# Notice of Proposed Exemption; BlackRock, Inc. and Its Investment Advisory, Investment Management and Broker-Dealer Affiliates and Their Successors (Applicants): Located in New York, NY

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URL: https://www.frixlaw.com/law-library/documents/fr%3A2012-788

## Record

- **Collection:** Federal Register
- **Document type:** Notice
- **Published:** January 19, 2012
- **Citation:** 77 FR 2798

## Text

DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Application No. D-11687]
Notice of Proposed Exemption; BlackRock, Inc. and Its Investment Advisory, Investment Management and Broker-Dealer Affiliates and Their Successors (Applicants): Located in New York, NY

AGENCY:

Employee Benefits Security Administration, U.S. Department of Labor.

ACTION:

Notice of proposed exemption.

SUMMARY:

This document contains a notice of pendency before the Department of Labor (the Department) of a proposed individual exemption from certain prohibited transaction restrictions of the Employee Retirement Income Security Act of 1974, as amended (ERISA), the Federal Employees' Retirement System Act of 1986, as amended (FERSA), and the Internal Revenue Code of 1986, as amended (the Code). The proposed transactions involve BlackRock, Inc. and its investment advisory, investment management and broker-dealer affiliates and their successors. The proposed exemption, if granted, would affect plans for which BlackRock, Inc. and its investment advisory, investment management and broker-dealer affiliates and their successors serve as fiduciaries, and the participants and beneficiaries of such plans.

DATES:

Effective Date:
If granted, this proposed exemption will be effective as of March 31, 2012, except that, with respect to Covered Transactions described in Section III.K. and S., the proposed exemption will be effective as of October 1, 2011.

Written Comments and Hearing Requests:
All interested persons are invited to submit written comments and/or requests for a hearing on the proposed exemption within forty five (45) days from the date of the 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 the request for a hearing and (2) the nature of the person's interest in the proposed exemption and the manner in which the person would be adversely affected by the proposed exemption. A request for a hearing must also state the issues to be addressed at the requested hearing and include a general description of the evidence to be presented at the requested hearing.

ADDRESSES:

All written comments and requests for a public hearing concerning the proposed exemption should be sent to the Office of Exemption Determinations, Employee Benefits Security Administration, Room N-5700, U.S. Department of Labor, 200 Constitution Avenue NW., Washington, DC 20210, Attention: Application No. D-11687. Interested persons are also invited to submit comments and/or hearing requests to the Employee Benefits Security Administration by email or FAX. Any such comments or requests should be sent either 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 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.

Warning:
If you submit written comments or hearing requests, do not include any personally-identifiable or confidential business information that you do not want to be publicly-disclosed. All comments and hearing requests are posted on the Internet exactly as they are received, and they can be retrieved by most Internet search engines. The Department will make no deletions, modifications or redactions to the comments or hearing requests received, as they are public records.

FOR FURTHER INFORMATION CONTACT:

Brian L. Shiker, Office of Exemption Determinations, Employee Benefits Security Administration, U.S. Department of Labor, telephone (202) 693-8552. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION:

This document contains a notice of proposed individual exemption from the restrictions of ERISA section 406(a)(1) and 406(b), FERSA section 8477(c)(1) and (c)(2) and the sanctions resulting from the application of Code section 4975, by reason of Code section 4975(c)(1). The proposed exemption has been requested by BlackRock, Inc. and its investment advisory, investment management and broker-dealer affiliates and their successors pursuant to ERISA section 408(a), Code section 4975(c)(2) and FERSA section 8477(c)(3), and in accordance with the procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, 32847, August 10, 1990). Effective December 31, 1978, section 102 of the Reorganization Plan No. 4 of 1978, (43 FR 47713, October 17, 1978) transferred the authority of the Secretary of the Treasury to issue exemptions of the type requested to the Secretary of Labor. Accordingly, this notice of proposed exemption is being issued solely by the Department.

Summary of Facts and Representations
1

1
Capitalized terms used but not defined in the Summary of Facts and Representations have the meaning set forth in Section VI of the proposed exemption.

1. BlackRock, Inc. (BlackRock), based in New York, NY, is the largest publicly traded investment management firm. BlackRock, through its investment advisory and investment management subsidiaries, currently manages assets for institutional and individual investors worldwide through a variety of equity, fixed income, cash management and alternative investment products. As of September 30, 2011, BlackRock, through its advisor subsidiaries, had approximately $3.345 trillion in assets under management, including assets managed by BlackRock Institutional Trust Company, N.A. (BTC) (formerly known as Barclays Global Investors, N.A. (BGI)) and its affiliates. The Applicants
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together with any other entity presently or subsequently under the direct or indirect control, through one or more intermediaries, of BlackRock and successors of any of the foregoing are referred to herein as the “BlackRock Entities.”

2
For purposes of this application, references to the “Applicants” include each of the banks, investment advisors and investment managers directly or indirectly, through one or more intermediaries, under the control of BlackRock, and any other bank, investment advisor or investment manager which subsequently becomes directly or indirectly, through one or more intermediaries, under the control of BlackRock, and successors of the foregoing. As of the date hereof, banks, investment advisors and investment managers under the control of BlackRock include, but are not limited to, BlackRock Advisors, LLC, BlackRock Financial Management, Inc., BlackRock Capital Management, Inc., BlackRock Institutional Management Corporation, BlackRock International, Ltd., BlackRock Realty Advisors, Inc., BlackRock Investment Management, LLC, BlackRock Fund Advisors, and BTC (collectively, the BlackRock Managers). “Applicants” also includes broker-dealers presently or subsequently under the direct or indirect control, through one or more intermediaries, of BlackRock.

