Proposed Exemptions Involving: D-11363-Citation Box and Paper Co. Profit Sharing Plan and Retirement Trust; and D-11435-Merrill Lynch & Co., Inc. and BlackRock, Inc., 26415-26431 [E8-10263]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 73, Number 91 (Friday, May 9, 2008)]
[Notices]
[Pages 26415-26431]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-10263]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Application Nos. D-11363 & D-11435]


Proposed Exemptions Involving: D-11363--Citation Box and Paper 
Co. Profit Sharing Plan and Retirement Trust; and D-11435--Merrill 
Lynch & Co., Inc. and BlackRock, Inc.

AGENCY: Employee Benefits Security Administration, Labor

ACTION: Notice of proposed exemption.

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SUMMARY: This document contains a notice of pendency before the 
Department of Labor (the Department) of proposed exemptions from 
certain of the prohibited transaction restrictions of the Employee 
Retirement Income Security Act of 1974 (ERISA or the Act) and/or the 
Internal Revenue Code of 1986 (the Code).

Written Comments and Hearing Requests

    All interested persons are invited to submit written comments or 
requests for a hearing on the pending exemption, unless otherwise 
stated in the Notice of Proposed Exemption, within 45 days from the 
date of publication of this Federal Register Notice. Comments and 
requests for a hearing should state: (1) The name, address, and 
telephone number of the person making the comment or request, and (2) 
the nature of the person's interest in the exemption and the manner in 
which the person would be adversely affected by the exemption. A 
request for a hearing must also state the issues to be addressed and 
include a general description of the evidence to be presented at the 
hearing.

ADDRESSES: All written comments and requests for a hearing (at least 
three

[[Page 26416]]

copies) should be sent to the Employee Benefits Security Administration 
(EBSA), Office of Exemption Determinations, Room N-5649, U.S. 
Department of Labor, 200 Constitution Avenue, NW., Washington, DC 
20210. Attention: Application No. ----, stated in each Notice of 
Proposed Exemption. Interested persons are also invited to submit 
comments and/or hearing requests to EBSA via e-mail or FAX. Any such 
comments or requests should be sent either by e-mail to: 
moffitt.betty@dol.gov, or by FAX to (202) 219-0204 by the end of the 
scheduled comment period. The application for exemption and the 
comments received will be available for public inspection in the Public 
Documents Room of the Employee Benefits Security Administration, U.S. 
Department of Labor, Room N-1513, 200 Constitution Avenue, NW., 
Washington, DC 20210.

Notice to Interested Persons

    Notice of the proposed exemption will be provided to all interested 
persons in the manner agreed upon by the applicant and the Department 
within 15 days of the date of publication in the Federal Register. Such 
notice shall include a copy of the notice of proposed exemption as 
published in the Federal Register and shall inform interested persons 
of their right to comment and to request a hearing (where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemption was requested in 
applications filed pursuant to section 408(a) of the Act and/or section 
4975(c)(2) of the Code, and in accordance with procedures set forth in 
29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990). 
Effective December 31, 1978, section 102 of Reorganization Plan No. 4 
of 1978, 5 U.S.C. App. 1 (1996), transferred the authority of the 
Secretary of the Treasury to issue exemptions of the type requested to 
the Secretary of Labor. Therefore, this notice of proposed exemption is 
issued solely by the Department.
    The application contains representations with regard to the 
proposed exemption which is summarized below. Interested persons are 
referred to the application on file with the Department for a complete 
statement of the facts and representations.

Citation Box and Paper Co. Profit Sharing Plan and Retirement Trust 
(the Plan), Located in Chicago, Illinois

[Exemption Application Number: D-11363].

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR Part 
2570 Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption 
is granted, the restrictions of sections 406(a)(1)(A) and (D), and 
sections 406(b)(1) and (b)(2) of the Act, and the sanctions resulting 
from the application of section 4975 of the Code, by reason of sections 
4975(c)(1)(A), (D), and (E) of the Code, shall not apply to the 
proposed sale of improved real property (the Property) by the Plan to a 
partnership to be comprised of Anthony J. Kostiuk (the Applicant and 
Plan Fiduciary), Anthony L. Kostiuk, Edmund Chmiel, Andre Frydl, and 
David Marinier, each of whom is a party in interest with respect to the 
Plan, provided that the following conditions are satisfied:
    (a) The sale is a one-time transaction for cash;
    (b) As a result of the sale, the Plan receives the greater of: (i) 
$975,000; (ii) The fair market value of the Property as of the date of 
the transaction as determined by a qualified, independent appraiser; or 
(iii) The cost to the Plan to acquire and hold the Property;
    (c) The Plan pays no commissions, fees or other expenses in 
connection with the sale;
    (d) The terms and conditions of the sale are at least as favorable 
as those obtainable in an arm's length transaction with an unrelated 
third party;
    (e) With respect to any lease payments for the occupancy of the 
Property that were made by the Citation Box and Paper Co. (the Company) 
to the Plan on or after July 1, 1996 and which (in the opinion of an 
MAI-certified, qualified independent appraiser) amounted to less than 
the fair market rental value of the Property at the time of such 
payment, the Company reimburses the Plan, prior to publication of a 
final grant of this requested prohibited transaction exemption, for the 
full amount of all such rental shortfalls in the form of a lump sum 
payment in arrears plus interest as calculated in conformity with the 
requirements of section 5(b)(5) of the Department's Voluntary Fiduciary 
Correction (VFC) Program described at 71 FR 20262 (April 19, 2006); and
    (f) To the extent that there are rental shortfalls referenced in 
paragraph (e), the Applicant shall provide the Department with all 
relevant documentation pertaining to the calculation of such shortfall 
(including the fair market rental value of the Property for each 
applicable lease year, the amount of the rental shortfall for each 
year, the interest attributable to the rental shortfall for each year, 
and proof that the reimbursement was paid to the Plan) prior to 
publication of a final grant of this requested prohibited transaction 
exemption.

