FILED BY MERRILL LYNCH & CO., INC.
PURSUANT TO RULE 425 UNDER THE SECURITIES ACT OF 1933
AND DEEMED FILED PURSUANT TO RULE 14A-12
OF THE SECURITIES EXCHANGE ACT OF 1934

SUBJECT COMPANY: NEW BLACKROCK, INC.
COMMISSION FILE NO. 333-134916

 

 

June 20, 2006

 

Dear Colleague:

In February, we announced our intention to combine our investment management business with BlackRock, with an anticipated closing date at the end of the third quarter of 2006. Once finalized, the combined organization will be responsible for managing approximately $1 trillion in client assets. We will offer clients worldwide a full range of equity, fixed income, liquidity and alternative investment products.

Since the announcement, we have been establishing teams, products and business models in an effort to create a firm that incorporates the best practices in the industry. While everything is still subject to closing, we thought it would be helpful to provide you with an update on our progress thus far.

Governance
The new BlackRock organization will be an independent firm in terms of both ownership and governance. BlackRock will remain a publicly traded asset management company for which Larry Fink will continue as Chairman and CEO. There will be no single majority shareholder, and the board will continue to have a majority of independent directors. We believe this structure will enable us to continue to focus on building a premier global asset management company. In reviewing the new structure, we also decided to formally announce the creation of an Executive Committee charged with setting the strategic direction of the firm and streamlining decision-making as the business grows in scope and complexity. The Executive Committee is comprised of 10 senior BlackRock executives (including seven founders) and upon closing, two senior executives of Merrill Lynch Investment Managers (MLIM^®) are expected to join this committee.

Portfolio Management
BlackRock and MLIM share a similar business philosophy in equities, which makes it relatively straightforward to combine our equity teams under Bob Doll’s leadership as Global CIO for equities. As you know, Bob has over 26 years of investment experience and currently manages several successful large cap portfolios at MLIM, in addition to serving as President and CIO. We are excited to have a global CIO for equities with such exceptional credentials. Each current BlackRock and MLIM dedicated equity team will continue to manage its products utilizing its current investment philosophy and process. The combined firm will manage in excess of $300 billion across a wide range of equity products, including large cap, mid cap, small cap, global and sector mandates.

We are pleased to report that Keith Anderson, a founder of BlackRock’s fixed income team with over 20 years of investment experience, will continue as Global CIO for Fixed Income and Scott Amero will continue as Co-Head of the fixed income team. The combined firm will manage over $400 billion in fixed income assets across a variety of mandates. The combined firm will offer several new strategies, and the team is being selectively expanded to add resources and expertise. Finally, our process will be enhanced with additional insights globally and open sharing of information on trends, flows, sectors and companies.

Private Client Business
Post-merger, BlackRock will be an industry leader in U.S. retail asset management with over $270 billion in assets invested for over 10 million individual investors. Our product line will feature considerable strength in equity, fixed income and liquidity products. The firm will manage $98 billion in open-end and variable funds, $44 billion in closed-end funds and $41 billion in separately managed accounts. Additionally, the firm will act as sub-adviser to $37 billion of assets and manage $48 billion in open-end liquidity funds.* We are proud to report that 84 funds in the combined open-end and closed-end fund families have Morningstar Ratings of 4 or 5 stars as of May 31, 2006.^†

The combined firm’s extensive resources, including BlackRock’s award-winning call center and shareholder statements, will allow BlackRock to focus on serving financial advisors and their individual clients, and other financial intermediaries. We also anticipate ongoing product innovations as we continue to serve our investors’ needs.

Mutual Fund Family
We are pleased to announce our mutual fund line-up for the combined firm, which we believe will offer investors world-class products in 87 funds across multiple asset classes. The new fund family, which will be branded “BlackRock,” will include a number of high-performing large cap equity funds, multiple global funds and a strong sector fund line-up, including Energy and Health Sciences. Our equity fund AUM will total more than $70 billion. Additionally, we will feature 33 fixed income products with over $20 billion in AUM, inclusive of BlackRock’s flagship taxable fixed income funds and strong performing municipal bond funds.

We have filed several fund reorganization proxy statements (N-14s) with the SEC as part of our initiative to consolidate certain comparable MLIM and BlackRock mutual funds. These consolidations are designed to reduce overlap in the product range, and they include consolidations of MLIM funds into BlackRock funds, BlackRock funds into MLIM funds, and MLIM funds into other MLIM funds. Exhibit A shows the complete open-end fund family as we expect it to look as of October 1, 2006.

