisions will be approved directly by shareholders.
H. Environmental
and Social Issues
These
are shareholder proposals to limit corporate conduct in some manner that relates to the
shareholders environmental or social concerns. The Funds generally believe that
annual shareholder meetings are inappropriate forums for the discussion of larger social
issues, and oppose shareholder resolutions micro-managing corporate conduct
or requesting release of information that would not help a shareholder evaluate an
investment in the corporation as an economic matter. While the Funds are generally
supportive of proposals to require corporate disclosure of matters that seem relevant and
material to the economic interests of shareholders, the Funds generally are not
supportive of proposals to require disclosure of corporate matters for other purposes.
Reports
to the Board
BlackRock
will report to the Directors on proxy votes it has made on behalf of the Funds at least
annually.
PART C. OTHER
INFORMATION
Item 23.
Exhibits.
Exhibit
Number
|
|
Description
|
1
|
(a)
|
|
Declaration
of Trust of the Registrant dated October 24, 1990.(a)
|
|
(b)
|
|
Certification
of Amendment dated April 16, 2002.(g)
|
|
(c)
|
|
Certification
of Amendment dated April 11, 2002.(g)
|
|
(d)
|
|
Certification of Amendment dated February 28, 2008.*
|
2
|
|
|
By-Laws of
the Registrant, Revised and Effective November 10, 2004.(l)
|
3
|
|
|
Portions of
the Declaration of Trust and By-Laws of the Registrant defining the rights of
holders of shares of the Registrant.(b)
|
4
|
|
|
None.
|
5
|
|
|
Unified
Distribution Agreement between the Registrant and Merrill Lynch, Pierce,
Fenner & Smith Incorporated (Merrill Lynch).(k)
|
6
|
|
|
None.
|
7
|
|
|
Form of
Custody Agreement between the Registrant and State Street Bank and Trust
Company.(i)
|
8
|
(a)
|
|
Form of
Administration Agreement between the Registrant and BlackRock Advisors, LLC.(f)
|
|
(b)
|
|
Form of Amended and Restated
Unified Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing
Agency Agreement between the Registrant and Financial Data Services, Inc.(f)
|
|
(c)
|
|
Form of Cash
Management Account Agreement.(h)
|
|
(d)
|
|
Form of
Administrative Services Agreement between the Registrant and State Street
Bank and Trust Company.(e)
|
9
|
|
|
Opinion and
Consent of Brown & Wood LLP, counsel to the Registrant.(c)
|
10
|
|
|
Consent of
Deloitte & Touche LLP, independent registered public accounting firm for
the Registrant.*
|
11
|
|
|
None.
|
12
|
|
|
None.
|
13
|
|
|
Form of
Amended and Restated Unified Distribution and Shareholder Servicing Plan of the Registrant.(k)
|
14
|
|
|
None.
|
15
|
|
|
Code of
Ethics.(d)
|
16
|
|
|
Power of
Attorney.(j)
|
(a)
|
|
Previously
filed pursuant to the Electronic Data Gathering, Analysis and Retrieval
(EDGAR) phase-in requirements on July 28, 1995 as an Exhibit to
Post-Effective Amendment No. 5 to the Registrants Registration Statement
under the Securities Act of 1933, as amended File No. 33-37439 (the Registration Statement).
|
(b)
|
|
Reference is
made to Article II, Section 2.3 and Articles III, V, VI, VIII, IX, X and XI
of the Registrants Declaration of Trust, filed as Exhibits 1(a)-(d) to the Registration Statement; and to
Articles I, V and VI of the Registrants By-Laws, filed
as Exhibit 2 to the Registration
Statement.
|
(c)
|
|
Refiled on July 27, 1999 as an Exhibit to
Post-Effective Amendment No. 10 to the Registration Statement
pursuant to EDGAR requirements
|
(d)
|
|
Incorporated
by reference to Exhibit (r) to Post-Effective Amendment No. 15 to the
Registration Statement on Form N-2 of BlackRock Senior Floating Rate Fund,
Inc. (File No. 333-39837), filed on November 13, 2006.
|
(e)
|
|
Incorporated
by reference to Exhibit 8(d) to Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A of Merrill Lynch Focus Twenty Fund, Inc.
(File No. 333-89775), filed on March 20, 2001.
|
(f)
|
|
Filed on July 27, 2007 as an Exhibit to
Post-Effective Amendment No. 23 to the Registration Statement.
|
(g)
|
|
Filed on July 29, 2002 as an Exhibit to
Post-Effective Amendment No. 13 to the Registration Statement.
|
(h)
|
|
Incorporated
by reference to Exhibit 8(c) to Post-Effective Amendment No. 30 to the
Registration Statement on Form N-1A of CMA Tax-Exempt Fund (File No.