Summary of Facts and Representations

    1. The Plan is a defined contribution profit sharing plan sponsored 
by the Citation Box and Paper Co. (the Company), which is headquartered 
in Chicago, Illinois. As of June 30, 2006, the Plan had approximately 
34 participants and total assets of approximately $3,107,545. The 
Plan's current and sole trustee is the Applicant, who is also a 
participant in the Plan and the owner of the Company. Anthony L. 
Kostiuk, Edmund Chmiel, Andre Frydl, and David Marinier are also 
participants in the Plan and, together with the Applicant, intend to 
establish a partnership that will purchase a parcel of improved real 
property (the Property), located at 4700 West Augusta Boulevard in 
Chicago, Illinois, from the Plan. The Applicant states that, in 
submitting this exemption application to the Department, he is 
authorized to represent the interests of his intended co-partners 
(Messrs. A. L. Kostiuk, Chmiel, Frydl, and Marinier) in the acquisition 
of the Property from the Plan.
    2. The Applicant represents that the Property covers a gross area 
of 76,444 square feet, and is irregular in shape. The Applicant 
represents that the Property was acquired by the Plan from the Company 
on November 18, 1971 at a cost of $294,000.\1\ The Property contains a 
two-story loft industrial structure (the Building) that houses the 
Company's warehouse and office facilities. The Applicant represents 
that the surface area of the Building at ground level totals 41,821 
square feet.
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    \1\ The Applicant has provided a copy of the 1984 exemption 
application (the 1984 Application) submitted on behalf of the Plan 
which culminated in the grant of PTE 85-7. The 1984 Application 
states that the Property was originally purchased by the Plan in 
1971 for a price of $294,000. According to the Applicant, the 1984 
Notice of Proposed Exemption (49 FR 43131, October 26, 1984) 
contains a typographical error, because it states that the Property 
was acquired by the Plan for $249,000. In addition, the Notice of 
Proposed Exemption states that the Property is approximately 76,000 
square feet in area; In the current application, as noted above, the 
Applicant represents that the more precise figure is 76,444 square 
feet.
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    The Applicant represents that a parcel of land adjacent to the 
Property (the Adjacent Parcel) previously owned by the Belt Railway 
Company (the Railway) of Chicago was purchased in 2005 by

[[Page 26417]]

Citation Properties, LLC, a single-member limited liability company 
whose sole member is the Applicant. Prior to its acquisition by the 
Company, the Applicant represents that Adjacent Parcel had been leased 
to the Company by the Railway to provide parking facilities, as well as 
access to and egress from the Property. The Applicant represents that 
this lease predated the Department's issuance of a previous 
administrative exemption, PTE 85-7 (50 FR 1006, January 8, 1985), 
involving the Plan and the Property at issue in this proposal. The 
Applicant represents that the Adjacent Parcel is rectangular in shape 
and covers an area of 17,600 square feet. The Applicant represents that 
the Plan has not paid the Company or Citation Properties, LLC for the 
use of the Adjacent Parcel since it was acquired from the Railway. The 
Applicant also represents that the remaining lots adjacent to the 
Property are owned by persons unrelated to the Company, the Applicant, 
and the intended co-partners.
    3. PTE 85-7 (the Original Exemption) permitted the Plan to lease 
the Property to the Company on a continuous basis on or after July 1, 
1984, provided that ``the terms and conditions of such leasing are at 
least as favorable to the Plan as those which the Plan could receive in 
a similar transaction with an unrelated party.'' The material facts and 
representations supporting the Department's grant of the Original 
Exemption were contained in a Notice of Proposed Exemption published on 
October 26, 1984, at 49 FR 43131 (the 1984 Notice).
    4. Since it acquired the Property in 1971, the Plan has leased the 
Property to the Company on a continuous basis. Each of the successive 
lease agreements executed between the Plan and the Company since the 
time of the acquisition have been ``absolute net leases'' requiring the 
company to be responsible for all upkeep, repair, fire insurance 
premiums, and taxes on the Property. According to the Summary of Facts 
and Representations contained in the 1984 Notice published prior to the 
issuance of PTE 85-7, the Original Exemption was intended to permit the 
continued leasing (the Lease) of the Property by the Plan to the 
Company until June 30, 1994, with three five-year options from such 
date.
    The 1984 Notice further stated that ``[t]he Lease provides that for 
each three-year period during the initial ten-year term and during each 
option period thereafter the rental amount would be adjusted based upon 
an MAI appraisal report as to the then-current fair rental value.'' The 
terms of the original Lease executed on January 16, 1984, stipulated 
that the fair rental value of the Property would be updated two months 
prior to July 1, 1987 (and triennially thereafter through the year 
2008), by an independent, MAI-certified appraiser.
    5. According to the 1984 Notice, an independent fiduciary 
(originally Unibanc Trust Company, subsequently replaced in March of 
1986 by Harris Trust and Savings Bank (Harris Trust)) was to exercise 
authority and control over and have responsibility for the operation of 
the lease. In addition, the 1984 Notice represented that this fiduciary 
was to have sole discretion to monitor the lease and enforce the rights 
of the Plan under the terms and conditions of any such lease.\2\ In 
April of 2004, the Company informed Harris Trust that it was exercising 
its option under the lease agreement to extend the term of the lease 
for an additional period of five years beginning on July 1, 2004, and 
ending on June 30, 2009.
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    \2\ The Department expresses no opinion herein as to whether the 
Plan's continued ownership and leasing of the Property is consistent 
with the general fiduciary responsibility provisions of Part 4 of 
Title I of the Act.
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    The Applicant represents that Harris Trust notified the Company in 
April of 2004 that it would no longer serve as an independent fiduciary 
to the Plan after May 31, 2004, because it was no longer providing 
retirement plan services to its clients. This line of business was sold 
by Harris Trust to another financial institution, Wells Fargo 
Investment and Trust Company (Wells Fargo). Upon receiving notification 
of Harris Trust's withdrawal, the Plan Fiduciary contacted Wells Fargo 
to inquire about its willingness to serve as a replacement independent 
fiduciary with respect to the monitoring of the Lease described in the 
Original Exemption. While it did assume various retirement plan 
services for the Plan previously performed by Harris Trust, Wells Fargo 
declined the Plan Fiduciary's request to serve as an independent 
fiduciary with respect to the Lease. The Applicant represents that the 
Plan Fiduciary then approached two other financial institutions to 
serve as a replacement independent fiduciary. However, neither of these 
institutions expressed a willingness to serve the Plan in such a 
capacity.
    6. As part of its current exemption application with the 
Department, the Plan Fiduciary submitted copies of a series of fair 
market rental appraisals of the Property for several prior lease terms. 
The applicant represents that each of these prior appraisals was 
prepared by a qualified, independent appraiser, Urban Real Estate 
Research, Inc. (Urban Real Estate) of Chicago, Illinois, and signed by 
Mr. Arthur J. Murphy, MAI, a certified general real estate appraiser 
licensed by the State of Illinois. In each of these appraisal reports, 
Urban Real Estate reported that the Property covered an approximate 
area of 72,844 square feet. In providing this approximate square 
footage figure (which is less than the 76,444 square foot area 
represented by the Applicant as the accurate size of the Property), the 
Applicant represents that Urban Real Estate used the measurement from 
the Realty Atlas Map. The Applicant also represents that the Realty 
Atlas Map is almost illegible, and appeared to indicate that the 
Property occupied approximately 241.31 feet of frontage along the north 
side of West Augusta Boulevard. The Applicant further represents, 
however, that a plat of survey conducted by the National Survey 
Service, Inc. shows that the actual frontage is actually 291.31 feet, a 
50-foot difference. The Applicant also acknowledges that, since at 
least July 1, 2006 (i.e., during the pendency of the current prohibited 
transaction exemption request), the annual rent paid by the Company to 
the Plan for the Property has been less than the fair rental value of 
the Property as determined by Urban Real Estate.
    7. The Applicant further represents that a second real estate 
appraiser, Muriello Appraisal and Consulting (Muriello Appraisal) of 
Elk Grove Village, Illinois, was retained by the Plan for the purpose 
of determining the fair market value of the Property in connection with 
the sale. The Applicant represents that Muriello Appraisal is 
independent of, and unrelated to, the Company, the Applicant, and the 
intended co partners. Muriello Appraisal represents that less than 1% 
of its gross annual revenue was derived from appraisal services 
performed for the Plan and the Company.
    On June 18, 2007, an updated appraisal report was issued by 
Muriello Appraisal concerning the fair market value of the Property as 
of June 11, 2007. The updated report was signed by Frank J. Muriello, 
MAI (a general real estate appraiser licensed by the State of Illinois) 
and Paul J. Muriello, a senior appraiser also licensed by the State of 
Illinois. In this updated report, Muriello Appraisal states that 
consideration was given in the appraisal to three approaches to value: 
The cost approach, the sales comparison approach, and the income 
capitalization approach. Relying upon the sales comparison approach, 
Muriello Appraisal issued a report dated June 18, 2007 which stated 
that the fair market value of the Property was $975,000 as of June 11, 
2007. The

