As filed with the Securities and Exchange Commission on July 26, 2011
Securities Act File No. 033-37439
Investment Company Act File No. 811-06196
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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x
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Pre-Effective Amendment No.
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¨
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Post-Effective Amendment No. 27
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x
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and/or
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REGISTRATION STATEMENT UNDER THE
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INVESTMENT COMPANY ACT OF 1940
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x
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Amendment No. 29
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x
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(Check appropriate box or boxes)
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BIF TREASURY FUND
(Exact Name of Registrant as Specified in Charter)
100 Bellevue Parkway, Wilmington, DE 19809
United States of America
(Address of Principal Executive Offices)
Registrants Telephone Number,
including Area Code: (800) 441-7762
John M. Perlowski
BIF Treasury Fund
55 East 52nd Street
New York, New York 10055
United States of America
(Name and Address of Agent for Service)
Copies to:
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Counsel for the Fund:
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Ira P. Shapiro, Esq.
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Laurin Blumenthal Kleiman, Esq.
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BlackRock Advisors, LLC
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Sidley Austin LLP
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55 East 52nd Street
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787 Seventh Avenue
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New York, New York 10055
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New York, New York 10019-6018
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It is proposed that this filing will become effective
(check appropriate box)
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x
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Immediately upon filing pursuant to paragraph (b)
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¨
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On (date) pursuant to paragraph (b)
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¨
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60 days after filing pursuant to paragraph (a)(1)
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On (date) pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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¨
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On (date) pursuant to paragraph (a)(2) of Rule 485
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If appropriate, check the following box:
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¨
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This post-effective amendment designates a new effective date for a previously filed post-effective amendment.
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Title of Securities Being Registered: Shares of beneficial
interest, par value $.10 per share.
Master Treasury LLC also has executed this Registration Statement.
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July 26,
2011
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Prospectus
BIF Government Securities Fund
BIF Money Fund
BIF Treasury Fund
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Fund
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Ticker
Symbol
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BIF Government Securities Fund
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CMGXX
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BIF Money Fund
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CMEXX
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BIF Treasury Fund
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CMTXX
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This Prospectus contains information you should know before investing, including information about risks. Please read it
before you invest and keep it for future reference.
The Securities
and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.
Not FDIC Insured
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May Lose
Value
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No Bank Guarantee
Table of Contents
Fund Overview
Key Facts About BIF Government Securities Fund
Investment Objective
The investment objective of BIF Government Securities Fund
(Government Fund or the Fund) is to seek preservation of capital, current income and liquidity.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares
of Government Fund.
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Shareholder Fees
(fees paid directly from your investment)
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CMA Account Annual Fee
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$
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125
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Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
1
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Management Fee
1
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0.230%
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Distribution and/or Service (12b-1) Fees
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0.125%
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Other Expenses
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0.345%
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Administration Fee
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0.250%
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Miscellaneous Other Expenses
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0.095%
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Total Annual Fund Operating Expenses
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0.70%
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1
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The fees and expenses shown in the table and the example that follows include both the expenses of Government Fund and Government Funds share of the
allocated expenses of Master Government Securities LLC (Government LLC). The management fees are paid by Government LLC.
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Example:
This Example is intended to help you compare the
cost of investing in the Fund with the cost of investing in other mutual funds. This Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. This Example also
assumes that your investment has a 5% return each year and that the Funds operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
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1 Year
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3 Years
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5 Years
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10 Years
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Government Fund
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$
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72
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$
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224
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$
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390
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$
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871
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Principal Investment Strategies of the Fund
Government
Fund seeks to achieve its objective by investing exclusively in a diversified portfolio made up only of short-term U.S. Government securities with maturities of not more than 397 days (13 months), 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 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 be 60 days or less, and the dollar-weighted average
life of all of its investments will be 120 days or less.
Principal Risks of Investing in the Fund
Government Fund cannot guarantee that it will achieve its investment objective.
An investment in the Fund is not a deposit in any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund could 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.
3
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. The following is a summary description of certain risks
of investing in the Fund.
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Credit Risk
Credit risk refers to the possibility that the issuer of a security will not be able to make payments of interest and principal
when due. Changes in an issuers credit rating or the markets perception of an issuers creditworthiness may also affect the value of the Funds investment in that issuer.
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Income Risk
Income risk is the risk that the Funds yield will vary as short-term securities in its portfolio mature and the proceeds
are reinvested in securities with different interest rates.
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Interest Rate Risk
Interest rate risk is the risk that the value of a debt security may fall when interest rates rise. In general, the
market price of debt securities with longer maturities will go up or down more in response to changes in interest rates than the market price of shorter term securities.
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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 Fund.
n
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Market Risk and Selection Risk
Market risk is the risk that one or more markets in which the Fund invests will go down in value, including
the possibility that the markets will go down sharply and unpredictably. Selection risk is the risk that the securities selected by Fund management will underperform the markets, the relevant indices or the securities selected by other funds with
similar investment objectives and investment strategies. This means you may lose money.
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Repurchase Agreements and Purchase and Sale Contracts Risks
If the other party to a repurchase agreement or purchase and sale contract
defaults on its obligation under the agreement, the Fund may suffer delays and incur costs or lose money in exercising its rights under the agreement. If the seller fails to repurchase the security in either situation and the market value of the
security declines, the Fund may lose money.
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Treasury Obligations Risk
Direct obligations of the U.S. Treasury 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 Fund.
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Variable and Floating Rate Instrument Risk
The absence of an active market for these securities could make it difficult for the Fund to
dispose of them if the issuer defaults.
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Performance Information
The information below shows you how Government Funds performance has varied year by year and provides some indication of the
risks of investing in the Fund. Information for the periods before February 2003, when the Fund changed to a master/feeder structure, reflects the Funds operations as a stand alone fund. As with all such investments, past
performance is not an indication of future results. The information for the Fund in the chart and the table assumes reinvestment of dividends and distributions. The table includes all applicable fees and sales charges. The Fund is a money market
fund managed pursuant to the requirements of Rule 2a-7 under the Investment Company Act of 1940, as amended (the Investment Company Act). Effective May 28, 2010, Rule 2a-7 was amended to impose new liquidity, credit quality and
maturity requirements on all money market funds. Fund performance shown prior to May 28, 2010 is based on Investment Company Act rules then in effect and is not an indication of future returns. Updated information on the Funds results can
be obtained by visiting www.blackrock.com/moneymarketreports or can be obtained by phone at (800) 626-1960.
Government Fund
ANNUAL
TOTAL RETURNS
As of 12/31
4
During the period shown in the bar chart, the highest return for a quarter was 1.25% (quarter ended March 31,
2001) and the lowest return for a quarter was 0.00% (quarter ended June 30, 2010). The year-to-date return as of June 30, 2011 was 0.00%.
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As of 12/31/10
Average Annual Total Returns
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1 Year
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5 Years
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10 Years
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Government Fund
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0.01
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%
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1.95
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%
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1.85
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%
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To obtain the Funds current 7-day yield,
call (800) 626-1960.
Investment Manager
Government Funds investment manager is BlackRock Advisors, LLC
(BlackRock).
* * *
For important information about the purchase and sale of Government Fund shares, tax
information and financial intermediary compensation, please turn to Important Additional Information on page 11 of the prospectus.
5
Fund Overview
Key Facts About BIF Money Fund
Investment Objective
The investment objective of BIF Money Fund (Money
Fund or the Fund) is to seek current income, preservation of capital and liquidity.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares
of Money Fund.
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Shareholder Fees
(fees paid directly from your investment)
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CMA Account Annual Fee
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$
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125
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Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
1
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Management Fee
1
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0.130%
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Distribution and/or Service (12b-1) Fees
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0.125%
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Other Expenses
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0.325%
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Administration Fee
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0.250%
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Miscellaneous Other Expenses
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0.075%
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Total Annual Fund Operating Expenses
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0.58%
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1
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The fees and expenses shown in the table and the example that follows include both the expenses of Money Fund and Money Funds share of the allocated
expenses of Master Money LLC (Money LLC). The management fees are paid by Money LLC.
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Example:
This Example is intended to help you compare the
cost of investing in the Fund with the cost of investing in other mutual funds. This Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. This Example also
assumes that your investment has a 5% return each year and that the Funds operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
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1 Year
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3 Years
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5 Years
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10 Years
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Money Fund
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$
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59
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$
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186
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$
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324
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$
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726
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Principal Investment Strategies of the Fund
Money Fund
seeks to achieve its objective by investing in a diversified portfolio of U.S. dollar-denominated short-term securities with maturities of not more than 397 days (13 months). 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, repurchase
agreements and municipal variable rate demand obligations. 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 be 60 days or less, and the dollar-weighted average life of all of its investments will be 120 days or less.
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 Funds 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.
6
Fund management 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 Funds yield by taking advantage of yield differentials that regularly occur between securities of a similar kind.
Principal Risks of Investing in the Fund
Money Fund
cannot guarantee that it will achieve its investment objective.
An
investment in the Fund is not a deposit in any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund could 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 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. The following is a
summary description of certain risks of investing in the Fund.
n
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Asset-Backed Securities Risk
Asset-backed securities represent interests in pools of assets, including consumer loans or
receivables held in trust. Asset-backed securities are subject to credit, interest rate, prepayment and extension risks. These securities are also subject to risk of default on the underlying asset, particularly during periods of economic downturn.
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Credit Risk
Credit risk refers to the possibility that the issuer of a security will not be able to make payments of interest and principal
when due. Changes in an issuers credit rating or the markets perception of an issuers creditworthiness may also affect the value of the Funds investment in that issuer.
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Extension Risk
When interest rates rise, certain obligations will be paid off by the obligor more slowly than anticipated, causing the value
of these securities to fall.
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Foreign Securities Risk
Foreign securities risk is the risk that the Fund may have difficulty buying and selling on foreign exchanges. In
addition, prices of foreign securities may go up and down more than prices of securities traded in the United States.
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Income Risk
Income risk is the risk that the Funds yield will vary as short-term securities in its portfolio mature and the proceeds
are reinvested in securities with different interest rates.
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n
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Interest Rate Risk
Interest rate risk is the risk that the value of a debt security may fall when interest rates rise. In general, the
market price of debt securities with longer maturities will go up or down more in response to changes in interest rates than the market price of shorter-term securities.
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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 Fund.
n
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Market Risk and Selection Risk
Market risk is the risk that one or more markets in which the Fund invests will go down in value, including
the possibility that the markets will go down sharply and unpredictably. Selection risk is the risk that the securities selected by Fund management will underperform the markets, the relevant indices or the securities selected by other funds with
similar investment objectives and investment strategies. This means you may lose money.
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Prepayment Risk
When interest rates fall, certain obligations will be paid off by the obligor more quickly than originally anticipated, and
the Fund may have to invest the proceeds in securities with lower yields.
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n
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Repurchase Agreements and Purchase and Sale Contracts Risks
If the other party to a repurchase agreement or purchase and sale contract
defaults on its obligation under the agreement, the Fund may suffer delays and incur costs or lose money in exercising its rights under the agreement. If the seller fails to repurchase the security in either situation and the market value of the
security declines, the Fund may lose money.
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n
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Treasury Obligations Risk
Direct obligations of the U.S. Treasury 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 Fund.
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U.S. Government Obligations Risk
Certain securities in which the Fund may invest, including securities issued by certain U.S. Government
agencies and U.S. Government sponsored enterprises, are not guaranteed by the U.S. Government or supported by the full faith and credit of the United States.
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Variable and Floating Rate Instrument Risk
The absence of an active market for these securities could make it difficult for the Fund to
dispose of them if the issuer defaults.
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Variable Rate Demand Obligations Risk
Variable rate demand obligations are floating rate securities that combine an interest in a long-term
municipal bond with a right to demand payment before maturity from a bank or other financial institution. If the bank or financial institution is unable to pay, the Fund may lose money.
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7
Performance Information
The information below shows you how Money Funds performance has varied year
by year and provides some indication of the risks of investing in the Fund. Information for the periods before February 2003, when the Fund changed to a master/feeder structure, reflects the Funds operations as a stand alone fund.
As with all such investments, past performance is not an indication of future results. The information for the Fund in the chart and the table assumes reinvestment of dividends and distributions. The table includes all applicable fees and sales
charges. The Fund is a money market fund managed pursuant to the requirements of Rule 2a-7 under the Investment Company Act of 1940, as amended (the Investment Company Act). Effective May 28, 2010, Rule 2a-7 was amended to impose
new liquidity, credit quality and maturity requirements on all money market funds. Fund performance shown prior to May 28, 2010 is based on Investment Company Act rules then in effect and is not an indication of future returns. Updated
information on the Funds results can be obtained by visiting www.blackrock.com/moneymarketreports or can be obtained by phone at (800) 626-1960.
Money Fund
ANNUAL TOTAL RETURNS
As of
12/31
During the period shown in the bar chart, the
highest return for a quarter was 1.37% (quarter ended March 31, 2001) and the lowest return for a quarter was 0.01% (quarter ended March 31, 2010). The year-to-date return as of June 30, 2011 was 0.02%.
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As of 12/31/10
Average Annual Total Returns
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1 Year
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5 Years
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10 Years
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Money Fund
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0.05
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%
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2.48
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%
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2.22
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%
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To obtain the Funds current 7-day yield,
call (800) 626-1960.
Investment Manager
Money Funds investment manager is BlackRock Advisors, LLC
(BlackRock).
* * *
For important information about the purchase and sale of Money Fund shares, tax
information and financial intermediary compensation, please turn to Important Additional Information on page 11 of the prospectus.
8
Fund Overview
Key Facts About BIF Treasury Fund
Investment Objective
The investment objective of BIF Treasury Fund (Treasury
Fund or the Fund) is to seek preservation of capital, liquidity and current income.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares
of Treasury Fund.
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Shareholder Fees
(fees paid directly from your investment)
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CMA Account Annual Fee
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$
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125
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Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
1
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Management Fee
1
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0.160%
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Distribution and/or Service (12b-1) Fees
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0.125%
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Other Expenses
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0.295%
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Administration Fee
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0.250%
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Miscellaneous Other Expenses
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0.045%
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Total Annual Fund Operating Expenses
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0.58%
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1
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The fees and expenses shown in the table and the example that follows include both the expenses of Treasury Fund and Treasury Funds share of the allocated
expenses of Master Treasury LLC (Treasury LLC). The management fees are paid by Treasury LLC.
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Example:
This Example is intended to help you compare the
cost of investing in the Fund with the cost of investing in other mutual funds. This Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also
assumes that your investment has a 5% return each year and that the Funds operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
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1 Year
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3 Years
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5 Years
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10 Years
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Treasury Fund
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$
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59
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$
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186
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$
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324
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$
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726
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Principal Investment Strategies of the Fund
Treasury
Fund seeks to achieve its objective by investing exclusively in a diversified portfolio made up only of short-term U.S. Treasury securities with maturities of not more than 397 days (13 months) 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 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 be 60 days or
less, and the dollar-weighted average life of all of its investments will be 120 days or less.
Principal Risks of Investing in the Fund
Treasury Fund cannot guarantee that it will achieve its investment objective.
An investment in the Fund is not a deposit in any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund could 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.
9
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. The following is a summary description of certain risks
of investing in the Fund.
n
|
|
Income Risk
Income risk is the risk that the Funds yield will vary as short-term securities in its portfolio mature and the proceeds
are reinvested in securities with different interest rates.
|
n
|
|
Interest Rate Risk
Interest rate risk is the risk that the value of a debt security may fall when interest rates rise. In general, the
market price of debt securities with longer maturities will go up or down more in response to changes in interest rates than the market price of shorter term securities.
|
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 Fund.
n
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|
Market Risk and Selection Risk
Market risk is the risk that one or more markets in which the Fund invests will go down in value, including
the possibility that the markets will go down sharply and unpredictably. Selection risk is the risk that the securities selected by Fund management will underperform the markets, the relevant indices or the securities selected by other funds with
similar investment objectives and investment strategies. This means you may lose money.
|
n
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|
Treasury Obligations Risk
Direct obligations of the U.S. Treasury 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 Fund.
|
Performance Information
The
information below shows you how Treasury Funds performance has varied year by year and provides some indication of the risks of investing in the Fund. Information for the periods before February 2003, when the Fund changed to a
master/feeder structure, reflects the Funds operations as a stand alone fund. As with all such investments, past performance is not an indication of future results. The information for the Fund in the chart and the table assumes
reinvestment of dividends and distributions. The table includes all applicable fees and sales charges. The Fund is a money market fund managed pursuant to the requirements of Rule 2a-7 under the Investment Company Act of 1940, as amended (the
Investment Company Act). Effective May 28, 2010, Rule 2a-7 was amended to impose new liquidity, credit quality and maturity requirements on all money market funds. Fund performance shown prior to May 28, 2010 is based on
Investment Company Act rules then in effect and is not an indication of future returns. Updated information on the Funds results can be obtained by visiting www.blackrock.com/moneymarketreports or can be obtained by phone at
(800) 626-1960.
Treasury Fund
ANNUAL TOTAL RETURNS
As of
12/31
10
During the period shown in the bar chart, the highest return for a quarter was 1.28% (quarter ended March 31,
2001) and the lowest return for a quarter was 0.00% (quarter ended June 30, 2010). The year-to-date return as of June 30, 2011 was 0.00%.
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As of 12/31/10
Average Annual Total Returns
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|
1 Year
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5 Years
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10 Years
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|
Treasury Fund
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0.01%
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1.85%
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1.74%
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To obtain the Funds current 7-day yield,
call (800) 626-1960.
Investment Manager
Treasury Funds investment manager is BlackRock Advisors, LLC
(BlackRock).
* * *
For important information about the purchase and sale of Treasury Fund shares, tax
information and financial intermediary compensation, please see Important Additional Information below.
Important Additional Information
Purchase and Sale of Fund Shares
If you are a Cash Management Account (CMA) service subscriber, there is no
minimum initial investment for Fund shares. The minimum assets for the CMA service is $20,000 in cash and/or securities. Other programs may have different minimum asset requirements. If you are not a CMA service or other Merrill Lynch, Pierce,
Fenner & Smith Incorporated (Merrill Lynch) central asset account program subscriber, the minimum initial investment for a Fund is $5,000. If you are an eligible CMA service subscriber and you choose to have your cash balances
automatically invested in a Fund, generally cash balances of more than $1 in a CMA account are automatically invested in shares of a Fund daily at the next determined net asset value on each business day on which both the New York Stock Exchange
(the Exchange) and New York banks are open; cash balances of less than $1 will be automatically invested in shares of a Fund at the next determined net asset value not later than the first business day of each week on which both the
Exchange and New York banks are open, which will usually be a Monday. If you are a CMA service or other eligible Merrill Lynch central asset account program subscriber, you may make manual investments of $1,000 or more at any time in shares of any
fund associated with the CMA service not designated as your primary money account. Generally, manual purchases placed through Merrill Lynch will be effective on the day following the day the order is placed with the Fund, subject to certain timing
considerations. If you are a CMA service subscriber, you may redeem your shares by directly submitting a written notice of redemption to Merrill Lynch, which will submit the request to the Funds transfer agent. You may sell shares held at the
Funds transfer agent by writing to Financial Data Services, Inc., P.O. Box 45290, Jacksonville, Florida 32231-5290.
Tax Information
Dividends and distributions may be subject to Federal income taxes and may be
taxed as ordinary income or capital gains, unless you are a tax-exempt investor or are investing through a retirement plan, in which case you may be subject to Federal income tax upon withdrawal from such tax-deferred arrangements.
Payments to Broker/Dealers and Other Financial Intermediaries
If you
purchase shares of a Fund through a broker-dealer or other financial intermediary, the Fund and BlackRock Investments, LLC, the Funds distributor, or its affiliates may pay the intermediary for the sale of Fund shares and related services.
These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your individual financial professional to recommend the Fund over another investment. Ask your individual financial professional or visit
your financial intermediarys website for more information.
11
Details About the Funds
Included in this prospectus are sections that tell you about buying and selling
shares, management information, shareholder features of the BIF Government Securities Fund (Government Fund), BIF Money Fund (Money Fund), and BIF Treasury Fund (Treasury Fund) (each, a Fund, and
collectively, the Funds) and your rights as a shareholder. Each of Government Fund, Money Fund, and Treasury Fund is a feeder fund that invests all of its assets in a corresponding master fund (each, a
Master LLC), a mutual fund that has the same objective and strategies as the applicable Fund. All investments will be made at the Master LLC level. This structure is sometimes called a master/feeder structure. Government Fund
invests all of its assets in Master Government Securities LLC (Government LLC). Money Fund invests all of its assets in Master Money LLC (Money LLC). Treasury Fund invests all of its assets in Master Treasury LLC
(Treasury LLC). Each Funds investment results will correspond directly to the investment results of the applicable Master LLC. For simplicity, this prospectus uses the name of the Fund or the term Fund to include the
applicable Master LLC in which the Fund invests.
How Each Fund Invests
Each Fund is a money market fund managed pursuant to Rule 2a-7 under the Investment
Company Act of 1940, as amended (the Investment Company Act).
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Each Fund seeks to maintain a net asset value of $1.00 per share.
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Each Fund will maintain a dollar-weighted average maturity of 60 days or less and a dollar-weighted average life of 120 days or less. For a discussion of
dollar-weighted average maturity and dollar-weighted average life, please see the Glossary on page 31.
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Pursuant to Rule 2a-7 each Fund is subject to a general liquidity requirement that requires that each Fund hold securities that are sufficiently
liquid to meet reasonably foreseeable shareholder redemptions in light of its obligations under section 22(e) of the Investment Company Act regarding share redemptions and any commitments the Fund has made to shareholders. To comply with this
general liquidity requirement, BlackRock must consider factors that could affect the Funds liquidity needs, including characteristics of the Funds investors and their likely redemptions. Depending upon the volatility of its cash flows
(particularly shareholder redemptions), this may require a Fund to maintain greater liquidity than would be required by the daily and weekly minimum liquidity requirements discussed below.
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Each Fund will not acquire any illiquid security (
i.e.
, securities that cannot be sold or disposed of in the ordinary course of business within seven days
at approximately the value ascribed to them by the Fund) if, immediately following such purchase, more than 5% of the Funds total assets are invested in illiquid securities. Each Fund will not acquire any security other than a daily liquid
asset unless, immediately following such purchase, at least 10% of its total assets would be invested in daily liquid assets and each Fund will not acquire any security other than a weekly liquid asset unless, immediately following such purchase, at
least 30% of its total assets would be invested in weekly liquid assets. For a discussion of daily liquid assets and weekly liquid assets, please see the Glossary on page 31.
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Each Fund is ordinarily limited to investing so that immediately following any such acquisition not more than 5% of its total assets will be invested in any one
issuers securities (other than U.S. Government obligations, repurchase agreements collateralized by such securities and securities subject to certain guarantees or otherwise providing a right to demand payment) or, in the event that such
securities are not First Tier Securities (as defined in Rule 2a-7), not more than
1
/
2
of 1% of the Funds total assets. In addition, Rule 2a-7 requires that not more than 3% of each Funds total assets be invested in Second Tier Securities (as defined in Rule 2a-7) and that Second Tier
Securities may only be purchased if they have a remaining maturity of 45 days or less at the time of acquisition.
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Government Fund
Investment Goal
Government Fund seeks preservation of capital, current income and liquidity.
Investment Process
In seeking to achieve Government Funds objective, 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 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.
12
Primary Investment Strategies
Government Fund tries to achieve its objective by investing in a diversified portfolio of short-term marketable securities that are direct U.S. Government obligations with maturities of not more than 397 days (13
months). This policy is a non-fundamental policy of the 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.
Government 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:
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U.S. Treasury obligations;
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U.S. Government agency securities, including securities issued by the Government National Mortgage Association (GNMA);
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Variable rate U.S. Government agency obligations, which have interest rates that reset periodically prior to maturity based on a specific index or interest rate;
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Short-term U.S. Government securities with maturities of up to 397 days (13 months); and
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Repurchase agreements and purchase and sale contracts involving U.S. Government securities described above.
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Money Fund
Investment Goal
Money Fund seeks current income, preservation of capital and liquidity.
Investment Process
Fund management will vary
the types of short-term securities in 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.
Primary Investment Strategies
Money Fund tries to achieve its objective by investing in a diversified portfolio of U.S. dollar-denominated short-term securities that mature or reset to a new
interest rate within 13 months.
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 statistical rating organization 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.
Among the short-term securities
the Fund may buy or the issuers in which the Fund may invest are:
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U.S. Government Securities
debt securities issued by and/or guaranteed as to principal and interest by the U.S. Government and supported by
the full faith and credit of the United States.
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U.S. Government Agency Securities
debt securities issued by and/or guaranteed as to principal and interest by U.S. Government agencies that
are not direct obligations of the U.S. Government. These securities may not be backed by the full faith and credit of the United States.
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U.S. Government Agencies
entities that are part of or sponsored by the Federal government, such as the Government National Mortgage
Association (GNMA), the Tennessee Valley Authority or the Federal Housing Administration.
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U.S. Government-Sponsored Enterprises
private corporations sponsored by the Federal government that have the legal status of government
agencies, such as the Federal Home Loan Mortgage Association, the Student Loan Marketing Association or the Federal National Mortgage Association. Securities issued by these entities are generally not supported by the full faith and credit of the
United States.
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U.S. Government Instrumentalities
supranational entities sponsored by the U.S. and other governments, such as the World Bank or the
Inter-American Development Bank.
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Bank Money Instruments
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 Eurodollar obligations or
Yankeedollar obligations. The Fund may invest in Eurodollar
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obligations only if they, by their terms, are general obligations of the U.S. parent bank. The 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.
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Commercial Paper
obligations, usually of nine months or less, issued by corporations, securities firms and other businesses for short-term
funding.
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Floating Rate Obligations
obligations of government agencies, corporations, depository institutions or other issuers that periodically or
automatically reset their interest rate to reflect a current market rate, such as the Federal Funds rate or a banks prime rate, or the level of an interest rate index, such as London Interbank Offered Rate (LIBOR) (a well-known
short-term interest rate index).
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Insurance Company Obligations
short-term funding agreements and guaranteed insurance contracts with fixed or floating interest rates.
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Master Notes
variable principal amount demand instruments issued by securities firms and other corporate issuers.
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Repurchase Agreements and Purchase and Sale Contracts
The Fund may enter into certain types of repurchase agreements or purchase and sale
contracts. In a repurchase agreement, the Fund buys a security from another party, which agrees to buy it back at an agreed upon time and price. The Fund may invest in repurchase agreements involving the money market securities described herein.
Purchase and sale contracts are similar to repurchase agreements, but purchase and sale contracts provide that the purchaser receives any interest on the security paid during the period. If the seller fails to repurchase the security in either
situation and the market value declines, the Fund may lose money.
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Short-Term Obligations
corporate or foreign government debt and asset-backed securities with a period of 397 days or less remaining to
maturity.
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Variable Rate Demand Obligations
floating rate securities that combine an interest in a long term municipal bond with a right to demand
payment periodically or on notice. The Fund also may buy a participation interest in a variable rate demand obligation owned by a commercial bank or other financial institution. When the Fund purchases a participation interest, it receives the right
to demand payment on notice to the owner of the obligation.
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Treasury Fund
Investment Goal
Treasury Fund seeks
preservation of capital, liquidity and current income.
Investment Process
In seeking to achieve
Treasury Funds objective, 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.
Primary Investment Strategies
Treasury Fund
tries to achieve its objective 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 Fund and may not be changed
without at least 60 days prior written notice to shareholders.
Treasury Fund may invest in short-term U.S. Treasury securities with maturities of up to 397 days (13 months).
Other Strategies Applicable to All Funds
In addition to the primary strategies discussed above, each Fund, as applicable, may use certain other investment strategies, including the following:
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Affiliated Money Market Funds (Money Fund)
Money Fund may invest uninvested cash balances in affiliated money market funds.
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Borrowing
Each Fund may borrow only to meet redemptions.
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Illiquid/Restricted Securities
Each Fund may invest up to 5% of its total assets in illiquid securities that it cannot sell within seven
days at approximately current value. Each Fund may also invest in restricted securities, which are securities that cannot be offered for public resale unless registered under the applicable securities laws or that have a contractual restriction that
prohibits or limits their resale (
i.e.
Rule 144A securities). Money Fund is limited to investing up to 10% of its total assets (including any amount invested in illiquid securities) in restricted securities. Restricted securities may include
private placement securities that have not been registered under the applicable securities laws. Restricted securities may not be listed on an exchange and may have no active trading market. Rule 144A securities are restricted securities that can be
resold to qualified institutional buyers but not to the general public and may be considered to be liquid securities.
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Other Eligible Investments (Money Fund)
Money Fund may invest in other money market instruments permitted by the Securities and Exchange
Commission (the SEC) rules governing money market funds.
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Reverse Repurchase Agreements (Money Fund)
In a reverse repurchase agreement, Money Fund sells a security to another party and agrees to buy
it back at a specific time and price. The Fund may engage in reverse repurchase agreements involving the money market securities described herein.
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Securities Lending (Money Fund)
Money Fund may lend securities with a value up to 33
1
/
3
% of its total assets to financial institutions that provide cash or
securities issued or guaranteed by the U.S. Government as collateral.
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When-Issued and Delayed Delivery Securities and Forward Commitments
The purchase or sale of securities on a when-issued basis or on a
delayed delivery basis or through a forward commitment involves the purchase or sale of securities by a Fund at an established price with payment and delivery taking place in the future. A Fund enters into these transactions to obtain what is
considered an advantageous price to the Fund at the time of entering into the transaction.
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Investment Risks
This section contains a discussion of the general risks of investing in the Funds. Investment Objectives and Policies in the Statement of Additional
Information (SAI) also includes more information about the Funds, their investments and the related risks. As with any fund, there can be no guarantee that a Fund will meet its objectives or that a Funds performance will be
positive for any period of time. An investment in a Fund is not a deposit in any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any bank or governmental agency. Although the Funds seek to preserve the value
of your investment at $1.00 per share, it is possible to lose money by investing in a Fund.
Main Risks of Investing in the Funds
Asset-Backed Securities Risk (Money Fund)
Asset-backed securities represent interests in pools of assets, including consumer loans or receivables held in trust. Asset-backed
securities, like traditional fixed-income securities, are subject to credit, interest rate, prepayment and extension risks.
Money Funds investments in asset-backed securities are subject to additional risks associated with the nature of the assets and the servicing of those assets.
These securities are also subject to the risk of default on the underlying assets, particularly during periods of economic downturn.
Asset-backed securities entail the risk that, in certain states, it may be difficult to perfect the liens securing the collateral backing certain asset-backed
securities. In addition, certain asset-backed securities are based on loans that are unsecured, which means that there is no collateral to seize if the underlying borrower defaults.
Credit Risk (Government Fund, Money Fund)
Credit risk refers to the possibility that the issuer of a security will
not be able to make principal and interest payments when due. Changes in an issuers credit rating or the markets perception of an issuers creditworthiness may also affect the value of a Funds investment in that issuer. The
degree of credit risk depends on both the financial condition of the issuer and the terms of the obligation. While each Fund invests only in money market securities of highly rated issuers, those issuers may still default on their obligations.
Extension Risk (Money Fund)
When interest rates rise,
certain obligations will be paid off by the obligor more slowly than anticipated, causing the value of these securities to fall. Rising interest rates tend to extend the duration of securities, making them more sensitive to changes in interest
rates. The value of longer-term securities generally changes more in response to changes in interest rates than shorter-term securities. As a result, in a period of rising interest rates, securities may exhibit additional volatility and may lose
value.
Foreign Securities Risk (Money Fund)
Money
Fund may invest in U.S. dollar denominated money market instruments and other U.S. dollar denominated short-term debt obligations issued by foreign banks and similar institutions. Although the Fund will invest in these securities only if Fund
management determines they are of comparable quality to the Funds U.S. investments, investing in securities of foreign issuers involves some additional risks that can increase the chances that the Fund will lose money. These risks include the
possibly higher costs of foreign investing, the possibility of adverse political, economic or other developments, and the often smaller size of foreign markets, which may make it difficult for the Fund to buy and sell securities in those markets. In
addition, prices of foreign securities may go up and down more than prices of securities traded in the United States.