2-69877), filed on February
10, 2003.
|
(i)
|
|
Incorporated
by reference to Exhibit 7 to Post-Effective Amendment No. 10 to the
Registration Statement on Form N-1A of Merrill Lynch Maryland Municipal Bond
Fund of Merrill Lynch Multi-State Municipal Series Trust (File No. 33-49873),
filed on October
30, 2001.
|
(j)
|
|
Incorporated
by reference to Exhibit 16 to Post-Effective Amendment No. 29 to the
Registration Statement on Form N-1A of Merrill Lynch U.S.A. Government Reserves (File No. 2-78702),
filed on December 21, 2007.
|
(k)
|
|
Incorporated by reference as an Exhibit to Post-Effective Amendment No. 37 to the Registration Statement on Form N-1A of CMA Money Fund (File No. 2-59311), filed on July 23, 2003.
|
(l)
|
|
Filed on July 25, 2005 as an Exhibit to
Post-Effective Amendment No. 21 to the Registration Statement.
|
*
|
|
Filed
herewith.
|
Item 24.
Persons
Controlled by or Under Common Control with Registrant.
The Registrant is a controlling
person of Master Treasury LLC. It is not under common control with any other person. As of
July 7, 2008, the Fund owned 66.40% and WCMA Treasury Fund owned 33.60% of the Master Treasury LLC. The Master Treasury LLC is a Delaware limited liability company.
Item 25.
Indemnification.
Reference is made to Section 5.3 of
the Registrants Declaration of Trust and Section 7 of the Unified Distribution Agreement.
Section 5.3 of the Registrants
Declaration of Trust provides as follows:
The Trust shall indemnify each of
its Trustees, officers, employees and agents (including persons who serve at its request
as directors, officers or trustees of another organization in which it has any interest
as a shareholder, creditor or otherwise) against all liabilities and expenses (including
amounts paid in satisfaction of judgments, in compromise, as fines and penalties, and as
counsel fees) reasonably incurred by him in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal, in which he may be
involved or with which he may be threatened, while in office or thereafter, by reason of
his being or having been such a trustee, officer, employee or agent, except with respect
to any matter as to which he shall have been adjudicated to have acted in bad faith,
willful misfeasance, gross negligence or reckless disregard of his duties; provided,
however, that as to any matter disposed of by a compromise payment by such person,
pursuant to a consent decree or otherwise, no indemnification either for said payment or
for any other expenses shall be provided unless the Trust shall have received a written
opinion from independent legal counsel approved by the Trustees to the effect that if
either the matter of willful misfeasance, gross negligence or reckless disregard of duty,
or the matter of good faith and reasonable belief as to the best interests of the Trust,
had been adjudicated, it would have been adjudicated in favor of such person. The rights
accruing to any person under these provisions shall not exclude any other right to which
he may be lawfully entitled; provided that no person may satisfy any right of indemnity
or reimbursement granted herein or in Section 5.1 or to which he may be otherwise
entitled except out of the property of the Trust, and no Shareholder shall be personally
liable to any person with respect to any claim for indemnity or reimbursement or
otherwise. The Trustees may make advance payments in connection with indemnification
under this Section 5.3, provided that the indemnified person shall have given a written
undertaking to reimburse the Trust in the event it is subsequently determined that he is
not entitled to such indemnification.
The Registrants Amended and
Restated By-Laws provide that insofar as the conditional advancing of indemnification
moneys pursuant to Section 5.3 of the Declaration of Trust for actions based upon the
Investment Company Act of 1940, as amended (the Investment Company Act) may be
concerned, such payments will be made only on the following conditions: (i) the advances
must be limited to amounts used, or to be used, for the preparation or presentation of a
defense to the action, including costs connected with the preparation of a settlement;
(ii) advances may be made only upon receipt of a written promise by, or on behalf of, the
recipient to repay that amount of the advance which exceeds the amount to which it is
ultimately determined he is entitled to receive from the Registrant by reason of
indemnification; and (iii) (a) such promise must be secured by a surety bond, other
suitable insurance or an equivalent form of security which assures that any repayments
may be obtained by the Registrant without delay or litigation, which bond, insurance or
other form of security must be provided by the recipient of the advance, or (b) a
majority of a quorum of the Registrants disinterested, non-party Trustees, or an
independent legal counsel in a written opinion, shall determine, based upon a review of
readily available facts, that the recipient of the advance ultimately will be found
entitled to indemnification.