[[Page 26418]]

Applicant later determined, however, that the appraisal report 
improperly aggregated the values of both the Property and the Adjacent 
Parcel in arriving at the $975,000 figure. The Applicant represents 
that Paul Muriello has subsequently acknowledged in writing that, if 
the Adjacent Parcel were disaggregated from the June, 2007, appraisal, 
the standalone value of the Property may have to be adjusted below 
$975,000. Nevertheless, the Applicant represents that the proposed 
partnership is willing to pay the Plan the greater of $975,000 or the 
fair market value of the Property on the date of the transaction.
    8. Accordingly, the Applicant proposes a one-time cash sale of the 
Property by the Plan to the proposed partnership for the greater of (1) 
$975,000 or (2) the fair market value of the Property on the date of 
the transaction as established by a qualified, independent appraiser. 
The Applicant represents that no Plan assets or monies allocated to 
individual participant accounts in the Plan will be utilized to 
purchase the Property. The Applicant further states that the proposed 
partnership intends to obtain financing from a financial institution to 
enable the sale of the Property in exchange for cash; the financial 
institution selected for this purpose shall be independent of and 
unrelated to the Company, the Applicant, and the intended copartners. 
Any mortgage obtained by the proposed partnership in connection with 
the acquisition of the Property shall be a nonrecourse loan with no 
obligations or liability to the Plan. The Applicant represents that the 
sale of the Property by the Plan is administratively feasible in that 
it will be a one-time transaction for cash. The Applicant also 
represents that the sale is in the interests of the Plan because it 
would provide additional liquidity to the Plan. In addition, the 
Applicant represents that the sale is protective of the interests of 
the Plan because the cash proceeds derived from the sale of the 
Property will be invested in a manner that diversifies the assets of 
the Plan.
    9. In summary, the proposed transaction satisfies the requirements 
of section 408(a) of the Act because: (a) The sale is a one-time 
transaction for cash; (b) As a result of the sale, the Plan receives 
the greater of (i) $975,000, (ii) the fair market value of the Property 
as of the date of the transaction as determined by a qualified, 
independent appraiser, or (iii) the cost to the Plan to acquire and 
hold the Property; (c) The Plan pays no commissions, fees or other 
expenses in connection with the sale; (d) The terms and conditions of 
the sale are at least as favorable as those obtainable in an arm's 
length transaction with an unrelated third party; (e) With respect to 
any lease payments for the occupancy of the Property that were made by 
the Company to the Plan on or after July 1, 1996 and which (in the 
opinion of an MAI-certified, qualified independent appraiser) amounted 
to less than the fair market rental value of the Property at the time 
of such payment, the Company reimburses the Plan, prior to publication 
of a final grant of this requested prohibited transaction exemption, 
for the full amount of all such rental shortfalls in the form of a lump 
sum payment in arrears plus interest as calculated in conformity with 
the requirements of section 5(b)(5) of the Department's Voluntary 
Fiduciary Correction (VFC) Program described at 71 FR 20262 (April 19, 
2006); and (f) To the extent that there are rental shortfalls 
referenced in paragraph (e), the Applicant shall provide the Department 
with all relevant documentation pertaining to the calculation of such 
shortfall (including the fair market rental value of the Property for 
each applicable lease year, the amount of the rental shortfall for each 
year, the interest attributable to the rental shortfall for each year, 
and proof that the reimbursement was paid to the Plan) prior to 
publication of a final grant of this prohibited transaction exemption.
    Notice to Interested Persons: A copy of this notice of the proposed 
exemption (the Notice) shall be given to all interested persons in the 
manner agreed upon by the applicant and the Department within fifteen 
(15) days of the date of its publication in the Federal Register. The 
Department must receive all written comments and requests for a hearing 
no later than forty-five (45) days after publication of the Notice in 
the Federal Register.

FOR FURTHER INFORMATION CONTACT: Mr. Mark Judge of the Department, 
telephone (202) 693-8339. (This is not a toll-free number.)

Merrill Lynch & Co., Inc. (ML&Co.) and BlackRock, Inc. (BlackRock); 
(Collectively, the Applicants), Located in New York, New York

[Exemption Application No. D-11435].

Proposed Exemption

    Based on the facts and representations set forth in the 
application, the Department of Labor (the Department) is considering 
granting an exemption under the authority of section 408(a) of the 
Employee Retirement Income Security Act of 1974 (the Act) and section 
4975(c)(2) of the Internal Revenue Code of 1986 (the Code) and in 
accordance with the procedures set forth in 29 CFR Part 2570, Subpart B 
(55 FR 32836, 32847, August 10, 1990):

1. Definitions

    (a) For purposes of this proposed exemption, the term ``Merrill 
Lynch/BlackRock Related Entity or Entities'' includes all entities 
listed in Section I(a)(1), (a)(2) and (a)(3):
    (1) Merrill Lynch & Co. (i.e., ML&Co.) and any person directly or 
indirectly, through one or more intermediaries, controlling, controlled 
by, or under common control with ML&Co.,
    (2) BlackRock, Inc. (i.e., BlackRock) and any person directly or 
indirectly, through one or more intermediaries, controlling, controlled 
by, or under common control with BlackRock, and
    (3) Any entity that meets the definition of a Merrill Lynch/
BlackRock Related Entity during the term of the exemption.
    (b) For purposes of section (a), the term ``control'' means the 
power to exercise a controlling influence over the management or 
policies of a person other than an individual.