Income Risk
A Funds yield will vary as the short-term securities in its portfolio mature and the proceeds are reinvested in securities
with different interest rates.
Interest Rate Risk
Interest rate risk is the risk that the value of a debt security may fall when interest rates rise. In general, the market price of debt securities with longer maturities will go up or down more in response to changes in interest rates than the
market price of shorter term securities.
15
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 a Fund.
Market Risk and Selection Risk
Market risk is the
risk that one or more markets in which a Fund invests will go down in value, including the possibility that the markets will go down sharply and unpredictably. Selection risk is the risk that the securities selected by Fund management will
underperform the markets, the relevant indices or the securities selected by other funds with similar investment objectives and investment strategies. This means you may lose money.
Prepayment Risk (Money Fund)
When interest rates fall, certain obligations will be paid off by the obligor more
quickly than originally anticipated, and Money Fund may have to invest the proceeds in securities with lower yields. In periods of falling interest rates, the rate of prepayments tends to increase (as does price fluctuation) as borrowers are
motivated to pay off debt and refinance at new lower rates. During such periods, reinvestment of the prepayment proceeds by Fund management will generally be at lower rates of return than the return on the assets that were prepaid. Prepayment
reduces the yield to maturity and the average life of the security.
Repurchase Agreements and Purchase and Sale Contracts Risk (Government Fund, Money Fund)
If the other party to a repurchase agreement or
purchase and sale contract defaults on its obligation under the agreement, a Fund may suffer delays and incur costs or lose money in exercising its rights under the agreement. If the seller fails to repurchase the security in either situation and
the market value of the security declines, a Fund may lose money.
Treasury Obligations Risk
Treasury obligations may differ in their interest rates, maturities, times of issuance and other characteristics.
Direct obligations of the U.S. Treasury 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 Fund.
U.S. Government Obligations Risk (Money Fund)
Obligations of U.S. Government agencies, authorities, instrumentalities and sponsored enterprises have historically involved little risk of loss of principal if held to maturity. However, not all U.S. Government securities are backed
by the full faith and credit of the United States. Obligations of certain agencies, authorities, instrumentalities and sponsored enterprises of the U.S. Government are backed by the full faith and credit of the United States (
e.g.,
GNMA);
other obligations are backed by the right of the issuer to borrow from the U.S. Treasury (
e.g.,
the Federal Home Loan Banks) and others are supported by the discretionary authority of the U.S. Government to purchase an agencys
obligations. Still others are backed only by the credit of the agency, authority, instrumentality or sponsored enterprise issuing the obligation. No assurance can be given that the U.S. Government would provide financial support to any of these
entities if it is not obligated to do so by law.
Variable and
Floating Rate Instrument Risk (Government Fund, Money Fund)
The absence of an active market for these securities could make it difficult for a Fund to dispose of them if the issuer defaults.
Variable Rate Demand Obligations Risk (VRDOs) (Money Fund)
VRDOs are floating rate securities that combine an interest in a long-term municipal bond with a right to demand payment before maturity from a bank or other financial institution. If the bank or financial institution is unable to
pay, Money Fund may lose money.
Other Risks of Investing in the Funds
The Funds may also be subject to certain other risks associated with
its investments and investment strategies, including:
Borrowing
Risk
Borrowing may exaggerate changes in the net asset value of Fund shares and in the return on a Funds portfolio. Borrowing will cost a Fund interest expense and other fees. The costs of borrowing may reduce a Funds
return. Borrowing may cause a Fund to liquidate positions when it may not be advantageous to do so to satisfy its obligations.
Expense Risk
Fund expenses are subject to a variety of factors, including fluctuations in a Funds net assets. Accordingly, actual
expenses may be greater or less than those indicated. For example, to the extent that a Funds net assets decrease due to market declines or redemptions, the Funds expenses will increase as a percentage of Fund net assets. During periods
of high market volatility, these increases in a Funds expense ratio could be significant.
Liquidity Risk (Money Fund)
Liquidity risk refers to the possibility that it may be difficult or impossible to sell certain positions at an acceptable price.
Reverse Repurchase Agreements Risk (Money Fund)
Reverse
repurchase agreements involve the sale of securities held by Money Fund with an agreement to repurchase the securities at an agreed-upon price, date and interest payment. Reverse repurchase agreements involve the risk that the other party may fail
to return the securities in a timely manner or at all. The Fund could lose money if it is unable to recover the securities and the value of the collateral held by the Fund, including the value of investments made with cash collateral, is less than
the value of the securities. These events could also trigger adverse tax consequences to Money Fund.
16
Securities Lending Risk (Money Fund)
Securities lending involves the risk that the borrower may
fail to return the securities in a timely manner or at all. As a result, Money Fund may lose money and there may be a delay in recovering the loaned securities. The Fund could also lose money if it does not recover the securities and/or the value of
the collateral falls, including the value of investments made with cash collateral. These events could trigger adverse tax consequences for the Fund.
When-Issued and Delayed Delivery Securities and Forward Commitments Risk
When-issued and delayed delivery securities and forward commitments
involve the risk that the security a Fund buys will lose value prior to its delivery. There also is the risk that the security will not be issued or that the other party to the transaction will not meet its obligation. If this occurs, the Fund loses
both the investment opportunity for the assets it set aside to pay for the security and any gain in the securitys price.
17
Account Information
Merrill Lynch CMA
®
Financial Service
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 fund deposit accounts maintained with banks, certain money market funds and a card/check account. Subscribers to the CMA service are charged an annual fee, and may also be subject to
applicable subaccount fees and certain transaction fees, optional service 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 Government Fund, Money Fund or Treasury Fund; however, CMA service subscribers may make manual investments in the Funds as described in this prospectus.
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
®
and Beyond Banking
®
Account
disclosures and account agreement.
Shares of the Funds are also 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 programs, consult the relevant program description
brochure provided to investors in those programs.
Distribution and Shareholder Servicing Plan
Each Fund
has adopted a distribution and shareholder servicing 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 and shareholder servicing fees for certain
services provided to its shareholders.
Plan Payments
Under the Plan, each Funds shares pay a fee to BlackRock Investments, LLC (the Distributor) and/or its affiliates, including The PNC Financial
Services Group, Inc. (PNC) and its affiliates, and to Barclays PLC (Barclays) and its affiliates, for account maintenance, sales and promotional activities and services in connection with the sale of shares. The fee may also
be used to pay financial intermediaries (including BlackRock, PNC, Barclays and their respective affiliates) for sales support services and related expenses. Fund shares pay a maximum 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 the Funds 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. For more information on the Plan, including a
complete list of services provided thereunder, see the SAI.
Other
Payments by the Funds
In addition to, rather than in lieu of, fees that a Fund may pay to a Financial Intermediary pursuant to the Plan and fees
the Fund pays to its transfer agent, BlackRock, on behalf of the Funds, may enter into non-Plan agreements with a financial intermediary pursuant to which a Fund will pay a financial intermediary for administrative, networking, recordkeeping,
subtransfer 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 financial intermediary or (2) a fixed dollar amount for
each account serviced by a financial intermediary. The aggregate amount of these payments may be substantial.
Other Payments by BlackRock
The Plan permits 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 a Funds). From time to time, BlackRock, the Distributor 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 own legitimate profits. BlackRock, the Distributor and their
affiliates may compensate affiliated and unaffiliated financial intermediaries for the sale and distribution of shares of a Fund or for these other services to the Fund and shareholders. These payments would be in addition to the Fund payments
18
described in this prospectus and may be a fixed dollar amount, may be based on the number of customer accounts maintained by the financial intermediary or may be based on a percentage of the
value of shares sold to, or held by, customers of the financial intermediary. 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 financial intermediary, its employees or associated persons to recommend or sell shares of a Fund to you. Please
contact your financial intermediary for details about payments it may receive from a Fund or from BlackRock, the Distributor or their affiliates. For more information, see the SAI.
How to Buy, Sell and Transfer Shares
The chart
on the following pages summarizes how to buy, sell and transfer shares through your financial professional or financial intermediary. You may also buy, sell and transfer shares through Financial Data Services, Inc. (the Transfer Agent)
if your account is held directly with the Transfer Agent. Because the selection of a mutual fund involves many considerations, your financial professional may help you with this decision.
Each Funds shares are distributed by the Distributor, an affiliate of BlackRock.
Each Fund may reject any purchase order, modify or waive the minimum
initial or subsequent investment requirements for any shareholders and suspend and resume the sale of shares of the Fund at any time, for any reason. In addition, each Fund may waive certain requirements regarding the purchase, sale or transfer of
shares described below. Merrill Lynch reserves the right to terminate a subscribers participation in the CMA service or any other Merrill Lynch central asset account program at any time, for any reason.
Under certain circumstances, if no activity occurs in an account within a time period
specified by state law, a shareholders shares in a Fund may be transferred to that state.
|
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How to Buy Shares
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Your Choices
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Important Information for You to Know
|
|
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|
Initial Purchase
|
|
Determine the amount of your investment
|
|
|
|
If you are not a CMA service or other Merrill Lynch central asset account program subscriber, the minimum initial investment for a
Fund is $5,000.
|
|
|
Have your Merrill Lynch Financial Advisor submit your purchase order
|
|
|
|
If you are a CMA service or other Merrill Lynch central asset program subscriber, you
may make manual investments of $1,000 or more in any Fund not designated as your primary money account.
Generally, manual purchases placed through Merrill Lynch will be effective on the day following the day the order is placed with the Fund, subject to certain timing considerations. Manual purchases of $500,000 or
more can be made effective on the same day the order is placed with the Fund provided certain requirements are met.
Purchase requests received by any Fund will receive the net asset value per share next computed after receipt of the purchase request by the Fund.
The minimum for the CMA service is $20,000 in cash or securities. When purchasing shares as a CMA service subscriber, you will also be
subject to the applicable annual program participation fee. To receive all the services available as a program subscriber, you must complete the account opening process, including completing or supplying requested documentation. Subscribers in
certain Merrill Lynch central asset account programs may be subject to different minimums and different annual participation fees from CMA service subscribers.
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Or contact the Transfer Agent
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|
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If you maintain an account directly with the Transfer Agent and are not a CMA service subscriber, you may call the Transfer Agent at
(800) 221-7210 and request a purchase application. Mail the completed purchase application to the Transfer Agent at the address on the inside back cover of this prospectus.
|
Add to Your Investment
|
|
Purchase additional shares
|
|
|
|
The minimum investment for additional purchases is $1,000 for all accounts.
|
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|
Acquire additional shares through the automatic dividend reinvestment plan
|
|
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All dividends are automatically reinvested in the form of additional shares at net asset value.
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19
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How to Sell Shares
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Your Choices
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Important Information for You to Know
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Full or Partial Redemption of Shares
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|
Automatic Redemption
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Each Fund has instituted an automatic redemption procedure for CMA service subscribers who have cash balances in their accounts
invested in shares of a designated Fund. For these subscribers, unless directed otherwise, Merrill Lynch will redeem a sufficient number of shares of the Fund to satisfy debit balances in the account (i) created by activity therein or (ii) created
by Visa
®
card purchases, cash advances or checks. Each account will be scanned automatically for debits each business day prior to 12 noon, Eastern time. After
application of any cash balances in the account to these debits, shares of the Fund or other money account designated as the primary money account and, to the extent necessary, shares of other applicable Funds or money accounts, will be redeemed at
net asset value at the 12 noon, Eastern time, pricing to satisfy any remaining debits.
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Have your Merrill Lynch Financial Advisor submit your sales order
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|
If you are a CMA service subscriber, you may redeem your shares directly by submitting a written notice of redemption to Merrill
Lynch, which will submit the request to the Transfer Agent. Cash proceeds from the redemption generally will be credited to your CMA account or mailed to you at your address of record, or upon request, mailed or wired (if $10,000 or more) to your
bank account. Redemption requests should not be sent to the Fund or the Transfer Agent. If inadvertently sent to the Fund or the Transfer Agent, redemption requests will be forwarded to Merrill Lynch. Redemption of Fund shares will be confirmed to
program subscribers (rounded to the nearest share) in their monthly transaction statements.
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Sell through the Transfer Agent
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You may sell shares held at the Transfer Agent by writing to the Transfer Agent at the
address on the inside back cover of this prospectus. All shareholders on the account must sign the letter. A medallion signature guarantee generally will be required but may be waived in certain limited circumstances. You can obtain a medallion
signature guarantee from a bank, securities dealer, securities broker, credit union, savings and loan association, national securities exchange and registered securities association. A notary public seal will not be acceptable. Redemption requests
should not be made to the Fund or Merrill Lynch. The Transfer Agent will mail redemption proceeds to you at your address of record.
* * *
If you make a redemption request before a Fund has collected payment for the purchase of shares, the Fund or the Transfer Agent may delay mailing your proceeds.
This delay will usually not exceed ten days. Check with the Transfer Agent or your Merrill Lynch Financial Advisor for details.
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How to Transfer your Account
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Your Choices
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Important Information for You to Know
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Transfer Shares to Another Securities Dealer
|
|
Transfer to a participating financial intermediary
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|
You may transfer your Fund shares only to another securities dealer that has entered into an agreement with Merrill Lynch. Certain
shareholder services may not be available for the transferred shares. You may only purchase additional shares of Funds previously owned before the transfer. All future trading of these assets must be coordinated by the receiving
firm.
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Transfer to a non-participating financial intermediary
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If you no longer maintain a Merrill Lynch account, you must either transfer your shares to an account with the Transfer Agent or they
will be automatically redeemed. Shareholders maintaining accounts directly with the Transfer Agent are not entitled to the services available to CMA service subscribers.
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20
Funds Rights
Each Fund
may:
n
|
|
Suspend the right of redemption if trading is halted or restricted on the Exchange or under other emergency conditions described in the Investment Company Act;
|
n
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|
Postpone the date of payment upon redemption if trading is halted or restricted on the Exchange or under other emergency conditions described in the Investment
Company Act or if a redemption request is made before the Fund has collected payment for the purchase of shares;
|
n
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|
Redeem shares for property other than cash if conditions exist which make cash payments undesirable in accordance with its rights under the Investment Company
Act; and
|
n
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|
Redeem shares involuntarily in certain cases, such as when the value of a shareholder account falls below a specified level.
|
Suspension of Redemptions Upon Liquidation.
If a Funds Board of
Trustees (each, a Board), including a majority of the trustees who are not interested persons of the Fund, as defined in the Investment Company Act, determines that the deviation between the Funds amortized cost price
per share and the market-based net asset value per share may result in material dilution or other unfair results, the Board, subject to certain conditions, may, in the case where the Board has determined to liquidate irrevocably, suspend redemptions
and payments of redemption proceeds in order to facilitate the permanent termination of the Fund in an orderly manner. If this were to occur, it would likely result in a delay in your receipt of your redemption proceeds.
Note on Low Balance Accounts.
Because of the high cost of maintaining smaller
accounts, each Fund may redeem shares in your account if the net asset value of the 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 Acts accounts.
Short-Term
Trading Policy
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
each Fund 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 Board has not adopted policies and procedures to deter short-term trading in the Funds. There can be no assurances, however, that a Fund
may not, on occasion, serve as a temporary or short-term investment vehicle for those who seek to market time funds offered by other investment companies.
Master/Feeder Structure
Each of Government Fund, Money Fund and Treasury Fund is a feeder fund
that invests all of its assets in Government LLC, Money LLC or 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 given Master LLC bear that Master LLCs expenses in proportion to their assets. This structure may enable the Funds to reduce costs through economies of scale. A larger investment portfolio may also reduce certain transaction costs
to the extent that contributions to and redemptions from a 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. In addition, large purchases or redemptions by one feeder fund could negatively affect the performance of other feeder funds that invest in the
same Master LLC. Information about other feeder funds, if any, is available by calling (800) 626-1960.
21
Whenever a Master LLC holds a vote of its feeder funds, the Fund investing in that Master LLC 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.
22
Management of the Funds
BlackRock
BlackRock is the manager to each Master LLC and manages the investments and its
business operations of each Master LLC subject to the oversight of each Funds Board and the Board of Directors of each Master LLC. While BlackRock is ultimately responsible for the management of the Master LLC, 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. BlackRock is an indirect, wholly-owned subsidiary of BlackRock, Inc.
BlackRock, a registered investment adviser, was organized in 1994 to perform advisory
services for investment companies. BlackRock and its affiliates had approximately $3.659 trillion in investment company and other portfolio assets under management as of June 30, 2011.
BlackRock serves as manager to each Master LLC pursuant to a management agreement (each, a Management Agreement). Pursuant to
the Management Agreements, BlackRock is entitled to fees computed daily and payable monthly at the maximum annual management fee rate (as a percentage of average daily net assets) calculated as follows:
|
|
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|
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|
Average Daily Net Assets
|
|
Rate of
Management Fee
|
|
First $500 million
|
|
|
0.250
|
%
|
$500 million $1 billion
|
|
|
0.175
|
%
|
Greater than $1 billion
|
|
|
0.125
|
%
|
For the fiscal year ended March 31, 2011,
BlackRock received management fees from each Master LLC at the following annual rates:
|
|
|
|
|
|
|
Master LLC
|
|
Paid to BlackRock
(net of any applicable waivers)
|
|
Government LLC
|
|
|
0.02
|
%
|
Money LLC
|
|
|
0.13
|
%
|
Treasury LLC
|
|
|
0.08
|
%
|
BlackRock also acts as each Funds
administrator. Each Fund pays BlackRock an administration fee at the annual rate of 0.25% of the average daily net assets of the Fund.
BlackRock, as administrator, and the Distributor have voluntarily agreed to waive a portion of their respective fees and/or reimburse operating expenses to enable
each Fund and Master LLC to maintain minimum levels of daily net investment income. BlackRock and the Distributor may discontinue this waiver and/or reimbursement at any time without notice.
For each Funds fiscal year ended March 31, 2011, BlackRock received administration fees from each Fund at the following annual
rates:
|
|
|
|
|
|
|
Fund
|
|
Paid to BlackRock
(net of any applicable waivers)
|
|
Government Fund
|
|
|
0.07
|
%
|
Money Fund
|
|
|
0.13
|
%
|
Treasury Fund
|
|
|
0.04
|
%
|
A discussion of the basis for the approval of the Management Agreement with BlackRock by the applicable Funds Board and the applicable Master LLCs Board of Directors is included in such Funds
semi-annual shareholder report for the fiscal period ended September 30, 2010.
From time to time, a manager, an analyst, or another employee of BlackRock 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 BlackRock or any other person within the BlackRock organization. Any such views are subject to change at any time
23
based upon market or other conditions and BlackRock 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 each Fund.
Conflicts of Interest
The investment activities of BlackRock and its affiliates (including BlackRock,
Inc.) and their affiliates, directors, partners, trustees, managing members, officers and employees (collectively, the Affiliates) and of BlackRock, Inc.s significant shareholder, Barclays Bank PLC and its affiliates, including
Barclays (each, a Barclays Entity and collectively, the Barclays Entities), in the management of, or their interest in, their own accounts and other accounts they manage, may present conflicts of interest that could
disadvantage the Funds and their shareholders. BlackRock and its Affiliates or the Barclays Entities provide investment management services to other funds and discretionary managed accounts that follow an investment program similar to that of the
Funds. BlackRock and its Affiliates or the Barclays Entities 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 the Funds. One or more Affiliates or Barclays Entities act or may act as an investor, investment banker, research provider, investment manager, financier, advisor, market maker, trader,
prime broker, lender, agent and principal, and have other direct and indirect interests in securities, currencies and other instruments in which the Funds directly and indirectly invest. Thus, it is likely that the Funds 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 or a Barclays Entity performs or seeks to perform investment banking or other services.
One or more Affiliates or Barclays Entities may engage in proprietary trading and advise accounts and funds that have investment objectives similar to those of the Funds and/or that engage in and compete for transactions in the same types of
securities, currencies and other instruments as the Funds. The trading activities of these Affiliates or Barclays Entities are carried out without reference to positions held directly or indirectly by the Funds and may result in an Affiliate or a
Barclays Entity having positions that are adverse to those of the Funds. No Affiliate or Barclays Entity is under any obligation to share any investment opportunity, idea or strategy with the Funds. As a result, an Affiliate or a Barclays Entity may
compete with the Funds for appropriate investment opportunities. The results of the Funds investment activities, therefore, may differ from those of an Affiliate or a Barclays Entity and of other accounts managed by an Affiliate or a Barclays
Entity, and it is possible that the Funds could sustain losses during periods in which one or more Affiliates or Barclays Entities and other accounts achieve profits on their trading for proprietary or other accounts. The opposite result is also
possible. In addition, the Funds may, from time to time, enter into transactions in which an Affiliate or a Barclays Entity or its other clients have an adverse interest. Furthermore, transactions undertaken by Affiliate- or Barclays Entity-advised
clients may adversely impact the Funds. Transactions by one or more Affiliate- or Barclays Entity-advised clients or BlackRock may have the effect of diluting or otherwise disadvantaging the values, prices or investment strategies of the Funds. The
Funds activities may be limited because of regulatory restrictions applicable to one or more Affiliates or Barclays Entities, 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 or a Barclays Entity has or is trying to develop investment banking relationships or in which an Affiliate or a Barclays Entity has significant debt or equity investments. The Funds also may invest in
securities of companies for which an Affiliate or a Barclays Entity provides or may some day provide research coverage. An Affiliate or a Barclays Entity may have business relationships with and purchase or distribute or sell services or products
from or to distributors, consultants or others who recommend the Funds or who engage in transactions with or for the Funds, and may receive compensation for such services. The Funds may also make brokerage and other payments to Affiliates or
Barclays Entities in connection with the Funds portfolio investment transactions.
Under a securities lending program approved by the Board of Directors of Money LLC, Money LLC has retained an affiliate of BlackRock to serve as the securities lending agent for Money LLC to the extent that Money
LLC participates in the securities lending program. For these services, the lending agent may receive a fee from Money LLC, including a fee based on the returns earned on Money LLCs investment of the cash received as collateral for the loaned
securities. In addition, one or more Affiliates may be among the entities to which Money LLC may lend its portfolio securities under the securities lending program.
The activities of Affiliates may give rise to other conflicts of interest that could
disadvantage the Funds and their shareholders. BlackRock has adopted policies and procedures designed to address these potential conflicts of interest. See the SAI for further information.
Valuation of Fund Investments
When you
buy shares, you pay the net asset value (normally $1.00 per share) without a sales charge. This is the offering price. Shares are also redeemed at their net asset value. Each Fund calculates the net asset value at 12 p.m. Eastern Standard Time on
each business day that the Exchange or New York banks are open, immediately after the daily declaration of dividends. Both the Exchange and New York banks are closed on New Years Day, Martin Luther King, Jr. Day, Presidents Day, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Currently, the only scheduled days on which the Exchange is open and New York banks are closed are Columbus Day
24
and Veterans Day. The only scheduled day on which New York banks are open and the Exchange is closed is Good Friday. The net asset value used in determining your price is the one calculated
after your purchase or redemption order becomes effective. Share purchase orders are effective on the date Federal funds become available to the applicable Fund.
The amortized cost method is used in calculating net asset value, meaning that the
calculation is based on a valuation of the assets held by a Fund at cost, with an adjustment for any discount or premium on a security at the time of purchase. Generally, trading in foreign securities, U.S. government securities and money market
instruments and certain fixed income securities is substantially completed each day at various times prior to the close of business on the Exchange. The values of such securities used in computing the net asset value of a Funds shares are
determined as of such times.
Each Fund may accept orders from certain
authorized financial intermediaries or their designees. Each Fund will be deemed to receive an order when accepted by the intermediary or designee and the order will receive the net asset value next computed by the Fund after such acceptance. If the
payment for a purchase order is not made by a designated later time, the order will be canceled and the financial intermediary could be held liable for any losses.
Dividends, Distributions and Taxes
Each
Fund will distribute dividends of net investment income, if any, daily and net realized capital gains, if any, at least annually. Income dividends are reinvested daily and capital gain dividends are reinvested at least annually in the form of
additional shares at net asset value. You will begin accruing dividends on the day following the date your purchase becomes effective. Dividends that are declared but unpaid will remain in the gross assets of the Fund and will, therefore, continue
to earn income for the Funds shareholders. In most cases, shareholders will receive statements monthly or quarterly as to such reinvestments. Shareholders redeeming their holdings will receive all dividends declared and reinvested through the
date of redemption, except where they request a transaction that settles on a same-day basis. In that case, unless otherwise requested, shareholders will receive all dividends declared and reinvested through the date immediately preceding the date
of redemption. Each Fund intends to make distributions, most of which will be taxed as ordinary income. Capital gains paid by the Fund may be taxable to you at different rates depending on how long the Fund has held the assets sold.
You will pay tax on dividends from a Fund even if you receive them in the form of
additional shares. If you redeem Fund shares, 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 non-corporate shareholders. However, to the extent that a Funds distributions are derived from income on short-term debt securities and short-term capital gains, such distributions will generally not be eligible for
taxation at the reduced rate.
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. However, for taxable years of a Fund beginning before January 1, 2012, certain distributions reported by the Fund as either interest-related dividends or short-term capital gain dividends and paid to a foreign shareholder would be
eligible for an exemption from U.S. withholding tax.
Recently enacted
legislation will impose a 3.8% Medicare tax on the net investment income (which includes interest, dividends and capital gains) of U.S. individuals with incomes exceeding $200,000, or $250,000 if married and filing jointly, and of trusts and estates
for taxable years beginning after December 31, 2012.
Other recently
enacted legislation will impose a 30% withholding tax on dividends and redemption proceeds paid after December 31, 2012 to (i) certain foreign financial institutions and investment funds, unless they agree to collect and disclose to the
Internal Revenue Service information regarding their direct and indirect U.S. account holders and (ii) certain other foreign entities, unless they certify certain information regarding their direct and indirect U.S. owners. Under some
circumstances, a foreign shareholder may be eligible for refunds or credits of such taxes.
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 a Fund. It does not address the specific potential state tax
and/or local tax consequences of your investment and is not a substitute for personal tax advice. Some states exempt from personal income tax the portion of dividends paid by regulated investment companies, such as the Funds, that are derived from
interest on certain obligations of the United States, if the regulated investment company meets certain requirements. Consult your personal tax adviser about the potential tax consequences of an investment in a Fund under all applicable tax laws.
25
Financial Highlights
The Financial Highlights tables are intended to help you understand each Funds financial performance for the periods
shown. Certain information reflects the financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the respective Fund (assuming reinvestment of all
dividends and/or distributions). The information has been audited by Deloitte & Touche LLP, whose reports, along with each Funds financial statements, are included in the respective Funds Annual Report, which is available upon
request.
Government Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Per Share Operating Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of year
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
Net investment income
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0070
|
|
|
|
0.0369
|
|
|
|
0.0439
|
|
Net realized gain (loss)
|
|
|
0.0001
|
|
|
|
0.0000
|
|
|
|
0.0001
|
|
|
|
(0.0005
|
)
|
|
|
0.0003
|
|
Net increase from investment operations
|
|
|
0.0001
|
|
|
|
0.0000
|
|
|
|
0.0071
|
|
|
|
0.0364
|
|
|
|
0.0442
|
|
Dividends and distributions from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(0.0000
|
)
|
|
|
(0.0002
|
)
|
|
|
(0.0070
|
)
|
|
|
(0.0369
|
)
|
|
|
(0.0439
|
)
|
Net realized gain
|
|
|
(0.0001
|
)
|
|
|
(0.0000
|
)
|
|
|
|
|
|
|
|
|
|
|
(0.0000
|
)
|
Total dividends and distributions
|
|
|
(0.0001
|
)
|
|
|
(0.0002
|
)
|
|
|
(0.0070
|
)
|
|
|
(0.0369
|
)
|
|
|
(0.0439
|
)
|
Net asset value, end of year
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
Total Investment
Return
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment return
|
|
|
0.01
|
%
|
|
|
0.03
|
%
|
|
|
0.70
|
%
|
|
|
3.74
|
%
|
|
|
4.46
|
%
|
Ratios to Average Net
Assets
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
0.49
|
%
3
|
|
|
0.50
|
%
|
|
|
0.63
|
%
|
|
|
0.66
|
%
|
|
|
0.70
|
%
|
Total expenses after fees waived
|
|
|
0.18
|
%
|
|
|
0.22
|
%
|
|
|
0.55
|
%
|
|
|
0.66
|
%
|
|
|
0.70
|
%
|
Net investment income
|
|
|
0.00
|
%
4
|
|
|
0.00
|
%
4
|
|
|
0.67
|
%
|
|
|
3.53
|
%
|
|
|
4.41
|
%
|
Supplemental Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of year (000)
|
|
$
|
208,517
|
|
|
$
|
320,643
|
|
|
$
|
668,476
|
|
|
$
|
797,803
|
|
|
$
|
503,160
|
|
1
|
Where applicable, total investment returns include the reinvestment of dividends and distributions.
|
2
|
Includes the Funds share of Government LLCs allocated expenses and/or net investment income.
|
3
|
Ratio includes the Funds share of Government LLCs allocated fees waived of 0.22%.
|
4
|
Amount is less than 0.01%.
|
26
Financial Highlights
(continued)
Money Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Per Share Operating Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of year
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
Net investment income
|
|
|
0.0004
|
|
|
|
0.0011
|
|
|
|
0.0202
|
|
|
|
0.0455
|
|
|
|
0.0460
|
|
Net realized gain
|
|
|
0.0001
|
|
|
|
0.0000
|
|
|
|
0.0001
|
|
|
|
0.0001
|
|
|
|
0.0007
|
|
Net increase from investment operations
|
|
|
0.0005
|
|
|
|
0.0011
|
|
|
|
0.0203
|
|
|
|
0.0456
|
|
|
|
0.0467
|
|
Dividends and distributions from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(0.0004
|
)
|
|
|
(0.0011
|
)
|
|
|
(0.0202
|
)
|
|
|
(0.0455
|
)
|
|
|
(0.0460
|
)
|
Net realized gain
|
|
|
(0.0001
|
)
|
|
|
(0.0000
|
)
|
|
|
|
|
|
|
|
|
|
|
(0.0000
|
)
|
Total dividends and distributions
|
|
|
(0.0005
|
)
|
|
|
(0.0011
|
)
|
|
|
(0.0202
|
)
|
|
|
(0.0455
|
)
|
|
|
(0.0460
|
)
|
Net asset value, end of year
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
Total Investment
Return
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment return
|
|
|
0.05
|
%
|
|
|
0.11
|
%
|
|
|
2.03
|
%
|
|
|
4.65
|
%
|
|
|
4.68
|
%
|
Ratios to Average Net
Assets
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
0.58
|
%
|
|
|
0.60
|
%
|
|
|
0.58
|
%
|
|
|
0.57
|
%
|
|
|
0.57
|
%
|
Total expenses after fees waived
|
|
|
0.34
|
%
|
|
|
0.45
|
%
|
|
|
0.58
|
%
|
|
|
0.57
|
%
|
|
|
0.57
|
%
|
Net investment income
|
|
|
0.04
|
%
|
|
|
0.11
|
%
|
|
|
2.01
|
%
|
|
|
4.48
|
%
|
|
|
4.62
|
%
|
Supplemental Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of year (000)
|
|
$
|
5,622,763
|
|
|
$
|
7,973,957
|
|
|
$
|
13,453,317
|
|
|
$
|
14,873,009
|
|
|
$
|
9,951,527
|
|
1
|
Where applicable, total investment returns include the reinvestment of dividends and distributions.
|
2
|
Includes the Funds share of Money LLCs allocated expenses and/or net investment income.
|
27
Financial Highlights
(concluded)
Treasury Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Per Share Operating Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of year
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
Net investment income
|
|
|
0.0000
|
|
|
|
0.0002
|
|
|
|
0.0064
|
|
|
|
0.0343
|
|
|
|
0.0421
|
|
Net realized gain (loss)
|
|
|
0.0001
|
|
|
|
0.0001
|
|
|
|
0.0001
|
|
|
|
(0.0002
|
)
|
|
|
0.0003
|
|
Net increase from investment operations
|
|
|
0.0001
|
|
|
|
0.0003
|
|
|
|
0.0065
|
|
|
|
0.0341
|
|
|
|
0.0424
|
|
Dividends and distributions from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(0.0000
|
)
|
|
|
(0.0004
|
)
|
|
|
(0.0064
|
)
|
|
|
(0.0343
|
)
|
|
|
(0.0421
|
)
|
Net realized gain
|
|
|
(0.0001
|
)
|
|
|
(0.0000
|
)
|
|
|
|
|
|
|
|
|
|
|
(0.0000
|
)
|
Total dividends and distributions
|
|
|
(0.0001
|
)
|
|
|
(0.0004
|
)
|
|
|
(0.0064
|
)
|
|
|
(0.0343
|
)
|
|
|
(0.0421
|
)
|
Net asset value, end of year
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
Total Investment
Return
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment return
|
|
|
0.01
|
%
|
|
|
0.04
|
%
|
|
|
0.64
|
%
|
|
|
3.48
|
%
|
|
|
4.28
|
%
|
Ratios to Average Net
Assets
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
0.49
|
%
3
|
|
|
0.53
|
%
|
|
|
0.57
|
%
|
|
|
0.60
|
%
|
|
|
0.68
|
%
|
Total expenses after fees waived
|
|
|
0.16
|
%
|
|
|
0.20
|
%
|
|
|
0.50
|
%
|
|
|
0.60
|
%
|
|
|
0.68
|
%
|
Net investment income
|
|
|
0.00
|
%
4
|
|
|
0.02
|
%
|
|
|
0.46
|
%
|
|
|
2.92
|
%
|
|
|
4.22
|
%
|
Supplemental Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of year (000)
|
|
$
|
1,625,719
|
|
|
$
|
1,677,334
|
|
|
$
|
4,235,341
|
|
|
$
|
2,434,583
|
|
|
$
|
462,854
|
|
1
|
Where applicable, total investment returns include the reinvestment of dividends and distributions.
|
2
|
Includes the Funds share of Treasury LLCs allocated expenses and/or net investment income.
|
3
|
Ratio includes the Funds share of Treasury LLCs allocated fees waived of 0.08%.
|
4
|
Amount is less than 0.01%.
|
28
General Information
Shareholder Documents
Electronic Access to Annual Reports, Semi-Annual Reports and Prospectuses
Electronic copies of most financial reports and prospectuses are available on BlackRocks website. Shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and
prospectuses by enrolling in a Funds electronic delivery program.