2. BTC is a national banking association headquartered in San Francisco, California. Prior to its acquisition by BlackRock on December 1, 2009 (the Acquisition), BTC (then BGI) was the largest asset manager in the U.S. A significant amount of BTC's assets under management in the U.S. consists of assets of employee benefit plans subject to ERISA, FERSA and/or the Code. BTC is a market leader in index and model-driven investment products. Until its sale to BlackRock, BGI was an indirect subsidiary of

Barclays PLC, a public limited company organized under the laws of England and Wales (Barclays). BTC, as of the date of the Acquisition, is a wholly owned subsidiary of BlackRock.

3. The Applicants represent that they are regulated by various Federal government agencies such as the Securities and Exchange Commission (SEC) and the Office of the Comptroller of the Currency, as well as state government agencies and industry self-regulatory organizations (
e.g.,
the Financial Industry Regulatory Authority or, in the case of some broker-dealers and banks, corresponding foreign regulatory authorities). As with the Applicants, each of (a) Barclays, (b) The PNC Financial Services Group, Inc. (PNC), and (c) each entity directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with one or more of Barclays or PNC,
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has previously made representations to the Department regarding the significant extent to which they are regulated.
4

3
Each of Barclays and PNC is a “Minority Passive Shareholder” or “MPS,” but, for avoidance of doubt, an MPS does not include any BlackRock Entity.

4
See applications associated with PTE 2009-25, 74 FR 45300 (September 1, 2009) (Barclays); and PTE 2009-22, 74 FR 45284 (September 1, 2009) (PNC).

The Acquisition

4. There have recently occurred extraordinary circumstances in both the U.S. financial services industry and the global financial services industry. Many entities in the financial services industry have faced severe economic hardship. During this period of upheaval, the recent trend of industry consolidation amongst significant banks, broker-dealers and other providers of financial services has accelerated. For example, in September 2008, Barclays Bank PLC (Barclays Bank), a subsidiary of Barclays, acquired most of the U.S. broker-dealer business of Lehman Brothers Holdings Inc.; and, in May 2008, Bear Stearns Companies Inc. was acquired by JPMorgan Chase & Co.

5. In this context, BlackRock, in June 2009, made a binding offer to Barclays pursuant to an Amended and Restated Stock Purchase Agreement by and among BlackRock, Barclays Bank and (for limited purposes) Barclays, which ultimately resulted in the Acquisition. BlackRock completed the Acquisition on December 1, 2009, in exchange for an aggregate of 37,566,771 shares of BlackRock common stock and participating preferred stock and approximately $6.6 billion in cash. Barclays' decision to enter into the Acquisition was based upon a variety of factors that Barclays stated would be beneficial to its shareholders, including the creation of material economic exposure to a highly competitive global asset manager.

6. Prior to the Acquisition, PNC, indirectly through its subsidiary PNC Bancorp, Inc. (PNC Bancorp), held an approximately 31.9% economic interest and an approximately 43.2% voting interest in BlackRock. Bank of America Corporation (BOA), through its (indirect) wholly owned subsidiary the Merrill Lynch Group, Inc. (the Merrill Group), held an approximately 48.3% economic interest and approximately 4.6% voting interest in BlackRock. Immediately following the Acquisition, (1) Barclays, (2) BOA, and (3) PNC (each of Barclays and PNC, a Minority Passive Shareholder, or MPS) controlled the following interests in BlackRock:

BOA.
BOA owned approximately 3.7% of BlackRock voting common stock and approximately 34.2% of BlackRock equity by value;

PNC.
PNC owned approximately 35.2% of BlackRock voting common stock and approximately 24.5% of BlackRock equity by value; and

Barclays.
Barclays owned approximately 4.8% of BlackRock voting common stock and approximately 19.8% of BlackRock equity by value.

7. Post-Acquisition, a secondary offering of BlackRock common stock was completed on November 15, 2010 (the Secondary Offering). BlackRock's ownership structure following the Secondary Offering was as follows: (a) BOA controlled 0% of BlackRock's voting common stock and approximately 7.1% of BlackRock's equity by value; (b) PNC controlled approximately 25.3% of BlackRock's voting common stock and approximately 20.3% of BlackRock's equity by value; and (c) Barclays controlled approximately 2.3% of BlackRock's voting common stock and approximately 19.6% of BlackRock's equity by value.

8. On June 1, 2011, BlackRock repurchased from a subsidiary of BOA its remaining ownership interest in BlackRock (the BOA Repurchase). These shares were retired. As a result of the BOA Repurchase, BOA's economic stake in BlackRock was reduced to 0.0%. Concurrently with the BOA Repurchase, Barclays sold a portion of its BlackRock Series B Non-Voting Preferred Stock, which automatically converted into common stock in the hands of the purchaser. As a result of these events on June 1, 2011, Barclays' and PNC's holdings by economic value increased to approximately 19.7% and 21.7%, respectively, and Barclays' and PNC's voting ownership interests were reduced to approximately 2.2% and 24.6%, respectively.