In Section 7 of the Unified
Distribution Agreement relating to the securities being offered hereby, the Registrant
agrees to indemnify the Distributor and each person, if any, who controls the Distributor
within the meaning of the Securities Act of 1933 (the Securities Act), against certain
types of civil liabilities arising in connection with the Registration Statement or
Prospectus.
Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to Trustees, officers and
controlling persons of the Registrant and the principal underwriter pursuant to the
foregoing provisions or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer or controlling person of
the Registrant and the principal underwriter in connection with the successful defense of
any action, suit or proceeding) is asserted by such Trustee, officer or controlling
person or the principal underwriter in connection with the shares being registered, the
Registrant will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Securities Act
and will be governed by the final adjudication of such issue.
Item 26.
Business and
Other Connections of the Manager.
(a) BlackRock Advisors, LLC is an
indirect wholly owned subsidiary of BlackRock, Inc. BlackRock Advisors, LLC was organized
in 1994 for the purpose of providing advisory services to investment companies. The
information required by this Item 26 about officers and directors of BlackRock Advisors,
LLC, together with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by such officers and directors during the
past two years, is incorporated by reference to Schedules A and D of Form ADV, filed by
BlackRock Advisors, LLC pursuant to the Investment Advisers Act of 1940 (SEC File No.
801-47710).
(b) BlackRock Institutional
Management Corporation (BIMC) is an indirect wholly owned subsidiary of BlackRock, Inc.
BIMC currently offers investment advisory services to institutional investors such as
pension and profit-sharing plans or trusts, insurance companies and banks. The list
required by this Item 26 of officers and directors of BIMC, together with information as
to any other business, profession, vocation or employment of a substantial nature engaged
in by such officers and directors during the past two years, is incorporated by reference
to Schedules A and D of Form ADV, filed by BIMC pursuant to the Investment Advisers Act
of 1940 (SEC File No. 801-48433).
Item 27.
Principal
Underwriters.
(a) Merrill Lynch acts as the
principal underwriter for each of the following open-end investment companies, including the Registrant: CMA Treasury Fund,
CMA Tax-Exempt Fund, eleven series of CMA Multi-State Municipal Series Trust, CMA
Government Securities Fund, CMA Money Fund, WCMA Money Fund, WCMA Government Securities Fund, WCMA
Tax-Exempt Fund and WCMA Treasury Fund, and also acted as the principal underwriter for a
number of closed-end registered investment companies advised by BlackRock Advisors, LLC,
including: BlackRock Apex Municipal Fund, Inc., BlackRock Enhanced Capital and Income
Fund, Inc., BlackRock Corporate High Yield Fund, Inc., BlackRock Corporate High Yield
Fund III, Inc., BlackRock Corporate High Yield Fund V, Inc., BlackRock Corporate High
Yield Fund VI, Inc., BlackRock Debt Strategies Fund, Inc., BlackRock Enhanced Equity
Yield Fund, Inc., BlackRock Enhanced Equity Yield & Premium Fund, Inc., Master Senior
Floating Rate LLC, BlackRock MuniAssets Fund, Inc., BlackRock Muni Intermediate Duration
Fund, Inc., BlackRock Muni New York Intermediate Duration Fund, Inc., BlackRock
MuniEnhanced Fund, Inc., BlackRock MuniHoldings Fund, Inc., BlackRock MuniHoldings Fund
II, Inc., BlackRock MuniHoldings Insured Fund, Inc., BlackRock MuniHoldings California
Insured Fund, Inc., BlackRock MuniHoldings Florida Insured Fund, BlackRock MuniHoldings
New Jersey Insured Fund, Inc., BlackRock MuniHoldings New York Insured Fund, Inc.,
BlackRock MuniVest Fund, Inc., BlackRock MuniVest Fund II, Inc., BlackRock MuniYield
Arizona Fund, Inc., BlackRock MuniYield California Insured Fund, Inc., BlackRock
MuniYield Florida Fund, BlackRock MuniYield Florida Insured Fund, BlackRock MuniYield
Fund, Inc., BlackRock MuniYield Insured Fund, Inc., BlackRock MuniYield Michigan Insured
Fund, Inc., BlackRock MuniYield Michigan Insured Fund II, Inc., BlackRock MuniYield New
Jersey Fund, Inc., BlackRock MuniYield New Jersey Insured Fund, Inc., BlackRock MuniYield
New York Insured Fund, Inc., BlackRock MuniYield Pennsylvania Insured Fund, BlackRock
MuniYield Quality Fund, Inc., BlackRock MuniYield Quality Fund II, Inc., BlackRock
Preferred Income Strategies Fund, Inc., BlackRock Preferred and Corporate Income
Strategies Fund, Inc., BlackRock Senior High Income Portfolio, Inc., Defined Opportunity Credit Trust and EcoSolutions Investment Trust. Merrill Lynch acts as the depositor of the following unit investment
trusts: The Corporate Income Fund, Municipal Investment Trust Fund, The ML Trust for
Government Guaranteed Securities and The Government Securities Income Fund.