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:
Please contact your financial professional. Please note that not all investment
advisers, banks or brokerages may offer this service.
Delivery of
Shareholder Documents
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 your financial professional.
Certain Fund Policies
Anti-Money Laundering Requirements
The Funds are 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,
each Fund may request information from shareholders to enable it to form a reasonable belief that it knows the true identity of its shareholders or, in some cases, the status of financial professionals; it will be used only for compliance with the
requirements of the Patriot Act. The Funds reserve the right to reject purchase orders from persons who have not submitted information sufficient to allow the Funds to verify their identity. The Funds also reserve the right to redeem any amounts in
the Funds 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 Privacy Principles
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 website.
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.
29
Statement of Additional Information
If you
would like further information about the Funds, including how they invest, please see the SAI.
For a discussion of each Funds policies and procedures regarding the selective disclosure of its portfolio holdings, please see the SAI.
30
Glossary
This glossary contains an explanation of some of the common terms used in this
prospectus. For additional information about the Funds, please see the SAI.
Administration Fees
a fee paid to BlackRock for providing administrative services to a Fund.
Annual Fund Operating Expenses
expenses that cover the costs of operating a Fund (and the Master LLC, if applicable).
Daily Liquid Assets
include (i) cash; (ii) direct
obligations of the U.S. Government; and (iii) securities that will mature or are subject to a demand feature that is exercisable and payable within one business day.
Distribution Fees
fees used to support a Funds marketing and
distribution efforts, such as compensating financial professionals and other financial intermediaries, advertising and promotion.
Dollar-Weighted Average Life
the dollar-weighted average maturity of a Funds portfolio calculated without reference to the exceptions used for
variable or floating rate securities regarding the use of interest rate reset dates in lieu of the securitys actual maturity date.
Dollar-Weighted Average Maturity
average maturity is the average amount of time until the organizations that issued the debt securities in the
Funds portfolio must pay off the principal amount of the debt. Dollar-weighted means the larger the dollar value of a debt security in a Fund, the more weight it gets in calculating this average. To calculate the dollar-weighted
average maturity, the Fund may treat a variable or floating rate security as having a maturity equal to the time remaining to the securitys next interest rate reset date rather than the securitys actual maturity.
Management Fee
a fee paid to BlackRock for managing a Master LLC.
Other Expenses
include administration, transfer agency,
custody, professional and registration fees.
Service Fees
fees used to compensate securities dealers and other financial intermediaries for shareholder servicing activities.
Shareholder Fees
fees paid directly by a shareholder, including account fees that you may pay on your CMA or other Merrill Lynch account.
Weekly Liquid Assets
include (i) cash; (ii) direct obligations
of the U.S. Government; (iii) Government securities issued by a person controlled or supervised by and acting as an instrumentality of the U.S. Government, pursuant to authority granted by the U.S. Congress, that are issued at a discount to the
principal amount to be repaid at maturity and have a remaining maturity of 60 days or less; and (iv) securities that will mature or are subject to a demand feature that is exercisable and payable within five business days.
Yield
the income generated by an investment in a Fund.
31
[This page intentionally left blank]
[This page intentionally left blank]
[This page intentionally left blank]
For More Information
Funds and Service Providers
FUNDS
BIF Government Securities Fund
BIF Money Fund
BIF Treasury Fund
100 Bellevue Parkway
Wilmington, Delaware 19809
Written Correspondence:
c/o Financial Data Services, Inc.
P.O. Box 45290
Jacksonville, Florida 32231-5290
Overnight Mail:
c/o Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida
32246-6484
(800) 221-7210
MANAGER AND ADMINISTRATOR
BlackRock Advisors, LLC
100 Bellevue Parkway
Wilmington, Delaware 19809
TRANSFER AGENT
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
500 College Road East
Princeton, New Jersey 08540
ACCOUNTING SERVICES PROVIDER
State Street Bank and Trust
Company
600 College Road East
Princeton, New Jersey
08540
DISTRIBUTOR
BlackRock Investments, LLC
40 East 52nd Street
New York, New York 10022
CUSTODIAN
State Street Bank and Trust Company
2 Avenue de Lafayette
Boston, Massachusetts 02111
COUNSEL
Sidley Austin LLP
787 Seventh Avenue
New York, New York 10019-6018
Additional Information
This prospectus contains important
information you should know before investing, including information about risks. Read it carefully and keep it for future reference. More information about the Funds is available at no charge upon request. This information includes:
Annual/Semi-Annual Reports
These reports contain additional information about the Funds investments.
Statement of Additional Information
A Statement of Additional Information (the SAI), dated July 26, 2011, has been filed with the Securities and Exchange Commission (the
SEC). The SAI, which includes additional information about the Funds, may be obtained free of charge, along with the Funds annual and semi-annual reports, by calling (800) 626-1960. The SAI, as supplemented from time to time,
is incorporated by reference into this prospectus.
BlackRock
Investor Services
Representatives are available to discuss mutual fund prospectuses, literature, programs and services available. Hours: 8:30 a.m.
to 6:00 p.m. (Eastern time), on any business day. Call: (800) 626-1960.
Purchases and Redemptions and Account Information
Call your
financial professional or Financial Data Services, Inc. at (800) 221-7210.
World Wide Web
General fund information and specific fund performance, including SAI and annual/semi-annual
reports, can be accessed free of charge at www.blackrock.com/moneymarketreports. Mutual fund prospectuses and literature can also be requested via this website.
Written Correspondence
BIF Government Securities Fund
BIF Money Fund
BIF Treasury Fund
c/o Financial Data Services, Inc.
P.O. Box 45290
Jacksonville, Florida 32231-5290
Overnight Mail
BIF Government Securities Fund
BIF Money Fund
BIF Treasury Fund
c/o Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
Internal Wholesalers/Broker Dealer Support
Available to support investment professionals 8:30 a.m. to 6:00 p.m. (Eastern time), on any business day. Call: (800) 626-1960.
Portfolio Characteristics and Holdings
A description of the Funds policies and procedures related to disclosure of portfolio characteristics and holdings is available in the SAI.
For information about portfolio holdings and characteristics, BlackRock fund
shareholders and prospective investors may call (800) 626-1960.
Securities and Exchange Commission
You may also view and
copy public information about the Funds, including the SAI, by visiting the EDGAR database on the SEC website (http://www.sec.gov) or the SECs Public Reference Room in Washington, D.C. Information about obtaining documents on the SECs
website without charge may be obtained by calling (800) SEC-0330. Copies of this information can be obtained, for a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing to the Public
Reference Room of the SEC, Washington, D.C. 20549.
You should rely
only on the information contained in this prospectus. No one is authorized to provide you with information that is different from information contained in this prospectus.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
BIF Government Securities Fund
BIF Money Fund
BIF Treasury Fund
INVESTMENT COMPANY ACT FILE NOS. 811-02752, 811-03205 AND 811-06196
©
BlackRock Advisors, LLC
|
|
|
PRO-10117-0711
|
|
|
STATEMENT OF ADDITIONAL INFORMATION
BIF
G
OVERNMENT
S
ECURITIES
F
UND
BIF M
ONEY
F
UND
BIF
T
REASURY
F
UND
100 Bellevue Parkway, Wilmington,
Delaware 19809 Phone No. (800) 626-1960
This
Statement of Additional Information of the BIF Government Securities Fund, BIF Money Fund and BIF Treasury Fund (each, a Fund, and collectively, the Funds) is not a prospectus and should be read in conjunction with the
prospectus of the Funds, dated July 26, 2011 (the Prospectus), which has been filed with the Securities and Exchange Commission (the Commission) and can be obtained, without charge, by calling (800) 626-1960 or by
writing to the Funds at the above address. The Prospectus is incorporated by reference into this Statement of Additional Information, and Part I of this Statement of Additional Information and the portions of Part II of this Statement of Additional
Information that relate to the Funds have been incorporated by reference into the Prospectus. The portions of Part II of this Statement of Additional Information that do not relate to the Funds do not form a part of the Funds Statement of
Additional Information, have not been incorporated by reference into the Prospectus and should not be relied upon by investors in the Funds. The audited financial statements of each Fund and its corresponding master limited liability company are
incorporated into this Statement of Additional Information by reference to each Funds 2011 Annual Report. You may request a copy of each Annual Report at no charge by calling (800) 626-1960 between 8:30 a.m. and 6:00 p.m. Eastern time on
any business day.
|
|
|
Fund
|
|
Ticker Symbol
|
|
|
BIF Government Securities Fund
|
|
CMGXX
|
|
|
BIF Money Fund
|
|
CMEXX
|
|
|
BIF Treasury Fund
|
|
CMTXX
|
B
LACK
R
OCK
A
DVISORS
, LLC M
ANAGER
B
LACK
R
OCK
I
NVESTMENTS
, LLC D
ISTRIBUTOR
The date of this Statement of Additional Information is July 26, 2011
TABLE OF CONTENTS
P
ART
I: I
NFORMATION
A
BOUT
BIF G
OVERNMENT
S
ECURITIES
F
UND
,
BIF M
ONEY
F
UND
AND
BIF T
REASURY
F
UND
Part I of this Statement of Additional Information sets forth information about BIF Government Securities Fund (Government Fund), BIF Money
Fund (Money Fund) and BIF Treasury Fund (Treasury Fund) (each, a Fund, and collectively, the Funds). It includes information about each Funds Board of Trustees (each, a Board), the
advisory services provided to, and the management fees paid by, each Fund, performance data for each Fund, and information about other fees paid by and services provided to each Fund. This Part I should be read in conjunction with the prospectus of
the Funds (the Prospectus) and those portions of Part II of this Statement of Additional Information that pertain to each Fund.
Each Fund is a feeder fund that invests all of its assets in Master Government Securities LLC (Government LLC), Master Money LLC
(Money LLC) or Master Treasury LLC (Treasury LLC), as applicable (each, a Master LLC and, collectively, the Master LLCs), each an investment company that has the same investment objective and
strategies as the corresponding Fund. All investments will be made at the Master LLC level. Each Funds investment results will correspond directly to the investment results of the applicable Master LLC. For simplicity, however, this Statement
of Additional Information, like the Prospectus, uses the term Fund to include the underlying Master LLC in which that Fund invests.
I.
|
|
Investment Objectives and Policies
|
Government Fund
Government Fund is a money market fund. Government Funds investment
objective is to seek preservation of capital, current income and liquidity. Government Funds investment objective is a fundamental policy of the Fund and may not be changed without the affirmative vote of a majority of Government Funds
outstanding shares as defined in the Investment Company Act of 1940, as amended (the Investment Company Act). Government Fund tries to achieve its objective by investing exclusively in a diversified portfolio of short-term marketable
securities that are direct obligations of the U.S. Government and repurchase agreements pertaining to such securities. Government Fund is classified as a diversified open-end investment company under the Investment Company Act.
Direct U.S. Government obligations consist of securities which are issued,
and/or guaranteed as to principal and interest, by the U.S. Government and which are backed by the full faith and credit of the United States, including securities issued by the Government National Mortgage Association. The Fund may not invest in
securities issued or guaranteed by U.S. Government agencies, instrumentalities or U.S. Government sponsored enterprises that are not backed by the full faith and credit of the United States. There can be no assurance that the investment objective of
Government Fund will be realized.
For purposes of its investment
policies, Government Fund defines short-term securities as securities that mature in not more than 397 days (13 months). The dollar-weighted average maturity of Government Funds portfolio will be 60 days or less and the dollar-weighted average
life of Government Funds portfolio will be 120 days or less.
Investment in Government Fund shares offers several potential benefits. Utilizing professional money market management and block purchases of securities, Government Fund seeks to provide as high a yield
potential, consistent with its objective, as is available from investments in short-term U.S. Government securities. It provides high liquidity because of its redemption features and seeks the reduced market risk that generally results from
diversification of assets. The shareholder is also relieved from administrative burdens associated with direct investment in short-term U.S. Government securities, such as coordinating maturities and reinvestments, safekeeping and making numerous
buy-sell decisions. These benefits are at least partially offset by certain expenses borne by investors, including management fees, distribution fees, administrative costs and operational costs.
Government Fund may invest in the U.S. Government securities described above
pursuant to repurchase agreements. Under such agreements, the counterparty agrees, upon entering into the contract, to repurchase
I-2
the security from the Fund 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.
Money Fund
Money Fund is a money market fund. Money Funds investment objective
is to seek current income, preservation of capital and liquidity. Money Funds investment objective is a fundamental policy of the Fund that may not be changed without the affirmative vote of a majority of Money Funds outstanding shares
as defined in the Investment Company Act of 1940, as amended (the Investment Company Act). Money Fund tries to achieve its objective by investing in a diversified portfolio of short-term money market securities. There can be no assurance
that the investment objective of Money Fund will be realized. Money Fund is classified as a diversified open-end investment company under the Investment Company Act.
Money Funds investments will be in instruments with a remaining
maturity of 397 days (13 months) or less. Other than its investments in U.S. Government securities and U.S. Government agency securities, and in certain securities issued by U.S. Government sponsored enterprises and U.S. Government
instrumentalities, Money Fund invests only in short-term securities that have received a short-term rating, or that have been issued by issuers that have received a short-term rating with respect to a class of debt obligations that are comparable in
priority and security to the instruments, from the requisite nationally recognized statistical rating organizations (NRSROs) in one of the two highest short-term rating categories or, if neither the instrument nor its issuer is so rated,
are of comparable quality as determined by the Trustees of Money Fund or by BlackRock Advisors, LLC pursuant to delegated authority. Currently, there are three NRSROs that rate the vast majority of rated obligations in which the Fund invests: Fitch
Ratings (Fitch), Moodys Investors Service, Inc. (Moodys) and Standard & Poors (S&P). Money Fund will determine the remaining maturity of its investments in accordance with Commission
regulations. The dollar-weighted average maturity of Money Funds portfolio will be 60 days or less and the dollar-weighted average life of Money Funds portfolio will be 120 days or less.
Investment in Money Fund shares offers several potential benefits. Utilizing
professional money market management, block purchases of securities and yield improvement techniques, Money Fund seeks to provide as high a yield potential, consistent with its objective, as is available through investment in short-term money market
securities. It provides high liquidity because of its redemption features and seeks the reduced risk that generally results from diversification of assets. The shareholder is also relieved from administrative burdens associated with direct
investment in short-term securities, such as coordinating maturities and reinvestments, safekeeping and making numerous buy-sell decisions. These benefits are at least partially offset by certain expenses borne by investors including management
fees, distribution fees, administrative costs and operational costs.
In managing the Fund, the Manager will employ a number of professional money management techniques, including varying the composition of investments and the average maturity of the portfolio based on its
assessment of the relative values of the various securities and future interest rate patterns. These assessments will respond to changing economic and money market conditions and to shifts in fiscal and monetary policy. The Manager also will seek to
improve yield by taking advantage of yield disparities that regularly occur in the money market. For example, market conditions frequently result in similar securities trading at different prices. Also, there frequently are differences in yields
between the various types of money market securities. Money Fund seeks to enhance yield by purchasing and selling securities based on these yield differences.
Treasury Fund
Treasury Fund is a money market fund. Treasury Funds investment objective is to seek preservation of capital, liquidity and current income. Treasury Funds investment objective is a fundamental
policy of the Fund and may not be changed without the affirmative vote of a majority of Treasury Funds outstanding shares as defined in the Investment Company Act of 1940, as amended (the Investment Company Act).
I-3
Treasury Fund tries to achieve its investment objective by investing exclusively in a diversified portfolio of short-term marketable securities that are direct obligations of the U.S. Treasury.
There can be no assurance that the investment objective of Treasury Fund will be realized. Treasury Fund is classified as a diversified open-end investment company under the Investment Company Act.
Preservation of capital is a prime investment objective of Treasury Fund and
the direct U.S. Treasury obligations in which it will invest are generally considered to have the lowest principal risk among money market securities. Historically, direct U.S. Treasury obligations have generally had lower rates of return than other
money market securities that offer less safety.
For purposes of
its investment objective, Treasury Fund defines short-term marketable securities that are direct obligations of the U.S. Treasury as any U.S. Treasury obligations having maturities of no more than 397 days (13 months). The dollar-weighted average
maturity of Treasury Funds portfolio will be 60 days or less and the dollar-weighted average life of Treasury Funds portfolio will be 120 days or less.
Investment in Treasury Fund shares offers several potential benefits.
Utilizing professional money market management and block purchases of securities, Treasury Fund seeks to provide as high a yield potential, consistent with its objective, as is available through investment in short-term U.S. Treasury obligations. It
provides high liquidity because of its redemption features and seeks the reduced market risk that generally results from diversification of assets. The shareholder is also relieved from administrative burdens associated with direct investment in
U.S. Treasury securities, such as coordinating maturities and reinvestments, and making numerous buy-sell decisions. These benefits are at least partially offset by certain expenses borne by investors, including management fees, distribution fees,
administrative costs and operational costs.
* * *
Set forth below is a listing of some of the types of investments
and investment strategies that the Funds may use, and the risks and considerations associated with those investments and investment strategies. Please see Part II of this Statement of Additional Information for information on these investments and
investment strategies.
Only information that is clearly
identified as applicable to a Fund is considered to form a part of the Funds Statement of Additional Information.
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Government
Fund
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Money
Fund
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Treasury
Fund
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Bank Money Instruments
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x
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Commercial Paper and Other Short-Term Obligations
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x
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Foreign Bank Money Instruments
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x
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Foreign Short-Term Debt Instruments
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x
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Forward Commitments
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x
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x
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x
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Investment in Other Investment Companies
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Municipal Investments
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Municipal Securities
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Municipal Securities Derivative Products
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Municipal Notes
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Municipal Commercial Paper
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Municipal Lease Obligations
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Municipal Securities Short-Term Maturity Standards
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Municipal Securities Quality Standards
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Municipal Securities Other Factors
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Single State Risk
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Variable Rate Demand Obligations (VRDOs) and Participating VRDOs
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x
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Purchase of Securities with Fixed Price Puts
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I-4
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Government
Fund
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Money
Fund
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Treasury
Fund
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Repurchase Agreements and Purchase and Sale Contracts
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x
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x
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Reverse Repurchase Agreements
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x
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Rule 2a-7 Requirements
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x
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x
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x
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Securities Lending
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x
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Taxable Money Market Securities
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x
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x
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x
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When Issued Securities, Delayed Delivery Securities and Forward Commitments
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x
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x
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x
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II.
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Investment Restrictions
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Each Fund has adopted restrictions and policies relating to the investment of the Funds assets and its activities. Certain of these restrictions are
fundamental policies of the Fund and may not be changed without the approval of the holders of a majority of that Funds outstanding voting securities (which for this purpose and under the Investment Company Act, means the lesser of
(i) 67% of the shares represented at a meeting at which more than 50% of the outstanding shares are represented or (ii) more than 50% of the outstanding shares). None of the following fundamental restrictions shall prevent a Fund from
investing all of its assets in shares of another registered investment company with the same investment objective and policies (in a master/feeder structure).
Each Funds corresponding Master LLC has adopted investment restrictions substantially similar to those set forth below. In addition, each Master
LLC has adopted certain additional fundamental investment restrictions and certain non-fundamental investment restrictions. Each Master LLCs non-fundamental investment restrictions may be changed by such Master LLCs Board of Directors
without interestholder approval.
Set forth below are each
Funds fundamental investment restrictions and each Master LLCs fundamental and non-fundamental investment restrictions. Unless otherwise provided, all references below to the assets of a Fund are in terms of current market value.
Government Fund
Under its fundamental investment restrictions, Government Fund may not:
(1) Purchase any securities other than short-term marketable
securities which are direct obligations of the U.S. Government and repurchase agreements pertaining to such securities;
(2) Enter into repurchase agreements with any one bank or primary dealer or an affiliate thereof, if immediately thereafter, more than 5% of the value of
its total assets (taken at market value) would be invested in repurchase agreements with such bank or primary dealer or an affiliate thereof;
(3) Enter into repurchase agreements if, as a result thereof, more than 10% of Government Funds net assets (taken at market value at the time of
each investment) would be subject to repurchase agreements maturing in more than seven days;
(4) Act as an underwriter of securities issued by other persons;
(5) Purchase any securities on margin, except for use of short-term credit necessary for clearance of purchases and sales of portfolio securities;
(6) Make short sales of securities or maintain a short position or write, purchase or sell puts, calls, straddles, spreads or
combinations thereof;
(7) Make loans to other persons, provided
that Government Fund may purchase short-term marketable securities which are direct obligations of the U.S. Government or enter into repurchase agreements pertaining thereto;
(8) Borrow amounts in excess of 20% of its total assets, taken at market
value (including the amount borrowed), and then only from banks as a temporary measure for extraordinary or emergency purposes
I-5
(usually only leveraged investment companies may borrow in excess of 5% of their assets; however, Government Fund will not borrow to increase income but only to meet redemption
requests which might otherwise require untimely dispositions of portfolio securities). Government Fund will not purchase securities while borrowings are outstanding. Interest paid on such borrowings will reduce net income;
(9) Mortgage, pledge, hypothecate or in any manner transfer as security for
indebtedness any securities owned or held by Government Fund except as may be necessary in connection with borrowings mentioned in (8) above, and then such mortgaging, pledging or hypothecating may not exceed 10% of Government Funds net
assets, taken at market value;
(10) Invest more than 25% of
its total assets (taken at market value at the time of each investment) in the securities of issuers in any particular industry (other than U.S. Government securities and U.S. Government agency securities);
(11) Issue senior securities to the extent such issuance would violate
applicable law;
(12) Purchase or sell real estate (other than
money market securities secured by real estate or interests therein or money market securities issued by companies which invest in real estate, or interests therein); and
(13) Purchase or sell commodities or contracts on commodities, except to the
extent that the Fund may do so in accordance with applicable law and the Prospectus and this Statement of Additional Information, as they may be amended from time to time, and without registering as a commodity pool operator under the Commodity
Exchange Act.
Notwithstanding the provisions of fundamental
investment restriction (3), Government Fund will not invest more than 5% of the value of its total assets in repurchase agreements that mature in more than seven days or in other securities that are illiquid (i.e., securities that cannot be sold or
disposed of in the ordinary course of business within seven days at approximately the value ascribed to them by Government Fund).
Government LLC has adopted fundamental investment restrictions that are substantially similar to fundamental investment restrictions (4), (7), (10), (11),
(12) and (13) of Government Fund. Under the following additional fundamental investment restrictions, Government LLC may not:
(1) Borrow money, except that (i) Government LLC may borrow from banks (as defined in the Investment Company Act) in amounts up
to 33
1
/
3
% of its total assets (including the amount
borrowed), (ii) Government LLC may borrow up to an additional 5% of its total assets for temporary purposes, (iii) Government LLC may obtain such short-term credit as may be necessary for the clearance of purchases and sales of portfolio
securities, and (iv) Government LLC may purchase securities on margin to the extent permitted by applicable law. These restrictions on borrowing shall not apply to reverse repurchase agreements as described in Government LLCs prospectus
and statement of additional information. Government LLC may not pledge its assets other than to secure such borrowings or to the extent permitted by Government LLCs investment policies as set forth in its prospectus and statement of additional
information, as they may be amended from time to time, in connection with hedging transactions, short sales, when-issued, reverse repurchase and forward commitment transactions and similar investment strategies.
(2) Make any investment inconsistent with Government LLCs
classification as a diversified investment company under the Investment Company Act.
Government LLC also has adopted non-fundamental investment restrictions that are identical to fundamental investment restrictions (1), (2), (3), (5), (6), (8) and (9) of Government Fund. Set
forth below are additional non-fundamental investment restrictions adopted by Government LLC:
a. Subject to its fundamental investment restrictions, Government LLC may not purchase shares of any registered open-end investment company or registered unit investment trust, in reliance on
Section 12(d)(1)(F) or (G) (the fund of funds provisions) of the Investment Company Act, at any time its shares are owned by another investment company that is part of the same group of investment companies as Government LLC.
I-6
b. Change its policy of 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, without providing 60 days prior written notice to shareholders.
Except with respect to Government Funds and Government LLCs
borrowing restrictions, 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.
Money Fund
Under its fundamental investment restrictions, Money Fund may not:
(1) Purchase any securities other than types of money market
securities and investments described in the Prospectus and under Investment Objectives and Policies;
(2) Invest more than 25% of its total assets (taken at market value at the time of each investment) in the securities of issuers in any particular industry (other than U.S. Government securities, U.S.
Government agency securities or domestic bank money market instruments);
(3) Purchase the securities of any one issuer, other than the U.S. Government, its agencies or instrumentalities, if immediately after the purchase, more than 5% of the value of its total assets (taken at
market value) would be invested in such issuer, except that, in the case of bank money market instruments or repurchase agreements with any one bank, up to 25% of the value of the Funds total assets may be invested without regard to such 5%
limitation but shall instead be subject to a 10% limitation;
(4)
Purchase more than 10% of the outstanding securities, or more than 10% of the outstanding voting securities, of an issuer;
(5) Enter into repurchase agreements if, as a result, more than 10% of Money Funds net assets (taken at market value at the time of each investment,
together with any other investments deemed illiquid) would be subject to repurchase agreements maturing in more than seven days;
(6) Make investments for the purpose of exercising control or management;
(7) Underwrite securities issued by other persons;
(8) Purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition or reorganization;
(9)
Purchase or sell real estate (other than money market securities secured by real estate or interests therein or money market securities issued by companies which invest in real estate or interests therein), commodities or commodity contracts,
interests in oil, gas or other mineral exploration or development programs;
(10) Purchase any securities on margin, except for the use of short-term credit necessary for clearance of purchases and sales of portfolio securities;
(11) Make short sales of securities or maintain a short position or write,
purchase or sell puts, calls, straddles, spreads or combinations thereof;
(12) Make loans to other persons, provided that Money Fund may purchase money market securities or enter into repurchase agreements and lend securities owned or held by it pursuant to (13) below;
(13) Lend its portfolio securities in excess
of 33
1
/
3
% of its total assets, taken at market
value, provided that such loans are made according to the guidelines set forth above;
(14) Borrow amounts in excess of 20% of its total assets, taken at market value (including the amount borrowed), and then only from banks as a temporary measure for extraordinary or emergency purposes
(the borrowing provisions shall not apply to reverse repurchase agreements) (usually only leveraged investment companies may borrow in excess of 5% of their assets; however, Money Fund will not borrow to increase
I-7
income but only to meet redemption requests which might otherwise require untimely dispositions of portfolio securities). Money Fund will not purchase securities while borrowings are outstanding.
Interest paid on such borrowings will reduce net income;
(15)
Mortgage, pledge, hypothecate or in any manner transfer (except as provided in (13) above) as security for indebtedness any securities owned or held by Money Fund except as may be necessary in connection with borrowings referred to in
investment restriction (14) above, and then such mortgaging, pledging or hypothecating may not exceed 10% of Money Funds net assets, taken at market value;
(16) Invest in securities with legal or contractual restrictions on resale
(except for repurchase agreements) or for which no readily available market exists if, regarding all such securities, more than 10% of its net assets (taken at market value) would be invested in such securities;
(17) Invest in securities of issuers (other than issuers of U.S. Government
agency securities) having a record, together with predecessors, of less than three years of continuous operation if, regarding all such securities, more than 5% of its total assets (taken at market value) would be invested in such securities;
(18) Enter into reverse repurchase agreements if, as a result
thereof, Money Funds obligations with respect to reverse repurchase agreements would exceed one-third of its net assets (defined to be total assets, taken at market value, less liabilities other than reverse repurchase agreements);
(19) Purchase or retain the securities of any issuer, if those individual
officers and Trustees of Money Fund, the Manager or any subsidiary thereof each owning beneficially more than 1% of the securities of such issuer own in the aggregate more than 5% of the securities of the issuer; and
(20) Issue senior securities to the extent such issuance would violate
applicable law.
Notwithstanding the provisions of fundamental
investment restrictions (5) and (16), Money Fund will not invest more than 5% of the value of its total assets in securities that are illiquid (i.e., securities that cannot be sold or disposed of in the ordinary course of business within seven
days at approximately the value ascribed to them by Money Fund).
Money LLC has adopted fundamental investment restrictions that are substantially similar to fundamental investment restrictions (2), (7), (9),
(12) and (20) of Money Fund. Under the following additional fundamental investment restrictions, Money LLC may not:
(1) Borrow money, except that (i) Money LLC may borrow from banks (as defined in the Investment Company Act) in amounts up to 33
1
/
3
% of its total assets (including the amount borrowed),
(ii) Money LLC may borrow up to an additional 5% of its total assets for temporary purposes, (iii) Money LLC may obtain such short-term credit as may be necessary for the clearance of purchases and sales of portfolio securities, and
(iv) Money LLC may purchase securities on margin to the extent permitted by applicable law. These restrictions on borrowing shall not apply to reverse repurchase agreements as described in Money LLCs prospectus and statement of additional
information. Money LLC may not pledge its assets other than to secure such borrowings or to the extent permitted by Money LLCs investment policies as set forth in its prospectus and statement of additional information, as they may be amended
from time to time, in connection with hedging transactions, short sales, when-issued, reverse repurchase and forward commitment transactions and similar investment strategies.
(2) Make any investment inconsistent with Money LLCs classification as a diversified investment company under the
Investment Company Act.
Money LLC also has adopted
non-fundamental investment restrictions that are identical to fundamental investment restrictions (1), (3), (4), (5), (6), (8), (10), (11), (13), (14), (15), (16), (17), (18) and (19) of Money Fund. Set forth below are additional
non-fundamental investment restrictions adopted by Money LLC:
a.
