Notice of Proposed Exemptions, 13242-13261 [E9-6619]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 74, Number 57 (Thursday, March 26, 2009)]
[Notices]
[Pages 13242-13261]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-6619]



[[Page 13242]]

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Application Nos. and Proposed Exemptions; D-11397, PNC Financial 
Services Group, Inc. (PNC Financial); D-11552, Barclays Bank PLC and 
Barclays Capital Inc. (Collectively, Barclays or the Applicants; D-
11536 Through D-11550, Individual Retirement Accounts (the IRAs) for 
Ralph Hartwell, Harold Latin, Kenlon Johnson, Carol Johnson, Shanon 
Taylor, Michael Ball, Dianne Barkas, Roy Barkas, Harry DeWall, Alice 
Pike, Steven Larsen, C. Timothy Hopkins, Wayne Meuleman, Robert L. 
Miller, and Richard T. Scott (Collectively, the Participants), et al.]


Notice of Proposed Exemptions

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of proposed exemptions.

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SUMMARY: This document contains notices 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 exemptions, 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 copies) should be sent to the Employee Benefits Security 
Administration (EBSA), Office of Exemption Determinations, Room N-5700, 
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 applications 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 exemptions 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 exemptions were 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, these notices of proposed exemption 
are issued solely by the Department.
    The applications contain representations with regard to the 
proposed exemptions which are summarized below. Interested persons are 
referred to the applications on file with the Department for a complete 
statement of the facts and representations.

PNC Financial Services Group, Inc. (PNC Financial) Located in 
Pittsburgh, Pennsylvania [Application No. D-11397]

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):

Section I--Exemption for Receipt of Fees

    In connection with the investment in an open-end investment company 
(a Fund or Funds), as defined, below, in Section IV(e), by certain 
employee benefit plans (Client Plan or Client Plans) for which PNC, as 
defined, below, in Section IV(a), serves as a fiduciary and is a party 
in interest with respect to such Client Plan(s), if the exemption is 
granted, the restrictions of sections 406(a) and 406(b) of the Act and 
the sanctions resulting from the application of section 4975 of the 
Code, by reason of sections 4975(c)(1)(A) through (F) \1\ of the Code, 
shall not apply, effective September 29, 2006, to:
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    \1\ For purposes of this exemption reference to specific 
provisions of Title I of the Act, unless otherwise specified, refer 
also to the corresponding provisions of the Code.
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    (a) The receipt of fees by PNC from a Fund where BlackRock, as 
defined, below, in Section IV(b), acts as the investment adviser for 
such Fund, and the receipt of fees by BlackRock for the provision of 
investment advisory services, or similar services, to such Fund;
    (b) the receipt of fees by PNC from a Fund for providing certain 
service(s) (Secondary Service(s)), as defined, below, in Section IV(i), 
to such Fund; and
    (c) the receipt of fees by PNC from BlackRock in connection with 
administrative service(s) (Mutual Fund Administration Service(s)), as 
defined, below, in Section IV(l), provided to a Fund in which a Client 
Plan invests; provided that the conditions, as set forth in Section II 
and Section III, below, were satisfied, as of the effective date of 
this exemption and thereafter.

Section II--Specific Conditions

    (a) PNC, serving as a fiduciary for a Client Plan, satisfies any 
one (but not all) of the following:
    (1) A Client Plan invested in a Fund does not pay any plan-level 
investment management fee, investment advisory fee, or similar fee 
(Plan-Level Fee(s)) to PNC with respect to any of the assets of such 
Client Plan which are invested in shares of such Fund for the entire 
period of such investment (the Offset Fee Method). This condition does 
not preclude the payment of investment advisory fees or similar fees 
(Fund-Level Fee(s)) by a Fund to BlackRock under the terms of an 
investment advisory agreement adopted in accordance with section 15 of 
the Investment Company Act of 1940 (the Investment Company Act);
    (2) A Client Plan invested in a Fund pays an investment management 
fee or similar fee based on total assets of such Client Plan from which 
a credit has been subtracted representing such Client Plan's pro rata 
share of

[[Page 13243]]