As part of this process, we are changing the names of selected funds and naming new portfolio managers of selected funds. Exhibit B identifies the funds that will have changes.

Closed-End Funds
The combined closed-end fund family will feature over 100 funds with approximately $44 billion in assets. The family will include equity, taxable and tax-exempt funds and benefit from extensive resources focused on supporting the funds in the secondary market. As part of the process of combining the firms, we will make some changes to portfolio managers on selected funds, which are identified in Exhibit C.

Proxy Solicitation
During the week of June 19, both BlackRock fund shareholders and MLIM fund shareholders will be mailed proxy materials asking them to vote on, among other things, new investment advisory agreements, a new investment sub-advisory agreement for certain funds and for certain BlackRock municipal funds, a fundamental investment policy change.

Additionally, shareholders of certain funds will be sent proxies asking them to approve the reorganization of selected BlackRock and MLIM funds. Only shareholders of the funds that are being acquired are required to approve these changes.

Exhibit D presents commonly asked questions and answers to help you respond to any inquiries you may receive.

Over the coming weeks, we will continue to update you on our progress and provide you with the information and tools you need to serve your clients. In early July, we will provide to all operations contacts details on new CUSIPs, fund symbols and fund rule/service changes in anticipation of fund mergers to be effective in mid-October.

Please know that we remain focused on investment performance and client service, as we recognize the importance of the trust you have placed with us. We appreciate your business and hope to continue to serve you and your clients for many years. As always, please contact your relationship manager if you have any additional questions around our upcoming combination with BlackRock.

Sincerely,

Frank Porcelli
Chief Operating Officer
Merrill Lynch Investment Managers, Americas

 

Attachments (4)

 

 

 

 

	*		Data as of 3.31.06.
	†		Overall Morningstar Ratings are based on historical risk-adjusted performance and are derived from a weighted average of the funds’ 3-, 5- and 10-year Morningstar Rating Metrics. Past performance is no guarantee of future results.

EXHIBIT A

PROPOSED OPEN-END FUND FAMILY AS OF OCTOBER 2006

EQUITY
Domestic Equity		Value		Core		Growth
Large		Large Cap Value		Large Cap Core		Large Cap Growth
		Basic Value		S&P 500 Fund		Fundamental Growth
		Focus Value		Investment Trust		Focus 20
		Equity Dividend Fund		Index Equity		Legacy
				Exchange
Mid		Mid-Cap Value		US Opportunities		Mid-Cap Growth
		Mid Cap Value Opps
SMID		Aurora				SMID Growth
Small		Value Opportunities		Small Cap Index		Small Cap Growth
		Small Cap Value1		Small Cap Core		Small Cap Growth II
Global & International		Value		Core		Growth
Large		Global Value		International		Global Growth
		International Value		International Index		Global Opps
				Global Dynamic Equity
Small		Developing Capital Markets				Global Small Cap
						Intl. Opps
Specialty
Other		Global Technology		Basic Value Prin. Prtd.1		Global Science & Tech
		Global Financial Svcs.		Real Investment		Utilities and Telecom
		All-Cap Global Resources		Fndmntl Gr. Prin. Prtd.1		Global Resources1
		Healthcare		Natural Resources		Health Sciences Opportunities
						Core Prin. Protected1
Blended
		Global Allocation		Balanced Capital		Asset Allocation
Regional
		EuroFund		Latin America		Pacific
FIXED INCOME
		Short		Intermediate/Long		Government
Fixed Income		Enhanced Income		Intermediate Bond		Intermediate Govt.
		Short Term Bond		Intermediate Bond II		GNMA
		Low Duration		Total Return		GNMA Accumulation
		Sr. Float		Bond Fund		Government Income
		Sr. Float II		Total Return II
				Managed Income
				Aggregate Bond Index
		Tips		High Yield		Global
Other		Inflation Protected		High Yield		International Bond
				High Income		World Income
		Short		National		State Specific
Municipals		Short Term Muni		Muni Int Term		California Muni
				Insured Muni		Delaware Muni
				National Muni		Florida Muni
				AMT-Free Muni		Kentucky Muni
						New Jersey Muni
						New York Muni
						Ohio Muni
						Pennsylvania Muni

1

Fund closed to new investors. Bold denotes Morningstar 4 and 5 star Overall Rating as of 5.31.06.