Subject to its fundamental investment restrictions, Money LLC may from time to time lend securities from its portfolio to brokers, dealers and financial institutions and receive 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
I-8
100% of the current market value of the loaned securities. Such cash collateral will be invested in short-term securities, the income from which will increase the return to Money LLC. Such loans
will be terminable at any time. Money LLC will have the right to regain record ownership of loaned securities to exercise beneficial rights. Money LLC may pay reasonable fees in connection with the arranging of such loan.
b. Subject to its fundamental investment restrictions, Money LLC may not
purchase shares of any registered open-end investment company or registered unit investment trust, in reliance on Section 12(d)(1)(F) or (G) (the fund of funds provisions) of the Investment Company Act, at any time its shares
are owned by another investment company that is part of the same group of investment companies as Money LLC.
Except with respect to Money Funds and Money LLCs borrowing restrictions, 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.
Treasury Fund
Under its fundamental investment restrictions, Treasury Fund may not:
(1) Purchase any securities (other than direct obligations of the U.S.
Treasury) with remaining maturities of more than 762 days (25 months);
(2) Act as an underwriter of securities issued by other persons;
(3) Purchase any securities on margin, except for use of short-term credit necessary for clearance of purchases and sales of portfolio securities;
(4) Make short sales of securities or maintain a short position or write, purchase or sell puts, calls, straddles, spreads or
combinations thereof;
(5) Make loans to other persons, provided
that Treasury Fund may purchase short-term marketable securities which are direct obligations of the U.S. Treasury;
(6) Borrow amounts in excess of 20% of its total assets, taken at market value (including the amount borrowed), and then only from banks as a temporary
measure for extraordinary or emergency purposes (usually only leveraged investment companies may borrow in excess of 5% of their assets; however, Treasury Fund will not borrow to increase income but only to meet redemption requests which
might otherwise require untimely dispositions of portfolio securities). Treasury Fund will not purchase securities while borrowings are outstanding. Interest paid on such borrowings will reduce net income;
(7) Mortgage, pledge, hypothecate or in any manner transfer as security for
indebtedness any securities owned or held by Treasury Fund except as may be necessary in connection with borrowings mentioned in (6) above, and then such mortgaging, pledging or hypothecating may not exceed 10% of Treasury Funds net
assets, taken at market value;
(8) Purchase or sell real estate
(other than money market securities secured by real estate or interests therein or money market securities issued by companies which invest in real estate, or interests therein);
(9) Purchase or sell commodities or contracts on commodities, except to the
extent that the Fund may do so in accordance with applicable law and the Prospectus and this Statement of Additional Information, as they may be amended from time to time, and without registering as a commodity pool operator under the Commodity
Exchange Act;
(10) Issue senior securities to the extent such
issuance would violate applicable law; and
(11) Invest more than
25% of its total assets (taken at market value at the time of each investment) in the securities of issuers in any particular industry (other than U.S. Government securities, U.S. Government Agency securities or bank money instruments).
Notwithstanding the provisions of fundamental investment restriction (1),
Treasury Fund will not purchase any securities with remaining maturities of more than 397 days (13 months).
I-9
Treasury LLC has adopted fundamental investment restrictions that are substantially similar to fundamental
investment restrictions (2), (8), (9), (10) and (11) of Treasury Fund. Under the following additional fundamental investment restrictions, Treasury LLC may not:
(1) Borrow money, except that (i) Treasury LLC may
borrow from banks (as defined in the Investment Company Act) in amounts up to 33
1
/
3
% of its total assets (including the amount borrowed), (ii) Treasury LLC may borrow up to an additional 5% of its total assets for temporary purposes, (iii) Treasury LLC may obtain such
short-term credit as may be necessary for the clearance of purchases and sales of portfolio securities, and (iv) Treasury LLC may purchase securities on margin to the extent permitted by applicable law. These restrictions on borrowing shall not
apply to reverse repurchase agreements as described in Treasury LLCs prospectus and statement of additional information. Treasury LLC may not pledge its assets other than to secure such borrowings or to the extent permitted by Treasury
LLCs investment policies as set forth in its prospectus and statement of additional information, as they may be amended from time to time, in connection with hedging transactions, short sales, when-issued, reverse repurchase and forward
commitment transactions and similar investment strategies.
(2) Make loans to other persons, except that the acquisition of bonds, debentures or other debt securities and investment in government obligations,
commercial paper, pass-through instruments, certificates of deposit, bankers acceptances, repurchase agreements or any similar instruments shall not be deemed to be the making of a loan, and except further that Treasury Fund may lend its
portfolio securities, provided that the lending of portfolio securities may be made only in accordance with applicable law and guidelines set forth in Treasury LLCs prospectus and statement of additional information, as they may be amended
from time to time.
(3) Make any investment inconsistent with
Treasury LLCs classification as a diversified investment company under the Investment Company Act.
Treasury LLC also has adopted non-fundamental restrictions that are identical to fundamental investment restrictions (1), (3), (4), (5), (6) and (7) of Treasury Fund. Set forth below are
additional non-fundamental investment restrictions adopted by Treasury LLC:
a. Subject to its fundamental investment restrictions, Treasury LLC may not purchase shares of any registered open-end investment company or registered unit investment trust, in reliance on
Section 12(d)(1)(F) or (G) (the fund of funds provisions) of the Investment Company Act, at any time its shares are owned by another investment company that is part of the same group of investment companies as Treasury LLC.
b. Change its policy of investing exclusively in a diversified
portfolio made up only of short-term marketable securities, that are direct obligations of the U.S. Treasury without providing 60 days prior written notice to shareholders.
Except with respect to 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.
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Information on Trustees and Officers
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The Board of each Fund consists of thirteen individuals (each, a Trustee), eleven of whom are not interested persons of the Fund
as defined in the Investment Company Act (the Independent Trustees). The same individuals serve as directors of the Master LLCs. The registered investment companies advised by BlackRock Advisors, LLC (BlackRock or the
Manager) or its affiliates (the BlackRock-advised Funds) are organized into one complex of closed-end funds, two complexes of open-end funds (the Equity-Liquidity Complex and the Equity-Bond Complex) and one complex of
exchange-traded funds (each, a BlackRock Fund Complex). The Funds are included in the BlackRock Fund Complex referred to as the Equity-Liquidity Complex. The Trustees also oversee as board members the operations of the other open-end
registered investment companies included in the Equity-Liquidity Complex.
I-10
The Board of each Fund has overall responsibility for the oversight of the Fund. The Co-Chairs of each
Board are Independent Trustees, and the Chair of each committee of each Board (each, a Committee) is an Independent Trustee. Each Board has five standing Committees: an Audit Committee, a Governance and Nominating Committee, a Compliance
Committee, a Performance Oversight and Contract Committee and an Executive Committee. Each Board also has one
ad hoc
committee, the Joint Product Pricing Committee. The role of the Co-Chairs of each Board is to preside at all meetings of the
Board and to act as a liaison with service providers, officers, attorneys and other Trustees generally between meetings. The Chair of each Committee performs a similar role with respect to the Committee. The Co-Chairs of each Board or the Chair of a
Committee may also perform such other functions as may be delegated by the Board or the Committee from time to time. The Independent Trustees meet regularly outside the presence of Fund management, in executive session or with other service
providers to the Funds. Each Board has regular meetings five times a year and may hold special meetings if required before its next regular meeting. Each Committee meets regularly to conduct the oversight functions delegated to that Committee by the
Board and reports its findings to the Board. Each Board and each standing Committee conduct annual assessments of their oversight function and structure. Each Board has determined that the Boards leadership structure is appropriate because it
allows the Board to exercise independent judgment over management and to allocate areas of responsibility among Committees and the full Board to enhance effective oversight.
Each Board has engaged the Manager to manage the applicable Fund on a
day-to-day basis. Each Board is responsible for overseeing the Manager, other service providers, the operations of the applicable Fund and associated risks in accordance with the provisions of the Investment Company Act, state law, other applicable
laws, the applicable Funds charter and the applicable Funds investment objective and strategies. Each Board reviews, on an ongoing basis, the applicable Funds performance, operations and investment strategies and techniques. Each
Board also conducts reviews of the Manager and its role in running the operations of the Fund.
Day-to-day risk management with respect to the Funds is the responsibility of the Manager or of subadvisers or other service providers (depending on the nature of the risk), subject to the supervision of
the Manager. The Funds are subject to a number of risks, including investment, compliance, operational and valuation risks, among others. While there are a number of risk management functions performed by the Manager and the subadvisers or other
service providers, as applicable, it is not possible to eliminate all of the risks applicable to the Funds. Risk oversight forms part of each Boards general oversight of the applicable Fund and is addressed as part of various Board and
Committee activities. Each Board, directly or through a Committee, also reviews reports from, among others, management, the independent registered public accounting firm for the applicable Fund, subadvisers and internal auditors for the investment
adviser or its affiliates, as appropriate, regarding risks faced by the Fund and managements or the service providers risk functions. The Committee system facilitates the timely and efficient consideration of matters by the Trustees and
facilitates effective oversight of compliance with legal and regulatory requirements and of the Funds activities and associated risks. Each Board has appointed a Chief Compliance Officer, who oversees the implementation and testing of the
applicable Funds compliance program and reports to the Board regarding compliance matters for the Fund and its service providers. The Independent Trustees have engaged independent legal counsel to assist them in performing their oversight
responsibilities.
The members of the Audit Committees are
Kenneth L. Urish (Chair), Herbert I. London and Frederick W. Winter, all of whom are Independent Trustees. The principal responsibilities of each Audit Committee are to approve the selection, retention, termination and compensation of the
Funds independent registered public accounting firm (the independent auditors) and to oversee the independent auditors work. The Audit Committees responsibilities include, without limitation, (1) to evaluate the
qualifications and independence of the independent auditors; (2) to approve all audit engagement terms and fees for the Fund; (3) to review the conduct and results of each independent audit of the Funds financial statements;
(4) to review any issues raised by the independent auditors or Fund management regarding the accounting or financial reporting policies and practices of the Fund and the internal controls of the Fund and certain service providers; (5) to
oversee the performance of (a) the Funds internal audit function provided by its investment adviser and (b)
I-11
the independent auditors; (6) to discuss with Fund management its policies regarding risk assessment and risk management as such matters relate to the Funds financial reporting and
controls; and (7) to resolve any disagreements between Fund management and the independent auditors regarding financial reporting. Each Board has adopted a written charter for the Audit Committee. During the fiscal year ended March 31, 2011,
each Audit Committee met five times.
The members of the
Governance and Nominating Committees (each, a Governance Committee) are Dr. Matina S. Horner (Chair), Cynthia A. Montgomery and Robert C. Robb, Jr., all of whom are Independent Trustees. The principal responsibilities of each
Governance Committee are (1) to identify individuals qualified to serve as Independent Trustees of the Fund and to recommend Independent Trustee nominees for election by shareholders or appointment by the Board; (2) to advise the Board
with respect to Board composition, procedures and Committees (other than the Audit Committee); (3) to oversee periodic self-assessments of the Board and Committees of the Board (other than the Audit Committee); (4) to review and to make
recommendations regarding Independent Trustee compensation; and (5) to monitor corporate governance matters and to develop appropriate recommendations to the Board. Each 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 the applicable Fund that include biographical information and set forth the qualifications of the
proposed nominee. Each Board has adopted a written charter for the Governance Committee. During the fiscal year ended March 31, 2011, each Governance Committee met five times.
The members of the Compliance Committees are Joseph P. Platt (Chair),
Cynthia A. Montgomery and Robert C. Robb, Jr., all of whom are Independent Trustees. Each Compliance Committees purpose is to assist the Board in fulfilling its responsibility to oversee regulatory and fiduciary compliance matters involving
the Fund, the fund-related activities of BlackRock and the Funds third party service providers. The Compliance Committees responsibilities include, without limitation, (1) to oversee the compliance policies and procedures of the
Fund and its service providers and to recommend changes or additions to such policies and procedures; (2) to review information on and, where appropriate, to recommend policies concerning the Funds compliance with applicable law; and
(3) to review reports from, to oversee the annual performance review of, and to make certain recommendations regarding the Funds Chief Compliance Officer. Each Board has adopted a written charter for the Compliance Committee. During the
fiscal year ended March 31, 2011, each Compliance Committee met ten times.
The members of the Performance Oversight and Contract Committees (each, a Performance Oversight Committee) are David O. Beim (Chair), Toby Rosenblatt (Vice Chair), Ronald W. Forbes and Rodney
D. Johnson, all of whom are Independent Trustees. Each Performance Oversight Committees purpose is to assist the Board in fulfilling its responsibility to oversee the Funds investment performance relative to its agreed-upon performance
objectives and to assist the Independent Trustees in their consideration of investment advisory agreements. The Performance Oversight Committees responsibilities include, without limitation, (1) to review the Funds investment
objective, policies and practices; (2) to review information on appropriate benchmarks and competitive universes and unusual or exceptional matters; (3) to review personnel and resources devoted to management of the Fund and to evaluate the
nature and quality of information furnished to the Performance Oversight Committee; (4) to recommend any required action regarding changes in fundamental and non-fundamental investment policies and restrictions, Fund mergers or liquidations;
(5) to request and to review information on the nature, extent and quality of services provided to the shareholders; and (6) to make recommendations to the Board concerning the approval or renewal of investment advisory agreements. Each
Board has adopted a written charter for the Performance Oversight Committee. During the fiscal year ended March 31, 2011, each Performance Oversight Committee met five times.
The Boards of the Equity-Liquidity Complex, the Equity-Bond Complex and the
closed-end BlackRock Fund Complex established the
ad hoc
Joint Product Pricing Committee (the Product Pricing Committee) comprised of nine members drawn from the independent board members serving on the boards of these BlackRock
Fund Complexes. Ronald W. Forbes and Rodney D. Johnson are members of the Product Pricing Committee representing the Equity-Liquidity Complex. Two independent board members representing the
I-12
closed-end BlackRock Fund Complex and five independent board members representing the Equity-Bond Complex serve on the Product Pricing Committee. The Product Pricing Committee is chaired by an
independent board member from the Equity-Bond Complex. The purpose of the Product Pricing Committee is to review the components and pricing structure of the non-money market funds in the BlackRock Fund Complexes. During the fiscal year ended March
31, 2011, the Product Pricing Committee met seven times.
The
members of the Executive Committees are Ronald W. Forbes and Rodney D. Johnson, both of whom are Independent Trustees, and Richard S. Davis, who serves as an interested Trustee. The principal responsibilities of the Executive Committee are
(1) to act on routine matters between meetings of the Board; (2) to act on such matters as may require urgent action between meetings of the Board; and (3) to exercise such other authority as may from time to time be delegated to the
Executive Committee by the Board. Each Board has adopted a written charter for the Executive Committee. During the fiscal year ended March 31, 2011, the Executive Committees did not hold a formal meeting.
Each Governance Committee has adopted a statement of policy that describes
the experience, qualifications, skills and attributes that are necessary and desirable for potential Independent Trustee candidates (the Statement of Policy). Each Board believes that each Independent Trustee satisfied, at the time he or
she was initially elected or appointed a Trustee, and continues to satisfy the standards contemplated by the Statement of Policy. Furthermore, in determining that a particular Trustee was and continues to be qualified to serve as a Trustee, each
Board has considered a variety of criteria, none of which, in isolation, was controlling. Each Board believes that, collectively, the Trustees have balanced and diverse experience, skills, attributes and qualifications, which allow the Board to
operate effectively in governing the Fund and protecting the interests of shareholders. Among the attributes common to all Trustees are their ability to review critically, to evaluate, to question and to discuss information provided to them; to
interact effectively with each Funds investment adviser, sub-advisers, other service providers, counsel and independent auditors; and to exercise effective business judgment in the performance of their duties as Trustees. Each Trustees
ability to perform his or her duties effectively is evidenced by his or her educational background or professional training; business, consulting, public service or academic positions; experience from service as a board member of each Fund and the
other funds in the BlackRock Fund Complex (and any predecessor funds), other investment funds, public companies, non-profit entities or other organizations; ongoing commitment to and participation in Board and Committee meetings, as well as his or
her leadership of standing and
ad hoc
committees throughout the years; or other relevant life experiences.
The table below discusses some of the experiences, qualifications and skills of each of the Trustees that support the conclusion that each Trustee should serve (or continue to serve) on the Boards.
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|
|
Trustees
|
|
Experience, Qualifications and Skills
|
|
|
Independent Trustees
|
|
|
|
|
David O. Beim
|
|
David O. Beim has served for approximately 13 years on the boards of registered investment companies, most recently as a member of the boards of the funds in the Equity-Liquidity
Complex and its predecessor funds, including the legacy Merrill Lynch Investment Managers, L.P. (MLIM) funds. Mr. Beim has served as a professor of finance and economics at the Columbia University Graduate School of Business since 1991
and has taught courses on corporate finance, international banking and emerging financial markets. The Boards benefit from the perspective and background gained by his almost 20 years of academic experience. He has published numerous articles
and books on a range of topics, including, among others, banking and finance. In addition, Mr. Beim spent 25 years in investment banking, including starting and running the investment banking business at Bankers Trust Company.
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Ronald W. Forbes
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|
Ronald W. Forbes has served for more than 30 years on the boards of registered investment companies, most recently as a member of the boards of the funds in the Equity-Liquidity
Complex and its predecessor funds, including the legacy MLIM funds. This length of service provides Mr. Forbes with direct knowledge of the operation of each Fund and the business and regulatory issues facing the Fund. He currently serves as
professor emeritus at the School of Business at the State University of New York at Albany, and has served as a professor of finance thereof since 1989. Mr. Forbes experience as a professor of finance provides valuable background for his
service on the boards. Mr. Forbes has also served as a member of the task force on municipal securities markets for Twentieth Century Fund.
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I-13
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|
|
Trustees
|
|
Experience, Qualifications and Skills
|
|
|
Dr. Matina S. Horner
|
|
Dr. Matina S. Horner has served for approximately 7 years on the boards of registered investment companies, most recently as a member of the boards of the funds in the
Equity-Liquidity Complex and its predecessor funds, including the legacy BlackRock funds. The Boards benefit from her service as executive vice president of Teachers Insurance and Annuity Association and College Retirement Equities Fund. This
experience provides Dr. Horner with management and corporate governance experience. In addition, Dr. Horner served as a professor in the Department of Psychology at Harvard University and served as President of Radcliffe College for 17 years. Dr.
Horner also served on various public, private and non-profit boards.
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Rodney D. Johnson
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|
Rodney D. Johnson has served for over 20 years on the boards of registered investment companies, most recently as a member of the boards of the funds in the Equity-Liquidity Complex
and its predecessor funds, including the legacy BlackRock funds. He has over 25 years of experience as a financial advisor covering a range of engagements, which has broadened his knowledge of and experience with the investment management business.
Prior to founding Fairmount Capital Advisors, Inc., Mr. Johnson served as Chief Investment Officer of Temple University for two years. He served as Director of Finance and Managing Director, in addition to a variety of other roles, for the City of
Philadelphia, and has extensive experience in municipal finance. Mr. Johnson was also a tenured associate professor of finance at Temple University and a research economist with the Federal Reserve Bank of Philadelphia.
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Herbert I. London
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|
Herbert I. London has served for over 20 years on the boards of registered investment companies, most recently as a member of the boards of the funds in the Equity-Liquidity Complex
and its predecessor funds, including the legacy MLIM funds. Dr. Londons experience as president of the Hudson Institute, a world renowned think tank in Washington D.C., since 1997, and in various positions at New York University provide both
background and perspective on financial, economic and global issues, which enhance his service on the Boards. He has authored several books and numerous articles, which have appeared in major newspapers and journals throughout the United
States.
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Cynthia A. Montgomery
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|
Cynthia A. Montgomery has served for over 15 years on the boards of registered investment companies, most recently as a member of the boards of the funds in the Equity-Liquidity
Complex and its predecessor funds, including the legacy MLIM funds. The Boards benefit from Ms. Montgomerys more than 20 years of academic experience as a professor at Harvard Business School where she taught courses on corporate strategy and
corporate governance. Ms. Montgomery also has business management and corporate governance experience through her service on the corporate boards of a variety of public companies. She has also authored numerous articles and books on these
topics.
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Joseph P. Platt
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|
Joseph P. Platt has served for approximately 12 years on the boards of registered investment companies, most recently as a member of the boards of the funds in the Equity-Liquidity
Complex and its predecessor funds, including the legacy BlackRock funds. Mr. Platt currently serves as general partner at Thorn Partners, LP, a private investment company. Prior to his joining Thorn Partners, LP, he was an owner, director and
executive vice president with Johnson and Higgins, an insurance broker and employee benefits consultant. He has over 25 years experience in the areas of insurance, compensation and benefits. Mr. Platt also serves on the boards of public, private and
non-profit companies.
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Robert C. Robb, Jr.
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|
Robert C. Robb, Jr. has served for approximately 12 years on the boards of registered investment companies, most recently as a member of the boards of the funds in the
Equity-Liquidity Complex and its predecessor funds, including the legacy BlackRock funds. Mr. Robb has over 30 years of experience in management consulting and has worked with many companies and business associations located throughout the United
States. Mr. Robb brings to the Boards a wealth of practical business experience across a range of industries.
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Toby Rosenblatt
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|
Toby Rosenblatt has served for approximately 20 years on the boards of registered investment companies, most recently as a member of the boards of the funds in the Equity-Liquidity
Complex and its predecessor funds, including the legacy BlackRock funds. He has served as president and general partner of Founders Investments, Ltd., a private investment limited partnership, since 1999, providing him with relevant experience with
the issues faced by investment management firms and their clients. Mr. Rosenblatt has been active in the civic arena and has served as a trustee of a number of community and educational organizations for over 30 years.
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Kenneth L. Urish
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|
Kenneth L. Urish has served for approximately 12 years on the boards of registered investment companies, most recently as a member of the boards of the funds in the Equity-Liquidity
Complex and its predecessor funds, including the legacy BlackRock funds. He has over 30 years of experience in public accounting. Mr. Urish has served as a managing member of an accounting and consulting firm. Mr. Urish has been determined by each
Audit Committee to be an audit committee financial expert, as such term is defined in the applicable SEC rules.
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Frederick W. Winter
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Frederick W. Winter has served for approximately 12 years on the boards of registered investment companies, most recently as a member of the boards of the funds in the
Equity-Liquidity Complex and its predecessor funds, including the legacy BlackRock funds. The Boards benefit from Mr. Winters years of academic experience, having served as a professor and dean emeritus of the Joseph M. Katz Graduate School of
Business at the University of Pittsburgh since 2005, and dean thereof since 1997. He is widely regarded as a specialist in marketing strategy, marketing management, business-to-business marketing and services marketing. He has also served as a
consultant to more than 50 different firms.
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I-14
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Trustees
|
|
Experience, Qualifications and Skills
|
|
|
Interested Trustees
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Richard S. Davis
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|
Richard S. Daviss experience as a Managing Director of BlackRock, Inc. and Chief Executive Officer of State Street Research & Management Company benefits the Funds by
providing them with additional business leadership and experience, while adding the benefit of his diverse knowledge concerning investment management firms. In addition Mr. Daviss experience as the Chairman of State Street Research Mutual
Funds and SSR Realty provides each Fund with a wealth of practical business knowledge and leadership. Mr. Daviss previous service on and long-standing relationship with the Boards also provide him with a specific understanding of the Funds,
their operations, and the business and regulatory issues facing the Funds.
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Henry Gabbay
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Henry Gabbays many years of experience in finance provide the Boards with a wealth of practical business knowledge and leadership. In particular, Mr. Gabbays experience
as a consultant for and Managing Director of BlackRock, Inc., Chief Administrative Officer of BlackRock Advisors, LLC and President of BlackRock Funds provides the Funds with greater insight into the analysis and evaluation of both its existing
investment portfolios and potential future investments as well as enhanced oversight of their investment decisions and investment valuation processes. In addition, Mr. Gabbays former positions as Chief Administrative Officer of BlackRock
Advisors, LLC and as Treasurer of certain closed-end funds in the BlackRock fund complex provide the Boards with direct knowledge of the operations of the Funds and their investment advisers. Mr. Gabbays previous service on and long-standing
relationship with the Boards also provide him with a specific understanding of the Funds, their operations, and the business and regulatory issues facing the Funds.
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Biographical
Information
Certain biographical and other information
relating to the Trustees of each Fund is set forth below, including address and year of birth, principal occupations for at least the last five years, length of time served, total number of registered investment companies and investment portfolios
overseen in the BlackRock-advised Funds and any public company and investment company directorships held during the past five years.
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Name, Address
and Year of Birth
|
|
Position(s)
Held with
Funds
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|
Length of
Time Served
as a Trustee
2
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|
Principal Occupation(s)
During Past Five
Years
|
|
Number
of
BlackRock-
Advised
Registered
Investment
Companies
(RICs)
Consisting of
Investment
Portfolios
(Portfolios)
Overseen
|
|
Public
Company and
Investment
Company
Directorships
Held
During
Past Five Years
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|
|
|
|
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|
Independent Trustees
1
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David O. Beim
3
55 East 52
nd
Street
New York, NY 10055
1940
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|
Trustee
|
|
2007 to present
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|
Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy since 2002; Chairman, Wave Hill, Inc. (public
garden and cultural center) from 1990 to 2006.
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|
36 RICs consisting of 95 Portfolios
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|
None
|
|
|
|
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Ronald W. Forbes
4
55 East
52
nd
Street
New York, NY 10055
1940
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|
Trustee
|
|
1981 to present (Government Fund and Money Fund); 1991 to present (Treasury Fund)
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Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.
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36 RICs consisting of 95 Portfolios
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|
None
|
|
|
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Dr. Matina S. Horner
5
55 East
52
nd
Street
New York, NY 10055
1939
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|
Trustee
|
|
2007 to present
|
|
Executive Vice President of Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.
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|
36 RICs consisting of 95 Portfolios
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|
NSTAR (electric and gas utility)
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|
Rodney D. Johnson
4
55 East
52
nd
Street
New York, NY 10055
1941
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|
Trustee
|
|
2007 to present
|
|
President, Fairmount Capital Advisors, Inc. since 1987; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2004; Director, The Committee of
Seventy (civic) since 2006; Director, Fox Chase Cancer Center from 2004 to 2010.
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|
36 RICs consisting of 95 Portfolios
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|
None
|
I-15
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|
|
|
|
|
|
|
|
|
|
Name, Address
and Year of Birth
|
|
Position(s)
Held with
Funds
|
|
Length of
Time Served
as a Trustee
2
|
|
Principal Occupation(s)
During Past Five
Years
|
|
Number
of
BlackRock-
Advised
Registered
Investment
Companies
(RICs)
Consisting of
Investment
Portfolios
(Portfolios)
Overseen
|
|
Public
Company and
Investment
Company
Directorships
Held During
Past
Five Years
|
|
|
|
|
|
|
Herbert I. London
55 East 52
nd
Street
New York, NY 10055
1939
|
|
Trustee
|
|
2007 to present
|
|
Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and 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, Cerego,
LLC (software development and design) since 2005; Director, Cybersettle (dispute resolution technology) since 2009.
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|
36 RICs consisting of 95 Portfolios
|
|
AIMS Worldwide, Inc. (marketing)
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|
|
|
|
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|
Cynthia A. Montgomery
55 East 52
nd
Street
New York, NY 10055
1952
|
|
Trustee
|
|
1994 to present
|
|
Professor, Harvard Business School since 1989; Director, McLean Hospital since 2005; Director, Harvard Business School Publishing from 2005 to 2010.
|
|
36 RICs consisting of 95 Portfolios
|
|
Newell Rubbermaid, Inc. (manufacturing)
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|
|
|
|
|
|
Joseph P. Platt
6
55 East 52
nd
Street
New York, NY 10055
1947
|
|
Trustee
|
|
2007 to present
|
|
Director, The West Penn Allegheny Health System (a not-for-profit health system) since 2008; Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn
Partners, LP (private investment) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.
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|
36 RICs consisting of 95 Portfolios
|
|
Greenlight Capital Re, Ltd. (reinsurance company)
|
|
|
|
|
|
|
Robert C. Robb, Jr.
55 East 52
nd
Street
New York, NY 10055
1945
|
|
Trustee
|
|
2007 to present
|
|
Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.
|
|
36 RICs consisting of 95 Portfolios
|
|
None
|
|
|
|
|
|
|
Toby Rosenblatt
7
55 East 52
nd
Street
New York, NY 10055
1938
|
|
Trustee
|
|
2007 to present
|
|
President, Founders Investments Ltd. (private investments) since 1999; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, Forward
Management, LLC since 2007; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.
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|
36 RICs consisting of 95 Portfolios
|
|
A.P. Pharma, Inc. (pharmaceuticals) (1983-2011)
|
|
|
|
|
|
|
Kenneth L. Urish
8
55 East 52
nd
Street
New York, NY 10055
1951
|
|
Trustee
|
|
2007 to present
|
|
Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Chairman Elect of the Professional Ethics Committee of the Pennsylvania
Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Trustee, The Holy Family Foundation from 2001 to 2010;
President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.
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|
36 RICs consisting of 95 Portfolios
|
|
None
|
I-16
|
|
|
|
|
|
|
|
|
|
|
Name, Address
and Year of Birth
|
|
Position(s)
Held with
Funds
|
|
Length of
Time Served
as a Trustee
2
|
|
Principal Occupation(s)
During Past Five
Years
|
|
Number
of
BlackRock-
Advised
Registered
Investment
Companies
(RICs)
Consisting of
Investment
Portfolios
(Portfolios)
Overseen
|
|
Public
Company and
Investment
Company
Directorships
Held
During
Past Five Years
|
|
|
|
|
|
|
Frederick W. Winter
55 East 52
nd
Street
New York, NY 10055
1945
|
|
Trustee
|
|
2007 to present
|
|
Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh since 2005 and Dean thereof from 1997 to 2005; Director, Alkon Corporation
(pneumatics) since 1992; Director, Tippman Sports (recreation) since 2005; Director, Indotronix International (IT services) from 2004 to 2008.
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|
36 RICs consisting of 95 Portfolios
|
|
None
|
|
|
|
|
|
|
Interested Trustees
1,9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard S. Davis
55 East 52
nd
Street
New York, NY 10055
1945
|
|
Trustee
|
|
2007 to present
|
|
Managing Director, BlackRock, Inc. since 2005; Chief Executive Officer, State Street Research & Management Company from 2000 to 2005; Chairman of the Board of Trustees, State
Street Research Mutual Funds from 2000 to 2005.
|
|
168 RICs consisting of 288 Portfolios
|
|
None
|
|
|
|
|
|
|
Henry Gabbay
55 East 52
nd
Street
New York, NY 10055
1947
|
|
Trustee
|
|
2007 to present
|
|
Consultant, BlackRock, Inc. from 2007 to 2008; Managing Director, BlackRock, Inc. from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007;
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.
|
|
168 RICs consisting of 288 Portfolios
|
|
None
|
1
|
|
Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved one-year
extensions in the terms of Trustees who turn 72 prior to December 31, 2013.