investment advisory fees or similar fees paid by such Fund to BlackRock 
(the Subtraction Fee Method). If, during any fee period for which a 
Client Plan has prepaid its investment management or similar fee, such 
Client Plan purchases shares of such Fund, the requirement of this 
Section II(a)(2) 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 assets 
of such Client Plan invested in shares of such Fund: (i) Is anticipated 
and subtracted from the prepaid fee at the time of payment of such fee, 
(ii) is returned to such Client Plan no later than during the 
immediately following fee period, or (iii) is offset against the 
prepaid fee for the immediately following fee period or for the fee 
period immediately following thereafter. For purposes of this Section 
II(a)(2), 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; or
    (3) A Client Plan invested in a Fund receives a ``a credit'' \2\ 
(the Credit Fee Method) of such Client Plan's proportionate share of 
all fees charged to such Fund by BlackRock for investment advisory 
services or similar services for a particular month: (1) Effective for 
the period, September 29, 2006, through December 31, 2008, on the 
earlier of either: (a) The same day as PNC receives a fee from 
BlackRock for Mutual Fund Administration Services provided for that 
month to such Fund by PNC, or (b) the fifth business day before the end 
of the month following the month in which fees for investment advisory 
services, or similar services, accrued, or (2) effective for the period 
beginning, January 1, 2009, and continuing thereafter, on a date which 
is no later than one business day after BlackRock receives fees from 
the Fund for investment advisory services, or similar services, 
provided for that month to such Fund by BlackRock. The crediting of all 
such fees to such Client Plan by PNC is audited by an independent 
accounting firm (the Auditor) on at least an annual basis to verify the 
proper crediting of such fees to such Client Plan.
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    \2\ PNC Financial represents that it would be accurate to 
describe ``the credit'' as a ``credited dollar amount'' to cover 
situations in which the credited amount is used to acquire 
additional shares of a Fund, rather than being held by a Client Plan 
in the form of cash. It is represented that the standard practice is 
to reinvest the ``credited dollar amount'' in additional shares of 
the same Fund with respect to which the fees were credited.
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    (b) The price paid or received by a Client Plan for shares in a 
Fund is the net asset value per share, as defined, below, in Section 
IV(f), at the time of the transaction, and is the same price which 
would have been paid or received for such shares by any other investor 
in such Fund at that time;
    (c) PNC, including any officer or director of PNC, does not 
purchase shares of a Fund from any Client Plan or sell shares of a Fund 
to any Client Plan;
    (d) A Client Plan does not pay sales commissions in connection with 
any purchase or sale of shares of a Fund, and a Client Plan does not 
pay redemption fees in connection with any sale of shares to a Fund, 
unless (1) such redemption fee is paid only to a Fund, and
    (2) The existence of such redemption fee is disclosed in the 
prospectus for such Fund in effect both at the time of any purchase of 
such shares and at the time of such sale;
    (e) The combined total of all fees received by PNC for services 
provided by PNC:
    (1) To Client Plans, and
    (2) To Funds in which Client Plans invest is not in excess of 
reasonable compensation within the meaning of section 408(b)(2) of the 
Act;
    (f) PNC does not receive any fees payable pursuant to Rule 12b-1 
under the Investment Company Act in connection with the subject 
transactions;
    (g) A Client Plan is not an employee benefit plan sponsored or 
maintained by PNC;
    (h) A second fiduciary (Second Fiduciary), as defined, below, in 
Section IV(h), who is acting on behalf of a Client Plan receives, in 
advance of any initial investment by a Client Plan in a Fund, full and 
detailed written disclosure of information concerning such Fund, 
including but not limited to:
    (1) A current prospectus for each Fund in which such Client Plan is 
considering investing;
    (2) A statement describing the fees, including the nature and 
extent of any differential between the rates of such fees for:
    (i) Any investment advisory or similar services to be paid by such 
Fund to BlackRock,
    (ii) Any Secondary Services to be paid by such Fund to PNC,
    (iii) Any Mutual Fund Administration Services to be paid by 
BlackRock to PNC, and
    (iv) All other fees to be charged to or paid by a Client Plan and 
by such Fund;
    (3) The reasons why PNC, acting as fiduciary for such Client Plan, 
may consider investment in such Fund to be appropriate for such Client 
Plan;
    (4) A statement describing whether there are any limitations 
applicable to PNC with respect to which assets of a Client Plan that 
may be invested in such Fund, and if so, the nature of such 
limitations; and
    (5) Upon the request of the Second Fiduciary, acting on behalf of a 
Client Plan, a copy of the proposed exemption and a copy of the final 
exemption, if granted, once such documents are published in the Federal 
Register.
    (i) On the basis of the information described, above, in Section 
II(h), a Second Fiduciary, acting on behalf of a Client Plan, 
authorizes in writing: (1) The investment of the assets of such Client 
Plan in shares of each particular Fund; and (2) the fees received by 
PNC and by BlackRock in connection with services provided by PNC and by 
BlackRock to such Fund. Such authorization by a Second Fiduciary must 
be consistent with the responsibilities, obligations, and duties 
imposed on fiduciaries by Part 4 of Title I of the Act.
    (j)(1) All authorizations, described, above, in Section II(i), made 
by a Second Fiduciary, regarding: (i) Investments by a Client Plan in a 
Fund, (ii) fees paid for investment advisory services or similar 
services provided by BlackRock to such Fund, (iii) fees paid for 
Secondary Services provided by PNC to such Fund, and (iv) fees paid by 
BlackRock to PNC for Mutual Fund Administration Services provided by 
PNC to such Fund, shall be terminable at will by the Second Fiduciary, 
acting on behalf of such Client Plan, without penalty to such Client 
Plan, upon receipt by PNC of a written notice of termination. A form 
(the Termination Form), as defined, below, in Section IV(j), expressly 
providing an election to terminate the authorizations, described, 
above, in Section II(i), with instructions on the use of such 
Termination Form must be provided to such Second Fiduciary at least 
annually. However, if a Termination Form has been provided to such 
Second Fiduciary, pursuant to Section II(k) and (l), below, then a 
Termination Form need not be provided again, pursuant to this Section 
II(j), unless at least six (6) months but no more than twelve (12) 
months have elapsed, since a Termination Form was provided, pursuant to 
Section II(k) and (l), below.
    (2) The instructions for the Termination Form must include the 
following statements:
    (i) The authorization, described, above, in Section II(i), is 
terminable at will by the Second Fiduciary, acting on

[[Page 13244]]

behalf of a Client Plan, without penalty to such Client Plan, upon 
receipt by PNC of written notice from such Second Fiduciary.
    (ii) Failure by such Second Fiduciary to return the Termination 
Form on behalf of such Client Plan will be deemed to be an approval by 
the Second Fiduciary and will result in the continuation of the 
authorization, as described, above, in Section II(i), of PNC to engage 
in the transactions which are the subject of this exemption.
    (k) For a Client Plan invested in a Fund which uses one of the fee 
methods described, above, in Section II(a)(1), (a)(2), or (a)(3), in 
the event of a proposed change from one of the fee methods to another 
or in the event of a proposed increase in the rate of any fee paid by a 
Fund to BlackRock for any investment advisory service, or similar 
service that BlackRock provides to such Fund over an existing rate for 
such services or method of determining the fee for such services, which 
had been authorized, in accordance with Section II(i), above, by the 
Second Fiduciary for such Client Plan, at least thirty (30) days in 
advance of the implementation of such change from one of the fee 
methods to another or such increase in a fee, PNC will provide a 
written notice (which may take the form of a proxy statement, letter, 
or similar communication that is separate from the prospectus of such 
Fund and which explains the nature and amount of such change from one 
of the fee methods to another or increase in fee) to the Second 
Fiduciary of each Client Plan affected by such change from one of the 
fee methods to another or increased fee. Such notice shall be 
accompanied by a Termination Form, with instructions on the use of such 
Termination Form, as described, above, in Section II(j).\3\
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    \3\ It is represented that PNC furnished only disclosure, not 
advanced notice, of a mid-2007 advisory fee change to the Second 
Fiduciaries of Client Plans invested in Funds using the Credit Fee 
Method. The change, which resulted in increased fees to BlackRock of 
0.5 basis points, (which it is represented was credited back to the 
Client Plans) occurred effective June 1, 2007, with the disclosure 
being provided in October 2007, after the effective date of such 
change. As the Second Fiduciaries of the Client Plans did not 
receive notification of such increase at least thirty (30) days in 
advance of the implementation of such increase, the Department, 
herein, is not providing relief for the receipt of such fee increase 
by BlackRock.
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    (l) In the event of:
    (i) A proposed addition of a Secondary Service for which an 
additional fee is charged; or
    (ii) A proposed addition of a Mutual Fund Administration Service 
provided by PNC to a Fund in which a Client Plan invests and for which 
an additional fee is charged; or
    (iii) A proposed increase in the rate of any fee paid by a Fund to 
PNC for any Secondary Service, or
    (iv) A proposed increase in the rate of any fee paid by BlackRock 
to PNC for Mutual Fund Administration Services provided to such Fund, 
or
    (v) A proposed increase in the rate of any fee paid for Secondary 
Services or for Mutual Fund Administration Services that results from 
the decrease in the number or kind of services performed by PNC for 
such fee over an existing rate for services which had been authorized, 
in accordance with Section II(i), by the Second Fiduciary for a Client 
Plan invested in such Fund, PNC, at least thirty (30) days in advance 
of the implementation of such fee increase or additional service for 
which an additional fee is charged, will provide a written notice 
(which may take the form of a proxy statement, letter, or similar 
communication that is separate from the prospectus of such Fund and 
which explains the nature and amount of the additional service for 
which an additional fee is charged or the nature and amount of the 
increase in fees) to the Second Fiduciary of each Client Plan invested 
in such Fund which is proposing to increase fees or add services for 
which an additional fee is charged. Such notice shall be accompanied by 
a Termination Form, with instructions on the use of such Termination 
Form, as described, above in Section II(j).
    (m) On an annual basis, PNC, serving as fiduciary to a Client Plan, 
provides the Second Fiduciary of such Client Plan invested in a Fund 
with:
    (1) A copy of the current prospectus for such Fund in which such 
Client Plan invests;
    (2) Upon the request of such Second Fiduciary, a copy of the 
Statement of Additional Information for such Fund which contains a 
description of all fees paid by such Fund to PNC and all fees paid by 
BlackRock to PNC for Mutual Fund Administration Services;
    (3) A copy of the annual financial disclosure report which includes 
information about Fund portfolios, as well as the audit findings of the 
independent Auditor, within sixty (60) days of the preparation of such 
report; and
    (4) Oral or written responses to inquiries of the Second Fiduciary 
of such Client Plan, as such inquiries arise.
    (n) All dealings between a Client Plan and a Fund are on a basis no 
less favorable to such Client Plan than dealings between such Fund and 
other shareholders invested in such Fund.