For Informational Purposes Only. This material is not intended to be a solicitation for any investment product referenced herein.

EXHIBIT B

PROPOSED FUND REORGANIZATIONS

PORTFOLIO IMPACTED		ACQUIRED BY		RESULTING		PORTFOLIO
				FUND NAME		MANAGEMENT TEAM
Equity Funds
ML Strategy All Equity		ML Large Cap Core		BR Large Cap Core		Doll
ML Strategy Growth & Income		ML Global Allocation		BR Global Allocation		Stattman/Chamby
ML Strategy Long-Term Growth		ML Global Allocation		BR Global Allocation		Stattman/Chamby
ML Disciplined Equity		ML Large Cap Core		BR Large Cap Core		Doll
BR Dividend AchieversTM		ML Equity Dividend		BR Equity Dividend		Shearer
BR Large Cap Growth		ML Large Cap Growth		BR Large Cap Growth		Doll
BR Large Cap Value		ML Large Cap Value		BR Large Cap Value		Doll
Taxable Fixed Income Funds
ML Inflation Protected		BR Inflation Protected		BR Inflation Protected		Spodek/Weinstein
ML Intermediate Term		ML Core Bond		BR Bond		Anderson/Amero/Marra/Phillips
ML Short Term U.S. Government		BR Low Duration		BR Low Duration		Anderson/Amero/Kopstein
ML U.S. Government		BR Government Income		BR Government Income		Phillips/Pellicciaro
ML U.S. High Yield		BR High Yield		BR High Yield		Gary/Amero
Municipal Funds
BR New Jersey Tax-Free		ML New Jersey Municipal		BR New Jersey Municipal		Jaeckel
BR Pennsylvania Tax-Free		ML Pennsylvania Municipal		BR Pennsylvania Municipal		Bock
BR UltraShort Municipal		ML Short Term Municipal		BR Short Term Municipal		Hayes

PROPOSED MUTUAL FUND NAME AND/OR PORTFOLIO MANAGER CHANGES

PORTFOLIO IMPACTED		NAME CHANGE		PORTFOLIO
				MANAGEMENT TEAM
Equity Funds
ML Global Equity Opportunities		BR Global Dynamic Equity		No Change
ML Small Cap Growth		BR Small Cap Growth II		Wagner/Leary/Thut
BR Health Sciences		BR Health Sciences Opportunities		No Change
Taxable Fixed Income Funds
ML High Income		BR High Income		Gary/Amero
ML Real Investment		BR Real Investment		Spodek/Weinstein
ML Low Duration		BR Short Term Bond		Anderson/Amero/Kopstein
ML World Income		BR World Income		Gordon/Hussain/Gary
ML Core Bond		BR Bond		Anderson/Amero/Marra/Phillips
BR Intermediate Bond		BR Intermediate Bond II		No Change1
BR Intermediate PLUS Bond		BR Intermediate Bond		No Change1
BR Core Bond Total Return		BR Total Return II		No Change1
BR Core PLUS Total Return		BR Total Return		No Change1
Municipal Funds
BR Delaware Tax-Free2		BR Delaware Municipal		O’Connor
BR Kentucky Tax-Free2		BR Kentucky Municipal		O’Connor
BR Ohio Tax-Free2		BR Ohio Municipal		O’Connor
BR Tax-Free Income3		BR AMT-Free Municipal		O’Connor

1		It is anticipated that following the closing of the MLIM and BlackRock transaction, Matthew Marra and Andrew J. Phillips will join Keith Anderson and Scott Amero in the day-to-day management of the portfolios.
2		Portfolio guidelines will be expanded to allow greater latitude to purchase AMT bonds (shareholder vote required) and bonds rated below investment grade.
3		Portfolio guidelines will be expanded to allow bonds rated below investment grade.

 

 

 

For Informational Purposes Only. This material is not intended to be a solicitation for any investment product referenced herein.