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2
|
|
Following the combination of 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 Independent Trustee first became a member of the boards of other legacy MLIM or legacy BlackRock
funds as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1999; Toby Rosenblatt,
2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.
|
3
|
|
Chair of the Performance Oversight Committees.
|
4
|
|
Co-Chair of each Board.
|
5
|
|
Chair of the Governance Committees.
|
6
|
|
Chair of the Compliance Committees.
|
7
|
|
Vice Chair of the Performance Oversight Committees.
|
8
|
|
Chair of the Audit Committees.
|
9
|
|
Mr. Davis is an interested person, as defined in the Investment Company Act, of the Funds based on his position with BlackRock, Inc.
and its affiliates. Mr. Gabbay is an interested person of the Funds based on his former positions with BlackRock, Inc. and its affiliates, as well as his ownership of BlackRock, Inc. and The PNC Financial Services Group, Inc.
|
I-17
Certain biographical and other information relating to the officers of the Funds is set forth below,
including address and year of birth, principal occupations for at least the last five years, length of time served, total number of registered investment companies and investment portfolios overseen in the BlackRock-advised Funds and any public
company and investment company directorships held during the past five years:
|
|
|
|
|
|
|
|
|
|
|
Name, Address
and Year of Birth
|
|
Position(s)
Held with
the Funds
|
|
Length of
Time Served
1
|
|
Principal Occupation(s)
During Past Five
Years
|
|
Number
of
BlackRock-
Advised
Registered
Investment
Companies
(RICs)
Consisting of
Investment
Portfolios
(Portfolios)
Overseen
|
|
Public
Company and
Investment
Company
Directorships
Held
During
Past Five Years
|
|
|
|
|
|
|
John Perlowski
55 East 52
nd
Street
New York, NY 10055
1964
|
|
President and Chief Executive Officer
|
|
2010 to present
|
|
Managing Director of BlackRock, Inc. since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product
Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of
Family Resource Network (charitable foundation) since 2009.
|
|
70 RICs consisting of 192 Portfolios
|
|
None
|
|
|
|
|
|
|
Richard Hoerner, CFA
55 East 52
nd
Street
New York, NY 10055
1958
|
|
Vice President
|
|
2009 to
present
|
|
Managing Director of BlackRock, Inc. since 2000; Co-head of BlackRocks Cash Management Portfolio Management Group since 2002; Member of the Cash Management Group Executive
Committee since 2005.
|
|
24 RICs consisting of 76 Portfolios
|
|
None
|
|
|
|
|
|
|
Brendan Kyne
55 East 52
nd
Street
New York, NY 10055
1977
|
|
Vice President
|
|
2009 to
present
|
|
Managing Director of BlackRock, Inc. since 2010; Director of BlackRock, Inc. from 2008 to 2009; Head of Product Development and Management for BlackRocks U.S. Retail Group
since 2009, Co-head thereof from 2007 to 2009; Vice President of BlackRock, Inc. from 2005 to 2008.
|
|
168 RICs consisting of 288 Portfolios
|
|
None
|
|
|
|
|
|
|
Simon Mendelson
55 East 52
nd
Street
New York, NY 10055
1964
|
|
Vice President
|
|
2009 to
present
|
|
Managing Director of BlackRock, Inc. since 2005; Co-head of the Global Cash and Securities Lending Group since 2010; Chief Operating Officer and Head of the Global Client Group for
BlackRocks Global Cash Management Business from 2007 to 2010; Head of BlackRocks Strategy and Development Group from 2005 to 2007; Partner of McKinsey and Co. from 1997 to 2005.
|
|
24 RICs consisting of 76 Portfolios
|
|
None
|
|
|
|
|
|
|
Christopher Stavrakos
55 East 52
nd
Street
New York, NY 10055
1959
|
|
Vice President
|
|
2009 to present
|
|
Managing Director of BlackRock, Inc. since 2006; Co-head of BlackRocks Cash Management Portfolio Management Group since 2006; Senior Vice President, Chief Investment Officer
and Director of Liability Management for the Securities Lending Group at Mellon Bank from 1999 to 2006.
|
|
24 RICs consisting of 76 Portfolios
|
|
None
|
|
|
|
|
|
|
Neal J. Andrews
55 East 52
nd
Street
New York, NY 10055
1966
|
|
Chief Financial Officer and Assistant Treasurer
|
|
2007 to present
|
|
Managing Director of BlackRock, Inc. since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc.
from 1992 to 2006.
|
|
168 RICs consisting of 288 Portfolios
|
|
None
|
I-18
|
|
|
|
|
|
|
|
|
|
|
Name, Address
and Year of Birth
|
|
Position(s)
Held with
the Funds
|
|
Length of
Time Served
1
|
|
Principal Occupation(s)
During Past Five
Years
|
|
Number
of
BlackRock-
Advised
Registered
Investment
Companies
(RICs)
Consisting of
Investment
Portfolios
(Portfolios)
Overseen
|
|
Public
Company and
Investment
Company
Directorships
Held
During
Past Five Years
|
|
|
|
|
|
|
Jay M. Fife
55 East 52
nd
Street
New York, NY 10055
1970
|
|
Treasurer
|
|
2007 to present
|
|
Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Assistant Treasurer of the Merrill Lynch Investment Managers, L.P. (MLIM) and Fund
Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
|
|
168 RICs consisting of 288 Portfolios
|
|
None
|
|
|
|
|
|
|
Brian P. Kindelan
55 East 52
nd
Street
New York, NY 10055
1959
|
|
Chief Compliance Officer and Anti-Money Laundering Officer
|
|
2007 to present
|
|
Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock, Inc. since 2005.
|
|
168 RICs consisting of 288 Portfolios
|
|
None
|
|
|
|
|
|
|
Ira P. Shapiro
55 East 52
nd
Street
New York, NY 10055
1963
|
|
Secretary
|
|
2010 to present
|
|
Managing Director of BlackRock, Inc.
since 2009; Managing Director and Associate General Counsel of Barclays Global Investors from 2008 to 2009; Principal thereof from 2004 to
2008.
|
|
74 RICs consisting of 410 Portfolios
|
|
None
|
1
|
|
Officers of the Funds serve at the pleasure of the respective Board.
|
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, 2010 is set forth in the chart below.
|
|
|
|
|
|
|
|
|
Name
|
|
Aggregate Dollar
Range of Equity
Securities in
Government Fund
|
|
Aggregate Dollar
Range of Equity
Securities in
Money Fund
|
|
Aggregate Dollar
Range of Equity
Securities in
Treasury Fund
|
|
Aggregate Dollar
Range of Equity
Securities in
Supervised Funds
|
|
|
|
|
|
Interested Trustees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard S. Davis
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
|
|
|
|
|
Henry Gabbay
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
|
|
|
|
|
Independent Trustees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David O. Beim
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
|
|
|
|
|
Ronald W. Forbes
|
|
None
|
|
$1 -$10,000
|
|
None
|
|
Over $100,000
|
|
|
|
|
|
Dr. Matina S. Horner
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
|
|
|
|
|
Rodney D. Johnson
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
|
|
|
|
|
Herbert I. London
|
|
None
|
|
None
|
|
None
|
|
$50,001 - $100,000
|
|
|
|
|
|
Cynthia A. Montgomery
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
|
|
|
|
|
Joseph P. Platt
|
|
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
|
|
Over $100,000
|
|
|
|
|
|
Frederick W. Winter
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
As of June 30, 2011, 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, 2010, none of the Independent Trustees of the Funds then in office or their immediate family members
owned beneficially or of record any securities of affiliates of the Manager.
I-19
Compensation of Trustees
Each Trustee who is an Independent Trustee is paid as compensation an
annual retainer of $250,000 per year for his or her services as a board member to the BlackRock-advised Funds in the Equity-Liquidity Complex, including the Funds, and a $5,000 board meeting fee to be paid for each in-person board meeting attended
(a $2,500 board meeting fee for telephonic attendance at regular Board meetings) for 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 each Board of Trustees are each paid an additional annual retainer of $45,000. The
Chairs of the Audit Committees, the Compliance Committees, the Governance Committees and the Performance Oversight Committees and the Vice-Chair of the Performance Oversight Committee are each paid an additional annual retainer of $25,000. The Chair
of the Product Pricing Committees, who oversees funds in the Equity-Bond Complex, is paid an annual retainer of $25,000 that is allocated among all of the non-money market funds in the Equity-Liquidity, the Equity-Bond and the closed-end BlackRock
Fund Complexes. For the year ended December 31, 2010, Messrs. Forbes and Johnson each received additional compensation of $40,000 (allocated among the non-money market funds in the Equity-Liquidity Complex) in recognition of their work on the
Product Pricing Committee.
Mr. Gabbay is an interested
Trustee of each Fund and serves as an interested board member of other funds that comprise the Equity-Liquidity, the Equity-Bond and the closed-end BlackRock Fund Complex. Mr. Gabbay receives as compensation for his services as a board member
of each of these three BlackRock Fund Complexes, (i) an annual retainer of $487,500, paid quarterly in arrears, allocated to the BlackRock-advised Funds in these three BlackRock Fund Complexes, including the Funds, and (ii) with respect to
each of the two open-end BlackRock Fund Complexes, a board meeting fee of $3,750 (with respect to meetings of the Equity-Liquidity Complex) and $18,750 (with respect to meetings of the Equity-Bond Complex) to be paid for attendance at each board
meeting for up to five board meetings held in a calendar year by each such Complex (compensation for meetings in excess of this number to be determined on a case-by-case basis). Mr. Gabbay will also be reimbursed for out-of-pocket expenses in
accordance with a Board policy on travel and other business expenses relating to attendance at meetings. Mr. Gabbays compensation for serving on the boards of funds in these three BlackRock Fund Complexes (including the Funds) is equal to
75% of each retainer and, as applicable, of each meeting fee (without regard to additional fees paid to Board and Committee Chairs) received by the independent board members serving on such boards. The Board of each Fund or the board of any other
BlackRock-advised Funds may modify the board members compensation from time to time depending upon market conditions, and Mr. Gabbays compensation would be impacted by those modifications.
I-20
The following table sets forth the compensation earned by the Trustees for the fiscal year ended
March 31, 2011 and the aggregate compensation paid to them by all BlackRock-advised Funds for the calendar year ended December 31, 2010. The Trustees do not receive additional compensation from the Funds.
|
|
|
|
|
|
|
|
|
Name of Trustee
|
|
Compensation from
Government LLC
|
|
Compensation from
Money LLC
|
|
Compensation from
Treasury LLC
|
|
Aggregate
Compensation from
the Master
LLCs
and
other BlackRock-
Advised Funds
1
|
|
|
|
|
|
Independent Trustees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David O. Beim
2
|
|
$1,425
|
|
$24,241
|
|
$4,949
|
|
$300,000
|
|
|
|
|
|
Ronald W. Forbes
3
|
|
$1,509
|
|
$25,985
|
|
$5,290
|
|
$360,000
|
|
|
|
|
|
Dr. Matina S. Horner
4
|
|
$1,425
|
|
$24,241
|
|
$4,949
|
|
$300,000
|
|
|
|
|
|
Rodney D. Johnson
3
|
|
$1,509
|
|
$25,985
|
|
$5,290
|
|
$360,000
|
|
|
|
|
|
Herbert I. London
|
|
$1,319
|
|
$22,061
|
|
$4,523
|
|
$275,000
|
|
|
|
|
|
Cynthia A. Montgomery
|
|
$1,319
|
|
$22,061
|
|
$4,523
|
|
$275,000
|
|
|
|
|
|
Joseph P. Platt
5
|
|
$1,425
|
|
$24,241
|
|
$4,949
|
|
$300,000
|
|
|
|
|
|
Robert C. Robb, Jr.
|
|
$1,319
|
|
$22,061
|
|
$4,523
|
|
$275,000
|
|
|
|
|
|
Toby Rosenblatt
6
|
|
$1,425
|
|
$24,241
|
|
$4,949
|
|
$300,000
|
|
|
|
|
|
Kenneth L. Urish
7
|
|
$1,397
|
|
$24,214
|
|
$4,922
|
|
$297,500
|
|
|
|
|
|
Frederick W. Winter
|
|
$1,319
|
|
$22,061
|
|
$4,523
|
|
$275,000
|
|
|
|
|
|
Interested Trustees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard S. Davis
|
|
None
|
|
None
|
|
None
|
|
None
|
|
|
|
|
|
Henry Gabbay
|
|
$941
|
|
$15,678
|
|
$3,361
|
|
$608,125
|
1
|
|
For the number of registered investment companies and investment portfolios from which each Trustee receives compensation, see the Biographical
Information chart beginning on page I-15.
|
2
|
|
Chair of the Performance Oversight Committees.
|
3
|
|
Co-Chair of each Board.
|
4
|
|
Chair of the Governance Committees.
|
5
|
|
Chair of the Compliance Committees.
|
6
|
|
Vice-Chair of the Performance Oversight Committees.
|
7
|
|
Chair of the Audit Committees.
|
IV.
|
|
Management and Advisory Arrangements
|
Management Arrangements
Each Fund invests all of its assets in its corresponding Master LLC.
Accordingly, no Fund invests directly in portfolio securities, and no Fund requires investment advisory services. All portfolio management occurs at the Master LLC level. Each Master LLC, on behalf of the relevant Fund, has entered into a separate
management agreement (each, a Management Agreement) with the Manager. 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.
Each Master LLC pays the Manager a management
fee at the following rates:
|
|
|
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-21
The table below sets forth information about the total management fees paid by each Master LLC to the
Manager for the past three fiscal years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government LLC
|
|
Money LLC
|
|
Treasury LLC
|
Fiscal Year Ended March 31,
|
|
Paid
to the
Manager
|
|
Waived
by
the
Manager
1
|
|
Paid
to the
Manager
|
|
Waived
by
the
Manager
1
|
|
Paid
to the
Manager
|
|
Waived
by
the
Manager
1
|
|
|
|
|
|
|
|
2011
|
|
$1,499,133
|
|
$1,367,742
|
|
$17,019,165
|
|
$0
|
|
$4,002,449
|
|
$2,089,778
|
|
|
|
|
|
|
|
2010
|
|
$1,823,881
|
|
$1,585,400
|
|
$22,702,230
|
|
$0
|
|
$5,421,189
|
|
$1,268,850
|
|
|
|
|
|
|
|
2009
|
|
$2,426,478
|
|
$363,814
|
|
$27,422,444
|
|
$0
|
|
$6,788,437
|
|
$111,200
|
1
|
|
BlackRock and BlackRock Investments, LLC (BRIL), each Funds distributor, have voluntarily agreed to waive a portion of their
respective fees and/or to reimburse operating expenses to enable each Fund to maintain minimum levels of daily net investment income. BlackRock and BRIL may discontinue this voluntary waiver and/or reimbursement at any time without notice.
|
Pursuant to the Management Agreements,
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 the Manager, to perform management services with respect to each
Master LLCs portfolio. In addition, the Manager may delegate certain of its management functions under the Management Agreements 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.
Prior to July 1, 2011, the Manager had entered into separate sub-advisory agreements with respect to each Master LLC with BlackRock Institutional
Management Corporation (the Sub-Adviser), pursuant to which the Sub-Adviser received for the services it provided a monthly fee at an annual rate equal to a percentage of the management fee paid to the Manager under the Management
Agreements. The Sub-Adviser was responsible for the day-to-day management of each Master LLCs portfolio. These sub-advisory agreements were terminated effective July 1, 2011.
The table below sets forth information about the sub-advisory fees paid by the Manager to the Sub-Adviser, with respect to each
Master LLC, for the past three fiscal years:
|
|
|
|
|
|
|
|
|
Paid to the Sub-Adviser
|
Fiscal Year Ended March 31,
|
|
Government LLC
|
|
Money LLC
|
|
Treasury LLC
|
|
|
|
|
2011
|
|
$80,718
|
|
$10,032,248
|
|
$1,158,487
|
|
|
|
|
2010
|
|
$125,197
|
|
$13,397,086
|
|
$2,429,370
|
|
|
|
|
2009
|
|
$1,230,773
|
|
$16,187,407
|
|
$3,960,635
|
Administration
Arrangements
Each Fund has entered into a separate
administration agreement (each, an Administration Agreement) with the Manager 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.
The table below sets forth information about the administration fees paid by each Fund to the Administrator for the past three fiscal years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government Fund
|
|
Money Fund
|
|
Treasury Fund
|
Fiscal Year Ended March 31,
|
|
Paid to the
Administrator
|
|
Waived by
the
Administrator
1
|
|
Paid to the
Administrator
|
|
Waived by
the
Administrator
1
|
|
Paid to the
Administrator
|
|
Waived by
the
Administrator
1
|
|
|
|
|
|
|
|
2011
|
|
$724,433
|
|
$519,192
|
|
$16,050,234
|
|
$7,468,199
|
|
$3,626,068
|
|
$2,998,241
|
|
|
|
|
|
|
|
2010
|
|
$1,043,688
|
|
$675,581
2
|
|
$25,906,901
|
|
$7,221,343
|
|
$5,779,529
|
|
$4,865,989
|
|
|
|
|
|
|
|
2009
|
|
$1,842,385
|
|
$309,885
|
|
$33,685,240
|
|
$0
|
|
$8,552,494
|
|
$1,078,051
|
I-22
1
|
|
BlackRock and BRIL have voluntarily agreed to waive a portion of their respective fees and/or to reimburse operating expenses to enable each Fund to
maintain minimum levels of daily net investment income. BlackRock and BRIL may discontinue this voluntary waiver and/or reimbursement at any time without notice.
|
2
|
|
BlackRock reimbursed an additional amount of $172 in operating expenses during the fiscal year ended March 31, 2010.
|
Transfer Agency Services
The table below sets forth the fees paid by each Fund to Financial Data
Services, Inc., the Funds transfer agent (the Transfer Agent), an affiliate of the Manager until December 31, 2008, for the period indicated:
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
Government Fund
|
|
Money Fund
|
|
Treasury Fund
|
|
|
|
|
2009
1
|
|
$49,446
|
|
$3,561,014
|
|
$138,052
|
1
|
|
For the period April 1, 2008 to December 31, 2008 (when the Transfer Agent ceased to be an affiliate of the Manager).
|
Accounting Services
The table below shows the amounts paid by each Master LLC to
State Street Bank and Trust Company (State Street) and to the Manager for accounting services for the past three fiscal years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government LLC
|
|
Money LLC
|
|
Treasury LLC
|
Fiscal Year Ended March 31,
|
|
Paid to
State
Street
1
|
|
Paid to
the Manager
|
|
Paid to
State
Street
1
|
|
Paid to
the Manager
|
|
Paid to
State
Street
1
|
|
Paid to
the Manager
|
|
|
|
|
|
|
|
2011
|
|
$66,686
|
|
$12,012
|
|
$563,948
|
|
$236,502
|
|
$165,054
|
|
$47,582
|
|
|
|
|
|
|
|
2010
|
|
$196,689
|
|
$15,572
|
|
$1,236,922
|
|
$363,090
|
|
$412,971
|
|
$83,249
|
|
|
|
|
|
|
|
2009
|
|
$232,832
|
|
$22,853
|
|
$1,452,162
|
|
$383,517
|
|
$449,283
|
|
$82,243
|
1
|
|
For providing services to the Master LLC and each feeder fund which invests in the Master LLC.
|
V.
|
|
Distribution Related Expenses
|
BlackRock Investments LLC (previously defined as BRIL or the Distributor), an affiliate of the Manager, acts as each Funds
distributor.
Each Fund has adopted a Unified Distribution and
Shareholder Servicing Plan pursuant to Rule 12b-1 under the Investment Company Act (the Distribution Plan). The distribution fees are not compensation for the administrative and operational services rendered to the Funds or to their
shareholders by the Distributor that are covered by the Management Agreements (see Management and Advisory Arrangements). The Trustees believe that each Funds expenditures under the Distribution Plan benefit such Fund and its
shareholders by providing better shareholder services and by facilitating the sale and distribution of Fund shares.
Set forth below are the distribution fees paid to BRIL pursuant to the Distribution Plan for the fiscal year ended March 31, 2011. All of such
amounts were allocated to the Distributors personnel and to related administrative costs.
|
|
|
|
|
Fund
|
|
Paid to BRIL
|
|
Waived by
BRIL
1
|
|
|
|
Government Fund
|
|
$357,376
|
|
$357,376
|
|
|
|
Money Fund
|
|
$7,987,900
|
|
$7,987,900
|
|
|
|
Treasury Fund
|
|
$1,805,263
|
|
$1,805,263
|
1
|
|
BlackRock and BRIL have voluntarily agreed to waive a portion of their respective fees and/or to reimburse operating expenses to enable each Fund to
maintain a minimum level of daily net investment income. BlackRock and BRIL may discontinue this waiver and/or reimbursement at any time without notice.
|
I-23
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. The yield on Government Fund, Money Fund and Treasury Fund shares for various reasons may not be comparable to the yield on bank deposits, shares of other money market funds or other investments.
|
|
|
Fund
|
|
Seven-Day Period Ended March 31, 2011
|
|
|
Government Fund
|
|
0.00%
|
|
|
Money Fund
|
|
0.04%
|
|
|
Treasury Fund
|
|
0.00%
|
VII.
|
|
Computation of Offering Price Per Share
|
The offering price for each Funds shares is equal to the net asset value of the Funds shares computed by dividing the value of the Funds
net assets by the number of shares outstanding. For more information on the purchase and valuation of shares, see Purchase of Shares and Redemption of Shares in Part II of this Statement of Additional Information.
VIII.
|
|
Portfolio Transactions
|
See Portfolio Transactions in Part II of this Statement of Additional Information for more information.
The Commission has issued an exemptive order permitting the Master LLCs
to conduct principal transactions with Merrill Lynch Government Securities, Inc. (GSI) in U.S. Government securities and with Merrill Lynch Money Markets Inc. (MMI) in short-term bank money instruments. Effective
December 31, 2008, GSI and MMI ceased being affiliates of the Master LLCs, and therefore the Master LLCs no longer rely on such exemptive order.
The number and dollar value of principal transactions engaged in by the Master LLCs pursuant to this exemptive order are set forth in the following table
for the period indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government LLC
|
|
Money LLC
|
|
Treasury LLC
|
Exemptive Orders:
Fiscal Year Ended March 31,
|
|
Number of
Transactions
|
|
Aggregate
Amount
(millions)
|
|
Number of
Transactions
|
|
Aggregate
Amount
(millions)
|
|
Number of
Transactions
|
|
Aggregate
Amount
(millions)
|
|
|
|
|
|
|
|
2009
1
|
|
43
|
|
$2,530.9
|
|
21
|
|
$2,078.3
|
|
2
|
|
$63.2
|
1
|
|
For the period April 1, 2008 to December 31, 2008 (date on which the Master LLCs ceased to rely on the exemptive order).
|
Money LLC did not pay securities lending
agent fees to the securities lending agent during the last three fiscal years. No other Master LLC engages in securities lending.
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, 2011 are as follows:
Government LLC
|
|
|
|
|
Regular Broker-Dealer
|
|
Debt (D)/Equity (E)
|
|
Aggregate Holdings (000s)
|
|
|
|
None
|
|
|
|
|
I-24
Money LLC
|
|
|
|
|
Regular Broker-Dealer
|
|
Debt (D)/Equity (E)
|
|
Aggregate Holdings (000s)
|
|
|
|
Deutsche Bank AG
|
|
D
|
|
$330,000
|
|
|
|
Rabobank Nederland NV
|
|
D
|
|
$213,400
|
|
|
|
Societe Generale
|
|
D
|
|
$200,000
|
|
|
|
Credit Suisse Group
|
|
D
|
|
$119,000
|
|
|
|
Societe Generale North America Inc.
|
|
D
|
|
$74,967
|
Treasury LLC
|
|
|
|
|
Regular Broker-Dealer
|
|
Debt (D)/Equity (E)
|
|
Aggregate Holdings (000s)
|
|
|
|
None
|
|
|
|
|
IX.
|
|
Additional Information
|
Description of Shares
Government Fund and Money Fund are unincorporated business trusts organized on June 5, 1989 under the laws of Massachusetts. Government Fund is the
successor to a Massachusetts business trust organized on August 3, 1981, and Money Fund is the successor to a Massachusetts business trust organized on September 19, 1977. Treasury Fund is an unincorporated business trust organized on
October 24, 1990 under the laws of Massachusetts. Each Fund is a diversified, open-end investment company. Effective June 18, 2010, the Funds changed their names as follows:
|
|
|
Former Name
|
|
Current Name
|
|
|
CMA
®
Government Securities Fund
|
|
BIF Government Securities Fund
|
|
|
CMA
®
Money Fund
|
|
BIF Money Fund
|
|
|
CMA
®
Treasury Fund
|
|
BIF Treasury Fund
|
Each of Government Fund, Money Fund and
Treasury Fund is a feeder fund that invests in a corresponding Master LLC: Government LLC, Money LLC and 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.
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
I-25
share represents an equal proportionate interest in the Fund with each other share. Upon liquidation of the Fund, shareholders are 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. 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 June 30, 2011.
|
|
|
|
|
Name
|
|
Address
|
|
Percent
|
|
|
|
Government Fund
|
|
|
|
|
|
|
|
Merrill Lynch, Pierce, Fenner & Smith, Incorporated
1
|
|
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
|
|
99.9%
|
|
|
|
Money Fund
|
|
|
|
|
|
|
|
Merrill Lynch, Pierce, Fenner & Smith, Incorporated
1
|
|
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
|
|
99.9%
|
|
|
|
Treasury Fund
|
|
|
|
|
|
|
|
Merrill Lynch, Pierce, Fenner & Smith, Incorporated
1
|
|
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
|
|
100.0%
|
1
|
|
Record holder does not beneficially own the shares.
|
Each Funds and each Master LLCs audited financial statements, including the report of their respective independent registered public
accounting firm, are incorporated in the respective Funds Statement of Additional Information by reference to that Funds 2011 Annual Report. You may request a copy of the Annual Report at no charge by calling (800) 626-1960 between
8:30 a.m. and 6:00 p.m. Eastern time on any business day.
I-26
Part II
Part II of this statement of additional information
contains information about the following funds: BIF Arizona Municipal Money Fund (BIF Arizona), BIF California Municipal Money Fund (BIF California), BIF Connecticut Municipal Money Fund (BIF Connecticut), BIF
Florida Municipal Money Fund (BIF Florida), BIF Massachusetts Municipal Money Fund (BIF Massachusetts), BIF Michigan Municipal Money Fund (BIF Michigan), BIF New Jersey Municipal Money Fund (BIF New
Jersey), BIF New York Municipal Money Fund (BIF New York), BIF North Carolina Municipal Money Fund (BIF North Carolina), BIF Ohio Municipal Money Fund (BIF Ohio) and BIF Pennsylvania Municipal Money Fund
(BIF Pennsylvania), each a series of the BIF Multi-State Municipal Series Trust (collectively, the BIF State Funds); BIF Government Securities Fund (BIF Government Securities); BIF Money Fund (BIF
Money); BIF Tax-Exempt Fund (BIF Tax-Exempt); BIF Treasury Fund (BIF Treasury); BBIF Government Securities Fund (BBIF Government Securities); BBIF Money Fund (BBIF Money); BBIF Tax-Exempt Fund
(BBIF Tax-Exempt); BBIF Treasury Fund (BBIF Treasury); BlackRock Money Market Portfolio (Money Market Portfolio), BlackRock U.S. Treasury Money Market Portfolio (U.S. Treasury Money Market Portfolio),
BlackRock Municipal Money Market Portfolio (Municipal Money Market Portfolio), BlackRock New Jersey Municipal Money Market Portfolio (New Jersey Portfolio), BlackRock North Carolina Municipal Money Market Portfolio
(North Carolina Portfolio), BlackRock Ohio Municipal Money Market Portfolio (Ohio Portfolio), BlackRock Pennsylvania Municipal Money Market Portfolio (Pennsylvania Portfolio) and BlackRock Virginia Municipal Money
Market Portfolio (Virginia Portfolio) (collectively, the BlackRock Funds Portfolios), each a series of BlackRock Funds
SM
(the Trust); BlackRock Summit Cash Reserves Fund (Summit Cash Reserves) of BlackRock Financial
Institutions Series Trust (FIST); Ready Assets Prime Money Fund (Ready Assets Prime); Ready Assets U.S.A. Government Money Fund (U.S.A. Government Money); Ready Assets U.S. Treasury Money Fund (U.S. Treasury
Money); and Retirement Reserves Money Fund of Retirement Series Trust (Retirement Reserves). Prior to June 18, 2010, BIF Arizona Municipal Money Fund, BIF California Municipal Money Fund, BIF Connecticut Municipal Money Fund,
BIF Florida Municipal Money Fund, BIF Massachusetts Municipal Money Fund, BIF Michigan Municipal Money Fund, BIF New Jersey Municipal Money Fund, BIF New York Municipal Money Fund, BIF North Carolina Municipal Money Fund, BIF Ohio Municipal Money
Fund, BIF Pennsylvania Municipal Money Fund, BIF Multi-State Municipal Series Trust, BIF Government Securities Fund, BIF Money Fund, BIF Tax-Exempt Fund and BIF Treasury Fund were know as CMA Arizona Municipal Money Fund, CMA California Municipal
Money Fund, CMA Connecticut Municipal Money Fund, CMA Florida Municipal Money Fund, CMA Massachusetts Municipal Money Fund, CMA Michigan Municipal Money Fund, CMA New Jersey Municipal Money Fund, CMA New York Municipal Money Fund, CMA North Carolina
Municipal Money Fund, CMA Ohio Municipal Money Fund, CMA Pennsylvania Municipal Money Fund, CMA Multi-State Municipal Series Trust, CMA Government Securities Fund, CMA Money Fund, CMA Tax-Exempt Fund and CMA Treasury Fund, respectively, and BBIF
Government Securities Fund, BBIF Money Fund, BBIF Tax-Exempt Fund and BBIF Treasury Fund were known as WCMA Government Securities Fund, WCMA Money Fund, WCMA Tax-Exempt Fund and WCMA Treasury Fund, respectively.
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 BIF State Funds, BIF Money, BIF Government Securities, BIF Tax-Exempt and BIF Treasury may be collectively referred to herein as the BIF
Funds. The BIF State Funds and BIF Tax-Exempt may be collectively referred to herein as the BIF Tax-Exempt Funds. BBIF Government Securities, BBIF Money, BBIF Tax-Exempt and BBIF Treasury may be collectively referred to herein as
the BBIF 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, as amended, is referred to herein as the Securities Act. The Securities Exchange Act of 1934, as amended, is referred to herein as
the Exchange Act. The Securities and Exchange Commission is referred to herein as the Commission.
BIF Money, BIF Government Securities, BIF Tax-Exempt and BIF Treasury as well as all of the BBIF 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 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
II-1
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.
In addition to
containing information about the Funds, Part II of this Statement of Additional Information contains general information about all funds in the BlackRock-advised fund complex. Certain information contained herein may not be relevant to the Funds.
I
NVESTMENT
R
ISKS
A
ND
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 Part I of this Statement of Additional Information for further information about 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 in Part I of this Statement of Additional Information 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.
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. BIF Money, BBIF Money and Retirement Reserves may invest only in Eurodollar
obligations that, by their terms, are general obligations of the U.S. parent bank. BIF Money and BBIF 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.
II-2
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. See Bank Money
Instruments.
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. See Bank Money Instruments.
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 appreciation in the value of the security during the
commitment period.
II-3
Investment in Other Investment Companies.
Certain Funds may, subject to applicable law, invest
in other investment companies (including investment companies managed by BlackRock and its affiliates), including exchange traded funds, which are typically open-end funds or unit investment trusts listed on a stock exchange. In accordance with the
Investment Company Act, a Fund may invest up to 10% of its total assets in securities of other investment companies. In addition, under the Investment Company Act a Fund may not own more than 3% of the total outstanding voting stock of any
investment company and not more than 5% of the value of the Funds total assets may be invested in securities of any investment company. (These limits do not restrict a Feeder Fund from investing all of its assets in shares of its Master
Portfolio.) Certain Funds, pursuant to the Investment Company Act and subject to certain conditions, may invest without limitation in affiliated registered and affiliated unregistered money market funds. (Alternatively, certain Funds may rely on an
exemptive order received from the Commission permitting it to invest in affiliated registered money market funds and in an affiliated private investment company without regard to such limitations, provided however, that in all cases the Funds
aggregate investment of cash in shares of such investment companies shall not exceed 25% of the Funds total assets at any time.) As with other investments, investments in other investment companies are subject to market and selection risk. In
addition, if a Fund acquires shares in investment companies, shareholders would bear both their proportionate share of expenses in the Fund (including management and advisory fees) and, indirectly, the expenses of such investment companies
(including management and advisory fees). Investments by a Fund in wholly owned investment entities created under the laws of certain countries will not be deemed an investment in other investment companies.
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 income 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
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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) the 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.