Section III--General Conditions

    (a) PNC maintains for a period of six (6) years the records 
necessary to enable the persons described, below, in Section III(b) to 
determine whether the conditions of this exemption have been met, 
except that:
    (1) A prohibited transaction will not be considered to have 
occurred, if solely because of circumstances beyond the control of PNC, 
the records are lost or destroyed prior to the end of the six-year 
period, and
    (2) No party in interest other than PNC 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 are not maintained or are not available for examination as 
required by Section III(b), below.
    (b)(1) Except as provided in Section III(b)(2) and notwithstanding 
any provisions of section 504(a)(2) of the Act, the records referred to 
in Section III(a) are unconditionally available at their customary 
location for examination during normal business hours by--
    (i) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service,
    (ii) Any fiduciary of a Client Plan who has authority to acquire or 
dispose of shares of a Fund owned by such Client Plan, or any duly 
authorized employee or representative of such fiduciary, and
    (iii) Any participant or beneficiary of a Client Plan or duly 
authorized employee or representative of such participant or 
beneficiary.
    (2) None of the persons described in Section III(b)(1)(ii) and 
(iii) shall be authorized to examine trade secrets of PNC, or 
commercial or financial information which is privileged or 
confidential.

Section IV--Definitions

    For purposes of this exemption:
    (a) The term, ``PNC,'' means PNC Financial, and any affiliate 
thereof, as defined, below in Section IV(c).
    (b) The term, ``BlackRock,'' means BlackRock, Inc., and any 
affiliate thereof, as defined, below in Section IV(c).
    (c) An ``affiliate'' of a person includes:
    (1) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person;
    (2) Any officer, director, employee, relative, or partner in any 
such person; and
    (3) Any corporation or partnership of which such person is an 
officer, director, partner, or employee.

[[Page 13245]]

    (d) The term, ``control,'' means the power to exercise a 
controlling influence over the management or policies of a person other 
than an individual.
    (e) The term, ``Fund(s),'' shall mean any diversified open-end 
investment company or companies registered with the Securities and 
Exchange Commission under the Investment Company Act, as amended, for 
which BlackRock serves as an investment adviser (but not sub-adviser).
    (f) The term, ``net asset value,'' means the amount for purposes of 
pricing all purchases and sales of shares of a Fund calculated by 
dividing the value of all securities, determined by a method as set 
forth in the prospectus for such Fund and in the statement of 
additional information, and other assets belonging to the Fund or 
portfolio of the Fund, less the liabilities charged to each such 
portfolio or Fund, by the number of outstanding shares.
    (g) 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.
    (h) The term, ``Second Fiduciary,'' means a fiduciary of a Client 
Plan who is independent of and unrelated to PNC and BlackRock. For 
purposes of this exemption, the Second Fiduciary will not be deemed to 
be independent of and unrelated to PNC and BlackRock if:
    (1) Such fiduciary, directly or indirectly controls, through one or 
more intermediaries, is controlled by, or is under common control with 
PNC or with BlackRock;
    (2) Such fiduciary, or any officer, director, partner, employee, or 
relative of the fiduciary, is an officer, director, partner, or 
employee of PNC or of BlackRock (or is a relative of such persons); or
    (3) Such fiduciary, directly or indirectly, receives any 
compensation or other consideration for his or her personal account in 
connection with any transaction described in this exemption.
    If an officer, director, partner, or employee of PNC or of 
BlackRock (or relative of such persons) is a director of such Second 
Fiduciary, and if he or she abstains from participation in:
    (i) The choice of such Client Plan's investment adviser,
    (ii) The approval of any such purchase or sale between such Client 
Plan and a Fund, and
    (iii) The approval of any change in fees, as described, above, in 
Section II(k) or (l), charged to or paid by such Client Plan in 
connection with any of the transactions described in Section I above, 
then Section IV(h)(2), above, shall not apply.
    (i) The term, ``Secondary Service(s),'' means a service or services 
which is/are provided by PNC to a Fund, including but not limited to 
custodial, accounting, or administrative services. The fees for 
providing Secondary Services to a Fund are paid to PNC by such Fund.
    (j) The term, ``Termination Form,'' means the form supplied to a 
Second Fiduciary which expressly provides an election to such Second 
Fiduciary to terminate on behalf of a Client Plan the authorization 
described, above, in Section II(i).
    (k) The term, ``business day,'' means any day that
    (i) PNC Financial is open for conducting all or substantially all 
of its banking functions, and
    (ii) The New York Stock Exchange (or any successor exchange) is 
open for trading.
    (l) The term, ``Mutual Fund Administration Services,'' means a 
service or services which is/are provided by PNC to, or on behalf of, a 
Fund, including PNC's maintaining records of investments by Client 
Plans in such Fund, processing Fund transactions for Client Plans, 
transmitting account statements and shareholder communications, 
responding to inquiries from Client Plans regarding account balances 
and dividends, and providing information to such Fund on sales and 
assisting in monitoring possible market timing. The fees for providing 
Mutual Fund Administration Services to a Fund are paid to PNC by 
BlackRock, rather than by such Fund.