9. All BlackRock stock beneficially owned from time to time by each MPS (other than stock held in certain fiduciary capacities and customer or market making accounts) is subject to a stockholders agreement entered into by and between that MPS and BlackRock (collectively, the Stockholders Agreements). Pursuant to each respective Stockholders Agreement, each MPS has the right to identify to BlackRock two (2) prospective directors, and, if such nominees are reasonably acceptable to the BlackRock Board of Directors (the Board), BlackRock and each respective MPS agree to use best efforts to cause the election of such nominees to the Board.
5

However, at least nine (9) of the current directors
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must be “independent” (within the meaning of New York Stock Exchange (NYSE) rules)
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of the MPSs and BlackRock management. Furthermore, subject to limited exceptions, each Stockholders Agreement provides that the relevant MPS must vote its BlackRock voting common stock in accordance with recommendations of the Board. In addition, the Audit Committee, the Management Development and Compensation Committee, and the Nominating and Governance Committee of the Board must consist entirely of independent directors, and a majority of each other committee (if any) of the Board, with the exception of the Executive Committee,
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must consist of independent directors. The Stockholders Agreements provide, with limited exceptions, that all decisions of any committee of the Board require the presence of a majority of the

directors at a meeting then serving on such committee. In fact, as of the date hereof, none of the directors identified to the Board by an MPS serve on any committee of the Board, except that one director identified to the Board by PNC serves on the Executive Committee. While each MPS monitors its investment in BlackRock through Board members it identified to the Board and each MPS has certain limited governance rights, no MPS has or will have, through the Board members it identified, any involvement in the day-to-day management of BlackRock, any BlackRock Manager or other BlackRock Entity.

5
The Stockholders Agreements also contemplate a reduction in the number of Board seats which an MPS is entitled to designate to one upon falling below a 10% equity interest for 90 consecutive days, and to zero upon falling below a 5% equity interest for 90 consecutive days.

6
There are currently 17 directors on the Board. The maximum permitted number of directors on the Board pursuant to the Stockholders Agreements is 19.

7
Section 303A.01 of the NYSE Listed Company Manual requires listed companies to have a majority of independent directors. Although an exception is made for companies controlled by a group of shareholders, the Stockholders Agreements among BlackRock and the MPSs preclude the MPSs from becoming part of any such group. BlackRock represents that, based on current equity ownership levels, the Board must include a minimum of 13 directors total (except for temporary vacancies arising by reason of, for example, poor health, retirement or resignation).

8
The Executive Committee of the Board has not met for over five (5) years.

10. In addition, the Stockholders Agreements provide for additional restrictions on the ability of an MPS to control BlackRock or any BlackRock Manager. These restrictions include standstill arrangements establishing caps on voting interests,
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transfer restrictions, and restrictions relating to arm's length business relationships between an MPS (or its affiliates) and BlackRock (or its affiliates) in each case as set forth in the applicable Stockholders Agreement.

9
The following are the caps on voting interests contained in the Stockholder Agreements: PNC = 49.9%; and Barclays = 4.9%. The following are the caps on economic interest: PNC = 38%; and Barclays = 19.9%.

Interim Prohibited Transaction Relief

11. The Applicants previously applied for (Application No. D-11588) and the Department issued Prohibited Transaction Exemption 2011-17, 76 Fed. Reg. 50632 (August 15, 2011)(the Interim Exemption) that covers certain transactions entered into by BlackRock Managers with, or involving, certain direct or indirect minority passive shareholders in BlackRock, and certain entities related thereto, on behalf of Client Plans or Pooled Funds subject to ERISA, the Code and/or FERSA. Since the Acquisition Date, the Applicants represent that they have expended a significant amount of time, money and other resources to establish and maintain the necessary infrastructure to ensure compliance with the conditions for relief set forth in the Interim Exemption. The Applicants have, among other things, put together a legal and compliance staff that is devoted to assuring compliance with the Interim Exemption, dedicated significant technology resources to developing trading systems and compliance solutions designed to address the requirements of the Interim Exemption, engaged in extensive training of BlackRock personnel (covering individuals serving in legal, compliance and business roles) regarding compliance with the Interim Exemption, and implemented robust post-trade reporting and record-keeping to monitor compliance with the Interim Exemption.

The Interim Exemption expires on the earlier of (a) the effective date of this proposed exemption, if granted, or (b) March 31, 2012.

Requested Relief

12. Given the unique nature of the BlackRock ownership structure following the Acquisition and subsequent Secondary Offering and BOA Repurchase, the Applicants believe that neither MPS should be regarded for ERISA purposes as an “affiliate” of BlackRock or any BlackRock Manager, because the Applicants believe that no MPS, alone or with the other MPS, is or will be in a position to “control” BlackRock. In addition to the BlackRock ownership structure itself preventing MPS control of BlackRock, the Applicants believe that the Stockholders Agreements provide several important safeguards to mitigate the possibility of an MPS exerting any form of control that might otherwise raise concerns under ERISA. In particular, the standstill agreements, transfer restrictions and arm's length business relationship provisions are designed to ensure that BlackRock maintains its independence. Even if the MPSs wished to act together to control BlackRock, BlackRock believes that the MPSs would not be able to control BlackRock because the Stockholders Agreements mandate that each MPS vote its shares in accordance with the recommendations of the Board, which is dominated by persons other than nominees identified by MPSs. Lastly, the MPSs are competitors in the financial services industry, and as such, concerted action among the MPSs is extremely unlikely.

13. Nevertheless, the Applicants represent that when a BlackRock Manager is a fiduciary with investment discretion with respect to a Client Plan,
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and the BlackRock Manager is deciding whether to enter into a Covered Transaction
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with or involving an MPS, the ownership interest of the MPS in BlackRock could affect the BlackRock Manager's best judgment as a fiduciary, raising issues under ERISA section 406(b). The Applicants note that the Department's regulation at 29 CFR 2550.408b-2(e)(1) provides that “[a] person in which a fiduciary has an interest which may affect the exercise of such fiduciary's best judgment as a fiduciary includes, for example, a person who is a party in interest by reason of a relationship to such fiduciary described in section 3(14)(E), (F), (G), (H), or (I)” of ERISA. ERISA section 3(14)(H) provides that a 10% or more shareholder of a service provider (which may include a plan fiduciary) is a party in interest to the plan in question by reason of that relationship to the service provider. Accordingly, the Applicants seek relief from the prohibitions of ERISA section 406(b) for the Covered Transactions.