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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 State Municipal Securities are Certificates of Participation (COPs) issued by governmental authorities or 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 5% 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
Investors 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
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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 may limit the types and volume of securities qualifying for the Federal income tax exemption of interest; this 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 (described below) may not be honored. The interest rates are adjustable at intervals
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(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%) in the underlying obligation and the right to demand payment of the unpaid principal balance plus accrued interest on the Participating VRDOs from a 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 BIF Tax-Exempt nor BBIF 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.
Repurchase Agreements and Purchase and Sale Contracts.
Funds may invest in Taxable Securities (as defined below, see Taxable Money Market 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. One
common type of repurchase agreement a Fund may enter into is a tri-party repurchase agreement. In tri-party repurchase agreements, an unaffiliated third party custodian maintains accounts to hold collateral for the Fund and
its counterparties and, therefore, the Fund may be subject to the credit risk of those custodians. In any repurchase transaction to which a Fund is a party, collateral for a repurchase agreement may include cash items and obligations issued by the
U.S. Government or its agencies or instrumentalities. Collateral, however, is not limited to the foregoing and may include for example obligations rated below the highest category by NRSROs. Collateral for a repurchase agreement may also include
securities that a Fund could not hold directly without the repurchase obligation. Irrespective of the type of collateral underlying the repurchase agreement, the Fund must determine that a repurchase obligation with a particular counterparty
involves minimal credit risk to the Fund and otherwise satisfies the credit quality standards applicable to the acquisition of an instrument issued by such counterparty in compliance with Rule 2a-7 under the Investment Company Act.
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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.
Repurchase agreements pose certain risks for a Fund that utilizes them. Such risks are not unique to the Fund but are inherent in repurchase agreements. The Funds seek to minimize such risks but because
of the inherent legal uncertainties involved in repurchase agreements, such risks cannot be eliminated. Lower quality collateral and collateral with longer maturities may be subject to greater price fluctuations than higher quality collateral and
collateral with shorter maturities. If the repurchase agreement counterparty were to default, lower quality collateral may be more difficult to liquidate than higher quality collateral. Should the counterparty default and the amount of collateral
not be sufficient to cover the counterpartys repurchase obligation, a Fund would retain the status of an unsecured creditor of the counterparty (
i.e.
, the position the Fund would normally be in if it were to hold, pursuant to its
investment policies, other unsecured debt securities of the defaulting counterparty) with respect to the amount of the shortfall. As an unsecured creditor, a Fund would be at risk of losing some or all of the principal and income involved in the
transaction.
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 may 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.
Rule 2a-7 Requirements.
Rule 2a-7 under the Investment
Company Act sets forth portfolio maturity, liquidity, diversification and quality requirements applicable to all money market funds.
Maturity.
Each Fund is managed so that the dollar-weighted average maturity of all of its investments will be 60 days or less, and the
dollar-weighted average life of all of its investments will be 120 days or less. In addition, the Funds will not acquire any instrument with a remaining maturity of greater than 397 days. The dollar-weighted average maturity of a Fund is
the average amount of time until the issuers of the debt securities in the Funds portfolio must pay off the principal amount of the debt. Dollar-weighted means the larger the dollar value of a debt security in a Fund, the more
weight it gets in calculating this average. To calculate the dollar-weighted average maturity, the Fund may treat a variable or floating rate security under certain circumstances as having a maturity equal to the time remaining to the
securitys next interest rate reset date rather than the securitys actual maturity. Dollar-weighted average life of a Funds portfolio is calculated without reference to the exceptions used in calculating the
dollar-weighted average maturity for variable or floating rate securities regarding the use of interest rate reset dates.
Liquidity.
Recent amendments to Rule 2a-7 added a general liquidity requirement that requires that each Fund hold securities that are
sufficiently liquid to meet reasonably foreseeable shareholder redemptions in light of its obligations under section 22(e) of the Investment Company Act, and any commitments the Fund has made to shareholders. To comply with this general liquidity
requirement, each Funds adviser or sub-adviser must consider factors that could affect the Funds liquidity needs, including characteristics of the Funds investors and their likely redemptions. Depending upon the volatility of its
cash flows (particularly
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shareholder redemptions), this new provision may require a Fund to maintain greater liquidity than would be required by the daily and weekly minimum liquidity requirements discussed below. The
Funds (other than BIF State Funds, BIF Tax-Exempt and BBIF Tax-Exempt) will not acquire any security other than daily liquid assets unless, immediately following such purchase, at least 10% of its total assets would be invested in daily liquid
assets. The Funds will not acquire any security other than weekly liquid assets unless, immediately following such purchase, at least 30% of its total assets would be invested in weekly liquid assets. Daily liquid assets include
(i) cash; (ii) direct obligations of the U.S. Government; and (iii) securities that will mature or are subject to a demand feature that is exercisable and payable within one business day. Weekly liquid assets include
(i) and (ii) above as well as (iii) Government securities issued by a person controlled or supervised by and acting as an instrumentality of the U.S. Government pursuant to authority granted by the U.S. Congress, that are issued at a
discount to the principal amount to be repaid at maturity and have a remaining maturity of 60 days or less; and (iv) securities that will mature or are subject to a demand feature that is exercisable and payable within five business days. No
Fund will invest more than 5% of the value of its total assets in securities that are illiquid (
i.e.
, securities that cannot be sold or disposed of in the ordinary course of business within seven days at approximately the value ascribed to
them by the Fund).
Portfolio
Diversification and Quality.
Rule 2a-7 under the Investment Company Act presently limits investments by each Fund (other than BIF State Funds) in securities issued by any one issuer (except for, among others, securities issued by the U.S.
Government, its agencies or instrumentalities or investments in First Tier Securities of a single issuer for certain temporary, limited purposes) ordinarily to not more than 5% of its total assets. In the case of BIF State Funds, this restriction is
applicable only with respect to 75% of a BIF State Funds total assets. In the event of investments in securities that are Second Tier Securities (as defined in Rule 2a-7) issued by a single issuer, not more than
1
/
2
of 1% of the Funds total assets may be invested in such
Second Tier Securities. For purposes of these diversification policies, investments in a repurchase agreement will be deemed to be an investment in the underlying securities so long as, among other criteria, the securities collateralizing the
repurchase agreement consist of cash items and U.S. Government securities and the respective Funds adviser or sub-adviser has evaluated the sellers creditworthiness. In addition, Rule 2a-7 requires that not more than 3% of each
Funds total assets be invested in Second Tier Securities and that Second Tier Securities may only be purchased if they have a remaining maturity of 45 days or less at the time of acquisition.
Securities Lending.
Certain Funds may lend
portfolio securities with a value not exceeding 33
1
/
3
% of the Funds 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 lending portfolio securities retains the right to vote or consent on proxy
proposals involving material events affecting the 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 if there are losses on investments made with the cash collateral or if 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. A 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. Pursuant to that order, each Fund has retained an affiliated entity of the Manager as the securities lending agent (the lending
agent) for a fee, including a fee based on a share of the returns on investment of cash collateral. In connection with securities lending activities, 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. Pursuant to the same order, each Fund may invest its uninvested cash in
registered money market funds advised by the Manager or its affiliates, or in a private investment company managed by the lending agent. If a Fund acquires shares in either the private investment company or an affiliated money market fund,
shareholders would bear both their proportionate share of the Funds expenses and, indirectly, the expenses of such other entities. However, in accordance with the exemptive order, the investment adviser to the private investment company will
not charge any advisory fees with respect to shares purchased by the Fund.
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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.
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 total 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 BIF State Funds, BIF Tax-Exempt and BBIF 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 BIF State Funds, BIF Tax-Exempt and BBIF 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 BIF State Funds has elected to be classified as diversified under the Investment
Company Act and must satisfy the diversification requirements set forth in Rule 2a-7.
II-11
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 BlackRock Investments, LLC (the Distributor or
BRIL), 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) or BNY Mellon Investment Servicing (US) Inc. (BNY Mellon)
pursuant to an agreement between State Street or BNY Mellon 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
Distributor pays 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.
II-12
Organization of the Manager
. The Manager, BlackRock Advisors, LLC, is a Delaware limited liability
company and 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. The Agreements are 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
. Each Fund has entered into an agreement with a transfer agent identified in the Funds Prospectus and Part I of the
Funds Statement of Additional Information, pursuant to which the transfer agent is responsible for the issuance, transfer, and redemption of shares and the opening and maintenance of shareholder accounts. Each Fund pays a fee for these
services.
See Part I, Section IV Management and Advisory
Arrangements Transfer Agency Services of each 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 appears 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.
II-13
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 Distributor in connection with the continuous offering of each class of shares of the Fund (the Distribution Agreement). The Distribution Agreement obligates the 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, the Distributor pays for the printing and distribution
of these documents used in connection with the offering to dealers and investors. The Distributor also pays for other supplementary sales literature and advertising costs. The Distribution Agreement is subject to the same renewal requirements and
termination provisions as the Management Agreement described above. See Part I, Section V Distribution Related Expenses of each Funds Statement of Additional Information for information on the fees paid by your Fund for the periods
indicated.
Disclosure of Portfolio Holdings
The Boards of Trustees of each Fund and the Board of Directors of the
Manager have each approved Portfolio Information Distribution Guidelines (the Guidelines) regarding the disclosure of the Funds portfolio securities, as applicable, and other portfolio information. The purpose of the Guidelines is
to ensure that (i) shareholders and prospective shareholders of the Funds have equal access to portfolio holdings and characteristics and (ii) third parties (such as consultants, intermediaries and third-party data providers) have access
to such information no more frequently than shareholders and prospective shareholders.
Pursuant to the Guidelines, the Fund and the Manager may, under certain circumstances as set forth below, make selective disclosure with respect to the Funds portfolio holdings. The respective
Boards of Trustees have approved the adoption by the Funds of the Guidelines, and employees of the Manager are responsible for adherence to the Guidelines. Each Funds Board of Trustees provides ongoing oversight of the Funds and
Managers compliance with the Guidelines. Examples of the types of information that may be disclosed pursuant to the Guidelines are provided below. This information may be both material non-public information (Confidential
Information) and proprietary information of the Manager. Information that is non-material or that may be obtained from public sources (
i.e.
, information that has been publicly disclosed via a filing with the Commission (
e.g.
,
fund annual report), through a press release or placement on a publicly-available internet web site) shall not be deemed Confidential Information.
Except as otherwise provided in the Guidelines, Confidential Information relating to the Funds may not be distributed to persons not employed by the
Manager unless the Fund has a legitimate business purpose for doing so. Confidential Information may also be disclosed to the Funds Trustees and their counsel, outside counsel for the Funds and the Funds auditors, and may be
disclosed to the Funds service providers and other appropriate parties with the approval of the Funds Chief Compliance Officer, the Managers General Counsel, the Managers Chief Compliance Officer or the designee of such
persons, and in addition, in the case of disclosure to third parties, subject to a confidentiality or non-disclosure agreement, as necessary, in accordance with the Guidelines. Information may also be disclosed as required by applicable laws and
regulation.
Examples of instances in which selective disclosure
of a Funds portfolio securities or other portfolio information may be appropriate include: (i) disclosure for due diligence purposes to an investment adviser that is in merger or acquisition talks with the Manager; (ii) disclosure to
a newly-hired investment adviser or sub-adviser prior to its commencing its duties; (iii) disclosure to a third-party feeder fund consistent with their agreements with a master portfolio advised by BlackRock; (iv) disclosure to third-party
service providers of legal, auditing, custody, proxy voting, pricing and other services to the Fund or a third-party feeder fund; or (v) disclosure to a rating or ranking organization.
Asset and Return Information
. Data on NAVs, asset levels (by total fund and share class), accruals, yields, capital
gains, dividends and fund returns (net of fees by share class) are generally available to shareholders, prospective shareholders, consultants and third-party data providers upon request, as soon as such data is available. Data on number of
shareholders (total and by share class) and benchmark returns (including performance measures such as standard deviation, information ratio, Sharpe ratio, alpha, and beta) are generally available to shareholders, prospective shareholders,
consultants and third-party data providers as soon as such data is released after month-end.
II-14
Portfolio Characteristics
. Examples of portfolio characteristics include sector allocation, credit
quality breakdown, maturity distribution, duration and convexity measures, average credit quality, average maturity, average coupon, top 10 holdings with percent of the fund held, average market capitalization, capitalization range, ROE, P/E, P/B,
P/CF, P/S and EPS.
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1.
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Month-end portfolio characteristics are available to shareholders, prospective shareholders, intermediaries and consultants on the fifth calendar day
after month-end.
1
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2.
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Fund Fact Sheets, which contain certain portfolio characteristics, are available, in both hard copy and electronically, to shareholders, prospective shareholders,
intermediaries and consultants on a monthly or quarterly basis upon posting to the Funds website. For money market funds, this will typically be on or about the tenth calendar day after the end of each month.
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3.
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Money Market Performance Reports, which contain money market fund performance for the recent month, rolling 12-month average yields and benchmark performance, are
available on a monthly basis to shareholders, prospective shareholders, intermediaries and consultants by the tenth calendar day of the month. This information may also be obtained electronically upon request.
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Portfolio Holdings.
In addition to position description,
portfolio holdings may also include issuer name, CUSIP, ticker symbol, total shares and market value for equity portfolios and issuer name, CUSIP, ticker symbol, coupon, maturity, current face value and market value for fixed income portfolios.
Other information that may be provided includes quantity, SEDOL, market price, yield, weighted average life, duration and convexity of each security in a Fund as of a specific date.
The following shall not be deemed to be a disclosure of Confidential Information:
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Month-end portfolio holdings may be made available to fund shareholders, prospective shareholders, intermediaries and consultants on the 20th calendar
day after month-end.
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Quarter-end portfolio holdings may be made available to third-party data providers, if there is a legitimate marketing and/or investment reason to do
so (
e.g.
, Lipper, Morningstar, Bloomberg, Thomson and S&P) on the 20th calendar day after quarter-end.
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The following information as it relates to money market funds, unless made available to the public, shall be deemed a disclosure of Confidential
Information and, subject to the Guidelines, requires a confidentiality or non-disclosure arrangement:
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Weekly portfolio holdings made available to fund shareholders, prospective shareholders, intermediaries and consultants on the next business day after
the end of the weekly period.
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Weekly portfolio holdings and characteristics made available to third-party data providers (
e.g.
, Lipper, Morningstar, Bloomberg, S&P,
Fitch, Moodys, Crane Data and iMoneyNet, Inc.) on the next business day after the end of the weekly period.
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Other Information
. The Guidelines shall also apply to other Confidential Information of a Fund such as attribution analyses or security-specific
information (
e.g.
, information about Fund holdings where an issuer has been downgraded, been acquired or declared bankruptcy).
Implementation
. All employees of the Manager must adhere to the Guidelines when responding to inquiries from shareholders, prospective
shareholders, consultants, and third-party databases. The Funds Chief Compliance Officer is responsible for oversight of compliance with the Guidelines and will recommend to the Board of Trustees any changes to the Guidelines that he or she
deems necessary or appropriate to ensure the Funds and the Managers compliance.
1
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The precise number of days specified above may vary slightly from period to period depending on whether the fifth or the 20th calendar day falls on a
weekend or holiday.
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II-15
Ongoing Arrangements.
The Manager has entered into ongoing agreements to provide selective disclosure
of Fund portfolio holdings to the following persons or entities:
1.
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Funds Boards of Trustees and, if necessary, Independent Trustees counsel and Fund counsel.
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4.
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Funds Administrator, if applicable.
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5.
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Funds independent registered public accounting firm.
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6.
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Funds accounting services provider
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7.
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Independent rating agencies Morningstar, Inc., Lipper Inc., S&P, Moodys, Fitch
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8.
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Information aggregators Wall Street on Demand, Thomson Financial and Bloomberg, eVestments Alliance, Informa/PSN, Investment Solutions, Crane Data, and iMoneyNet
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9.
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Sponsors of 401(k) plans that include BlackRock-advised funds E.I. Dupont de Nemours and Company, Inc.
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10.
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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.
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11.
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Pricing Vendors Reuters Pricing Service, Bloomberg, FT Interactive Data (FT IDC), ITG, Telekurs Financial, FactSet, Pricing Direct (formerly Bear Stearns Pricing
Service), Standard and Poors Security Evaluations Service, Lehman Index Pricing, Bank of America High Yield Index, Loan Pricing Corporation (LPC), LoanX, Super Derivatives, iBOXX Index, Barclays Euro Govt Inflation-Linked Bond Index,
JPMorgan Emerging & Developed Market Index, Reuters/WM Company, Nomura BPI Index, Japan Securities Dealers Association.
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12.
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Portfolio Compliance Consultants Oracle/i-Flex Solutions, Inc.
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13.
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Third-party feeder funds Hewitt Money Market Fund, Hewitt Series Fund, Hewitt Financial Services LLC, PayPal Money Market Fund, PayPal Funds, PayPal Asset
Management, Inc., Homestead, Inc., Transamerica and State Farm Mutual Fund, and their respective boards, sponsors, administrators and other service providers.
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14.
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Affiliated feeder funds BlackRock Cayman Prime Money Market Fund, Ltd. and BlackRock Cayman Treasury Money Market Fund Ltd., and their respective boards,
sponsors, administrators and other service providers.
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15.
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Other Chicago Mercantile Exchange, Inc., Be Creative, Inc. and Investment Company Institute.
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With respect to each such arrangement, each Fund has a legitimate business
purpose for the release of information. The release of the information is subject to confidential treatment to prohibit the entity from sharing with an unauthorized source or trading upon the information provided. The Funds, the Manager and their
affiliates do not receive any compensation or other consideration in connection with such arrangements.
The Funds 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 Business Conduct and Ethics all of which require
II-16
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 Funds 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
Barclays PLC (Barclays) and The PNC
Financial Services Group, Inc. (PNC) each has a significant economic interest in BlackRock, Inc., the parent of BlackRock Advisors, LLC, the Funds investment adviser. PNC is considered to be an affiliate of BlackRock, Inc., under
the Investment Company Act. Certain activities of BlackRock Advisors, LLC, BlackRock, Inc. and their affiliates (referred to in this section collectively as BlackRock) and PNC and its affiliates (collectively, PNC and
together with BlackRock, Affiliates), and those of Barclays and its affiliates (collectively, the Barclays Entities), with respect to the Funds and/or other accounts managed by BlackRock, PNC or the Barclays Entities, may
give rise to actual or perceived conflicts of interest such as those described below.
BlackRock is one of the worlds largest asset management firms. PNC is a diversified financial services organization spanning the retail, business and corporate markets. Barclays is a major global
financial services provider engaged in a range of activities including retail and commercial banking, credit cards, investment banking, and wealth management. BlackRock, PNC, Barclays and their respective 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, are engaged worldwide in businesses, including
equity, fixed income, cash management and alternative investments, and have interests other than that of managing the Funds. 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, as well as the Barclays Entities,
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 and Barclays Entities 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 or Barclays Entities 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 BlackRock and its Affiliates or the Barclays Entities
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 or its Affiliates or a Barclays Entity 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 or its Affiliates or a Barclays Entity 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 or its Affiliates or a Barclays Entity 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.
II-17
Conflicts may also arise because portfolio decisions regarding a Fund may benefit other accounts managed
by BlackRock or its Affiliates or a Barclays Entity. 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
Barclays Entities 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 Barclays Entities
or their other accounts.
BlackRock and its Affiliates or a
Barclays Entity 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 or its Affiliates or a Barclays Entity 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 BlackRock and its Affiliates or the Barclays Entities 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 Affiliate- or Barclays Entity-managed accounts 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 or Barclays Entity-managed accounts 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 or Barclays Entities 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 or Barclays
Entities, and/or their internal policies designed to comply with such restrictions. As a result, there may be periods, for example, when BlackRock, and/or one or more Affiliates or Barclays Entities, will not initiate or recommend certain types of
transactions in certain securities or instruments with respect to which BlackRock and/or one or more Affiliates or Barclays Entities are performing services or when position limits have been reached.
In connection with its management of a Fund, BlackRock may have access to
certain fundamental analysis and proprietary technical models developed by one or more Affiliates or Barclays Entities. BlackRock 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, nor any Barclays Entity, 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 BlackRock will have access to such information for the purpose of managing the Fund. The proprietary activities or portfolio strategies of
BlackRock and its Affiliates and the Barclays Entities, or the activities or strategies used for accounts managed by them or other customer accounts could conflict with the transactions and strategies employed by BlackRock in managing a Fund.
In addition, certain principals and certain employees of
BlackRock are also principals or employees of BlackRock 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.
BlackRock may enter into transactions and invest in
securities, instruments and currencies on behalf of a Fund in which customers of BlackRock or its Affiliates or a Barclays Entity, or, to the extent permitted by the SEC, BlackRock or another Affiliate or a Barclays Entity, serves 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 or its Affiliates or a Barclays Entity. One or more Affiliates or Barclays Entities 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 or Barclays Entities and may also enter into transactions with other clients of an Affiliate or Barclays Entity where such other clients
have interests adverse to those of the Fund.
At times, these
activities may cause departments of BlackRock or its Affiliates or a Barclays Entity 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 or the Barclays Entities on an arms-length basis. BlackRock or its Affiliates or a
II-18
Barclays Entity 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 or the Barclays Entities.
One or more Affiliates or one of the Barclays Entities may act as broker, dealer, agent, lender or adviser 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 or Barclays Entity will be in
its view commercially reasonable, although each Affiliate or Barclays Entity, including its sales personnel, will have an interest in obtaining fees and other amounts that are favorable to the Affiliate or Barclays Entity and such sales personnel.
Subject to applicable law, the Affiliates and Barclays Entities
(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, adviser 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 or Barclays Entity of any such fees or other amounts.
When an Affiliate or Barclays Entity acts as broker, dealer,
agent, adviser or in other commercial capacities in relation to the Funds, the Affiliate or Barclays Entity 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, nor any Barclays Entity, 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 or Barclays Entities 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. BlackRock and its Affiliates and the Barclays Entities, 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.
BlackRock may select brokers (including, without limitation, Affiliates or Barclays Entities) that furnish BlackRock, the Funds, other BlackRock client accounts or other Affiliates or Barclays Entities or
personnel, directly or through correspondent relationships, with research or other appropriate services which provide, in BlackRocks view, appropriate assistance to BlackRock 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; research-oriented 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 BlackRock uses soft dollars, it will not have to pay for those products and services itself.
BlackRock 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 BlackRock 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 BlackRock.
BlackRock 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 BlackRock believes are useful in its investment decision-
II-19
making process. BlackRock may from time to time choose not to engage in the above described arrangements to varying degrees. BlackRock may also enter into commission sharing arrangements under
which BlackRock may execute transactions through a broker-dealer, including, where permitted, an Affiliate or Barclays Entity, and request that the broker-dealer allocate a portion of the commissions or commission credits to another firm that
provides research to BlackRock. To the extent that BlackRock engages in commission sharing arrangements, many of the same conflicts related to traditional soft dollars may exist.
BlackRock 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 BlackRock 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 BlackRock. This would have the effect of reducing the access fees paid by BlackRock. BlackRock 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 and/or its Affiliates or a Barclays Entity, 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 its Affiliates or a Barclays Entity 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 or Barclays Entities
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 or by a Barclays Entity 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 or a Barclays Entity has or is trying to develop investment banking relationships as well as securities of entities in which BlackRock or its Affiliates or a Barclays Entity has significant debt or equity
investments or in which an Affiliate or Barclays Entity makes a market. A Fund also may invest in securities of companies to which an Affiliate or a Barclays Entity 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 its Affiliates or a Barclays Entity. In making investment decisions for a Fund, BlackRock is not permitted to obtain or use material non-public information
acquired by any division, department or Affiliate of BlackRock or of a Barclays Entity in the course of these activities. In addition, from time to time, the activities of an Affiliate or a Barclays Entity may limit a Funds flexibility in
purchases and sales of securities. When an Affiliate is engaged in an underwriting or other distribution of securities of an entity, BlackRock may be prohibited from purchasing or recommending the purchase of certain securities of that entity for a
Fund.
BlackRock and its Affiliates and the Barclays Entities,
their personnel and other financial service providers have interests in promoting sales of the Funds. With respect to BlackRock and its Affiliates and the Barclays Entities 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 and its Affiliates or the Barclays
Entities 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 or its Affiliates or a Barclays Entity 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 and its Affiliates or a Barclays Entity 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 to a Barclays
Entity, 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 or its
II-20
Affiliates or the Barclays Entities and their personnel to recommend BlackRock over unaffiliated investment advisers or to effect transactions differently in one account over another.
BlackRock and its Affiliates or a Barclays Entity 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 and/or fund accountants, there may be instances where the Funds pricing vendors or fund accountants assign a different valuation to a security or other investment than the valuation for such security or
investment determined or recommended by BlackRock.
As
disclosed in more detail in Determination of Net Asset Value in this Statement of Additional Information, when market quotations are not readily available or are believed by BlackRock to be unreliable, a Funds investments may be
valued at fair value by BlackRock, pursuant to procedures adopted by the Funds Boards of Directors. When determining an assets fair value, BlackRock seeks to determine the price that a Fund might reasonably expect to receive
from the current sale of that asset in an arms-length transaction. The price generally may not be determined based on what a Fund might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity.
While fair value determinations will be based upon all available factors that BlackRock deems relevant at the time of the determination, and may be based on analytical values determined by BlackRock using proprietary or third party valuation models,
fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair
values were used in determining a Funds net asset value. As a result, a Funds sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BlackRock (pursuant to Board-adopted procedures) at
fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
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 private 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.
BlackRock and its Affiliates or a Barclays Entity 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 BlackRock or by Barclays Entities 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, BRIL and BlackRock each have 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. Each Code of Ethics can be reviewed and copied at the SECs Public Reference Room in Washington,
D.C. Information about obtaining documents on the SECs website without charge may be obtained by calling (800) SEC-0330. Each Code of Ethics is also available on the EDGAR Database on the SECs 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 to the SECs Public Reference Section, Washington, DC 20549-0102.
BlackRock 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 BlackRock by the SEC. These transactions would be affected in circumstances in which BlackRock determined that it would be appropriate for the Fund to
purchase and another client of BlackRock to sell, or the Fund to sell and another client of BlackRock 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 or its Affiliates or a Barclays Entity 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 BlackRock 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 or a Barclays Entity is performing investment banking, market making, advisory 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. In addition, when BlackRock is engaged to provide advisory or risk management
services for a company, BlackRock may be prohibited from or limited in purchasing or selling securities of that company on behalf of a Fund,
II-21
particularly where such services result in BlackRock obtaining material non-public information about the company. Similar situations could arise if personnel of BlackRock or its Affiliates or a
Barclays Entity serve as directors of companies the securities of which the Funds wish to purchase or sell. However, if permitted by applicable law, and where consistent with BlackRocks policies and procedures (including the necessary
implementation of appropriate information barriers), the Funds may purchase securities or instruments that are issued by such companies, are the subject of an underwriting, distribution, or advisory assignment by an Affiliate or a Barclays Entity or
are the subject of an advisory or risk management assignment by BlackRock, or where personnel of BlackRock or its Affiliates or of the Barclays Entities are directors or officers of the issuer.
In certain circumstances where the Funds invest in securities issued by
companies that operate in certain regulated industries, in certain emerging or international markets, or are subject to corporate or regulatory ownership definitions, there may be limits on the aggregate amount invested by Affiliates (including
BlackRock) or the Barclays Entities for their proprietary accounts and for client accounts (including the Funds) 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. As a result, BlackRock on behalf of its clients (including the Funds) may limit purchases, sell existing investments, or otherwise restrict or limit the exercise of
rights (including voting rights) when BlackRock, in its sole discretion, deems it appropriate in light of potential regulatory or other restrictions on ownership or other consequences resulting from reaching investment thresholds.
In those circumstances where ownership thresholds or limitations must be
observed, BlackRock seeks to allocate limited investment opportunities equitably among clients (including the Funds), taking into consideration benchmark weight and investment strategy. When ownership in certain securities nears an applicable
threshold, BlackRock may limit purchases in such securities to the issuer's weighting in the applicable benchmark used by BlackRock to manage the Fund. If client (including Fund) holdings of an issuer exceed an applicable threshold and BlackRock is
unable to obtain relief to enable the continued holding of such investments, it may be necessary to sell down these positions to meet the applicable limitations. In these cases, benchmark overweight positions will be sold prior to benchmark
positions being reduced to meet applicable limitations.
In
addition to the foregoing, other ownership thresholds may trigger reporting requirements to governmental and regulatory authorities, and such reports may entail the disclosure of the identity of a client or BlackRocks intended strategy with
respect to such security or asset.
BlackRock and its
Affiliates and the Barclays Entities may maintain securities indices as part of their product offerings. Index based funds seek to track the performance of securities indices and may use the name of the index in the fund name. Index providers,
including BlackRock and its Affiliates and Barclays Entities may be paid licensing fees for use of their index or index name. BlackRock and its Affiliates and the Barclays Entities will not be obligated to license their indices to BlackRock, and
BlackRock cannot be assured that the terms of any index licensing agreement with BlackRock and its Affiliates and the Barclays Entities will be as favorable as those terms offered to other index licensees.
BlackRock and its Affiliates and the Barclays Entities may serve as
Authorized Participants in the creation and redemption of exchange traded funds, including funds advised by Affiliates of BlackRock. BlackRock and its Affiliates and the Barclays Entities may therefore be deemed to be participants in a distribution
of such exchange traded funds, which could render them statutory underwriters.
The custody arrangement described in Part I of the Statement of Additional Information in Management and Advisory Arrangements may lead to potential conflicts of interest with BlackRock
Advisors, LLC where BlackRock Advisors, LLC has agreed to waive fees and/or reimburse ordinary operating expenses in order to cap expenses of the Funds. This is because the custody arrangements with the Funds' custodian may have the effect of
reducing custody fees when the Funds leave 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 BlackRock Advisors, LLC
would be required to make to the Fund. This could be viewed as having the potential to provide BlackRock Advisors, LLC an incentive to keep high positive cash balances for Funds with expense caps in order to offset fund custody fees that BlackRock
Advisors, LLC might otherwise reimburse. However, portfolio managers of BlackRock Advisors, LLC 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 and the Barclays Entities, including BlackRock Advisors, LLC, in addition to those described in this section, may give rise to additional conflicts of interest.
II-22
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 Distributor.
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 Distributor. The types of shareholder service programs offered to 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 Cash Management Account
®
(CMA) service (or other Merrill Lynch central asset account program) Subscribers, Working Capital Management Account
®
(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 Distributor, 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 BIF Fund directly through the
Funds transfer agent in the manner described below under Methods of PaymentPayment to the Transfer Agent. Shareholders of the BIF 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.
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 the 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 BIF 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
Funds transfer agent.
II-23
Payment by Wire
. If you maintain an account directly with the Funds transfer agent, you may
invest in a Fund through wire transmittal of Federal Funds to the Funds transfer agent. A Fund will not be responsible for delays in the wiring system. Payment should be wired to Bank of America, 1401 Elm Street, Dallas, Texas 75202. You
should give your financial institution the following wiring instructions: ABA #026009593 Merrill Lynch Money Markets, DDA #375624069. 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 Funds 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 Funds transfer agent. Purchase orders by mail should be sent to Financial Data Services, Inc., P.O. Box 45290, Jacksonville, Florida 32231-5290. 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 Money Through Merrill Lynch Plans
Shares of U.S.A. Government Money 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 Money 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 Money 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 BIF 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 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 primary Money Account for CMA service subscribers is the Merrill
Lynch Bank Deposit Program (described below). Certain clients may qualify to choose the BIF Tax-Exempt or BIF State Funds as their primary Money Account.
II-24
You may also elect to have free cash balances invested in individual 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., FSB (the Merrill Lynch Bank Deposit 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 BIF 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 BIF Funds shareholders to issue additional shares. If sales of shares of BIF Tax-Exempt are suspended and you have designated this Fund as
your Money Account, you may designate one of the BIF State Funds (if available) as the Money Account and vice versa. Alternatively, you may designate the Merrill Lynch Bank Deposit 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
(BIF Tax-Exempt and BIF State Funds):
Where offered, 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 BIF Funds except for BIF Tax-Exempt Funds):
In limited
circumstances, free cash balances in certain Merrill Lynch central asset account programs may be swept into BIF 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 Bank Deposit Program chosen by the participant as his or her Money Account. Debits in CMA accounts will be paid from balances in BIF Money, BIF Government Securities and BIF 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 the BIF Tax-Exempt Funds.