DATES: Effective Date: If granted, this proposed exemption will be 
effective as of September 29, 2006.

Summary of Facts and Representations

    1. PNC Financial is a bank holding company that owns or controls 
two banks and a number of non-bank subsidiaries. PNC Financial 
provides, through its subsidiaries, a wide variety of trust and banking 
services to individuals, corporations, and institutions. Through its 
banking subsidiaries, PNC Financial provides investment management, 
fiduciary and trustee services to employee benefit plans and charitable 
and endowment assets, and provides non-discretionary services and 
investment options for defined contribution plans. PNC Financial also 
provides a range of tailored investment, trust, and private banking 
products to affluent individuals and families. In addition, PNC 
Financial and its affiliates provide various types of administrative 
services to mutual funds, including acting as transfer and disbursing 
agents and providing custodial and accounting services.
    As of June 30, 2006, PNC Financial had $50 billion in assets under 
management.
    2. The Funds are open-end investment companies registered with the 
Securities and Exchange Commission under the Investment Company Act, as 
amended. The investment adviser to the Fund is BlackRock Advisors, Inc. 
(BlackRock Advisors), a wholly-owned subsidiary of BlackRock, Inc. 
which is a subsidiary of PNC Financial. BlackRock Advisors had $464.1 
billion in assets under management, as of June 30, 2006. Based in New 
York, BlackRock Advisors currently manages assets for institutional and 
individual investors worldwide through a variety of equity, fixed 
income, cash management, and alternative investment products.
    The overall management of the Funds, including the negotiation of 
investment advisory contracts, rests with the Board of Trustees that 
are elected by the shareholders of the Funds.
    3. PFPC Inc. serves as co-administrator, transfer agent, and 
dividend disbursing agent for the Funds, and its parent company, PFPC 
Trust Company, serves as custodian for the Funds. Both are indirect 
wholly-owned subsidiaries of PNC Financial. The distributor for the 
Funds is BlackRock Distributors, Inc., a wholly-owned subsidiary of 
PFPC Inc. In the application file, PNC Financial represents that the 
Funds or their agents may pay fees to broker-dealers that are 
affiliates of PNC for omnibus account services with regard to 
shareholders that have invested through such broker-dealers. In this 
regard, PNC Financial has agreed to the exclusion from the scope of 
relief under this proposed exemption of brokerage services provided to 
the Funds by affiliated brokers for the execution of securities 
transactions engaged in by the Funds.\4\
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    \4\ The Department, herein, is not providing any relief for 
brokerage services provided to the Funds by affiliated brokers for 
the execution of securities transactions engaged in by the Funds.
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    4. The Client Plans which are the subject of this exemption, 
include employee benefit plans, as defined in section 3(3) of the Act, 
and plans, as defined in section 4975(e)(1) of the Code.
    PNC Financial, through its subsidiaries and affiliates serves as 
trustee, investment manager, and in other similar fiduciary capacities 
with

[[Page 13246]]