10
“Client Plan” is defined in Section VI.T. of the proposed exemption and means any plan subject to ERISA section 406, Code section 4975 or FERSA section 8477(c) for which a BlackRock Manager is a fiduciary as described in ERISA section 3(21), including, but not limited to, any Pooled Fund, MPS Plan, Index Account or Fund, Model-Driven Account or Fund, Other Account or Fund, or In-House Plan, as defined in Section VI of the proposed exemption, except where specified to the contrary.

11
“Covered Transaction” is defined in Section VI.X. of the proposed exemption and means each transaction set forth in Section III of the proposed exemption entered into by a BlackRock Manager for a Client Plan with or involving, directly or indirectly, an MPS and/or a BlackRock Entity.

14. Further, if BlackRock Entities and one or more MPS are deemed affiliates, and because each MPS and its affiliates are very likely parties in interest within the meaning of ERISA section 3(14) with respect to many Client Plans, the Applicants also seek relief from the prohibitions of ERISA section 406(a) with respect to the Covered Transactions. Specifically, many prohibited transaction class exemptions from ERISA section 406(a) require as a condition for relief that the plan fiduciary and the party in interest not be “affiliates.” Although the Applicants believe that no MPS should be regarded for ERISA purposes as an “affiliate” of BlackRock, the Applicants desire the certainty of relief which the proposed exemption would provide if Covered Transactions are entered into in conformance therewith.

15. As discussed above, there have recently occurred extraordinary circumstances in both the U.S. and the global financial services industry. Many entities in the financial services industry have faced severe economic hardship. During this period of upheaval, the trend of industry consolidation amongst significant banks, broker-dealers and other providers of financial services has accelerated. It is the Applicants' belief that each MPS' involvement in financial services has expanded at the same time as the number of participants in the capital markets has declined. As a result, the Applicants believe that the failure to obtain exemptive relief proposed herein would deny Client

Plans access to a significant portion of the financial markets and that such denial would unduly harm Client Plans and their participants and beneficiaries.

16. The Applicants request that the Department continue relief similar to that provided in the Interim Exemption on the terms set forth herein. The exemption proposed herein would provide relief for certain Covered Transactions that, except as outlined below, are similar in all material respects to the Covered Transactions for which relief is provided in the Interim Exemption.

Structure of Relief

17. The structure of the Applicants' requested relief is founded upon compliance with five sets of general conditions. The five sets of general conditions are: (a) Modified conditions derived from Prohibited Transaction Exemption (PTE) 84-14, as amended (sometimes referred to as the QPAM Exemption);
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(b) restrictions on the compensation of BlackRock Managers and their employees; (c) the establishment and implementation of certain policies and procedures (the Exemption Polices and Procedures or EPPs); (d) the appointment by BlackRock of an Exemption Compliance Officer (ECO); and (e) the retention by BlackRock of an Independent Monitor (IM). The purpose of these general conditions is, when coupled with the restrictions of the Stockholders Agreements and the BlackRock ownership structure, to foster independence of action by the BlackRock Managers notwithstanding the equity interests in BlackRock held by the MPSs. This unique overarching structure includes a comprehensive compliance function and an independent monitor, each of which work together for the benefit of Client Plans and their participants and beneficiaries by allowing Covered Transactions with or involving an MPS only if the Covered Transaction is, as best as can be determined, as favorable to the Client Plans as arm's length transactions with third parties.

12
49 FR 9494 (Mar. 13, 1984), as amended, 70 FR 49305 (Aug. 23, 2005), and as amended, 75 FR 38837 (July 6, 2010).

18. In addition to the general conditions, each Covered Transaction has its own set of specific conditions deemed suitable for it in light of the nature of the transaction. Many of the conditions for individual Covered Transactions are derived from statutory exemptions, administrative class exemptions or administrative individual exemptions frequently relied upon by fiduciaries and parties in interest (sometimes affiliated and sometimes not) to exempt similar transactions. The general and transaction-specific conditions for relief attempt to strike a balance that takes into account both the MPSs' unique equity interests in BlackRock and the ability of BlackRock Managers acting on behalf of Client Plans to engage in arm's length Covered Transactions with or involving institutions as significant in their markets as are the MPSs.

General Conditions

19. The structure of the relief proposed herein is very similar to that granted in the Interim Exemption, and is founded upon compliance with general conditions that are essentially the same as the general conditions set forth in the Interim Exemption. Accordingly, Section II of the proposed exemption provides general conditions as follows:

20.
Compliance with the QPAM Exemption (Section II.A.).
With certain exceptions, the conditions for relief under Part I of PTE 84-14 (the QPAM Exemption) must be satisfied with respect to each Covered Transaction.
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These exceptions are substantially similar to those set forth in the Interim Exemption.
14

Each BlackRock Manager utilizing the requested relief must meet the definition of a “qualified professional asset manager” (QPAM) as described in Section VI(a) of the QPAM Exemption, and each Covered Transaction must satisfy the general conditions relating to the QPAM Exemption as set forth in the proposal, which are essentially the same as the Interim Exemption's general conditions relating to the QPAM Exemption.

13
The QPAM Exemption may not be relied upon for securities lending.
See
Part I(b)(1) of the QPAM Exemption. However, for purposes of the exemption proposed herein, securities lending constituting Covered Transactions involving an MPS must comply with the terms of Section II.A. of the proposed exemption as well as the specific conditions set forth in Section III.L. of the proposed exemption.