2. General Conditions

    (a) The applicable Merrill Lynch/BlackRock Related Entity or 
Entities maintain(s) or cause(s) to be maintained for a period of six 
(6) years from the date of any transaction described herein, such 
records as are necessary to enable the persons described in paragraph 
(b) to determine whether the conditions of this exemption were met, 
except that--
    (1) If the records necessary to enable the persons described in 
paragraph (b)(1)(i)-(iv) to determine whether the conditions of the 
exemption have been met are lost or destroyed, due to circumstances 
beyond the control of the Merrill Lynch/BlackRock Related Entity or 
Entities, then no prohibited transaction will be considered to have 
occurred solely on the basis of the unavailability of those records; 
and
    (2) No party in interest with respect to a plan which engages in 
the covered transactions, other than any Merrill Lynch/BlackRock 
Related Entity or Entities, shall be subject to the civil penalty that 
may be assessed under section 502(i) of the Act or to the taxes imposed 
by section 4975(a) and (b) of the Code if the records have not been 
maintained or are not available for examination as required by 
paragraph (b) below.
    (b)(1) Except as provided below in paragraph (b)(2), and 
notwithstanding the provisions of subsections (a)(2) and (b) of section 
504 of the Act, the records referred to above in paragraph (a) above 
are unconditionally available for

[[Page 26419]]

examination during normal business hours at their customary location to 
the following persons or an authorized representative thereof--
    (i) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service, or the SEC; or
    (ii) Any fiduciary of any plan that engages in the covered 
transactions, or any duly authorized employee or representative of such 
fiduciary; or
    (iii) Any employer of participants and beneficiaries and any 
employee organization whose members are covered by a plan that engages 
in the transactions covered herein, or any authorized employee or 
representative of these entities; or
    (iv) Any participant or beneficiary of a plan that engages in the 
transactions covered herein, or duly authorized representative of such 
participant or beneficiary;
    (2) None of the persons described above in paragraph (b)(1)(ii)-
(iv) shall be authorized to examine trade secrets of the Merrill Lynch/
BlackRock Related Entity or Entities, or commercial or financial 
information, which is privileged or confidential; and
    (3) Should the Merrill Lynch/BlackRock Related Entity or Entities 
refuse to disclose information on the basis that such information is 
exempt from disclosure, pursuant to paragraph (b)(2) above, the Merrill 
Lynch/BlackRock Related Entity or Entities shall, by the thirtieth 
(30th ) day following the request, provide a written notice advising 
that person of the reasons for the refusal and that the Department may 
request such information.
3. Exemptions From Prohibitions Respecting Certain Classes of 
Transactions Involving Employee Benefit Plans and Certain Broker-
Dealers and Banks--Underwritings
    The restrictions of sections 406 of the Act, and the taxes imposed 
by reason of section 4975(a) and (b) of the Code, by reason of section 
4975(c)(1) of the Code, shall not apply to the purchase or other 
acquisition of certain securities by an employee benefit plan during 
the existence of an underwriting or selling syndicate with respect to 
such securities, from any person other than a Merrill Lynch/BlackRock 
Related Entity or Entities, when such Merrill Lynch/BlackRock Related 
Entity or Entities is a fiduciary with respect to such plan, and a 
member of such syndicate, provided that the following conditions are 
met:
    (a) No Merrill Lynch/BlackRock Related Entity or Entities which is 
involved in any way in causing the plan to make the purchase is a 
manager of such underwriting or selling syndicate. For purposes of this 
exemption, the term ``manager'' means any member of an underwriting or 
selling syndicate who, either alone or together with other members of 
the syndicate, is authorized to act on behalf of the members of the 
syndicate in connection with the sale and distribution of the 
securities being offered or who receives compensation from the members 
of the syndicate for its services as a manager of the syndicate.
    (b) The securities to be purchased or otherwise acquired are--
    (1) Part of an issue registered under the Securities Act of 1933 
or, if exempt from such registration requirement, are (i) issued or 
guaranteed by the United States or by any person controlled or 
supervised by and acting as an instrumentality of the United States 
pursuant to authority granted by the Congress of the United States, 
(ii) issued by a bank, (iii) issued by a common or contract carrier, if 
such issuance is subject to the provisions of section 20a of the 
Interstate Commerce Act, as amended, (iv) exempt from such registration 
requirement pursuant to a Federal statute other than the Securities Act 
of 1933, or (v) are the subject of a distribution and are of a class 
which is required to be registered under section 12 of the Securities 
Exchange Act of 1934 (15 U.S.C. 781), and the issuer of which has been 
subject to the reporting requirements of section 13 of the Act (15 
U.S.C. 78m) for a period of at least 90 days immediately preceding the 
sale of securities and has filed all reports required to be filed 
thereunder with the Securities and Exchange Commission during the 
preceding 12 months.
    (2) Purchased at not more than the public offering price prior to 
the end of the first full business day after the final term of the 
securities have been fixed and announced to the public, except that--
    (i) if such securities are offered for subscription upon exercise 
of rights, they are purchased on or before the fourth day preceding the 
day on which the rights offering terminates; or
    (ii) if such securities are debt securities, they may be purchased 
at a public offering price on a day subsequent to the end of such first 
full business day, provided that the interest rates on comparable debt 
securities offered to the public subsequent to such first full business 
day and prior to the purchase are less than the interest rate of the 
debt securities being purchased.
    (3) Offered pursuant to an underwriting agreement under which the 
members of the syndicate are committed to purchase all of the 
securities being offered, except if--
    (i) such securities are purchased by others pursuant to a rights 
offering; or
    (ii) such securities are offered pursuant to an over-allotment 
option.
    (c) The issuer of such securities has been in continuous operation 
for not less than three years, including the operations of any 
predecessors, unless--
    (1) Such securities are non-convertible debt securities rated in 
one of the four highest rating categories by at least one of the 
following rating organizations: Standard & Poor's Rating Services, 
Moody's Investors Service, Inc., Fitch Ratings Inc., Dominion Bond 
Ratings Service Limited, and Dominion Bond Rating Service, Inc., or any 
successors thereto;
    (2) Such securities are issued or fully guaranteed by a person 
described in paragraph (b)(1)(i) of this exemption; or
    (3) Such securities are issued or fully guaranteed by a person who 
has issued securities described in paragraph (b)(1)(ii), (iii), (iv) or 
(v), and this paragraph (c) of this exemption.
    (d) The amount of such securities to be purchased or otherwise 
acquired by the plan does not exceed 3% of the total amount of such 
securities being offered.
    (e) The consideration to be paid by the plan in purchasing or 
otherwise acquiring such securities does not exceed three percent of 
the fair market value of the total assets of the plan as of the last 
day of the most recent fiscal quarter of the plan prior to such 
transaction, provided that if such consideration exceeds $1 million, it 
does not exceed 1% of such fair market value of the total assets of the 
plan.
    If such securities are purchased by the plan from a party in 
interest or disqualified person with respect to the plan, such party in 
interest or disqualified person shall not be subject to the civil 
penalty which may be assessed under section 502(i) of the Act, or to 
the taxes imposed by section 4975(a) and (b) of the Code, if the 
conditions of this exemption are not met. However, if such securities 
are purchased from a party in interest or disqualified person with 
respect to the plan, the restrictions of section 406(a) of the Act 
shall apply to any fiduciary with respect to the plan and the taxes 
imposed by section 4975(a) and (b) of the Code, by reason of section 
4975(c)(1)(A) through (D) of the Code, shall apply to such party in 
interest or disqualified person, unless the conditions for exemption of 
PTE 75-1 (40 FR 50845, October 31, 1975), Part II (relating to certain 
principal transactions) are met.