respect to retirement plans qualified under section 401(a) of the Code, 
individual retirement accounts (IRAs) described in section 408 of the 
Code, and welfare or other employee benefit plans that constitute 
``employee plans,'' as defined in section 3(3) of the Act and/or plans, 
as defined in section 4975(e)(1) of the Code. These services include 
discretionary investment management programs under which PNC Financial 
and its affiliates invest the assets of plans in securities, including 
shares of open-end investment companies registered under the Investment 
Company Act, the investment advisers of which may or may not be 
affiliated with PNC Financial and its affiliates.
    The specific Client Plans for which this exemption has been 
requested are Client Plans to which PNC Financial or one of its 
affiliates is a fiduciary with investment discretion and whose assets 
either: (1) Are currently invested in the Funds; or (2) may in the 
future be invested in the Funds.
    The exemption is not being requested for in-house plans of PNC 
Financial or its affiliates.
    5. PNC provides discretionary investment management services to a 
number of its Client Plans. As of June 30, 2006, PNC performed 
discretionary asset management services, including through the 
management of asset allocation models, for 1,102 employee benefit 
accounts with total assets of $4.299 billion. PNC receives asset-based 
compensation for its services to the Client Plans, which is paid for 
either by a Client Plan from its assets or by the sponsor of a Client 
Plan. In the course of managing assets for Client Plans, PNC may invest 
the assets of such Client Plans in the Funds as a means of obtaining 
more specialized management along with enhanced liquidity, economies of 
scale, and greater diversification than would be available through a 
separate account arrangement.
    Investments by Client Plans in the Funds occur through direct 
purchases of shares of the Funds on an ongoing basis. PNC also offers 
an asset allocation product, Capital Directions, which utilizes the 
Funds.
    6. Section 406(a)(1)(A) of the Act prohibits a fiduciary with 
respect to a plan from causing such plan to engage in a direct or 
indirect sale or exchange of any property with a party in interest. 
Section 406(a)(1)(D) of the Act prohibits a fiduciary with respect to a 
plan from causing such plan to engage in a transaction, if he knows or 
should know, that such transaction constitutes a transfer to, or use by 
or for the benefit of, a party in interest, of any assets of such plan.
    Sections 3(14)(A) and (B) of the Act define the term, ``party in 
interest,'' to include, respectively, any fiduciary of a plan and any 
person providing services to a plan. Under section 3(21)(A)(i) of the 
Act, a person is a fiduciary with respect to a plan to the extent such 
person exercises authority or control with respect to the management or 
disposition of a plan's assets.
    Under section 406(b) of the Act, a fiduciary with respect to a plan 
may not: (1) Deal with the assets of a plan in his own interest or for 
his own account, (2) in his individual or in any other capacity act in 
any transaction involving a plan on behalf of a party (or represent a 
party) whose interests are adverse to the interests of such plan or the 
interests of its participants or beneficiaries, or (3) receive any 
consideration for his own personal account from any party dealing with 
a plan in connection with a transaction involving the assets of such 
plan.
    Where PNC is a fiduciary with respect to a Client Plan, the 
investment of that Client Plan's assets in a Fund advised by BlackRock 
may potentially raise issues under sections 406(a)(1)(D), 406(b)(1), 
406(b)(2) and 406(b)(3) of the Act, unless an exemption is available.
Reliance on PTE 77-4
    7. PTE 77-4 provides an exemption from section 406 of the Act and 
section 4975 of the Code for the purchase or sale by a plan of mutual 
fund shares where the investment adviser of such fund: (1) Is a plan 
fiduciary or affiliated with a plan fiduciary; and (2) is not an 
employer of employees covered by the plan. The conditions of the PTE 
77-4 prohibit the payment of commissions by a plan, limit the payment 
of redemption fees by such plan, require prior disclosure to and 
approval by a second fiduciary, and prohibit the payment of double 
investment advisory fees.
    PNC is considered a fiduciary with respect to Client Plans for 
which it has investment discretion. PNC has in the past used and 
continues using investment discretion to invest the assets of Client 
Plans in the Funds. In the past, PNC has relied on the relief provided 
by PTE 77-4.
Description of Merger
    8. On September 29, 2006, Merrill Lynch and Co., Inc. (Merrill 
Lynch) merged its asset management group, Merrill Lynch Investment 
Managers (MLIM), with BlackRock Advisors, in return for an interest in 
BlackRock Advisors. The new company formed by the merger operates under 
the ``BlackRock'' name and is governed by a Board of Directors with a 
majority of independent members. As a result of the merger, Merrill 
Lynch holds a 49.8 percent (49.8%) economic stake and about 45 percent 
(45%) of the common stock of the new company, and the interest of PNC 
in the common stock was reduced from approximately 70 percent (70%) to 
approximately 34 percent (34%) of the new company. Further, as a result 
of the merger, mutual funds previously advised by MLIM now have 
BlackRock Advisors, acting as the investment adviser. The Funds 
previously advised by BlackRock continue to operate as before. It is 
represented that certain Funds with similar investment objectives will 
be merged to simplify investment offerings. All Funds will be labeled 
with the ``BlackRock'' name. For purposes of this proposed exemption, 
the term, ``Fund(s),'' includes those former Merrill Lynch funds that, 
following the merger, have BlackRock Advisors as the investment 
adviser.
Availability of PTE 77-4 after the Merger
    9. As discussed above, PTE 77-4 provides relief for investments in 
a Fund by a Client Plan for which PNC is a fiduciary with investment 
discretion. However, PTE 77-4 applies only where the investment adviser 
to such Fund is also a fiduciary to such Client Plan, or an affiliate 
of such a fiduciary. BlackRock is the investment adviser to the Funds. 
However, because PNC, rather than BlackRock, is the fiduciary to the 
Client Plan, PNC is concerned with its reliance on the relief provided 
under PTE 77-4.
Retroactive Relief
    10. The Applicant has requested retroactive relief pursuant to 
ERISA Technical Release 85-1.\5\ It is represented that after the 
merger was initially approved in February of 2006, PNC decided in June 
of 2006, to seek an individual exemption. On September 26, 2006, the 
Department received an application for exemption filed on behalf of PNC 
which was dated September 25, 2006. It is represented that the 
application was submitted as soon as possible under the circumstances. 
In going forward on the basis of the requested relief, PNC represents 
that it acted in good faith in this matter. Accordingly, PNC requests 
that the proposed exemption be granted

[[Page 13247]]

retroactively to September 29, 2006, the date of the merger.
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    \5\ Reprinted at [August 1983-August 1985 Transfer Binder] Pens. 
Plan Guide (CCH) ] 23,672D.
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Receipt of Fees pursuant to the Fee Methods
    11. PNC represents that, prior to the effective date of this 
proposed exemption, it relied on PTE 77-4 for exemptive relief for each 
of the fee methods: (a) The Offset Fee Method, (b) the Subtraction Fee 
Method, and (c) the Credit Fee Method,\6\ as described in Section 
II(a)(1), (a)(2), and (a)(3) of this proposed exemption. PNC has 
confirmed that all three fee methods were in place on the effective 
date of this exemption, September 29, 2006. As of this effective date, 
the proposed exemption, if granted, would specifically permit PNC to 
use any one of these three (3) fee methods to comply with the 
prohibition against a Client Plan paying double investment management 
fees, investment advisory or similar fees for assets of Client Plans 
invested in a Fund, provided that the conditions of this exemption are 
satisfied.
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    \6\ It is the view of PNC that the Credit Fee Method is covered 
by PTE 77-4. The Department does not concur with PNC's view that the 
Credit Fee Method is covered under PTE 77-4. Accordingly, the 
Department has determined that no relief is available under 77-4 for 
PNC's use of the Credit Fee Method.
---------------------------------------------------------------------------

    It is represented that where a Client Plan is investing in a Fund, 
all Fund-Level Fees for advisory or similar services related to that 
Client Plan's investment in such Fund are subject to the same fee 
method. It is represented that the fee methods are not applied on a 
fund-by-fund basis. PNC Financial determines the fee method to be used, 
subject to plan approval. As a general rule, Client Plan accounts use 
the Credit Fee Method. An exception to the general rule involves Client 
Plan accounts investing through Capital Directions, an asset allocation 
program, which uses the Subtraction Fee Method. IRA's also use the 
Subtraction Fee Method. The fee method to be used is described in the 
disclosure provided at the opening of a Client Plan account, and 
affirmatively approved at that time by the Second Fiduciary for such 
Client Plan. It is represented that the Second Fiduciary of such Client 
Plan is notified in advance of any change in the fee method and is 
provided with a Termination Form. Failure by the Second Fiduciary of 
such Client Plan to return the Termination Form on behalf of such 
Client Plan is deemed to be an approval by the Second Fiduciary of a 
change in the fee method.
Offset Fee Method
    12. With regard to the Offset Fee Method, PNC represents that it 
does not charge a Client Plan any direct fees for investment management 
with respect to such Client Plan's assets invested in the Funds. Such 
Client Plan pays fees to PNC solely for non-investment trust or custody 
services. The fees a Client Plan pays for those assets invested in the 
Funds come solely from the Funds in accordance with certain advisory 
agreements. The result is that the Plan-Level Fees are offset, and the 
Client Plan pays only an investment advisory or similar Fund-Level Fee 
with respect to those plan assets invested in a Fund.
Subtraction Fee Method
    13. With regard to the Subtraction Fee Method, PNC represents that 
under this method, PNC charges a Client Plan a direct investment 
management fee but credits to the benefit of such Client Plan, as a 
subtraction to such Client Plan's Plan-Level Fees, its proportionate 
share of the investment advisory fee for Client Plan assets invested in 
a Fund and paid to BlackRock (as reduced by any waiver or rebate by 
BlackRock of such fees to the Fund due to state law or other limits on 
Fund expenses).\7\ The result is that a Client Plan pays only one 
investment management fee with respect to those assets. The subtraction 
is solely against those Plan-Level Fees charged by PNC for serving as 
investment manager, and does not include non-investment management 
trustee fees.
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    \7\ It is represented that while fees above a certain limit may 
be waived or rebated by BlackRock, as a technical matter the Funds 
may pay the excess fees and then simultaneously receive a rebate of 
the excess amount. For purposes of the Subtraction Fee Method, 
described in this section, PNC intends to credit to Client Plans 
only the net fees that BlackRock receives, and not to credit any of 
the excess fees that have been rebated to the Funds.
---------------------------------------------------------------------------