14
76 FR at 50637.

21. The Applicants, however, believe that the Interim Exemption's conditions should be modified in order to more accurately reflect BlackRock's ability to monitor the entities that provide investment advice to Client Plans' assets under its management. As a result of changes made in this regard, a new Section II.A.3.(b) has been added to the proposed exemption. A discussion of Section II.A.3.(b) is set forth below under Covered Transactions.

22.
Compensation Restrictions (Section II.B).
The Applicants recognize that an unrestricted ability for employees of BlackRock to receive compensation in connection with the Covered Transactions could give rise to potential ERISA conflicts. In order to address this potential for conflicts, Section II.B. of the proposed exemption provides for the same compensation restrictions set forth in the Interim Exemption.
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15
76 FR at 50638.

23.
Exemption Policies and Procedures (Section II.C.).
The Applicants recognize that, in order for BlackRock to successfully manage and monitor Covered Transactions, the establishment and use of systematic policies and procedures is essential. Section II.C. of the proposed exemption requires that BlackRock utilize (and update as necessary) the “Exemption Policies and Procedures”, or “EPPs”, that were developed and used in connection with the Interim Exemption and which address each of the Covered Transactions. Consistent with the Interim Exemption, the Exemption Policies and Procedures will be developed and/or updated with the cooperation of both the ECO and the IM, and such EPPs will remain subject to the approval of the IM. The EPPs need not address transactions which are not within the definition of the term Covered Transactions.

24.
Exemption Compliance Officer (II.D.).
The Applicants recognize that in order to ensure compliance with the EPPs and the terms of the proposed exemption an internal compliance officer is necessary. Consistent with the Interim Exemption, Section II.D. of the proposed exemption requires that BlackRock employ an internal “Exemption Compliance Officer”, or “ECO”, as well as an “ECO Function”.
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The ECO and the ECO Function will be maintained by BlackRock in order to monitor the Covered Transactions for compliance with the Code, ERISA, FERSA, the EPPs and the exemption. The responsibilities and requirements of the ECO and the ECO Function are set forth in Section II.D. of the proposed exemption.

16
For purposes hereof, “ECO Function” is defined in Section VI.Z. of the proposed exemption and means the ECO and such other BlackRock employees in legal and compliance roles working under the supervision of the ECO in connection with the Covered Transactions. The list of BlackRock employees shall be shared with the IM from time to time, not less than quarterly, and such employees will be made available to discuss the relevant Covered Transactions with the IM to the extent the IM or the ECO deem it reasonably prudent.

25.
Independent Monitor (II.E.).
The Applicants believe that the ECO and the ECO Function alone may not be sufficient to completely avoid potential

conflicts of interests or the appearance thereof. Conversely, the Applicants also believe that a wholly independent third party alone would not be able to efficiently or effectively monitor and oversee all of the relevant BlackRock activities. Consistent with the Interim Exemption, Section II.E. of the proposed exemption requires that BlackRock appoint an “Independent Monitor”, or “IM”. The IM will monitor the ECO and the Covered Transactions for compliance with the Code, ERISA, FERSA, the EPPs and the exemption. The responsibilities and requirements of the IM are set forth in Section II.E. of the proposed exemption.

26.
Notice (II.F.).
Client Plans will receive notice regarding the proposed exemption through publication in the
Federal Register
. The Applicants believe that such notice is sufficient and that additional mailings to the Client Plans would be confusing and burdensome to the Client Plans given the substantial similarity between the Interim Exemption and this proposed exemption.

Covered Transactions

27. As discussed above, the structure of the requested relief is founded upon compliance with five sets of general conditions. These five sets of general conditions are then modified by specific conditions deemed suitable for each Covered Transaction. Many of the conditions for individual Covered Transactions are derived from statutory exemptions, administrative class exemptions or administrative individual exemptions frequently relied upon by fiduciaries and parties in interest (sometimes affiliated and sometimes not) to exempt similar transactions. Section III of the proposed exemption sets forth the Covered Transactions for which the Applicants are seeking exemptive relief and the conditions which must be satisfied in respect of such Covered Transactions in order to be accorded such relief.

28. Except as described below, the Covered Transactions for which relief is proposed herein are substantially similar to the corresponding “Covered Transactions” in the Interim Exemption, and each such Covered Transaction is subject to substantially the same conditions as set forth in the Interim Exemption.
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The Applicants are not requesting relief with respect to the Covered Transactions described in Section III.A. (Continuing Covered Transactions), T. (The Provision of Custodial, Administrative and Similar Ministerial Services by an MPS for a Client Plan as a Consequence of a BlackRock Manager Exercising Investment Discretion on Behalf of the Client Plan or Rendering Investment Advice to the Client Plan) or W. (Investment of Assets of MPS Plans in a BlackRock Bank-Maintained Common or Collective Trust as of the Date of the Acquisition—Fees Paid Outside the Trust) of the Interim Exemption. However, the Applicants are seeking exemptive relief with respect to a new Covered Transaction described in Section III.W. of the proposed exemption.

17
76 FR at 50640.

29. The Applicants further request, with respect to a small number of the Covered Transactions identified herein, certain changes from the relief provided in the Interim Exemption and to the applicable conditions. Set forth below is a discussion of (a) three broad changes that impact multiple Covered Transactions and (b) modifications with respect to specific Covered Transactions.