Manual Purchases
(All BIF Funds):
If you subscribe to the CMA service, you may make manual investments of $1,000 or more through your
Financial Advisor at any time in shares of a BIF 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.
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 provided by Merrill Lynch.
Working Capital Management Account
®
.
The Working Capital
Management Account
®
(WCMA) financial service (WCMA service) for corporations and other
businesses provides participants a securities account (which includes all the features of a
II-25
regular CMA account) plus optional lines of credit and other features. 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.
Participants in the WCMA service are able to manually invest funds in certain designated BIF 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 BIF 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 BIF 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 BIF 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 BIF 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 BIF 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 BIF 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 BBIF Funds by WCMA Service Subscribers
Eligibility
. Shares of the BBIF 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 manually invest cash balances into certain other money market funds or individual money market accounts pursuant to the Insured Savings Account
SM
.
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 BBIF Fund designated as the
Primary Money Account will be made pursuant to the automatic or manual purchase procedures described below.
BBIF 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 BBIF 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.
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 BBIF 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
II-26
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 BBIF 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.
All purchases of the BBIF 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.
BBIF Multiple Class Structure
.
Each BBIF 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 Account Information BBIF Multiple Class
Structure and How to Choose the Share Class that Best Suits Your Needs 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 BBIF
Fund.
Each Class 1, Class 2, Class 3 or Class 4 share of a BBIF
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 Account Information BBIF Multiple Class Structure and How to Choose the Share Class that Best Suits Your Needs 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 BBIF 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 BBIF 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 BBIF 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 BBIF 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, 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
II-27
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) an 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
II-28
by your attorney to determine their applicability. You are further advised that the tax treatment of the Plans under applicable state law may vary.
Purchase of Shares of Summit Cash Reserves
Exchange Privilege.
Investor A shareholders of Summit Cash Reserves
who acquired their shares upon an exchange from Investor A or Institutional Shares of certain affiliated funds will have an exchange privilege with Investor A or Institutional Shares of certain affiliated funds. Shareholders may exchange Investor A
Shares of the Fund for Institutional Shares of one of the affiliated funds if the shareholder holds any Institutional Shares of that affiliated fund in the account in which the exchange is to be made at the time of the exchange or is otherwise
eligible to purchase Institutional Shares of such affiliated fund. Otherwise Investor A Shares will automatically be purchased.
Eligible institutional investors include: employees of BlackRock, Merrill Lynch, PNC and Directors of any BlackRock-advised funds; customers of
broker-dealers and agents that have established a servicing relationship with the Fund on behalf of their customers; investors who currently own Institutional Shares in a shareholder account are entitled to purchase additional Institutional Shares
of the Fund in that account; institutional and individual retail investors with a minimum investment of $2 million; certain qualified retirement plans; investors in selected fee based programs; registered investment advisers with a minimum
investment of $250,000; Trust departments of PNC Bank and Merrill Lynch Trust Company and their affiliates for whom they (i) act in a fiduciary capacity (excluding participant directed employee benefit plans); (ii) otherwise have
investment discretion; (iii) act as custodian for at least $2 million in assets; unaffiliated banks, thrifts or trust companies that have agreements with a Distributor; and holders of certain Merrill Lynch sponsored unit investment trusts
(UITs) who reinvest dividends received from such UITs in shares of the Fund.
If a holder of Investor A Shares of the Fund subsequently exchanges back into the same class of shares of the original affiliated fund it will do so without paying any sales charge. If a holder of
Investor A Shares of the Fund exchanges into Investor A or Institutional Shares of another affiliated fund, the holder will be required to pay a sales charge equal to the difference, if any, between the sales charge previously paid on the shares of
the original affiliated fund and the sales charge payable at the time of the exchange on the shares of the new affiliated fund.
Investor B shareholders of the Fund who acquired their shares upon an exchange from Investor B or Investor C Shares of certain affiliated funds will have
an exchange privilege with Investor B or Investor C Shares of certain affiliated funds. A holder of Investor B Shares of the Fund may subsequently exchange back into the original affiliated fund. When a shareholder exchanges Investor B or Investor C
Shares of an affiliated fund for Investor B Shares of the Fund, the period of time that the shareholder holds the Investor B Shares of the Fund will count towards satisfaction of the holding period requirement for purposes of reducing the CDSC
relating to the Investor B or Investor C Shares acquired upon exchange of the Investor B Shares of the Fund. With respect to exchanges of Investor B Shares of an affiliated fund into Investor B Shares of the Fund, the period of time the Investor B
Shares of the affiliated fund are held will count towards satisfaction of the conversion period (the length of time until the Investor B Shares acquired upon exchange of the Investor B Shares of the Fund are automatically converted into Investor A
Shares). Conversely, the period of time that a shareholder has held the shares of an affiliated fund or a fund participating in the Exchange Program will count towards the satisfaction of the conversion period under which Investor B Shares of the
Fund convert to Investor A Shares of the Fund.
If Investor B
Shares are redeemed from the Fund and not exchanged into shares of an affiliated fund, a CDSC will be charged to the extent it would have been charged on a redemption of shares from the original affiliated fund.
It is contemplated that the exchange privilege may be applicable to
other new mutual funds whose shares are distributed by the Distributor.
Under the exchange privilege, exchanges are made on the basis of the relative net asset values of the shares being exchanged. Shares issued pursuant to dividend reinvestment are sold on a no-load basis in
each of the affiliated funds. For purposes of the exchange privilege, dividend reinvestment shares shall be deemed to have been sold with a sales charge equal to the sales charge previously paid on the shares on which the dividend was paid. Based on
this formula an exchange of Investor A Shares of the Fund
II-29
for Investor A or Institutional Shares of an affiliated fund generally will require the payment of a sales charge equal to the difference, if any, between the sales charge previously paid on the
Institutional or Investor A Shares originally exchanged for Investor A Shares of the Fund and the sales charge that may be payable at the time of the exchange on the Institutional or Investor A Shares of the affiliated fund to be acquired.
Exchange Program.
The Fund participates in an exchange
program with certain non-money market open-end management investment companies that are (i) distributed by a selected securities dealer that is an affiliate of the Distributor, (ii) not affiliated funds, and (iii) not distributed by
the Distributor (each referred to as a Participating Fund) (the Exchange Program). Exchanges may be made into Investor A or Investor B Shares of the Fund at net asset value without the imposition of a front-end sales charge
(sales charge) or CDSC. Shares of a Participating Fund that are subject to a sales charge will be exchanged for Investor A Shares of the Fund without the imposition of a sales charge. The holder of Investor A Shares of the Fund may
subsequently either exchange back into the same class of shares of the Participating Fund without incurring any sales charge or exchange into shares of another Participating Fund subject to a sales charge in the same fund complex as the original
Participating Fund by remitting an amount equal to the difference, if any, between the sales charge previously paid on the shares of the original Participating Fund and the sales charge payable at the time of the exchange on the shares of the new
Participating Fund.
Exchanges may be made into Investor B Shares
of the Fund at net asset value without the imposition of a sales charge. Shares of Participating Funds subject to a CDSC will be exchanged for Investor B Shares of the Fund without the payment of a CDSC that might otherwise be due on redemption of
the Participating Fund shares. The holder of such Investor B Shares of the Fund may subsequently either exchange back into the same class of shares of the Participating Fund or exchange into shares of another Participating Fund in the same fund
complex as the original Participating Fund. Upon such exchange, the holder of the Investor B Shares of the Fund will receive credit toward reduction of the CDSC that would have been due on the Participating Fund shares for the time period during
which the Investor B Shares of the Fund were held. This period of time will also count towards satisfaction of any conversion period applicable to the Participating Fund shares. If holders of the Investor B Shares of the Fund redeem those shares
instead of exchanging back into shares of the original Participating Fund or of another Participating Fund in the same fund complex, CDSC payments, if any, will be assessed based upon the combined holding period for the Participating Fund shares and
the Fund shares.
The Participating Funds may impose
administrative and/or redemption fees on an exchange transaction with the Fund. There will be no sales charge on exchange transactions into the Fund. The Exchange Program may be modified or terminated at any time in accordance with the rules of the
Commission.
A Participating Fund may modify or terminate the
terms of its involvement in the Exchange Program at any time in accordance with the rules of the Commission.
Before effecting an exchange, shareholders of the Fund should obtain a currently effective prospectus of the affiliated fund or participating Fund into
which the exchange is to be made for information regarding the fund and for further details regarding such exchange.
To effect an exchange, shareholders should contact their financial adviser, selected securities dealer or other financial intermediary, who will advise
the Fund of the exchange, or write to the Funds transfer agent requesting that the exchange be effected. Shareholders of Participating Funds and certain affiliated funds with shares for which certificates have not been issued may effect an
exchange by wire through their securities dealers. The Exchange Program or the exchange privilege may be modified or terminated at any time in accordance with the rules of the Commission. There is currently no limitation on the number of times a
shareholder may effect an exchange into the Fund either through the exchange privilege or the Exchange Program; however, the Fund reserves the right to limit the number of times an investor may effect an exchange. Certain Participating Funds and
affiliated funds may suspend the continuous offering of their shares at any time and thereafter may resume such offering from time to time. The Exchange Program and the exchange privilege are available only to U.S. shareholders in states where the
exchange legally may be made.
An exchange pursuant to the
exchange privilege or pursuant to the Exchange Program is treated as a sale of the exchanged shares and a purchase of the new shares for Federal income tax purposes. In addition, an exchanging shareholder of any of the funds may
II-30
be subject to backup withholding unless such shareholder certifies under penalty of perjury that the taxpayer identification number on file with any such fund is correct, and that he or she is
not otherwise subject to backup withholding. See Taxes.
Purchase of Shares of BlackRock Funds Portfolios
Each of the BlackRock Funds Portfolios has authorized one or more brokers and/or financial institutions (Authorized Persons) to receive on its behalf purchase and redemption orders that are in
good form in accordance with the policies of those Authorized Persons. Such Authorized Persons are authorized to designate other intermediaries to receive purchase and redemption orders on the Funds behalf, and the Fund will be
deemed to have received a purchase or redemption order when an Authorized Persons or, if applicable, such Authorized Persons authorized designee, receives the order. Such customer orders will be priced at a Portfolios net asset value
next computed after they are received by an Authorized Person or such Authorized Persons authorized designee. Financial institutions may include retirement plan service providers who aggregate purchase and redemption instructions received from
numerous retirement plans or plan participants.
Investor
Shares
Purchase of Shares.
The minimum investment for
the initial purchase of shares is $1,000, except that the minimum is $250 for certain fee-based retirement programs and $100 for qualified employee benefit plans; there is a $50 minimum for subsequent investments. Purchases through the Automatic
Investment Plan are subject to a lower initial purchase minimum. In addition, the minimum initial investment for employees of the Fund, the Funds Manager, sub-advisor, BRIL or transfer agent or employees of their affiliates is $100, unless
payment is made through a payroll deduction program in which case the minimum investment is $25.
Purchases Through Brokers.
It is the responsibility of brokers to transmit purchase orders and payment on a timely basis. Generally, if payment is not received within the period described in the
prospectuses, the order will be canceled, notice thereof will be given, and the broker and its customers will be responsible for any loss to the Fund or its shareholders. Orders of less than $500 may be mailed by a broker to the transfer agent.
Other Purchase Information.
Shares of each Fund are sold
on a continuous basis by BRIL as distributor. BRIL maintains its principal offices at 40 East 52nd Street, New York, New York 10022. Purchases may be effected on weekdays on which the NYSE is open for business (a Business Day). Payment
for orders which are not received or accepted will be returned after prompt inquiry. The issuance of shares is recorded on the books of the Fund. No certificates will be issued for shares. Payments for shares of a Fund may, in the discretion of the
Funds Manager, be made in the form of securities that are permissible investments for that Fund. The Fund reserves the right to reject any purchase order, to modify or waive the minimum initial or subsequent investment requirement and to
suspend and resume the sale of any share class of any Fund at any time.
Shareholder Features
Exchange Privilege.
Unless an exemption applies, a front-end sales charge will be charged in connection with exchanges of Investor A Shares of a BlackRock Fund Portfolio for Investor A Shares of
one of the non-money market portfolios of the Trust (each a Non-Money Market Portfolio). Exchanges of Investor B or Investor C Shares of a Fund for Investor B or Investor C Shares of a Non-Money Market Portfolio of the Trust will be
exercised at NAV. However, a CDSC will be charged in connection with the redemption of the Investor B or Investor C Shares of the Non-Money Market Portfolio received in the exchange.
Investor A Shares of Funds that were (1) acquired through the use of the exchange privilege and (2) can be traced
back to a purchase of shares in one or more investment portfolios of the Fund for which a sales charge was paid, can be exchanged for Investor A Shares of a Fund subject to a sales charge.
A shareholder wishing to make an exchange may do so by sending a written request to the Fund c/o BNY Mellon Investment
Servicing (US) Inc. at the following address: BNY Mellon Investment Servicing (US) Inc., P.O. Box 9819, Providence, RI 02940-8019. Shareholders are automatically provided with telephone exchange privileges when opening an account, unless they
indicate on the Application that they do not wish to use this privilege. To add this feature to an existing account that previously did not provide this option, a Telephone Exchange Authorization Form must be filed with BNY Mellon. This form is
available from BNY Mellon. Once this election has been made, the shareholder may simply contact the Fund by telephone at (800) 441-7762 to request
II-31
the exchange. During periods of substantial economic or market change, telephone exchanges may be
difficult to complete and shareholders may have to submit exchange requests to BNY Mellon in writing.
If the exchanging shareholder does not currently own shares of the investment portfolio whose shares are being acquired, a new account will be established with the same registration, dividend and capital
gain options and broker of record as the account from which shares are exchanged, unless otherwise specified in writing by the shareholder with all signatures guaranteed by an eligible guarantor institution as defined below. In order to participate
in the Automatic Investment Program or establish a Systematic Withdrawal Plan for the new account, however, an exchanging shareholder must file a specific written request.
Any share exchange must satisfy the requirements relating to the minimum
initial investment requirement, and must be legally available for sale in the state of the investors residence. For Federal income tax purposes, a share exchange is a taxable event and, accordingly, a capital gain or loss may be realized.
Before making an exchange request, shareholders should consult a tax or other financial adviser and should consider the investment objective, policies and restrictions of the investment portfolio into which the shareholder is making an exchange.
Brokers may charge a fee for handling exchanges.
Each Fund
reserves the right to suspend, modify or terminate the exchange privilege at any time. Notice will be given to shareholders of any material modification or termination except where notice is not required. Each Fund reserves the right to reject any
telephone exchange request. Telephone exchanges may be subject to limitations as to amount or frequency, and to other restrictions that may be established from time to time to ensure that exchanges do not operate to the disadvantage of any portfolio
or its shareholders. Each Fund, the Administrators and BRIL will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. The Fund, the Trust, the administrators and BRIL will not be liable for any loss,
liability, cost or expense for acting upon telephone instructions reasonably believed to be genuine in accordance with such procedures.
By use of the exchange privilege, the investor authorizes the Funds transfer agent to act on telephonic or written exchange instructions from any
person representing himself to be the investor and believed by the Funds transfer agent to be genuine. The records of the Funds transfer agent pertaining to such instructions are binding. The exchange privilege may be modified or
terminated at any time upon 60 days notice to affected shareholders. The exchange privilege is only available in states where the exchange may legally be made.
The redemption of shares of one Fund and the subsequent investment in
another Fund generally will be treated as two separate transactions. Therefore, a front-end sales charge will be imposed (unless an exemption applies) on the purchase of Investor A or Investor A1 Shares of a Non-Money Market Portfolio with the
proceeds of a redemption of Investor Shares of a BlackRock Funds Portfolio. In addition, when Investor Shares of a BlackRock Funds Portfolio are redeemed and the proceeds are used to purchase Investor B, Investor B1, Investor B2, Investor C,
Investor C1 or Investor C2 Shares of a Non-Money Market Portfolio, a contingent deferred sales charge will be imposed (unless an exemption applies) when the Investor B Shares or Investor C Shares of the Non-Money Market Portfolio are redeemed.
Automatic Investment Plan
(AIP).
Investor Share shareholders who were shareholders of the Compass Capital Group of Funds at the time of its combination with The PNC
®
Fund in 1996 may arrange for periodic investments in a Fund through automatic deductions from a checking or savings account by completing the AIP Application Form
which may be obtained from the Funds transfer agent. The minimum pre-authorized investment amount is $50.
Systematic Withdrawal Plan (SWP).
Each BlackRock Funds Portfolio offers a Systematic Withdrawal Plan to shareholders who wish to receive regular distributions from their accounts. Upon
commencement of the SWP, the account must have a current value of $10,000 or more in a Fund. Shareholders may elect to receive automatic cash payments of $50 or more at any interval. You may choose any day for the withdrawal. If no day is specified,
the withdrawals will be processed on the 25th day of the month or, if such day in not a Business Day, on the prior Business Day and are paid promptly thereafter. An investor may utilize the SWP by completing the Systematic Withdrawal Plan
Application Form which may be obtained by visiting our website at www.blackrock.com/funds.
Shareholders should realize that if withdrawals exceed income dividends their invested principal in the account will be depleted. To participate in the SWP, shareholders must have their dividends
automatically reinvested. Shareholders may change or cancel the SWP at any time, upon written notice to the Fund, or by calling the Fund at (800) 441-7762.
II-32
For this reason, a shareholder may not participate in the Automatic Investment Plan (see Services
for Shareholders Automatic Investment Plan in the Funds Prospectus) and the Systematic Withdrawal Plan at the same time.
Dividend Allocation Plan.
The Dividend Allocation Plan allows shareholders to elect to have all their dividends and any other distributions from
the BlackRock Funds Portfolio or any Eligible Fund (which includes the Fund and other funds as designated by BRIL from time to time) automatically invested at net asset value in one other such Eligible Fund designated by the shareholder, provided
the account into which the dividends and distributions are directed is initially funded with the requisite minimum amount.
Institutional Shares
Purchase of Shares.
Employees of BlackRock, directors, trustees and officers of the funds advised by BlackRock and accounts managed for their
benefit and employees and directors of BlackRock, The PNC Financial Services Group, Inc., Merrill Lynch or their respective affiliates, may buy Institutional Shares of the Fund without regard to any existing minimum investment requirements. The Fund
may in its discretion waive or modify the minimum investment amount, may reject any order for Institutional Shares and may suspend and resume the sale of shares of any Fund at any time.
Institutional Shares of the Funds may be purchased by customers of broker-dealers and agents which have established a servicing
relationship with the Fund on behalf of their customers. These broker-dealers and agents may impose additional or different conditions on the purchase or redemption of Fund shares by their customers and may charge their customers transaction,
account or other fees on the purchase and redemption of Fund shares. Each broker-dealer or agent is responsible for transmitting to its customers a schedule of any such fees and information regarding any additional or different conditions regarding
purchases and redemptions. Shareholders who are customers of such broker-dealers or agents should consult them for information regarding these fees and conditions.
Payment for Institutional Shares must normally be made in Federal funds or
other funds immediately available by 4:00 p.m. (Eastern time) on the first business day following receipt of the order. Payment may also, in the discretion of the Fund, be made in the form of securities that are permissible investments for the Fund.
If payment for a purchase order is not received by the prescribed time, an investor may be liable for any resulting losses or expenses incurred by the Fund.
DCC&S.
Qualified Plans may be able to invest in shares of the BlackRock Funds Portfolios through the Defined Contribution Clearance and
Settlement System (DCC&S) of the National Securities Clearing Corporation. Institutions qualifying to trade on DCC&S include broker/dealers, trust companies and third party administrators. Please contact the Fund for information
on agreements, procedures, sales charges and fees related to DCC&S transactions.
Hilliard Lyons Shares (HL Shares)
Purchase of Shares.
The minimum investment for the initial purchase of HL Shares is $1,000; there is a $100 minimum for subsequent investments. Purchases through the Automatic Investment Plan are
subject to a lower initial purchase minimum. In addition, the minimum initial investment for employees of a BlackRock Funds Portfolio, the Manager, sub-advisors, BRIL or transfer agent or employees of their affiliates is $100, unless payment is made
through a payroll deduction program in which case the minimum investment is $25.
Other Purchase Information.
Payment for orders which are not received or accepted will be returned after prompt inquiry. The issuance of shares is recorded on the books of the Fund. No certificates
will be issued for shares. Payments for shares of a Fund may, in the discretion of the Funds Manager be made in the form of securities that are permissible investments for that Fund. The Funds reserve the right to reject any purchase order, to
modify or waive the minimum initial or subsequent investment requirement and to suspend and resume the sale of any share class of any Fund at any time.
Distribution and/or Shareholder Servicing Plans
Each Fund has entered into a distribution agreement with BlackRock Investments, LLC (previously defined as the Distributor) under which the
Distributor, as agent, offers shares of each Fund on a continuous basis. The Distributor has agreed to use
II-33
appropriate efforts to effect sales of the shares, but it is not obligated to sell any particular amount of shares. The Distributors principal business address is 40 East 52nd Street, New
York, NY 10022. The Distributor is an affiliate of BlackRock.
Each Fund has adopted a shareholder servicing plan and/or a distribution plan or plans (in the case of Retirement Reserves, with respect to Class II
shares only and with respect to Summit Cash Reserves with respect to Investor B Shares only) (each, a Distribution Plan) in compliance with Rule 12b-1 under the Investment Company Act. Each Fund other than Retirement Reserves and the
BBIF Funds is authorized to pay the Distributor a fee at an annual rate based on the average daily net asset value of Fund accounts maintained through the Distributor. Retirement Reserves pays the Distributor a fee at an annual rate based on the
average daily net assets attributable to Class II shares maintained through the Distributor. The Distribution Plan for each class of shares of the BBIF Funds provides that the Funds pay the 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 BBIF 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 BBIF Funds compensates the Distributor 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 Distributor then determines, based on a number of criteria, how to allocate such fee among financial advisors, selected dealers and affiliates of
the Distributor. The fee paid by Retirement Reserves compensates the Distributor for the expenses associated with marketing activities and services related to Class II shares. The BBIF Distribution Plans for the Class 1, Class 2, Class 3 and Class 4
shares each provide that a Fund also pays the 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 BBIF 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 Distributor. With respect to
each Fund other than BlackRock Funds Portfolios, Retirement Reserves and Summit Cash Reserves, in the event that the aggregate payments received by the Distributor under the Distribution Plan in any year exceeds the amount of the distribution and
shareholder servicing expenditures incurred by the Distributor, the Distributor is 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.
II-34
See Part I, Section V Distribution Related Expenses of each Funds Statement of
Additional Information for information relating to the fees paid by your Fund to the Distributor 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 BBIF 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 (i) 7.25% of eligible gross sales of the applicable shares (excluding shares issued pursuant to dividend reinvestments and
exchanges), plus (ii) 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 BBIF 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 BBIF Fund will not make further payments of the distribution fee with respect to its shares; however, a BBIF 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 Distribution
Arrangements. In the case of the BlackRock Funds Portfolios, the BlackRock Funds Portfolios and BlackRock have entered into distribution agreements with UBS AG and BMO Harris Investment Management Inc. whereby those firms may, in certain
circumstances, sell shares of certain BlackRock Funds Portfolios in certain jurisdictions. The level of payments made to UBS AG in any year for the sale and distribution of shares of a BlackRock Funds Portfolio will vary and normally will not exceed
the sum of the service fee payable on the assets attributable to UBS AG plus an additional fee equal to a percentage of such assets which shall range up to 0.25%. BMO Harris Investment Management Inc. does not receive payments in connection with the
sale and distribution of BlackRock Funds Portfolio shares.
Other Compensation to Selling Dealers
Pursuant to each Funds Distribution Plans, each Fund may pay the Distributor 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, PNC and its affiliates, and Barclays and its affiliates) (collectively,
Service Organizations) fees for the provision of personal services to shareholders. From time to time the Distributor 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 the
Distributor, 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, the
Distributor, 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 the Distributor, 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 the Distributors, 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.
As of the date of this Statement of Additional Information, as amended or supplemented from time to time, the following
Service Organizations have specific distribution and marketing agreements with the Funds and may receive payments relating to
II-35
distribution and sales support activities: Ameriprise Financial Services, Inc., AXA Advisors, LLC, CCO Investment Services, Commonwealth Equity Services, LLP (Commonwealth Financial Network),
Donegal Securities, Inc., Financial Network Investment Corporation, FSC Securities Corporation, ING Financial Partners, Inc., LPL Financial Corporation, Merrill Lynch, MetLife Securities, Inc., Morgan Stanley Smith Barney, Multi-Financial Securities
Corporation, New England Securities Corporation, Oppenheimer & Co. Inc., PFS Investments, PrimeVest Financial Services, Inc., Raymond James, RBC Capital Markets, Royal Alliance Associates, SagePoint Financial, Securities America, Inc.,
Tower Square Securities Inc., UBS, Walnut Street Securities Inc., Wells Fargo and/or broker-dealers and other financial services firms under common control with the above organizations (or their successors or assignees). The level of payments made
to these Service Organizations with respect to the Funds in any year will vary, may be limited to specific Funds or share classes, or may exclude the Funds entirely.
In lieu of payments pursuant to the foregoing, the Distributor, BlackRock,
PNC or their affiliates may make payments to the above-named Service Organizations of an agreed-upon amount which, subject to certain agreed-upon minimums, will generally not exceed the amount that would have been payable pursuant to the formula,
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, the Distributor, 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, the Distributor, 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
and certain of its affiliates fees for administration and servicing with respect to assets of the Funds attributable to shares held by customers of such entities. These assets are predominantly in the Institutional Share Class of a Fund, with
respect to which the Fund does not pay shareholder servicing fees under a Plan. The fees are paid according to the following schedule: certain money market funds: 0.15% of net assets; certain fixed income funds: 0.20% of net assets; and certain
equity funds: 0.25% of net assets.
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 enters 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 Shares of such classes and are intended to supplement the
services provided by the Funds Administrators and transfer agent to the Funds shareholders of record. In consideration for payment of the applicable service fee 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 and shareholder servicing fees that a Fund
II-36
may pay to a Service Organization pursuant to the Plan and fees the Fund pays to its transfer agent, the 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, the Distributor or their
affiliates also may pay a portion of the fees for administrative, networking, omnibus, operational and 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
O
F
S
HARES
Each Fund will normally redeem shares for cash upon receipt of a request in proper form, although each Fund retains the right to redeem some or all of its
shares in-kind under unusual circumstances, in order to protect the interests of remaining shareholders, or to accommodate a request by a particular shareholder that does not adversely affect the interest of the remaining shareholders, by delivery
of securities selected from the Funds assets at its discretion. In-kind payment means payment will be made in portfolio securities rather than cash. If this occurs, the redeeming shareholder might incur brokerage or other transaction costs to
convert the securities to cash. Each Fund has elected to be governed by Rule 18f-1 under the Investment Company Act so that the Fund is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during
any 90-day period for any shareholder of the Fund. The redemption price is the net asset value per share next determined after the initial receipt of proper notice of redemption.
The value of the shareholders investment at the time of redemption may
be more or less than his or her cost, depending on the market value of the securities held by the Fund at such time and income earned. In the case of Investor B Shares of Summit Cash Reserves, the redemption price will be reduced by any applicable
CDSC.
If notice is received by the Funds 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 BIF Funds, the BBIF Funds and the BlackRock Funds Portfolios
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 Funds 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 Funds 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 Funds 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
II-37
or deposit it like any check drawn on a bank. When such a check is presented to the Funds transfer agent for payment, the Funds 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 Funds transfer agent upon request.
You will be subject to the transfer agents rules and regulations governing such checking accounts, including the right of the Funds 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 a Funds 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 Funds 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 Funds 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 Funds 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 Funds transfer agent toll-free at 1-800-221-7210. 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 Funds 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 Funds transfer agent to the dealer.
Regular Redemption.
If you hold shares with the Funds transfer
agent you may redeem by writing to the Funds transfer agent, Financial Data Services, Inc., P.O. Box 45290, Jacksonville, Florida 32231-5290. 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 Exchange Act, whose existence and validity may be
verified by the Funds 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 Funds 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 Funds transfer agent of a proper redemption request.
You may also redeem shares held with the Funds transfer agent by calling 1-800-221-7210. 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
II-38
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 Funds 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 Money 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 Money 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 Funds 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 Funds 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 Money 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.
BIF Funds Redemption of Shares by CMA Service Subscribers
BIF 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
II-39
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 Margin Lending Program 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 BIF 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 BIF 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.
BIF Funds Manual Redemptions.
If you are a CMA
service (or other Merrill Lynch central asset account) subscriber or if you hold shares of a BIF Fund in a Merrill Lynch securities account, you may redeem shares of a BIF Fund directly by writing to Merrill Lynch, which will submit your request to
the Funds 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 a Funds transfer agent. If you inadvertently send the request to a Fund or a Funds 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 BIF Funds and the BBIF 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.
BBIF Funds Redemption of Shares by WCMA Service Subscribers
BBIF 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 BBIF 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 Margin Lending Program 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 BBIF 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 BBIF 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 BBIF 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 BBIF 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
II-40
Description Booklet that is furnished in connection with such other programs, which may be obtained by contacting a Merrill Lynch Financial Advisor.
BBIF 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 BBIF Fund or its
transfer agent. If inadvertently sent to the BBIF Fund or the Funds 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 Exchange Act, the existence and validity of which may be verified by the Funds 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 BBIF Fund shares will be confirmed to WCMA service subscribers (rounded to the nearest share) in the monthly transaction statement.
BIF 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 BIF 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 Funds transfer agent, who are not CMA service (or other Merrill Lynch central asset account) subscribers, may redeem shares of a BIF Fund by submitting a written notice by mail directly to the Funds transfer agent,
Financial Data Services, Inc., P.O. Box 45290, Jacksonville, Florida 32231-5290. 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 Funds 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 Exchange Act, the existence and validity of which may be verified by the Funds 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 programs may be able to manually invest funds in certain BIF 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
II-41
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.
BlackRock Funds Portfolios Redemption of Shares.
Redemptions may be made in the manner and amounts described in the BlackRock Funds
Portfolios prospectuses. Signatures, when required, must conform exactly to the account registration. If (i) the proceeds of the redemption would exceed $250,000 for a redemption by wire or ACH, or $100,000 for a redemption by check,
(ii) the Fund does not have verified banking information on file, (iii) the proceeds are not to be paid to the record owner at the record address, or (iv) the shareholder is a corporation, partnership, trust or fiduciary, signature(s)
must be guaranteed by any eligible guarantor institution.
Generally, a properly signed written request with any required signature guarantee is all that is required for a redemption. In some cases, however, other
documents may be necessary. Additional documentary evidence of authority is required by BNY Mellon in the event redemption is requested by a corporation, partnership, trust, fiduciary, executor or administrator. See Signature Guarantee
below.
Investor A shareholders of the Funds may redeem their
shares through the checkwriting privilege. Upon receipt of the checkwriting application and signature card by the Funds transfer agent, checks will be forwarded to the investor. The minimum amount of a check is $100. If more than one
shareholder owns the account, each shareholder must sign each check, unless an election has been made to permit check writing by a limited number of signatures and such election is on file with the Funds transfer agent. Investor A Shares
represented by a check redemption will continue to earn daily income until the check is presented for payment. The Bank of New York Mellon Corporation (BONY), as the investors agent, will cause the Fund to redeem a sufficient
number of Investor A Shares owned to cover the check. When redeeming Investor A Shares by check, an investor should make certain that there is an adequate number of Investor A Shares in the account to cover the amount of the check. If an
insufficient number of Investor A Shares is held or if checks are not properly endorsed, they may not be honored and a $15 service charge will be incurred. Checks may not be presented for cash payments at the offices of BONY. This limitation does
not affect checks used for the payment of bills or cash at other banks. However, a shareholder cannot close an account by writing a checkwriting check.