[[Page 26420]]

4. Exemptions From Prohibitions Respecting Certain Classes of 
Transactions Involving Employee Benefit Plans and Certain Broker-
Dealers, Reporting Broker-Dealers and Banks--Market-Making

    The restrictions of sections 406 of the Act, and the taxes imposed 
by section 4975(a) and (b) of the Code, by reason of section 4975(c)(1) 
of the Code, shall not apply to any purchase or sale of any securities 
by an employee benefit plan from or to a Merrill Lynch/BlackRock 
Related Entity or Entities which is a market-maker with respect to such 
securities, when a Merrill Lynch/BlackRock Related Entity or Entities 
is also a fiduciary with respect to such plan, provided that the 
following conditions are met:
    (a) The issuer of such securities has been in continuous operation 
for not less than three years, including the operations of any 
predecessors, unless--
    (1) Such securities are non-convertible debt securities rated in 
one of the four highest rating categories by at least one of the 
following rating organizations: Standard & Poor's Rating Services, 
Moody's Investors Service, Inc., Fitch Ratings Inc., Dominion Bond 
Ratings Service Limited, and Dominion Bond Rating Service, Inc., or any 
successors thereto;
    (2) Such securities are issued or guaranteed by the United States 
or by any person controlled or supervised by and acting as an 
instrumentality of the United States pursuant to authority granted by 
the Congress of the United States; or
    (3) Such securities are fully guaranteed by a person described in 
this paragraph (a).
    (b) As a result of purchasing such securities--
    (1) The fair market value of the aggregate amount of such 
securities owned, directly or indirectly, by the plan and with respect 
to which such Merrill Lynch/BlackRock Related Entity or Entities is a 
fiduciary, does not exceed 3% of the fair market value of the assets of 
the plan with respect to which such Merrill Lynch/BlackRock Related 
Entity or Entities is a fiduciary, as of the last day of the most 
recent fiscal quarter of the plan prior to such transaction, provided 
that if the fair market value of such securities exceeds $1 million, it 
does not exceed one percent of such fair market value of such assets of 
the plan, except that this paragraph shall not apply to securities 
described in (a)(2) of this exemption; and
    (2) The fair market value of the aggregate amount of all securities 
for which such Merrill Lynch/BlackRock Related Entity or Entities is a 
market-maker, which are owned, directly or indirectly, by the plan and 
with respect to which such Merrill Lynch/BlackRock Related Entity or 
Entities is a fiduciary, does not exceed 10% of the fair market value 
of the assets of the plan with respect to which such Merrill Lynch/
BlackRock Related Entity or Entities is a fiduciary, as of the last day 
of the most recent fiscal quarter of the plan prior to such 
transaction, except that this paragraph shall not apply to securities 
described in paragraph (a)(2) of this exemption.
    (c) At least one person other than a Merrill Lynch/BlackRock 
Related Entity or Entities is a market-maker with respect to such 
securities.
    (d) The transaction is executed at a net price to the plan for the 
number of shares or other units to be purchased or sold in the 
transaction which is more favorable to the plan than that which such 
Merrill Lynch/BlackRock Related Entity or Entities acting as fiduciary 
and acting in good faith, reasonably believes to be available at the 
time of such transaction from all other market-makers with respect to 
such securities.
    For purposes of this exemption, the term ``market-maker'' shall 
mean any specialist permitted to act as a dealer, and any dealer who, 
with respect to a security, holds himself out (by entering quotations 
in an inter-dealer communications system or otherwise) as being willing 
to buy and sell such security for his own account on a regular or 
continuous basis.

5. Exemption Involving Mutual Fund In-House Plans

    The restrictions of sections 406 and 407(a) of the Act and the 
taxes imposed by section 4975(a) and (b) of the Code, by reason of 
section 4975(c)(1) of the Code, shall not apply to the acquisition or 
sale of shares of an open-end investment company registered under the 
Investment Company Act of 1940 by an employee benefit plan covering 
only employees of such investment company, employees of the investment 
adviser or principal underwriter for such investment company, or 
employees of any affiliated person (as defined in section 2(a)(3) of 
the Investment Company Act of 1940) of such investment adviser or 
principal underwriter, provided that the investment adviser or 
principal underwriter or their affiliates are a Merrill Lynch/BlackRock 
Related Entity or Entities, and the following conditions are met 
(whether or not such investment company, investment adviser, principal 
underwriter or any affiliated person thereof is a fiduciary with 
respect to the plan):
    (a) The plan does not pay any investment management, investment 
advisory or similar fee to such investment adviser, principal 
underwriter or affiliated person. This condition does not preclude the 
payment of investment advisory fees by the investment company under the 
terms of its investment advisory agreement adopted in accordance with 
section 15 of the Investment Company Act of 1940.
    (b) The plan does not pay a redemption fee in connection with the 
sale by the plan to the investment company of such shares unless (1) 
such redemption fee is paid only to the investment company, and (2) the 
existence of such redemption fee is disclosed in the investment company 
prospectus in effect both at the time of the acquisition of such shares 
and at the time of such sale.
    (c) The plan does not pay a sales commission in connection with 
such acquisition or sale.
    (d) All other dealings between the plan and the investment company, 
the investment adviser or principal underwriter for the investment 
company, or any affiliated person of such investment adviser or 
principal underwriter are on a basis no less favorable to the plan than 
such dealings are with other shareholders of the investment company.

6. Exemption for Certain Transactions Between Investment Companies and 
Employee Benefit Plans

    The restrictions of section 406 of the Act and the taxes imposed by 
section 4975(a) and (b) of the Code, by reason of section 4975(c)(1) of 
the Code, shall not apply to the purchase or sale by an employee 
benefit plan of shares of an open-end investment company registered 
under the Investment Company Act of 1940, where the investment adviser 
of the investment company is a Merrill Lynch/BlackRock Related Entity 
or Entities, who is also a fiduciary with respect to the plan but not 
an employer of employees covered by the plan, provided that the 
following conditions are met:
    (a) The plan does not pay a sales commission in connection with 
such purchase or sale.
    (b) The plan does not pay a redemption fee in connection with the 
sale by the plan to the investment company of such shares unless (1) 
such redemption fee is paid only to the investment company, and (2) the 
existence of such redemption fee is disclosed in the investment company