30.
MPS Investment Advice.
The Interim Exemption imposed conditions with respect to several Covered Transactions that restricted BlackRock Managers from engaging in transactions with MPSs that possess discretionary authority or control with respect to the investment of the Client Plan assets involved in the transaction, or render investment advice within the meaning of 29 CFR 2510.3-21(c) with respect to such assets. This condition was set forth in Section III.I. (Repurchase Agreements), L. (Bank Deposits and Commercial Paper), M. (Securities Lending) and U. (ABCP Conduit) of the Interim Exemption. In this proposed exemption, the relevant sections are re-designated Section III.H. (Repurchase Agreements), K. (Bank Deposits and Commercial Paper), L. (Securities Lending) and S. (ABCP Conduit).

The Applicants represent that BlackRock Managers are often unable to make a determination as to which parties provide investment advice with respect to Client Plan assets. The inability to make these determinations created uncertainty as to which parties were subject to the restriction of these conditions, resulting in the relief provided in the Interim Exemption for those sections being unworkable in some situations from a practical perspective. The Applicants, therefore, requested deletion of that portion of the condition that would limit transactions with MPSs that provide investment advice within the meaning of 29 CFR 2510.3-21(c).

The Department understands the Applicants' concerns regarding the practical implication of the restriction on transactions with investment advice providers and, for purposes of the exemption proposed herein, has revised the conditions at issue so that the restriction only apply to transactions with MPSs that possess discretionary authority or control with respect to the investment of the Client Plan assets involved in the transaction. The Department additionally made several related changes to the affected sections. First, the Department added a condition to Section III.H. and K. to clarify that the Client Plan involved in the transaction may not be an MPS Plan of the MPS with whom the transaction takes place, or an MPS Plan of another member of the same MPS Group as such MPS. Second, at the Applicants' request, the Department revised Section II.A.3. to include a new Section II.A.3.(b), which provides that the conditions described above in this paragraph shall be deemed satisfied if, with respect to the Covered Transaction in question, section II.A.3.(a) is satisfied. Section II.A.3.(a) provides that, in the case of an investment fund in which two or more unrelated Client Plans have an interest, a Covered Transaction with an MPS will be deemed to satisfy the requirements of Section II.A.2. of the proposed exemption if the assets of a Client Plan on behalf of which the MPS or its affiliate possesses the authority and which are managed by the BlackRock Manager in the investment fund, when combined with the assets of other Client Plans established or maintained by the same employer (or an affiliate thereof) or by the same employee organization, on behalf of which the same MPS possesses such authority and which are managed in the same investment fund, represent less than ten percent (10%) of the assets of the investment fund. Finally, with respect to relief for Securities lending by a BlackRock Manager to an MPS, the Department included two additional conditions in Section III.L. similar to those contained in subsections (p) and (q) of PTE 2002-46.
18

It is the Department's view that the general conditions of the proposed exemption, including the modified conditions derived from the QPAM exemption, with the specific conditions of these Sections as modified, provide sufficient safeguards for the affected Client Plans, participants and beneficiaries, even without the restriction on transactions with investment advice providers.

18
67 FR 59569 (September 23, 2002), as corrected, 67 FR 69046 (November 14, 2002).

31.
Directed Brokerage Accounts/Wrap Agreements.
Section III.P., R., S. and V. of the Interim Exemption

provided relief that included a provision that permitted BlackRock Managers to use an MPS as a Securities broker pursuant to either directed brokerage and/or wrap fee arrangements in effect on the date of the Acquisition.
19

The Applicants represent that relief for such directed brokerage and/or wrap fee arrangements is no longer necessary. In the absence of such necessity, the Department has eliminated the directed brokerage and/or wrap fee agreement provisions in the corresponding sections (Section III.O., Q., R. and T.) of the proposed exemption.

19
76 FR at 50647-50650.

32.
Primary/Secondary Markets and Agency/Principal.
Section III.L and U. of the Interim Exemption provided relief with respect to (a) investments in bank deposits and commercial paper, and (b) purchases, sales and holdings by BlackRock Managers for Client Plans of commercial paper issued by ABCP conduits, when an MPS has one or more roles.
20

The Applicants request changes from the conditions with respect to both Covered Transactions in the Interim Exemption. Purchases, sales and placements of bank deposits and commercial paper commonly occur without reference to primary or secondary markets and without distinction as to whether they are on a principal or agency basis. As a result, such distinctions are simply not relevant to the short term instruments described in the Covered Transactions (which is in contrast to trading of longer term Fixed Income Obligations or equity Securities). To address this issue, the Department has modified the language of Section II.K. and S. of the proposed exemption to more accurately reflect the nomenclature of bank deposits and commercial paper.

20
76 FR at 50643 and 50649.

33.
Repurchase Agreements when an MPS is the Seller (Section III.H.).
With respect to Covered Transactions involving investments in repurchase agreements when an MPS is the seller, the Interim Exemption provided relief with respect to certain repurchase agreements that were in effect as of the date of the Acquisition that otherwise would not have complied with the conditions of the Interim Exemption.
21

Applicants represent that such repurchase agreements are no longer in place. As a result, the Applicants are no longer requesting relief with respect to repurchase agreements that were in effect as of the date of the Acquisition. The Department has made this change to the proposed exemption.

21
76 FR at 50642.

34.
Bank Deposits and Commercial Paper (Section III.K.).
With respect to Covered Transactions involving investments in bank deposits and commercial paper, the Applicants request changes from the conditions in the Interim Exemption. The Applicants represent that, with respect to commercial paper, an MPS may often act in a continuing capacity, such as a placement agent or an administrator. To address this concern, the language of the proposed exemption has been modified to reflect the fact that an MPS may act in a continuing capacity. In addition, in order to provide additional protections for participants and beneficiaries, the proposed exemption provides that all purchases and sales of commercial paper to or from an MPS be made pursuant to the Three Quote Process.