EXHIBIT C

CLOSED-END FUNDS WITH PORTFOLIO MANAGER AND NAME CHANGES

NATIONAL MUNICIPAL PORTFOLIOS		PM TEAM
BlackRock Long-Term Municipal Advantage Trust		O’Connor
BlackRock Municipal Income Trust II		O’Connor
BlackRock Municipal Bond Trust		O’Connor
BlackRock Municipal Income Trust		O’Connor
BlackRock Strategic Municipal Trust		O’Connor
BlackRock Investment Quality Municipal Trust Inc.		O’Connor
BlackRock Insured Municipal Income Trust		DiMella
NATIONAL MUNICIPAL TERM TRUSTS		PM TEAM
BlackRock Insured Municipal 2008 Term Trust Inc.		DiMella
BlackRock Municipal 2020 Term Trust		O’Connor
BlackRock Municipal 2018 Term Trust		O’Connor
BlackRock Insured Municipal Term Trust Inc. (2010)		DiMella
BlackRock Municipal Target Term Trust Inc. (2006)		DiMella
STATE-SPECIFIC MUNICIPAL PORTFOLIOS		PM TEAM
BlackRock California Insured Municipal Income Trust		O’Connor
BlackRock California Municipal Income Trust II		O’Connor
BlackRock California Municipal Bond Trust		O’Connor
BlackRock California Municipal Income Trust		O’Connor
BlackRock California Investment Quality Municipal Trust, Inc.		O’Connor
BlackRock Florida Insured Municipal Income Trust		Sneeden
BlackRock Florida Municipal Bond Trust		Sneeden
BlackRock Florida Municipal Income Trust		Sneeden
BlackRock Florida Investment Quality Municipal Trust		Sneeden
BlackRock Maryland Municipal Bond Trust		O’Connor
BlackRock New Jersey Municipal Bond Trust		Jaeckel
BlackRock New Jersey Municipal Income Trust		Jaeckel
BlackRock New Jersey Investment Quality Municipal Trust		Jaeckel
BlackRock New York Insured Municipal Income Trust		O’Connor, Browse
BlackRock New York Municipal Income Trust II		O’Connor, Browse
BlackRock New York Municipal Bond Trust		O’Connor, Browse
BlackRock New York Municipal Income Trust		O’Connor, Browse
BlackRock New York Investment Quality Municipal Trust Inc.		O’Connor, Browse
BlackRock Pennsylvania Strategic Municipal Trust		Bock
BlackRock Virginia Municipal Bond Trust		O’Connor
STATE-SPECIFIC MUNICIPAL TERM TRUSTS		PM TEAM
BlackRock California Municipal 2018 Term Trust		O’Connor
BlackRock California Insured Municipal 2008 Term Trust Inc.		O’Connor
BlackRock Florida Municipal 2020 Term Trust		Sneeden
BlackRock Florida Insured Municipal 2008 Term Trust		Sneeden
BlackRock New York Municipal 2018 Term Trust		O’Connor
BlackRock New York Insured Municipal 2008 Term Trust Inc.		O’Connor

 

 

 

For Informational Purposes Only. This material is not intended to be a solicitation for any investment product referenced herein.

EXHIBIT D

This brief Q&A is provided to assist financial professionals in best answering questions their clients might have regarding an upcoming proxy solicitation and other transaction-related information.

QUESTIONS RELATING TO NEW ADVISORY AGREEMENTS

Q.		Why am I being asked to vote on a new advisory agreement and sub-advisory agreement, if applicable?
A.		BlackRock and Merrill Lynch announced on February 15, 2006 that they had reached an agreement pursuant to which Merrill Lynch will contribute its investment management business, Merrill Lynch Investment Managers (“MLIM”), to BlackRock. With this change, the existing MLIM advisory agreements will terminate at the closing of the transaction. Therefore, new advisory agreements must be approved by shareholders.
Q.		What is the rationale for the merger of MLIM to BlackRock?
A.		The new company will offer a full range of equity, fixed income, cash management and alternative investment products with strong representation in both retail and institutional channels, in the United States and internationally.
Q.		What does the combination of MLIM and BlackRock mean to shareholders?
A.		The new company will offer you even greater access to a well-diversified product mix across asset classes and an enhanced ability to serve your investment needs.
Q.		How does the proposed new investment advisory agreement for my Portfolio differ from the current agreement?
A.		The advisory fees payable by each Portfolio to its investment adviser and services provided under its new investment advisory agreement are identical to those under the current agreement. While the other terms of the new investment advisory agreement generally are substantially similar to those of the current agreement, certain changes are being proposed in the new investment advisory agreement in order to standardize terms and language across all BlackRock- and MLIM-sponsored funds.
Q.		How does the proposed new sub-advisory agreement for my Portfolio differ from the current agreement?
A.		The sub-advisory fees payable by the adviser to the sub-adviser and services provided under each new sub-advisory agreement are identical to those under the current agreements. While the other terms of the new sub-advisory agreements generally are substantially similar to those of the current agreements, certain changes are being proposed in the new sub-advisory agreements in order to standardize terms and language across all BlackRock- and MLIM-sponsored funds.
Q.		Will my Portfolio’s total fees for advisory services increase?
A.		No. The total fees payable under your fund’s current investment advisory agreement will remain the same. Any additional fees incurred under the new sub-advisory agreement will be paid by your fund’s advisor at no additional cost to you or your Portfolio