(b) Set forth below is information
concerning each director and executive officer of Merrill Lynch. The principal business
address of each such person is World Financial Center, North Tower, 250 Vesey Street, New
York, New York 10080.
Name
|
Position(s)
and Office(s)
with Merrill Lynch
|
|
Position(s)
and Office(s)
with Registrant
|
|
|
|
|
Robert J. McCann
|
Director, Chairman of the Board and Chief Executive Officer
|
|
None
|
|
|
|
|
Candace E. Browning-Platt
|
Director and Senior Vice President
|
|
None
|
|
|
|
|
Gregory J. Fleming
|
Director and Executive Vice President
|
|
None
|
|
|
|
|
Carlos M. Morales
|
Director and Chief Legal Officer
|
|
None
|
Item 28.
Location of
Accounts and Records.
All accounts, books and other
documents required to be maintained by Section 31(a) of the Investment Company Act and
the rules thereunder are maintained at the offices of:
|
(a)
Registrant, 100 Bellevue Parkway, Wilmington, Delaware 19809.
|
|
(b)
Merrill Lynch, Pierce, Fenner & Smith Incorporated, World Financial Center, North
Tower, 250 Vesey Street, New York, New York 10080 and 1700 Merrill Lynch Drive Pennington, New Jersey 08534 (records relating to its functions as distributor).
|
|
(c)
BlackRock Advisors, LLC, 100 Bellevue Parkway, Wilmington, Delaware 19809 (records
relating to its functions as investment adviser).
|
|
(d)
BlackRock Institutional Management Corporation, 100 Bellevue Parkway, Wilmington,
Delaware 19809 (records relating to its functions as sub-adviser).
|
|
(e)
Financial Data Services, Inc., 4800 Deer Lake Drive, Jacksonville, Florida 32246-6484
(records relating to its functions as transfer agent)
|
Item 29.
Management
Services.
Other than as set forth under the
caption Management of the FundsBlackRock Advisors, LLC in the Prospectus
constituting Part A of the Registration Statement and under Part I Management and
Advisory Arrangements and Part II Management and Other Service Arrangements in the
Statement of Additional Information constituting Part B of the Registration Statement for
the Registrant, the Registrant is not a party to any management-related service contract.
Item 30.
Undertakings.
SIGNATURES
Pursuant to the requirements of the
Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies
that it meets all the requirements for the effectiveness of this Post-Effective Amendment
to the Registration Statement pursuant to Rule 485(b) under the Securities Act and has
duly caused this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Township of Plainsboro, and the State of New Jersey, on
July 25, 2008.
|
CMA
®
T
REASURY
F
UND
(Registrant)
|
|
|
|
|
By:
|
/s/ D
ONALD
C. B
URKE
|
|
|
(Donald C.
Burke, President and Chief Executive Officer)
|
Pursuant to the requirements of the
Securities Act, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
/s/ D
ONALD
C. B
URKE
(Donald
C. Burke)
|
|
President and Chief Executive Officer
(Principal Executive Officer)
|
|
July 25, 2008
|
|
|
|
|
|
/s/
N
EAL
J. A
NDREWS
(Neal
J. Andrews)
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
July 25, 2008
|
|
|
|
|
|
D
AVID
O. B
EIM
*
(David
O. Beim)
|
|
Trustee
|
|
|
|
|
|
|
|
R
ONALD
W. F
ORBES
*
(Ronald
W. Forbes)
|
|
Trustee
|
|
|
|
|
|
|
|
D
R.
M
ATINA
H
ORNER
*
(Dr.
Matina Horner)
|
|
Trustee
|
|
|
|
|
|
|
|
R
ODNEY
D. J
OHNSON
*
(Rodney
D. Johnson)
|
|
Trustee
|
|
|
|
|
|
|
|
H
ERBERT
I. L
ONDON
*
(Herbert
I. London)
|
|
Trustee
|
|
|
|
|
|
|
|
C
YNTHIA
A. M
ONTGOMERY
*
(Cynthia
A. Montgomery)
|
|
Trustee
|
|
|
|
|
|
|
|
J
OSEPH
P. P
LATT,
J
R.