35.
Securities Lending to an MPS (Section III.L.).
The Interim Exemption provided relief for the lending of securities by BlackRock Managers to an MPS. Such relief was extended to both (a) Index Accounts or Funds and Model-Driven Accounts or Funds and (b) Other Accounts or Funds. For purposes of this proposed exemption, the Applicants limited their request to relief for Index Accounts or Funds and Model-Driven Accounts or Funds. The Department has revised Section III.L. of the proposed exemption accordingly.

36.
To-Be-Announced Trades (TBAs) of GNMA, FHLMC, FarmerMac or FNMA Mortgage-Backed Securities with an MPS Counterparty (Section III.M.).
With respect to To-Be-Announced Trades (TBAs), Section III.N. of the Interim Exemption provided relief for TBAs of GNMA, FHLMC, or FNMA Mortgage-Backed Securities with an MPS counterparty.
22

The Applicants request that the Department add FarmerMac mortgage-backed Securities to the relief provided for TBAs. Such additional relief is necessary because the Applicants have found that, in practice, BlackRock Managers may engage in principal trades on a TBA basis with FarmerMac mortgage-backed Securities. Not allowing such TBAs, according to the Applicants, would deprive Client Plans of a substantial pool of TBAs.

22
76 FR at 50647.

The Applicants represent that the addition of relief for TBAs of FarmerMac mortgage-backed Securities is consistent with the relief provided in the Interim Exemption with respect to both FHLMC and FNMA mortgage-backed Securities. All three entities are the recipients of indirect government guarantees, and each entity has historically been treated similarly by the Department.
23

The Department agrees with the Applicants, and it has added FarmerMac mortgage-backed Securities to the relief proposed for TBAs herein.

23

See
ERISA Advisory Opinion 99-05A (February 22, 1999).

37.
Purchase of a Portion or All of a Loan to an Entity Which is not an MPS and is not a BlackRock Entity from an MPS or Other Arranger and the Holding thereof by BlackRock Managers Where an MPS is an Arranger, and/or an MPS has an Ongoing Function Regarding Such Loan (Section III.W.).
The Applicants request exemptive relief with respect to a new Covered Transaction. The Applicants represent that there is a significant market in Loans (and participations in such Loans) made to commercial borrowers to finance either their current and ongoing operations, or a specific transaction. The terms governing the Loans and the lenders' commitment to fund them are generally negotiated between the borrower and the sole Arranger or Lead Arranger,
24

as applicable. The sole Arranger, or Lead Arranger with the assistance of the other Arrangers, undertakes to effectively sell portions of the Loan in a Loan Offering
25

by finding one or more sophisticated financial institutions such as commercial banks, insurance companies or other companies or funds regularly engaged in making, investing in, purchasing or selling commercial loans with sufficient capital to either take an assignment of, or a participation interest in, all or a portion of the Loan, on either a firm commitment or best efforts basis (in each case, as described below). The Arrangers assume a portion of the commitment to the borrower to fund the Loans initially. The Applicants represent that conceptually, these types of lending transactions are similar to the purchase and holding by BlackRock Managers on behalf of Client Plans of Fixed Income Obligations issued by

third parties where an MPS may act as the underwriter.
26

24
“Arranger” is defined in Section VI.I. of the proposed exemption and the term means a sophisticated financial institution, such as a commercial or investment bank, regularly engaged in structuring commercial loans, and “Lead Arranger” is defined in Section VI.ZZ. of the proposed exemption and the term means, with respect to any Loan Offering involving more than one Arranger, the Arranger designated as such by all of such Arrangers.

25
“Loan Offering” is defined in Section VI.BBB. of the proposed exemption and the term means, with respect to the aggregate principal amount of any Loan extended to a commercial borrower in any single transaction, the process of structuring, marketing and offering to banks, insurance companies, investment funds and other institutional investors the opportunity to purchase interests in such Loan.

26
Solely for purposes of Section III.W. of the proposed exemption, “Loan” is defined in Section VI.AAA. of the proposed exemption and the term does not include any Fixed Income Obligations which are covered separately under Section IV.A. of the proposed exemption.

The Applicants further represent that in a firm commitment Loan Offering, the Arrangers are obligated to make the Loan in the full amount of their commitment, even if they have not found other investors to participate in or take an assignment of all or a portion of the Loan. If the transaction is conducted on a best efforts basis, the Arrangers are not obligated to make the Loan in the full amount requested by the borrower if there is not sufficient interest in the market. Selling efforts with respect to a particular Loan Offering do not begin before a decision is made regarding whether such Loan Offering will be made on a firm commitment or best efforts basis. The Applicants are only requesting relief under the proposed exemption for Loans that are made on a firm commitment basis.

The Applicants represent that potential purchasers of a portion or all of a Loan are able to review relevant information about the Loan in advance, and indicate whether they are interested in taking an assignment or participation in such Loan. In an assignment, the lender of record of the portion of the Loan which is assigned is changed, and the title, voting rights and all other rights are transferred to the assignee. In a participation, the lender of record remains the original lender, and such lender typically retains voting rights, except for certain extraordinary actions primarily relating to the economic terms of the Loan. The Applicants are only requesting relief under the proposed exemption for transactions involving the assignment of Loans.