[[Page 26421]]

prospectus in effect both at the time of the purchase of such shares 
and at the time of such sale.
    (c) The plan does not pay an investment management, investment 
advisory or similar fee with respect to the plan assets invested in 
such shares for the entire period of such investment. This condition 
does not preclude the payment of investment advisory fees by the 
investment company under the terms of its investment advisory agreement 
adopted in accordance with section 15 of the Investment Company Act of 
1940. This condition also does not preclude payment of an investment 
advisory fee by the plan based on total plan assets from which a credit 
has been subtracted representing the plan's pro rata share of 
investment advisory fees paid by the investment company. If, during any 
fee period for which the plan has prepaid its investment management, 
investment advisory or similar fee, the plan purchases shares of the 
investment company, the requirement of this paragraph (c) shall be 
deemed met with respect to such prepaid fee if by a method reasonably 
designed to accomplish the same, the amount of the prepaid fee that 
constitutes the fee with respect to the plan assets invested in the 
investment company shares (1) is anticipated and subtracted from the 
prepaid fee at the time of payment of such fee, (2) is returned to the 
plan no later than during the immediately following fee period, or (3) 
is offset against the prepaid fee for the immediately following fee 
period or for the fee period immediately following thereafter. For 
purposes of this paragraph (c), a fee shall be deemed to be prepaid for 
any fee period if the amount of such fee is calculated as of a date not 
later than the first day of such period.
    (d) A second fiduciary with respect to the plan, who is independent 
of and unrelated to the fiduciary/investment adviser or any affiliate 
thereof, receives a current prospectus issued by the investment 
company, and full and detailed written disclosure of the investment 
advisory and other fees charged to or paid by the plan and the 
investment company, including the nature and extent of any differential 
between the rates of such fees, the reasons why the fiduciary/
investment adviser may consider such purchases to be appropriate for 
the plan, and whether there are any limitations on the fiduciary/
investment adviser with respect to which plan assets may be invested in 
shares of the investment company and, if so, the nature of such 
limitations. For purposes of this paragraph (d), such second fiduciary 
will not be deemed to be independent of and unrelated to the fiduciary/
investment adviser or any affiliate thereof if:
    (1) Such second fiduciary directly or indirectly controls, is 
controlled by, or is under common with the fiduciary/investment adviser 
or any affiliate thereof;
    (2) Such second fiduciary, or any officer, director, partner, 
employee or relative of such second fiduciary is an officer, director, 
partner, employee or relative of such fiduciary/investment adviser or 
any affiliate thereof; or
    (3) Such second fiduciary directly or indirectly receives any 
compensation or other consideration for his or her own personal account 
in connection with any transaction described in this exemption.
    If an officer, director, partner, employee or relative of such 
fiduciary/investment adviser or any affiliate thereof is a director of 
such second fiduciary, and if he or she abstains from participation in 
(i) the choice of the plan's investment adviser, (ii) the approval of 
any such purchase or sale between the plan and the investment company, 
and (iii) the approval of any change of fees charged to or paid by the 
plan, then paragraph (d) of this exemption shall not apply.
    For purposes of paragraph (d)(1) above, the term ``control'' means 
the power to exercise a controlling influence over the management or 
policies of a person other than an individual, and the term 
``relative'' means a ``relative'' as that term is defined in section 
3(15) of the Act (or a ``member of the family'' as that term is defined 
in section 4975(e)(6) of the Code), or a brother, a sister, or a spouse 
of a brother or a sister.
    (e) On the basis of the prospectus and disclosure referred to in 
paragraph (d), the second fiduciary referred to in paragraph (d) 
approves such purchases and sales consistent with the responsibilities 
obligations, and duties imposed on fiduciaries by Part 4 of Title I of 
the Act. Such approval may be limited solely to the investment advisory 
and other fees paid by the mutual fund in relation to the fees paid by 
the plan and need not relate to any other aspects of such investments. 
In addition, such approval must be either (1) set forth in the plan 
documents or in the investment management agreement between the plan 
and the fiduciary/investment adviser, (2) indicated in writing prior to 
each purchase or sale, or (3) indicated in writing prior to the 
commencement of a specified purchase or sale program in the shares of 
such investment company.
    (f) The second fiduciary referred to in paragraph (d), above, or 
any successor thereto, is notified of any change in any of the rates of 
fees referred to in paragraph (d) and approves in writing the 
continuation of such purchases or sales and the continued holding of 
any investment company shares acquired by the plan prior to such change 
and still held by the plan. Such approval may be limited solely to the 
investment advisory and other fees paid by the mutual fund in relation 
to the fees paid by the plan and need not relate to any other aspects 
of such investment.

7. Exemption Involving Closed-End Investment Company In-House Plans

    The restrictions of sections 406 and 407(a) of the Act, and the 
taxes imposed by section 4975 (a) and (b) of the Code, by reason of 
section 4975(c)(1) of the Code, shall not apply to the acquisition, 
ownership or sale of shares of a closed-end investment company which is 
registered under the Investment Company Act of 1940 and is not a small 
business investment company as defined by section 103 of the Small 
Business Investment Company Act of 1958, by an employee benefit plan 
covering only employees of such investment company, employees of the 
investment adviser of such investment company, or employees of any 
affiliated person (as defined in section 2(a)(3) of the Investment 
Company Act of 1940) of such investment company or investment adviser, 
provided that such entity or entities are a Merrill Lynch/BlackRock 
Related Entity or Entities, and the following conditions are met 
(whether or not such investment company, investment adviser or any 
affiliated person thereof is a fiduciary with respect to the plan):
    (a) The plan does not pay any investment management, investment 
advisory, or similar fee to such investment adviser or affiliated 
person. This condition does not preclude the payment of investment 
advisory fees by the investment company under the terms of its 
investment advisory agreement adopted in accordance with section 15 of 
the Investment Company Act of 1940.
    (b) The plan does not pay a sales commission in connection with 
such acquisition or sale to any such investment company or to any such 
investment company, investment adviser or affiliated person; and
    (c) All other dealings between the plan and such investment 
company, the investment adviser, or affiliated person, are on a basis 
no less favorable to the plan than such dealings are with other

[[Page 26422]]

shareholders of the investment company.