    The credit under this Subtraction Fee Method and the credit under 
the Credit Fee Method, as discussed below, do not include the co-
administrator, custodial, transfer agent, or other non-advisory fees 
payable by the Funds to PNC, because these services rendered to the 
Fund are not duplicative of any services provided directly to a Client 
Plan. The co-administrator services assist in the administration and 
operation of a Fund, which are matters particular to such Fund. The 
custodial services provided by PNC to a Fund involve maintaining 
custody and providing reporting relative to the individual securities 
owned by such Fund. The custodial services provided by PNC to a Client 
Plan, by contrast, involve maintaining custody over all or a portion of 
the Client Plan's assets, which would include the Client Plan's shares 
in a Fund, but not the assets underlying such Fund shares. These Client 
Plan custody services are necessary regardless of whether such Client 
Plan's assets are invested in the Funds.
Credit Fee Method
    14. PNC represents that in 1989 at the time PNC converted its 
collective investment funds into mutual funds, it started using the 
Credit Fee Method to avoid duplicative investment advisory fees. PNC's 
understanding at the time was that the Credit Fee Method was covered by 
PTE 77-4.\8\
---------------------------------------------------------------------------

    \8\ See supra., footnote 6.
---------------------------------------------------------------------------

    Under the Credit Fee Method, PNC charges standard fees, as 
applicable to each Client Plan, for serving as trustee and investment 
manager, without any offset. In this method, a Client Plan receives ``a 
credited dollar amount'' from BlackRock of such Client Plan's 
proportionate share of all investment advisory fees charged by 
BlackRock to the Funds for the particular month (as reduced by any 
waiver or rebate by BlackRock of such fees, as described above). The 
result of the Credit Fee Method is that a Client Plan pays its 
proportionate share of the Fund-Level Fees, but receives a ``credited 
dollar amount'' of such payment.
    It is represented that the standard practice is to reinvest the 
``credited dollar amount'' in additional shares of the same Fund with 
respect to which the fees were credited. The additional shares so 
acquired are valued at the net asset value on the date the purchase 
request is transmitted to the Fund, which is the same day the 
``credited dollar amount'' is made to the Client Plan's account.
    It is represented that the Client Plans could, in theory, request 
that the ``credited dollar amount'' be made in cash, instead of 
additional shares. No such request has occurred to date, because it has 
not been the practice of PNC to notify Client Plans that they have the 
option to request cash, rather than additional shares. If such a 
request were to be made, it is represented that the cash would be 
invested in a money market account pending an investment direction from 
the investment officer for the account.
    The applicant points out that in other exemptions granted by the 
Department, the timing of the credits generally occurred within one 
business day of the date that the mutual fund investment adviser 
received investment advisory fees. In the subject case, the applicant 
represents that the fees for investment

[[Page 13248]]

advisory services, or similar services, provided by BlackRock to a Fund 
that have accrued for a given month are not paid out to BlackRock until 
certain calculations are confirmed between BlackRock and the accountant 
for such Fund, which is generally not before the third week of the next 
month. For example, the fees for investment advisory services, or 
similar services, which accrue for the month of January, may not be 
paid to BlackRock until the third week of February, or later. However, 
it is represented that there is no consistent period of time after 
BlackRock receives such fees for investment advisory services, or 
similar services, that BlackRock then pays PNC the fees for Mutual Fund 
Administration Services provided by PNC to such Fund. For instance, 
under this example, BlackRock may not pay PNC until the following 
month, i.e., March. For this reason, PNC has adopted a practice of 
crediting the accrued fees for investment advisory services, or similar 
services, for a given month to its Client Plans no later than the fifth 
business day before the end of the month following the month in which 
fees for investment advisory services or similar services accrued--in 
this example, by the fifth business day before the end of February--
even if PNC has not yet received payment from BlackRock of the fees for 
the provision of Mutual Fund Administrations Services by PNC to such 
Fund. It is represented that PNC is implementing a system whereby it 
will be notified when BlackRock receives its fees for investment 
advisory services, or similar services, which will allow PNC to make 
the credits to its Client Plans within one business day of when 
BlackRock is paid. However, this system will not be in place until 
January 2009. Therefore, while PNC agrees that the credit of the fees 
for investment advisory services, or similar services, to the Client 
Plans will occur no later than one business day after the receipt of 
such fees by BlackRock, this condition is effective only for the fees 
for investment advisory services, or similar services, accrued after 
January 1, 2009. For prior periods, PNC has requested that consistent 
with the original language in its application for exemption and with 
PNC's practice prior to January 1, 2009, the requirement should be that 
the credit of the fees for investment advisory services, or similar 
services, accrued for a given month be made no later than the earlier 
of either: (1) The same day as the receipt by PNC of the fees from 
BlackRock for the provision of Mutual Fund Administration Services to a 
Fund for that month, or (2) the fifth business day before the end of 
the month following the month in which fees for investment advisory 
services, or similar services, accrued. Accordingly, section II(a)(3) 
of this proposed exemption reads as follows:

    A Client Plan invested in a Fund receives a ``a credit'' of such 
Client Plan's proportionate share of all fees charged to such Fund 
by BlackRock for investment advisory services, or similar services, 
for a particular month: (1) Effective for the period, September 29, 
2006, through December 31, 2008, on the earlier of either: (a) The 
same day as PNC receives a fee from BlackRock for Mutual Fund 
Administration Services provided for that month to such Fund by PNC, 
or (b) the fifth business day before the end of the month following 
the month in which fees for investment advisory services, or similar 
services, accrued, or (2) effective for the period beginning, 
January 1, 2009, and continuing thereafter, on a date which is no 
later than one business day after BlackRock receives fees from the 
Fund for investment advisory services, or similar services, provided 
for that month to such Fund by BlackRock.
Audit of the Credit Fee Method
    15. It is represented that there are sufficient safeguards to 
permit exemptive relief for the use by PNC of the Credit Fee Method. In 
this regard, PNC will establish and maintain a system of internal 
accounting controls for crediting the fees under the Credit Fee Method. 
In addition, PNC will retain the services of an independent Auditor to 
audit annually the crediting of fees to the Client Plans under the 
Credit Fee Method. Such audits will provide independent verification of 
the proper crediting to such Client Plans.
    In the annual audit of the Credit Fee Method, the Auditor will use 
procedures designed to review and test compliance with the specific 
operational controls and procedures established by PNC for making the 
credits. Specifically, the Auditor will: (i) Verify on a test basis the 
investment advisory fees paid by the Funds to BlackRock; (ii) verify on 
a test basis the monthly factors used to determine the investment 
advisory fees; (iii) verify on a test basis the credits paid in total 
for a one-month period; (iv) re-compute, on a test basis, using the 
monthly factors described above, the amount of the credit determined 
for selected Client Plans; (v) verify on a test basis the proper 
assignment of identification fields for receipt of fee credits to the 
Client Plans; and (vi) verify on a test basis that the credits were 
posted to the Client Plans within the required timeframe.
    In the event either the internal audit made by PNC or the 
independent audit made by the Auditor identifies an error in the 
crediting of fees to a Client Plan, PNC will correct the error. With 
respect to any shortfall in credited fees to a Client Plan, PNC will 
make a cash payment to such Client Plan equal to the amount of the 
error, plus interest paid at money market rates offered by PNC for the 
period involved. Any excess credits made to a Client Plan will be 
corrected by an appropriate deduction from such Client Plan or 
reallocation of cash during the next payment period after discovery of 
the error to reflect accurately the amount of total credits due to such 
Client Plan for the period involved.
Receipt of Secondary Services Fees
    16. Prior to the effective date of this proposed exemption, it is 
represented that the receipt by PNC of fees paid out of the assets of a 
Fund for Secondary Services, such as custodial, administrative, 
accounting, and transfer agency services, provided by PNC to such Fund 
were treated as exempt under PTE 77-4, pursuant to Advisory Opinion 93-
12A (Apr. 27, 1993, addressed to PNC Financial). It is further 
represented that Advisory Opinion 93-12A permits such fees for 
Secondary Services: (a) To be paid to PNC by a Fund where PNC also 
receives fees as the investment adviser to such Fund, and (b) to be 
retained by PNC without the need for PNC to offset or waive such 
fees.\9\
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    \9\ With respect to the relief available under PTE 77-4, 
pursuant to Advisory Opinion 93-12A, no reference is made to the 
Credit Fee Method. Accordingly, the Department has determined that 
the relief available under PTE 77-4, pursuant to Advisory Opinion 
93-12A was not in the past and is not now available for the Credit 
Fee Method.
---------------------------------------------------------------------------

    PNC requests an administrative exemption, effective as of September 
29, 2006, for receipt of fees by PNC for the provision of Secondary 
Services to the Funds, because it is no longer clear that relief for 
the receipt of Secondary Services fees by PNC, which prior to the 
merger was treated as exempt under PTE 77-4, pursuant to Advisory 
Opinion 93-12A, continues to be available after the merger.
Receipt of Mutual Fund Administration Services Fees
    17. It is represented that PNC also has provided in the past and 
continues to provide Mutual Fund Administration Services to, or on 
behalf of, the Funds. Mutual Fund Administration Services are part of 
an omnibus arrangement which includes maintaining records of 
investments by Client Plans in the Funds, processing Fund transactions 
for Client Plans, transmitting account

[[Page 13249]]