 

 

 

 

For Informational Purposes Only. This material is not intended to be a solicitation for any investment product referenced herein.

QUESTIONS RELATING TO FUND REORGANIZATIONS

Q.		When will the reorganization of BlackRock and MLIM funds occur?
A.		If approved by shareholders, the reorganization is expected to occur contemporaneously, or shortly thereafter, with the combination of MLIM and BlackRock, which is expected to occur at the end of the third quarter of 2006.
Q.		How will the reorganization affect fund shareholders?
A.		If the proposed reorganization of funds is approved, the assets and certain stated liabilities of certain Merrill Lynch and BlackRock funds will be combined with those of the Surviving Merrill Lynch or BlackRock funds, and shareholders will receive shares of the Surviving Fund. Shareholders will receive the same or a similar class of shares of the Surviving Fund as they currently hold of the Merging Fund. The aggregate net asset value of the shares they receive in the reorganization will equal the aggregate net asset value of the shares they own immediately prior to the reorganization.
Q.		Will shareholders have to pay any sales load, commission or other similar fee in connection with the reorganization?
A.		No, shareholders will not pay any sales load, commission or other similar fee in connection with the reorganization.
Q.		Will shareholders have to pay any federal taxes as a result of the reorganization?
A.		The reorganization is expected to qualify as a tax-free “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
Q.		Who will be responsible for leading the portfolio management teams of the BlackRock Funds after the reorganization?
A.		Overall, the funds’ portfolio management teams are expected to be led by a combination of BlackRock and MLIM managers. See the attached exhibits for more information on the proposed fund line-up and portfolio management teams after the reorganization.

 

 

 

 

For Informational Purposes Only. This material is not intended to be a solicitation for any investment product referenced herein.

DISCLOSURE

In connection with the proposed transaction, a registration statement of New BlackRock Inc. (“New BlackRock”) which includes a preliminary proxy statement of New BlackRock and other materials have been filed with the Securities and Exchange Commission (the “SEC”) and are publicly available. Investors are urged to read the registration statement and other materials when they are available because they contain important information. Investors will be able to obtain free copies of the registration statement and proxy statement, when they become available, as well as other filings containing information about BlackRock and Merrill Lynch & Co., Inc. (“Merrill Lynch”), at the SEC’s Internet site (http://www.sec.gov).

Merrill Lynch, BlackRock and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from BlackRock stockholders in respect of the proposed transaction. Information regarding Merrill Lynch’s directors and executive officers is available in its proxy statement for its 2006 annual meeting of stockholders, dated March 10, 2006, and information regarding BlackRock’s directors and executive officers is available in its proxy statement for its 2006 annual meeting of stockholders, dated April 28, 2006. Additional information regarding the interests of such potential participants will be included in the registration statement and the other relevant documents filed with the SEC when they become available.

Cautionary Language Concerning Forward-Looking Statements
Information contained in this document may contain forward-looking statements, including, for example, statements about management expectations, strategic objectives, growth opportunities, business prospects and regulatory proceedings, transaction synergies, and other similar matters. These forward-looking statements are not statements of historical facts and represent only Merrill Lynch’s beliefs regarding future performance, which is inherently uncertain. There are a variety of factors, many of which are beyond Merrill Lynch’s control, which affect the operations, performance, business strategy and results and could cause actual results and experience to differ materially from the expectations and objectives expressed in any forward-looking statements. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only to the date on which they are made, and may be impacted by a variety of factors that are beyond Merrill Lynch’s and BlackRock’s control. Merrill Lynch and BlackRock do not undertake to update these statements to reflect the impact of circumstances or events that arise after the date on which they were made. Investors should consult Merrill Lynch’s and BlackRock’s reports filed with the SEC for any additional information.

For Informational Purposes Only. This material is not intended to be a solicitation for any investment product referenced herein.

NPR716-6/2006