8. Exemption for Securities Transactions Involving Employee Benefit 
Plans and Broker-Dealers

Section I: Definition and Special Rules

    The following definitions and special rules apply to this 
exemption:
    (a) The term ``Merrill Lynch/BlackRock Related Entity or Entities'' 
includes affiliates of such entity or entities.
    (b) An ``affiliate'' of a Merrill Lynch/BlackRock Related Entity or 
Entities includes the following:
    (1) Any officer, director, partner, employee, relative (as defined 
in section 3(15) of the Act), brother, sister, or spouse of a brother 
or sister, of the Merrill Lynch/BlackRock Related Entity or Entities; 
and
    (2) any corporation or partnership of which the Merrill Lynch/
BlackRock Related Entity or Entities is an officer, director or 
partner.
    A person is not an affiliate of another person solely because one 
of them has investment discretion over the other's assets.
    (c) An ``agency cross transaction'' is a securities transaction in 
which the same Merrill Lynch/BlackRock Related Entity or Entities 
act(s) as agent for both any seller and any buyer for the purchase or 
sale of a security.
    (d) The term ``covered transaction'' means an action described in 
Section II (a), (b) or (c) of this exemption.
    (e) The term ``effecting or executing a securities transaction'' 
means the execution of a securities transaction as agent for another 
person and/or the performance of clearance, settlement, custodial or 
other functions ancillary thereto.
    (f) A plan fiduciary is independent of a Merrill Lynch/BlackRock 
Related Entity or Entities only if the fiduciary has no relationship to 
or interest in such Merrill Lynch/BlackRock Related Entity or Entities 
that might affect the exercise of such fiduciary's best judgment as a 
fiduciary.
    (g) The term ``profit'' includes all charges relating to effecting 
or executing securities transactions, less reasonable and necessary 
expenses including reasonable indirect expenses (such as overheard 
costs) properly allocated to the performance of these transactions 
under generally accepted accounting principles.
    (h) The term ``securities transaction'' means the purchase or sale 
of securities.
    (i) The term ``nondiscretionary trustee'' of a plan means a trustee 
or custodian whose powers and duties with respect to any assets of the 
plan are limited to (1) the provision of nondiscretionary trust 
services to the plan, and (2) duties imposed on the trustee by any 
provision or provisions of the Act or the Code. The term 
``nondiscretionary trust services and services'' means custodial 
services and services ancillary to custodial services, none of which 
services are discretionary. For purposes of this exemption, a person 
does not fail to be a nondiscretionary trustee solely by reason of 
having been delegated, by the sponsor of a master or prototype plan, 
the power to amend such plan.

Section II: Covered Transactions

    If each condition of Section III of this exemption is either 
satisfied or not applicable under Section IV of this exemption, the 
restrictions of section 406(b) of the Act and the taxes imposed by 
section 4975(a) and (b) of the Code by reason of section 4975(c)(1)(E) 
and (F) of the Code shall not apply to--
    (a) A Merrill Lynch/BlackRock Related Entity or Entities that is a 
plan fiduciary using its authority to cause a plan to pay a fee to a 
Merrill Lynch/BlackRock Related Entity or Entities as agent for the 
plan, for effecting or executing securities transactions, but only to 
the extent that such transactions are not excessive, under the 
circumstances, in either amount or frequency;
    (b) A Merrill Lynch/BlackRock Related Entity or Entities that is a 
plan fiduciary acting as the agent in an agency cross transaction for 
both the plan and one or more other parties to the transaction; or
    (c) The receipt by any Merrill Lynch/BlackRock Related Entity or 
Entities that is a plan fiduciary of reasonable compensation for 
effecting or executing an agency cross transaction to which a plan is a 
party from one or more other parties to the transaction.

Section III: Conditions

    Except to the extent otherwise provided in Section IV of this 
exemption, Section II of this exemption applies only if the following 
conditions are satisfied:
    (a) The Merrill Lynch/BlackRock Related Entity engaging in the 
covered transaction is not an administrator of the plan, or an employer 
any of whose employees are covered by the plan.
    (b)(1) The covered transaction is performed under a written 
authorization executed in advance by a fiduciary of each plan whose 
assets are involved in the transaction, which plan fiduciary is 
independent of the Merrill Lynch/BlackRock Related Entity or Entities 
engaging in the covered transaction.
    (2) For purposes of this exemption, Section III(b) will be deemed 
satisfied for the period commencing September 29, 2006, notwithstanding 
Merrill Lynch Investment Managers, LLC (MLIM)'s reliance on written 
authorizations obtained prior to the consummation of the Merger \3\, 
provided that after the closing of the Merger, MLIM notified each such 
authorizing plan fiduciary of the fact that: (A) As a result of the 
Merger, MLIM had become a subsidiary of BlackRock; (B) the existing 
authorization by such authorizing plan fiduciary would continue to 
permit MLIM to engage in the covered transaction on behalf of the plan; 
(C) such authorization is terminable at will by the plan, without 
penalty to the plan, upon receipt by MLIM of written notice from an 
authorizing plan fiduciary of termination; (D) a form expressly 
providing an election to terminate the authorization with instructions 
on the use of such form was supplied to each such authorizing plan 
fiduciary; and (E) failure to return such termination form would result 
in the continued authorization of MLIM to engage in the covered 
transactions on behalf of the plan. Notwithstanding the foregoing, this 
exception does not apply to new authorizations to engage in covered 
transactions entered into after the consummation of the Merger.
---------------------------------------------------------------------------

    \3\ On September 29, 2006, ML&Co. and BlackRock consummated a 
transaction (the Merger), in which ML&Co. contributed MLIM and 
various other assets and subsidiaries that comprised its investment 
management business to BlackRock in exchange for approximately 45% 
of the outstanding voting securities of BlackRock.
---------------------------------------------------------------------------

    (c) The authorization referred to in paragraph (b) of this Section 
is terminable at will by the plan, without penalty to the plan, upon 
receipt by the authorized Merrill Lynch/BlackRock Related Entity or 
Entities of written notice of termination. A form expressly providing 
an election to terminate the authorization described in paragraph (b) 
of this Section with instructions on the use of the form must be 
supplied to the authorizing plan fiduciary no less than annually. The 
instructions for such form must include the following information:
    (1) The authorization is terminable at will by the plan, without 
penalty to the plan, upon receipt by the authorized Merrill Lynch/
BlackRock Related Entity or Entities of written notice from the 
authorizing plan fiduciary or other plan official having authority to 
terminate the authorization; and
    (2) Failure to return the form will result in the continued 
authorization of the authorized Merrill Lynch/BlackRock

[[Page 26423]]