statements and shareholder communications, responding to inquiries from 
Client Plans regarding account balances and dividends, and providing 
information to the Funds on sales and assisting in monitoring possible 
market timing.
    PNC has received fees in the past and continues to receive fees for 
the provision of Mutual Fund Administration Services to the Funds. The 
Funds do not pay the fees for the Mutual Fund Administration Services 
provided by PNC. Instead, BlackRock, the investment adviser to the 
Fund, pays the fees to PNC for Mutual Fund Administration Services. It 
is represented that many mutual fund advisers have adopted the practice 
of covering service costs out of their own assets, a practice referred 
to as ``adviser pay.''
    It is represented that the fees for the provision of Mutual Fund 
Administration Services by PNC are currently fifteen (15) basis points 
for assets in money market funds, twenty (20) basis points for assets 
in fixed income funds (except three funds as to which the fee is five 
(5) basis points), and twenty-five (25) basis points for assets in 
equity funds (except one fund as to which the fee is four (4) basis 
points). It is represented that the fees for such Mutual Fund 
Administration Services are subject to negotiation.
    The Department believes that the receipt of fees by PNC from 
BlackRock for the provision of Mutual Fund Administration Services by 
PNC to the Funds is beyond the scope of relief provided by PTE 77-4. 
PNC has not requested, and the Department is not providing, relief in 
this proposed exemption for the payment, prior to the date of the 
merger, by BlackRock of fees for the provision of Mutual Fund 
Administration Services by PNC to the Funds.
    However, PNC has requested an individual administrative exemption, 
effective as of September 29, 2006, the date of the merger, to cover 
the payment by BlackRock to PNC Bank, National Association (PNC Bank), 
an affiliate of PNC, of fees for the provision of Mutual Fund 
Administration Services by PNC Bank to the assets in a Fund for which 
BlackRock serves as investment adviser.
In the Interest of Client Plans
    18. The applicant represents that the proposed exemption is in the 
interest of the Client Plans and their participants and beneficiaries. 
In this regard, the Funds provide advantages for Client Plans, 
including professional management, the ability to monitor performance 
on a daily basis, and the flexibility to purchase and redeem shares on 
a daily basis. It is represented that no sales commissions are charged 
to Client Plans in connection with the purchase or sale of shares in 
any of the Funds. In addition, these investments in the Funds by Client 
Plans are made in certain classes of shares, which are not subject to 
12b-1 fees. Redemption fees are charged only if disclosed in the 
prospectuses in effect at both the time of the original investment in 
the shares of a Fund and the time of redemption.
    It is further represented that the Funds provide a means for Client 
Plans with limited assets to achieve diversification of investment in a 
manner that may not be attainable through direct investment. For these 
reasons, the applicant maintains that the availability of the Funds as 
investments enable PNC, as investment manager, to better meet the 
investment goals and strategies of a Client Plan.
Protective of Client Plans
    19. It is represented that the proposed exemption contains 
sufficient safeguards for the protection of the Client Plans invested 
in the Funds. In this regard, prior to any investment by a Client Plan 
in a Fund, the investment must be authorized in writing by the Second 
Fiduciary of such Client Plan, based on full and detailed written 
disclosure concerning such Fund.
    In addition to the initial disclosures received by the Second 
Fiduciary of a Client Plan invested in a Fund, PNC provides to such 
Second Fiduciary ongoing disclosures regarding such Fund and the fee 
methods. Specifically, on an annual basis, such Second Fiduciary 
receives copies of the current Fund prospectuses, as well as copies of 
the annual financial disclosure reports containing information about 
the Funds and audit findings of the Auditor within sixty (60) days of 
the preparation of such report.
    Further, it is represented that PNC Financial or an appropriate 
affiliate, thereof, will respond to inquiries from a Second Fiduciary. 
In addition, a Second Fiduciary, upon request, will receive copies of 
the Statements of Additional Information for the Funds and a copy of 
the proposed exemption and a copy of the final exemption, if granted, 
once such documents are published in the Federal Register.
    Furthermore, each investment of the assets of a Client Plan in a 
Fund will be subject to the ongoing ability of the Second Fiduciary of 
such Client Plan to terminate the investment in such Fund without 
penalty to such Client Plan at any time upon written notice of 
termination to PNC. In this regard, a Termination Form, expressly 
providing an election to terminate the authorization, with instructions 
on the use of such Termination Form, will be supplied to the Second 
Fiduciary at least annually.
    The Termination Form may be used to notify PNC, in writing to 
effect a termination by selling the shares of the Funds held by a 
Client Plan. Such sales are to occur within one (1) business day, as 
defined in Section IV(k) of this exemption, following receipt by PNC of 
the Termination Form. If, due to circumstances beyond the control of 
PNC, the sale cannot be executed within one (1) business day, PNC will 
be obligated to complete the sale within the next business day.
    In addition, by using the Termination Form that PNC provides thirty 
(30) days in advance of any increase in the rate of fees and change in 
services, the Second Fiduciary will have sufficient opportunity to 
terminate a Client Plan's investment in a Fund, without penalty to the 
Client Plan, and withdraw the Client Plan's investment from such Fund 
in advance of any such increase in fee and change in services.
Feasibility
    20. The applicant represents that the proposed exemption is 
feasible in that compliance with the terms of the exemption will be 
monitored by the Second Fiduciary of a Client Plan who is independent 
of PNC. Further, PNC provides internal accounting safeguards to ensure 
the accuracy of the calculation of the ``credited dollar amounts'' 
under the Credit Fee Method, and an independent Auditor will provide 
assurance that the Credit Fee Method is properly administered. For 
these reasons, the applicant maintains that the Department will not 
have to monitor the implementation and enforcement of the exemption.
    Further, it is represented that the negative consent procedure, as 
described in the proposed exemption, for obtaining the approval from 
the Second Fiduciary of each Client Plan invested in a Fund for 
increases in fees and the addition of services for which a fee is 
charged is more efficient, cost effective, and administratively 
feasible than written affirmative consent approval, as described in PTE 
77-4.
    Under PTE 77-4, an increase in fees and any change in services may 
not be implemented until written approval of such increase or change is 
obtained from every Second Fiduciary of Client Plans invested in a 
Fund. A communication failure that results in not obtaining an 
affirmative written approval from a Second Fiduciary of a

[[Page 13250]]

Client Plan could force PNC to transfer a Client Plan's investments out 
of a Fund.
    Under the negative consent procedure, as set forth in this proposed 
exemption, the difficulties of obtaining written affirmative approval 
from the Second Fiduciary of each Client Plan and coordinating any fee 
increases and any additional services for which a fee is charged will 
be avoided while such Second Fiduciary will still receive the necessary 
disclosures. Specifically, each Second Fiduciary of a Client Plan 
invested in a Fund will receive advanced notice in a statement separate 
from such Fund's prospectus of any proposed change from one fee method 
to another or any proposed increase in a rate of fee for investment 
advisory services, or similar services, paid to BlackRock that was 
previously disclosed in the Fund prospectus. In addition, each Second 
Fiduciary will receive advanced notice of any additional Secondary 
Service or Mutual Fund Administration Service for which a fee is 
charged and any increase of any rate of any fee paid for Mutual Fund 
Administration Services and any Secondary Services to PNC or an 
increase in a rate of any fee that results from an addition or 
elimination in the number or kind of service performed by PNC in 
connection with a previously authorized fee for such service. With 
regard to the affected Fund, the advanced notice will contain an 
explanation of the nature and amount of the increase in fees and the 
nature and amount of the addition (or elimination) of a service for 
which an additional fee is charged. The Second Fiduciary will receive 
such advanced notice thirty (30) days prior to the effective date of 
such increase in the rate of fees and change in services with respect 
to a Client Plan's investment in a Fund. Such advanced notice must be 
accompanied by a Termination Form that would allow the Second Fiduciary 
to terminate, without penalty to the Client Plan, the authorization to 
invest in the Funds. The notice requirement would not apply if an 
increase is the result of the cessation of a voluntary temporary waiver 
of fees by PNC, and the full fee level had previously been described in 
writing to and authorized by the Second Fiduciary. Failure to return 
the Termination Form by the thirtieth (30th) day will result in the 
negative consent of the Second Fiduciary to the increase in the fees 
and to the addition of services for which an additional fee is charged.
    21. In summary, the applicant represents that the proposed 
transactions satisfy the statutory criteria for an exemption under 
section 408(a) of the Act for the following reasons:
    (a) The Funds will provide Client Plans with an effective 
investment vehicle;
    (b) The investment by Client Plan in the Funds and the payment of 
fees for Secondary Services by the Funds to PNC, the payment of fees 
for Mutual Fund Administration Services by BlackRock to PNC, and the 
payment of fees for investment advisory or similar services by the 
Funds to BlackRock in connection the investment in the Funds by Client 
Plans will require an authorization in writing in advance by a Second 
Fiduciary after full written disclosure, including current prospectuses 
for the Funds and a statement describing the fee method to be used;
    (c) Any authorization made by a Second Fiduciary will be terminable 
at wil