Service Shares
Redemption of Shares.
A BlackRock Funds Portfolio may redeem Service Shares if the account balance drops below the required minimum initial
investment as the result of redemption requests and the shareholder does not increase the balance to at least the required minimum initial investment upon thirty days written notice. If a customer has agreed with an institution to maintain a
minimum balance in his or her account with the institution, and the balance in the account falls below that minimum, the customer may be obligated to redeem all or part of his or her shares in the Fund to the extent necessary to maintain the minimum
balance required.
The following is applicable only to persons
who were shareholders of an investment portfolio of Compass Capital Group of Funds at the time of the Trusts combination with The PNC Fund in 1996:
Except as noted below, a request for redemption must be signed by all persons in whose names the shares are registered. Signatures must conform exactly to
the account registration. If the proceeds of the redemption would exceed $25,000, or if the proceeds are not to be paid to the record owner at the record address, or if the shareholder is a corporation, partnership, trust or fiduciary, signature(s)
must be guaranteed by any eligible guarantor institution.
II-42
Generally, a properly signed written request with any required signature guarantee is all that is
required for a redemption. In some cases, however, other documents may be necessary. Additional documentary evidence of authority is required by BNY Mellon in the event redemption is requested by a corporation, partnership, trust, fiduciary,
executor or administrator. See Signature Guarantee below.
If a shareholder has given authorization for expedited redemption, shares can be redeemed by telephone and the proceeds sent by check to the shareholder or by Federal wire transfer to a single previously
designated bank account. Once authorization is on file, the Fund will honor requests by any person by telephone at (800) 537-4942 or other means. The Fund reserves the right to terminate these redemption privileges. If the proceeds of a
redemption would exceed $25,000, the redemption request must be in writing and will be subject to the signature guarantee requirement described below under Signature Guarantee.
Persons who were shareholders of an investment portfolio of Compass Capital Group of Funds at the time of the portfolios
combination with The PNC Fund may also purchase and redeem Service Shares of the same Fund and for the same account in which they held shares on that date through the procedures described in this section.
Payment of Redemption Proceeds.
The Funds may suspend the right of
redemption or postpone the date of payment upon redemption for such periods as are permitted under the Investment Company Act, and may redeem shares involuntarily or make payment for redemption in securities or other property when determined
appropriate in light of the Funds responsibilities under the Investment Company Act.
Each Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of a Funds shares by making payment in whole or in part in
securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing a Funds net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into
cash. Each Fund has elected, however, to be governed by Rule 18f-1 under the Investment Company Act so that a Fund is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period
for any one shareholder of a Fund.
Under the Investment Company
Act, a Fund may suspend the right to redemption or postpone the date of payment upon redemption for any period during which the NYSE is closed (other than customary weekend and holiday closings), or during which trading on the NYSE is restricted, or
during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation or portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (A Portfolio may
also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.)
Each Fund may redeem shares involuntarily to reimburse a Fund for any loss sustained by reason of the failure of a shareholder to make full payment for
shares purchased by the shareholder or to collect any charge relating to a transaction effected for the benefit of a shareholder. Each Fund reserves the express right to redeem shares of each Fund involuntarily at any time if the Board of Trustees
determines, in its sole discretion, that failure to do so may have adverse consequences to the holders of shares in the Fund. Upon such redemption the holders of shares so redeemed shall have no further right with respect thereto other than to
receive payment of the redemption price.
Signature
Guarantee.
A signature guarantee is designed to protect the shareholders and the Fund against fraudulent transactions by unauthorized persons. A signature guarantee may be obtained from a domestic bank or trust company, recognized broker,
dealer, clearing agency, savings association who are participants in a medallion program by the Securities Transfer Association, credit unions, national securities exchanges and registered securities associations. The three recognized medallion
programs are Securities Transfer Agent Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP). Signature Guarantees which are not a part of these programs will not be
accepted. Please note that a notary public stamp or seal is not acceptable.
II-43
S
HAREHOLDER
S
ERVICES
Shareholder Services for All Funds other than BIF Funds,
BBIF Funds, Retirement Reserves and BlackRock Funds Portfolios
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 of the Part I of this Statement of Additional Information, or from the Distributor.
Investment Account
If your account is maintained at the Funds 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 Funds transfer agent. You may ascertain the number of shares in your Investment Account by calling the Funds transfer agent toll-free at 1-800-221-7210. The Funds
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 Funds 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 Funds 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 Funds 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 Funds transfer agent at 1-800-221-7210.
Automatic Investment Plans
If you maintain an account directly with the Funds transfer agent,
each Fund offers an Automatic Investment Plan whereby the Funds 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 Funds transfer agent or the Distributor. If you do not maintain an account directly with the Funds transfer agent, you
should contact your financial professional.
Accrued
Monthly Payout Plan
The dividends paid by each Fund are
generally reinvested automatically in additional shares. If you maintain an account at the Funds 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 Funds 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 Funds transfer agent
II-44
or the Distributor. If you do not maintain an account directly with the Funds transfer agent, you should contact your financial professional.
Systematic Withdrawal Plans
If you maintain an account with the Funds 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 24th day of each month or the 24th 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 Funds
transfer agent or the Distributor. 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 Funds transfer agent, you should contact your financial professional. 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 professional.
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 its 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.
II-45
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
1
/
2
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, 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 60 days or less, a dollar-weighted average life of 120
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 a Funds Board.
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 BIF Tax-Exempt, BBIF Tax-Exempt and the BIF 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 BIF Tax-Exempt, BBIF Tax-Exempt and the BIF 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 BIF Funds. As with yield quotations, yield comparisons should not be considered indicative of a Funds yield or relative performance for any future period.
II-46
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.
OTC issues, including most fixed income securities such as
corporate debt and U.S. Government securities, are normally traded on a net basis without a stated commission, through dealers acting for their own account and not as brokers. The Funds will primarily engage in transactions with these
dealers or deal directly with the issuer unless a better price or execution could be obtained by using a broker. Prices paid to a dealer with respect to both non-U.S. and domestic securities will generally include a spread, which is the
difference between the prices at which the dealer is willing to purchase and sell the specific security at the time, and includes the dealers normal profit.
Purchases of money market instruments by a Fund are made from dealers,
underwriters and issuers. The Funds do not currently expect to incur any brokerage commission expense on such transactions because money market instruments are generally traded on a net basis with dealers acting as principal for their
own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer. Each money market Fund (each a Money Market Portfolio) intends to purchase only securities with remaining maturities
of 13 months or less as determined in accordance with the rules of the SEC. As a result, the portfolio turnover rates of a Money Market Portfolio will be relatively high. However, because brokerage commissions will not normally be paid with respect
to investments made by a Money Market Portfolio, the turnover rates should not adversely affect the Funds net asset values or net income.
II-47
Securities purchased in underwritten offerings include a fixed amount of compensation to the
underwriter, generally referred to as the underwriters concession or discount. When securities are purchased or sold directly from or to an issuer, no commissions or discounts are paid.
The Manager or Sub-Advisers may seek to obtain an undertaking from issuers of commercial paper or dealers selling commercial
paper to consider the repurchase of such securities from a Fund prior to maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that a Funds anticipated need for
liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that a Fund would incur a capital loss in liquidating commercial paper, especially if interest rates have risen since acquisition of such commercial
paper.
Investment decisions for each Fund and for other
investment accounts managed by the Manager or Sub-Advisers are made independently of each other in light of differing conditions. BlackRock allocates investments among client accounts in a fair and equitable manner. A variety of factors will be
considered in making such allocations. These factors include: (i) investment objectives or strategies for particular accounts, including sector, industry, country or region and capitalization weightings, (ii) tax considerations of an
account, (iii) risk or investment concentration parameters for an account, (iv) supply or demand for a security at a given price level, (v) size of available investment, (vi) cash availability and liquidity requirements for
accounts, (vii) regulatory restrictions, (viii) minimum investment size of an account, (ix) relative size of account, and (x) such other factors as may be approved by BlackRocks general counsel. Moreover, investments may
not be allocated to one client account over another based on any of the following considerations: (i) to favor one client account at the expense of another, (ii) to generate higher fees paid by one client account over another or to produce
greater performance compensation to BlackRock, (iii) to develop or enhance a relationship with a client or prospective client, (iv) to compensate a client for past services or benefits rendered to BlackRock or to induce future services or
benefits to be rendered to BlackRock, or (v) to manage or equalize investment performance among different client accounts.
Because of different objectives or other factors, a particular security may be bought for one or more funds or clients advised by BlackRock or its
affiliates (collectively, clients) when one or more clients of BlackRock 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 BlackRock 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 BlackRock 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.
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. 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 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 VIII
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
II-48
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 BIF Funds and the BBIF 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 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 distributions, 25%) additional tax on any amount withdrawn from a retirement account prior to the participants attainment of age 59
1
/
2
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 59
1
/
2
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
1
/
2
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.
II-49
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 Taxes General 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 certain ESAs are scheduled to expire after December 31, 2012. Unless such provisions are extended, the tax treatment of such 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 Plans 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 adviser with respect to the tax consequences of investing through such an account.
II-50
Taxes
Each Fund intends to elect and to qualify or to continue to qualify, as appropriate, for the special tax treatment afforded 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, notwithstanding the availability of certain relief provisions, such Fund would be taxed in the same manner as an ordinary
corporation and all distributions from earnings and profits (as determined under 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, 2013) and the dividends-received deduction for corporate shareholders. However, distributions from a BIF Tax-Exempt Fund or from BBIF 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, 98.2% 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 BIF Tax-Exempt Funds and BBIF 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, 2013. Under these rules, the 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 with respect to the shares.
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. Each Fund will furnish its
shareholders with a written statement reporting 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
II-51
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 the 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 BIF Tax-Exempt Funds and BBIF 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 BBIF Tax-Exempt or a BIF 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 non-corporate shareholders 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.
Recently enacted legislation will impose a 3.8% Medicare tax on the net investment income (which includes interest, dividends and capital gains) of U.S.
individuals with income exceeding $200,000 or $250,000 if married filing jointly, and of trusts and estates, for taxable years beginning after December 31, 2012.
Other recently enacted legislation will impose a 30% withholding tax on
dividends and redemption proceeds paid after December 31, 2012, to (i) certain foreign financial institutions and investment funds unless they agree to collect and disclose to the IRS information regarding their direct and indirect U.S.
account holders and (ii) certain other foreign entities unless they certify certain information regarding their direct and indirect U.S. owners. Under some circumstances, a foreign shareholder may be eligible for refunds or credits of such
taxes.
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
II-52
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 reported 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 report such dividends as interest-related
dividends or short-term capital gain dividends. However, depending on its circumstances, a Fund may report 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 reports 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, 2012.
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.
BIF Tax-Exempt Funds, BBIF Tax-Exempt and Their Shareholders
The BIF Tax-Exempt Funds and BBIF 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 reported as exempt-interest dividends in a written statement furnished to the
Funds shareholders.
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 BIF Tax-Exempt Funds and BBIF 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 BIF
Tax-Exempt Funds and BBIF Tax Exempt.
All or a portion of
the BIF Tax-Exempt Funds and BBIF 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. In general, 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. Such loss will be allowed, however, in the
case of shares acquired after December 22, 2010 in a Fund that declares exempt-interest dividends daily in an amount equal to at least 90% of its net tax-exempt interest and distributes such dividends at least monthly.
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. BBIF Tax Exempt and each BIF Tax-Exempt Fund will purchase such private
II-53
activity bonds and will report to shareholders 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 BBIF Tax Exempt or a BIF 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.
BIF State Funds State Taxes
Dividends paid by each BIF 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 BIF State
Fund invests, please see Part I, Section X State Fund Tax Summaries of the BIF State Funds Statement of Additional Information.
The Appendices to the BIF State Funds Statement of Additional Information contain a general and abbreviated summary of the state tax laws relevant
to each BIF 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 BIF State Fund should consult their tax advisers about other state and local tax consequences of investment in such BIF 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 BBIF Tax-Exempt or any of the BIF 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 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 each Fund 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 is 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 BBIF
II-54
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 has 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 BBIF Funds. Shares issued are fully-paid and non-assessable by each Fund.
A copy of the Declaration establishing each Fund, 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.
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APPENDIX A
DESCRIPTION OF DEBT RATINGS
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 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 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. 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.
A-1
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/VMIG1 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 great 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.
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 very 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.
A-2
APPENDIX B
Proxy Voting Policies
For The BlackRock-Advised Funds
December, 2009
Copyright
©
2009 BlackRock, Inc.
All rights reserved.
B-1
B-2
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.
Rule 206(4)-6 under the Investment Advisers Act of 1940 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 Corporate Governance Committee (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.
BlackRock
votes (or refrains from voting) proxies for each Fund in a manner that BlackRock, in the exercise of its independent business judgment, concludes are in the best economic interests of such Fund. In some cases, BlackRock may determine that it is in
the best economic interests of a Fund to refrain from exercising the Funds proxy voting rights (such as, for example, proxies on certain non-U.S. securities that might impose costly or time-consuming in-person voting requirements). With regard
to the relationship between securities lending and proxy voting, BlackRocks approach is also driven by our clients economic interests. The evaluation of the economic desirability of recalling loans involves balancing the revenue
producing value of loans against the likely economic value of casting votes. Based on our evaluation of this relationship, BlackRock believes that the likely economic value of casting a vote generally is less than the securities lending income,
either because the votes will not have significant economic consequences or because the outcome of the vote would not be affected by BlackRock recalling loaned securities in order to ensure they are voted. Periodically, BlackRock analyzes the
process and benefits of voting proxies for securities on loan, and will consider whether any modification of its proxy voting policies or procedures are necessary in light of any regulatory changes.
BlackRock will normally vote on specific proxy issues in accordance with
BlackRocks proxy voting guidelines. BlackRocks proxy voting guidelines provide detailed guidance as to how to vote proxies on certain important or commonly raised issues. BlackRock may, in the exercise of its business judgment, conclude
that the proxy voting guidelines do not cover the specific matter upon which a proxy vote is requested, or that an exception to the proxy voting guidelines would be in the best economic interests of a Fund. BlackRock votes (or refrains from voting)
proxies without regard to the relationship of the issuer of the proxy (or any shareholder of such issuer) to the Fund, the Funds affiliates (if any), BlackRock or BlackRocks affiliates. When voting proxies, BlackRock attempts to
encourage companies to follow practices that enhance shareholder value and increase transparency and allow the market to place a proper value on their assets.
II.
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Proxy Voting Policies
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A. Boards of Directors
The Funds generally support the boards nominees in the election of directors and generally supports proposals that strengthen the independence of
boards of directors. 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
B-3
Funds therefore believe that the foundation of good corporate governance is the election of responsible, 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 the company issuing the proxy or 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 BlackRock 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 the company issuing the proxy or 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.
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 BlackRock 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. As a general matter, the Funds generally
vote against anti-takeover proposals and proposals that would create additional barriers or costs to corporate transactions that are likely to deliver a premium to shareholders.
F. Environmental and Social Issues
These are shareholder proposals addressing either
corporate social and environmental policies or requesting specific reporting on these issues. The Funds generally do not support proposals on social issues that lack a demonstrable economic benefit to the issuer and the Fund investing in such
issuer. BlackRock seeks to make proxy voting decisions in the manner most likely to protect and promote the long-term economic value of the securities held in client accounts. We intend to support economically advantageous corporate practices while
leaving direct oversight of company management and strategy to boards of directors. We seek to avoid micromanagement of companies, as we believe that a companys board of directors is best positioned to represent shareholders and oversee
management on shareholders behalf. Issues of corporate social and environmental responsibility are evaluated on a case-by-case basis within this framework.
III.
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CONFLICTS MANAGEMENT
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BlackRock maintains policies and procedures that are designed to prevent any relationship between the issuer of the proxy (or any shareholder of the
issuer) and a Fund, a Funds affiliates (if any), BlackRock or BlackRocks affiliates, from having undue influence on BlackRocks proxy voting activity. In certain instances, BlackRock may determine to engage an independent fiduciary
to vote proxies as a further safeguard against potential conflicts of interest or as otherwise required by applicable law. The independent fiduciary may either vote such proxies or provide BlackRock with instructions as to how to vote such proxies.
In the latter case, BlackRock votes the proxy in accordance with the independent fiduciarys determination.
B-4
BlackRock will report to the Directors on proxy votes it has made on behalf of the Funds at least annually.
B-5
SAI-BIF-0711
BIF TREASURY FUND
PART C. OTHER INFORMATION
Item 28.
Exhibits.
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Exhibit
Number
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Description
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1
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(a)
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Declaration of Trust of BIF Treasury Fund (the Registrant) dated October 24, 1990.(a)
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(b)
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Certification of Amendment dated April 11, 2002.(g)
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(c)
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Certification of Amendment dated April 16, 2002.(g)
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(d)
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Certification of Amendment dated February 25, 2008.(l)
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(e)
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Certificate of Amendment to the Declaration of Trust dated May 19, 2010.(o)
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2
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Amended and Restated By-Laws of the Registrant, dated December 9, 2008.(n)
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3
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Portions of the Declaration of Trust and By-Laws of the Registrant defining the rights of holders of shares of the
Registrant.(b)
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4
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None.
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5
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Form of Distribution Agreement between the Registrant and BlackRock Investments, LLC (formerly known as BlackRock
Investments, Inc.) (BRIL).(k)
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6
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None.
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7
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Form of Custody Agreement between the Registrant and State Street Bank and Trust Company.(i)
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8
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(a)
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Form of Administration Agreement between the Registrant and the Manager.(f)
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(b)
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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)
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(c)
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Form of Amendment No. 1 to Amended and Restated Unified Transfer Agency, Dividend Disbursing Agency and Shareholder
Servicing Agency Agreement dated as of October 1, 2008.(m)
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(d)
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Form of Cash Management Account Agreement.(h)
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(e)
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Form of Administrative Services Agreement between the Registrant and State Street Bank and Trust
Company.(e)
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9
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Opinion and Consent of Brown & Wood
LLP
, counsel to the Registrant.(c)
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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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11
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None.
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12
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None.
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13
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Form of Unified Distribution and Shareholder Servicing Plan of the Registrant.(k)
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14
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None.
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15
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(a)
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Code of Ethics of the Registrant.(d)
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(b)
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Code of Ethics of BRIL.(d)
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(c)
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Code of Ethics of the Manager.(d)
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16
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Power of Attorney.(j)
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(a)
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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).
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C-1
(b)
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Reference is made to Article II, Sections 2.3 and 2.4 and Articles III, IV, V, VI, VIII, IX, X and XI of the Registrants Declaration of Trust, filed as Exhibits
1(a)-(e) to this Registration Statement; and to Article I, Article II (Sections 2-4), Article IV (Section 1), and Article V of the Registrants Amended and Restated By-Laws, incorporated by reference to Exhibit 2 to this Registration
Statement.
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(c)
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Refiled on June 29, 2000 as Exhibit 9 to Post-Effective Amendment No. 11 to the Registrants Registration Statement pursuant to EDGAR requirements.
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(d)
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Incorporated by reference to an Exhibit to Post-Effective Amendment No. 44 to the Registration Statement on Form N-1A of Ready Assets Prime Money Fund (formerly
known as Merrill Lynch Ready Assets Trust) (File No. 2-52711), filed on April 29, 2009.
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(e)
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Incorporated by reference to Exhibit 8(d) to Post-Effective Amendment No. 1 to the Registration Statement on Form N-1A of BlackRock Focus Growth Fund, Inc.
(formerly known as Merrill Lynch Focus Twenty Fund, Inc.) (File No. 333-89775), filed on March 20, 2001.
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(f)
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Filed on July 27, 2007, as an Exhibit to Post-Effective Amendment No. 23 to the Registration Statement.
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(g)
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Filed on July 29, 2002 as an Exhibit to Post-Effective Amendment No. 13 to the Registration Statement.
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(h)
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Incorporated by reference to Exhibit 8(c) to Post-Effective Amendment No. 30 to the Registration Statement on Form N-1A of BIF Tax-Exempt Fund (formerly known as
CMA Tax-Exempt Fund) (File No. 2-69877), filed on February 10, 2003.
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(i)
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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.
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(j)
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Incorporated by reference to Exhibit 16 to Post-Effective Amendment No. 17 to the Registration Statement on Form N-1A of BlackRock International Fund of BlackRock
Series, Inc. (File No. 333-56203), filed on February 28, 2011.
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(k)
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Incorporated by reference to an Exhibit to Post-Effective Amendment No. 43 to the Registration Statement on Form N-1A of BIF Money Fund (formerly known as CMA
Money Fund) (File No. 2-59311), filed on July 29, 2009.
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(l)
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Filed on July 25, 2008, as Exhibit 1(d) to Post-Effective Amendment No. 24 to the Registration Statement.
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(m)
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Incorporated by reference to Exhibit 8(b) to Post-Effective Amendment No. 31 to the Registration Statement on Form N-1A of Ready Assets U.S.A. Government Money
Fund (formerly known as Merrill Lynch U.S.A. Government Reserves) (File No. 2-78702), filed on December 29, 2008.
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(n)
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Incorporated by reference to Exhibit 2 to Post-Effective Amendment No. 23 to the Registration Statement on Form N-1A of Ready Assets U.S. Treasury Money Fund
(formerly known as Merrill Lynch U.S. Treasury Money Fund) (File No. 33-37537), filed on March 30, 2009.
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(o)
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Filed on July 29, 2010 as Exhibit 1(e) to Post-Effective Amendment No. 22 to the Registration Statement.
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Item 29.
Persons Controlled by or under Common Control with the Registrant.
BIF Treasury Fund (previously defined as the
Registrant) is a controlling person of Master Treasury LLC. It is not under common control with any other person. As of July 12, 2011, the Fund owned 58.02% and BBIF Treasury Fund owned 41.98% of the Master Treasury LLC. The Master
Treasury LLC is a Delaware limited liability company.
Item 30.
Indemnification.
Reference is made to Section 5.3 of the
Registrants Declaration of Trust and Section 8 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
C-2
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.
Article IV, Section 2(d) of the Registrants By-Laws provides as follows:
The Fund shall make advance payments in connection
with the expenses of defending any action with respect to which indemnification might be sought hereunder, to the full extent permitted under applicable law, only if the Fund receives a written undertaking by the Indemnitee to reimburse the Fund if
it shall ultimately be determined that the standards of conduct necessary for indemnification have not been met. In addition, at least one of the following conditions must be met: (i) the Indemnitee shall provide adequate security for his or
her undertaking, (ii) the Fund shall be insured against losses arising by reason of any lawful advances or (iii) a majority of a quorum of the Independent Non-Party Directors, or if such quorum is not obtainable or even if obtainable, if a
majority vote of such quorum so direct, Special Counsel in a written opinion, shall conclude based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is substantial reason to believe that the Indemnitee
ultimately will be found entitled to Indemnification.
In Section 8 of the Unified Distribution Agreement relating to the securities being offered hereby, the Registrant agrees to indemnify BRIL and each person, if any, who controls BRIL 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 the 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.
C-3
Item 31.
Business and Other Connections of the Manager.
(a) BlackRock Advisors, LLC (previously
defined as the Manager) is an indirect wholly owned subsidiary of BlackRock, Inc. The Manager was organized in 1994 for the purpose of providing advisory services to investment companies. The information required by this Item 31
about officers and directors of the Manager, 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 the Manager pursuant to the Investment Advisers Act of 1940, as amended (the Advisers Act) (SEC File No. 801-47710).
Item 32.
Principal Underwriters.
(a) BlackRock Investments LLC (previously defined as
BRIL) acts as the principal underwriter or placement agent, as applicable, for each of the following open-end investment companies, including the Registrant:
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BBIF Government Securities Fund
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BlackRock Liquidity Funds
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BBIF Money Fund
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BlackRock Master LLC
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BBIF Tax-Exempt Fund
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BlackRock Mid Cap Value Opportunities Series, Inc.
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BBIF Treasury Fund
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BlackRock Multi-State Municipal Series Trust
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BIF Government Securities Fund
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BlackRock Municipal Bond Fund, Inc.
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BIF Money Fund
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BlackRock Municipal Series Trust
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BIF Multi-State Municipal Series Trust
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BlackRock Natural Resources Trust
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BIF Tax-Exempt Fund
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BlackRock Pacific Fund, Inc.
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BIF Treasury Fund
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BlackRock Series Fund, Inc.
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BlackRock Balanced Capital Fund, Inc.
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BlackRock Series, Inc.
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BlackRock Basic Value Fund, Inc.
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BlackRock Utilities and Telecommunications Fund, Inc.
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BlackRock Bond Allocation Target Shares
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BlackRock Value Opportunities Fund, Inc.
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BlackRock Bond Fund, Inc.
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BlackRock Variable Series Funds, Inc.
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BlackRock California Municipal Series Trust
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BlackRock World Income Fund, Inc.
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BlackRock Capital Appreciation Fund, Inc.
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FDP Series, Inc.
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BlackRock Equity Dividend Fund
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Funds For Institutions Series
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BlackRock EuroFund
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Managed Account Series
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BlackRock Financial Institutions Series Trust
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Master Basic Value LLC
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BlackRock Focus Growth Fund, Inc.
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Master Bond LLC
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BlackRock Focus Value Fund, Inc.
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Master Focus Growth LLC
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BlackRock Funds
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Master Government Securities LLC
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BlackRock Funds II
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Master Institutional Money Market LLC
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BlackRock Funds III
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Master Investment Portfolio
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BlackRock Global Allocation Fund, Inc.
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Master Large Cap Series LLC
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BlackRock Global Dynamic Equity Fund
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Master Money LLC
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BlackRock Global Emerging Markets Fund, Inc.
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Master Tax-Exempt LLC
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BlackRock Global Growth Fund, Inc.
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Master Treasury LLC
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BlackRock Global SmallCap Fund, Inc.
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Master Value Opportunities LLC
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BlackRock Healthcare Fund, Inc.
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Quantitative Master Series LLC
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BlackRock Index Funds, Inc.
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Ready Assets Prime Money Fund
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BlackRock International Value Trust
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Ready Assets U.S.A. Government Money Fund
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BlackRock Large Cap Series Funds, Inc.
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Ready Assets U.S. Treasury Money Fund
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BlackRock Latin America Fund, Inc.
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Retirement Series Trust
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C-4
BRIL also acts as the principal underwriter or placement agent, as applicable, for the
following closed-end registered investment company:
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BlackRock Fixed Income Value Opportunities
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(b)
Set forth below is information concerning each director and officer of BRIL. The principal business address of each such person is 40 East 52
nd
Street, New York, New York 10022.
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Name
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Position(s) and Office(s)
with BRIL
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Position(s) and Office(s)
with Registrant
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Laurence Fink
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Chairman and Member, Board of Managers
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None
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Francis Porcelli
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Chief Executive Officer and Managing Director
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None
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Anne F. Ackerley
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Managing Director
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None
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Robert Connolly
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General Counsel, Secretary and Senior Managing Director
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None
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Rick Froio
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Chief Compliance Officer and Assistant Secretary
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None
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Paul Greenberg
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Chief Financial Officer, Treasurer and Managing Director
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None
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John Blevins
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Managing Director and Assistant Secretary
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None
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Brenda Sklar
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Managing Director
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None
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Richard Turnill
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Managing Director (FSA approved)
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None
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Daniel Adams
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Vice President
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None
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Stephen Hart
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Vice President and Assistant Secretary
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None
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Robert Kapito
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Member, Board of Managers
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None
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Daniel Waltcher
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Member, Board of Managers
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None
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(c) Not applicable.
Item 33.
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:
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(a)
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Registrant, 100 Bellevue Parkway, Wilmington, Delaware 19809.
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(b)
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BlackRock Advisors, LLC, 100 Bellevue Parkway, Wilmington, Delaware 19809 (records relating to its functions as manager and administrator).
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(c)
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BlackRock Investments, LLC, 40 East 52
nd
Street, New York, New York 10022 (records relating to its functions as distributor).
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(d)
|
Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484 (records relating to its functions as transfer agent and dividend disbursing
agent).
|
|
(e)
|
State Street Bank and Trust Company, 600 College Road East, Princeton, New Jersey 08540 (records relating to its functions as accounting services provider).
|
|
(f)
|
State Street Bank and Trust Company, 2 Avenue de Lafayette, Boston, Massachusetts 02111 (records relating to its functions as custodian).
|
C-5
Item 34.
Management Services.
Other than as set forth under the caption Management
of the FundsBlackRock 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 35.
Undertakings.
Not applicable.
C-6
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 City of New York, and the State of New York, on the 26th day of July, 2011.
|
|
|
BIF T
REASURY
F
UND
(Registrant)
|
|
|
By:
|
|
/
S
/ J
OHN
M. P
ERLOWSKI
|
|
|
(John M. Perlowski,
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
/ J
OHN
M.
P
ERLOWSKI
(John M. Perlowski)
|
|
President and Chief Executive Officer (Principal Executive Officer)
|
|
July 26, 2011
|
|
|
|
/
S
/ N
EAL
J.
A
NDREWS
(Neal J. Andrews)
|
|
Chief Financial Officer (Principal Financial and Accounting Officer)
|
|
July 26, 2011
|
|
|
|
D
AVID
O. B
EIM
*
(David O. Beim)
|
|
Trustee
|
|
|
|
|
|
R
ONALD
W. F
ORBES
*
(Ronald W. Forbes)
|
|
Trustee
|
|
|
|
|
|
D
R
. M
ATINA
S. H
ORNER
*
(Dr. Matina S. 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
*
(Joseph P. Platt)
|
|
Trustee
|
|
|
|
|
|
R
OBERT
C. R
OBB
, J
R
.*
(Robert C. Robb, Jr.)
|
|
Trustee
|
|
|
|
|
|
T
OBY
R
OSENBLATT
*
(Toby Rosenblatt)
|
|
Trustee
|
|
|
C-7
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
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
/ B
EN
A
RCHIBALD
(Ben Archibald, Attorney-In-Fact)
|
|
|
|
July 26, 2011
|
C-8
SIGNATURES
Master Treasury LLC has duly caused this Registration
Statement of BIF Treasury Fund to be signed on its behalf by the undersigned, thereto duly authorized, in the City of New York, and State of New York, on the 26th day of July, 2011.
|
|
|
M
ASTER
T
REASURY
LLC
(Registrant)
|
|
|
By:
|
|
/
S
/ J
OHN
M. P
ERLOWSKI
|
|
|
(John M. Perlowski,
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
/ J
OHN
M.
P
ERLOWSKI
(John M. Perlowski)
|
|
President and Chief Executive Officer (Principal Executive Officer)
|
|
July 26, 2011
|
|
|
|
/
S
/ N
EAL
J.
A
NDREWS
(Neal J. Andrews)
|
|
Chief Financial Officer (Principal Financial and Accounting Officer)
|
|
July 26, 2011
|
|
|
|
D
AVID
O. B
EIM
*
(David O. Beim)
|
|
Director
|
|
|
|
|
|
R
ONALD
W. F
ORBES
*
(Ronald W. Forbes)
|
|
Director
|
|
|
|
|
|
D
R
. M
ATINA
S. H
ORNER
*
(Dr. Matina S. 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
*
(Joesph P. Platt)
|
|
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
|
|
|
C-9
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
F
REDERICK
W. W
INTER
*
(Frederick W. Winter)
|
|
Director
|
|
|
|
|
|
R
ICHARD
S. D
AVIS
*
(Richard S. Davis)
|
|
Director
|
|
|
|
|
|
H
ENRY
G
ABBAY
*
(Henry Gabbay)
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*By:
|
|
/
S
/ B
EN
A
RCHIBALD
(Ben Archibald, Attorney-In-Fact)
|
|
|
|
July 26, 2011
|
C-10
EXHIBIT INDEX
|
|
|
|
|
Exhibit
Number
|
|
|
Description
|
|
|
|
10
|
|
|
Consent of Deloitte & Touche
LLP
, independent registered public accounting firm for the
Registrant.
|
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