Related Entity or Entities to engage in the covered transactions on 
behalf of the plan.
    (d) Within three months before an authorization is made, the 
authorizing plan fiduciary is furnished with any reasonably available 
information that the Merrill Lynch/BlackRock Related Entity or Entities 
seeking authorization reasonably believes to be necessary for the 
authorizing plan fiduciary to determine whether the authorization 
should be made including (but not limited to) a copy of this exemption, 
the form for termination of authorization described in Section III(c) 
of this exemption, a description of the Merrill Lynch/BlackRock Related 
Entity or Entities' brokerage placement practices, and any other 
reasonably available information regarding the matter that the 
authorizing plan fiduciary requests.
    (e) The Merrill Lynch/BlackRock Related Entity or Entities engaging 
in a covered transaction furnishes the authorizing plan fiduciary with 
either:
    (1) A confirmation slip for each securities transaction underlying 
a covered transaction within ten business days of the securities 
transaction containing the information described in Rule 10b-10(a)(1-7) 
under the Securities Exchange Act of 1934, 17 CFR 240.10b-10; or
    (2) at least once every three months and not later than 45 days 
following the period to which it relates, a report disclosing:
    (A) A compilation of the information that would be provided to the 
plan pursuant to subparagraph (e)(1) of this Section during the three-
month period covered by the report;
    (B) The total of all securities transaction-related charges 
incurred by the plan during such period in connection with such covered 
transactions; and
    (C) The amount of the securities transaction-related charges 
retained by such Merrill Lynch/BlackRock Related Entity or Entities and 
the amount of such charges paid to other persons for execution or other 
services.
    For purposes of this paragraph (e), the words ``incurred by the 
plan'' shall be construed to mean ``incurred by the pooled fund'' when 
such Merrill Lynch/BlackRock Related Entity or Entities engages in 
covered transactions on behalf of a pooled fund in which the plan 
participates.
    (f) The authorizing plan fiduciary is furnished with a summary of 
the information required under paragraph (e)(1) of this Section at 
least once per year. The summary must be furnished within 45 days after 
the end of the period to which it relates, and must contain the 
following:
    (1) The total of all securities transaction-related charges 
incurred by the plan during the period in connection with covered 
securities transactions.
    (2) The amount of the securities transaction-related charges 
retained by the authorized Merrill Lynch/BlackRock Related Entity or 
Entities and the amount of these charges paid to other persons for 
execution or other services.
    (3) A description of the Merrill Lynch/BlackRock Related Entity or 
Entities' brokerage placement practices, if such practices have 
materially changed during the period covered by the summary.
    (4) (i) A portfolio turnover ratio is calculated in a manner which 
is reasonably designed to provide the authorizing plan fiduciary with 
the information needed to assist in discharging its duty of prudence. 
The requirements of this paragraph (f)(4)(i) will be met if the 
``annualized portfolio turnover ratio'', calculated in the manner 
described in paragraph (f)(4)(ii), is contained in the summary.
    (ii) The ``annualized portfolio turnover ratio'' shall be 
calculated as a percentage of the plan assets consisting of securities 
or cash over which the authorized Merrill Lynch/BlackRock Related 
Entity or Entities had discretionary investment authority, or with 
respect to which such Merrill Lynch/BlackRock Related Entity or 
Entities rendered, or had any responsibility to render, investment 
advice (the portfolio) at any time or times (management period(s)) 
during the period covered by the report. First, the ``portfolio 
turnover ratio'' (not annualized) is obtained by dividing (A) the 
lesser of the aggregate dollar amounts of purchases or sales of 
portfolio securities during the management period(s) by (B) the monthly 
average of the market value of the portfolio securities during all 
management period(s). Such monthly average is calculated by totaling 
the market values of the portfolio securities as of the beginning and 
ending of each management period and as of the end of each month that 
ends within such period(s), and dividing the sum by the number of 
valuation dates so used. For purposes of this calculation, all debt 
securities whose maturities at the time of acquisition were one year or 
less are excluded from both the numerator and the denominator.
    The ``annualized portfolio turnover ratio'' is then derived by 
multiplying the ``portfolio turnover ratio'' by an annualizing factor. 
The annualizing factor is obtained by dividing (C) the number twelve by 
(D) the aggregate duration of the management period(s) expressed in 
months (and fractions thereof).
    (iii) The information described in this paragraph (f)(4) is not 
required to be furnished in any case where the authorized Merrill 
Lynch/BlackRock Related Entity or Entities acting as plan fiduciary has 
not exercised discretionary authority over trading in the plan's 
account during the period covered by the report.
    For purposes of this paragraph (f), the words ``incurred by the 
plan'' shall be construed to mean ``incurred by the pooled fund'' when 
such Merrill Lynch/BlackRock Related Entity or Entities engages in 
covered transactions on behalf of a pooled fund in which the plan 
participates.
    (g) If an agency cross transaction to which Section IV(b) of this 
exemption does not apply is involved, the following conditions must 
also be satisfied:
    (1) The information required under Section III(d) or IV(d)(1)(B) of 
this exemption includes a statement to the effect that with respect to 
agency cross transactions, the Merrill Lynch/BlackRock Related Entity 
or Entities effecting or executing the transactions will have a 
potentially conflicting division of loyalties and responsibilities 
regarding the parties to the transactions;
    (2) The summary required under Section III(f) of this exemption 
includes a statement identifying the total number of agency cross 
transactions during the period covered by the summary and the total 
amount of all commissions or other remuneration received or to be 
received from all sources by the Merrill Lynch/BlackRock Related Entity 
or Entities engaging in the transactions in connection with those 
transaction during the period;
    (3) The Merrill Lynch/BlackRock Related Entity or Entities 
effecting or executing the agency cross transaction has the 
discretionary authority to act on behalf of, and/or provide investment 
advice to, either (A) one or more sellers or (B) one or more buyers 
with respect to the transaction, but not both.
    (4) The agency cross transaction is a purchase or sale, for no 
consideration other than cash payment against prompt delivery of a 
security for which market quotations are readily available; and
    (5) The agency cross transaction is executed or effected at a price 
that is at or between the independent bid and independent ask prices 
for the security prevailing at the time of the transaction.
    (h) A trustee (other than a nondiscretionary trustee) may only

[[Page 26424]]

engage in a covered transaction with a plan that has total net assets 
with a value of at least $50 million and in the case of a pooled fund, 
the $50 million net asset requirement will be met if 50 percent or more 
of the units of beneficial interest in such pooled fund are held by 
plans each of which has total net assets with a value of at least $50 
million.
    For purposes of the net asset tests described above, where a group 
of plans is maintained by a single employer or controlled group of 
employers, as defined in section 407(d)(7) of the Act, the $50 million 
net asset requirement may be met by aggregating the assets of such 
plans, if the assets are pooled for investment purposes in a single 
master trust.
    (i) The trustee (other than a nondiscretionary trustee) engaging in 
a covered transaction furnishes, at least annually, to the authorizing 
plan fiduciary of each plan the following:
    (1) The aggregate brokerage commissions, expressed in dollars, paid 
by the plan to brokerage firms affiliated with the trustee;
    (2) The aggregate brokerage commissions, expressed in dollars, paid 
by the plan to brokerage firms unaffiliated with the trustee;
    (3) The average brokerage commissions, expressed as cents per 
share, paid by the plan to brokerage firms affiliated with the trustee; 
and
    (4) The average brokerage commissions, expressed as cents per 
share, paid by the plan to brokerage firms unaffiliated with the 
trustee.
    For purposes of this paragraph (i), the words ``paid by the plan'' 
should be construed to mean ``paid by the pooled fund'' when the 
trustee engages in covered transactions on behalf of a pooled fund in 
which the plan participates.

Section IV: Exceptions From Conditions

    (a) Certain plans not covering employees. Section III of this 
exemption does not apply to covered transactions to the extent they are 
engaged in on behalf of individual retirement accounts meeting the 
conditions of 29 CFR 2510.3-2(d), or plans, other than training 
programs, that cover no employees within the meaning of 29 CFR 2510.3-
3.
    (b) Certain agency cro