*
(Joseph
P. Platt, Jr.)
|
|
Trustee
|
|
|
|
|
|
|
|
R
OBERT
C. R
OBB
, J
R.
*
(Robert
C. Robb, Jr.)
|
|
Trustee
|
|
|
|
|
|
|
|
T
OBY
R
OSENBLATT
*
(Toby
Rosenblatt)
|
|
Trustee
|
|
|
|
|
|
|
|
K
ENNETH
L. U
RISH
*
(Kenneth
L. Urish)
|
|
Trustee
|
|
|
|
|
|
|
|
F
REDERICK
W. W
INTER
*
(Frederick
W. Winter)
|
|
Trustee
|
|
|
|
|
|
|
|
R
ICHARD
S. D
AVIS
*
(Richard
S. Davis)
|
|
Trustee
|
|
|
|
|
|
|
|
H
ENRY
G
ABBAY
*
(Henry
Gabbay)
|
|
Trustee
|
|
|
|
|
|
|
|
*By: /s/ D
ONALD
C. B
URKE
(Donald
C. Burke, Attorney-In-Fact)
|
|
|
|
July 25, 2008
|
SIGNATURES
Master Treasury
LLC has duly caused this Registration Statement of CMA Treasury Fund to be
signed on its behalf by the undersigned, thereto duly authorized, in the Township
of Plainsboro, and State of New Jersey, on the 25th day of July, 2008.
M
ASTER
T
REASURY
LLC
(Registrant)
|
|
|
By:
|
|
/s/ D
ONALD
C.
B
URKE
|
|
|
(Donald C.
Burke, President and
Chief Executive Officer)
|
Pursuant to
the requirements of the Securities Act of 1933, this Registration Statement has
been signed below by the following persons in the capacities and on the date
indicated.
Signature
|
|
Title
|
|
Date
|
/s/ D
ONALD
C. B
URKE
(Donald C. Burke)
|
|
President and Chief
Executive Officer
(Principal Executive Officer)
|
|
July 25, 2008
|
|
|
|
/s/ N
EAL
J. A
NDREWS
(Neal J. Andrews)
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
July 25, 2008
|
|
|
|
D
AVID
O. B
EIM
*
(David O. Beim)
|
|
Director
|
|
|
|
|
|
R
ONALD
W. F
ORBES
*
(Ronald W. Forbes)
|
|
Director
|
|
|
|
|
|
D
R.
M
ATINA
H
ORNER
*
(Dr. Matina Horner)
|
|
Director
|
|
|
|
|
|
R
ODNEY
D. J
OHNSON
*
(Rodney D. Johnson)
|
|
Director
|
|
|
|
|
|
H
ERBERT
I. L
ONDON
*
(Herbert I. London)
|
|
Director
|
|
|
|
|
|
|
|
C
YNTHIA
A. M
ONTGOMERY
*
(Cynthia A. Montgomery)
|
|
Director
|
|
|
|
|
|
|
|
J
OSEPH
P. P
LATT,
J
R.
*
(Joesph P. Platt, Jr.)
|
|
Director
|
|
|
|
|
|
|
|
R
OBERT
C. R
OBB
, J
R.
*
(Robert C. Robb, Jr.)
|
|
Director
|
|
|
|
|
|
|
|
T
OBY
R
OSENBLATT
*
(Toby Rosenblatt)
|
|
Director
|
|
|
|
|
|
|
|
K
ENNETH
L. U
RISH
*
(Kenneth L. Urish)
|
|
Director
|
|
|
|
|
|
|
|
F
REDERICK
W.
W
INTER
*
(Frederick W. Winter)
|
|
Director
|
|
|
|
|
|
|
|
R
ICHARD
S. D
AVIS
*
(Richard S. Davis)
|
|
Director
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H
ENRY
G
ABBAY
*
(Henry Gabbay)
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Director
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*By:
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/s/ D
ONALD
C. B
URKE
(Donald C. Burke, Attorney-in-Fact)
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July
25,
2008
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C-8
EXHIBIT INDEX
Exhibit
Number
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Description
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1(d)
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Certification of Amendment dated February 28, 2008.
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10
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Consent
of Deloitte & Touche LLP, independent registered public accounting firm for the
Registrant.
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