The Applicants represent that the sole Arranger or Lead Arranger, as applicable, is typically responsible for negotiating the terms of the Loan, including the Loan Offering, commitment or other similar underwriting fee to be paid by the borrower, and building a book of investors to hold the Loan. Where there is more than one Arranger, other Arrangers may participate in the sales effort in coordination with the Lead Arranger. The material terms of the Loan are typically negotiated and agreed with the borrower before commencement of the Loan Offering effort. When the sole Arranger or Lead Arranger, as applicable, has negotiated the material terms of the Loan, they are posted to one or more web-based sites (
e.g.,
Intralinks) for potential investors and lenders to review. These sites provide detailed information regarding the borrower and draft Loan documents (
e.g.,
credit agreement, confidential information statement). The covenants in the applicable credit agreement are often more highly structured than in a high yield fixed income underwritten offering and thereby would typically provide enhanced protection for investors.

The Applicants represent that the fee received by an Arranger depends upon whether the offering is on a firm commitment or a best efforts basis and is generally calculated as a percentage of the principal amount of the Loan. The fee is generally higher for a firm commitment transaction than a best efforts transaction. In a firm commitment transaction, each Arranger will receive a specified percentage of the fee which is determined on the basis of the size of the Loan commitment before the sales effort commences and the amount of such fee does not vary depending on a particular member's success in the sales effort. Thus, if an MPS is an Arranger, its compensation in the form of the fee will not increase if a BlackRock Manager on behalf of a Client Plan purchases from such MPS, rather than another Arranger.

The Applicants represent that in some Loan transactions, the sole Arranger or Lead Arranger, as applicable, has no ongoing role after the sale with respect to the Loans. In other transactions, the sole Arranger or Lead Arranger, as applicable, does serve an ongoing function such as an administrative agent or a collateral agent. Most commonly, the collateral agent and the administrative agent are the same entity. The Applicants further represent that generally: (a) The administrative agent acts as an agent between the lenders and the borrower; the role of an administrative agent is administrative and ministerial and involves relaying information, tallying votes and organizing calls; there is no fiduciary relationship between the lenders and the administrative agent; and there is generally a flat fee (currently in the range of $100,000 to $200,000 per annum) for acting as an administrative agent and this fee is paid by the borrower; and (b) the collateral agent holds the collateral on behalf of all of the lenders.

The Applicants represent that, according to their research, the Barclays MPSs are ranked in the top ten Arrangers for Loans. They acted in 92 deals in 2010, representing 6% market share and in 70 deals in the first half of 2011, representing a 7.6% market share. The same research indicates that the shares of PNC MPSs are smaller, but the PNC MPSs still rank in the top 25 Arrangers for Loans.

The Applicants represent that investments in these types of firm commitment assigned Loans represent an attractive investment opportunity for Client Plans. Such Loans are typically senior secured and typically have the highest or second highest priority of claim on a borrower's assets and cash flow. Such Loans also provide an opportunity to generate a return based upon a floating interest rate (resulting in Client Plans receiving more when interest rates rise). The Applicants believe that a failure to obtain relief for this type of Covered Transaction would materially inhibit Client Plan access to this significant asset class.

In response, the Department is proposing relief for the purchase and holding of all or a portion of a Loan by a BlackRock Manager on behalf of a Client Plan, where such purchase may be from an MPS or other Arranger, and/or an MPS may be an Arranger and/or have an ongoing function regarding such Loan. Conditions applicable to this type of transaction would be: (a) The BlackRock Manager on behalf of the Client Plan obtains an assigned interest in the Loan or a portion thereof, as opposed to a participation interest, (b) the borrower under the Loan must not be an MPS or BlackRock Entity, (c) the Loan must be offered on a firm commitment basis, (d) conditions similar to Subsections IV.A.4-12., as applicable, and (e) if an MPS has an ongoing function in respect of such Loan, such as an administrative agent or collateral agent, the taking of or refraining from taking of any action by the responsible BlackRock Manager which could have a material positive or negative effect upon the MPS must be decided upon by the IM.

Affiliated Underwritings and Affiliated Servicing (Section IV)

38. Covered Transactions for which relief is proposed herein, including Sections III.B., D., E. and F., include in their conditions requirements regarding affiliated underwriting and affiliated servicing that are set forth in Section IV of the proposed exemption. The Department notes that these conditions are substantially similar to those under the Interim Exemption.
27

27
76 FR at 50651.

Correction Procedures (Section V)

39. The Applicants request confirmation that isolated transgressions of the EPPs, or isolated failures to

comply with the conditions associated with a Covered Transaction constituting a non-exempt prohibited transaction (the latter, a Violation) should not cause the entire exemption, if granted, to cease to be available. Only a persistent pattern or practice of violations of the EPPs or the conditions of the exemption should potentially cause the exemption to be revoked. The Department notes that the correction procedures under the proposed exemption are substantially similar to those under the Interim Exemption, and the Department concurs with the Applicants' analysis on this issue.
28

28
76 FR at 50654.

Effective Date

40. If granted, the proposed exemption will be effective March 31, 2012. However, Applicants represent that they substantially complied with the conditions applicable to Covered Transactions described in Section III.K. and S. effective October 1, 2011. As a result, the proposed exemption will be effective with respect to Covered Transactions described in Section III.K. and S. as of October 1, 2011.

41. In summary, the Applicants represent that the exemption proposed herein will satisfy the statutory criteria of ERISA section 408(a) and Code section 4975(c)(2) because:

(a)
Administratively feasible.
The Applicants believe that the proposed exemption is administratively feasible. Most of the Covered Transactions are the subject of existing statutory and/or administrative exemptions. The conditions for relief for the Covered Transactions have been modified to reflect, on the one hand, the possible negative implication of the equity investments of the MPSs in BlackRock, and on the other hand, the circumscribed ability of the MPSs to exercise rights normally associated with such equity investments. In addition, EPPs have been developed with the cooperation and approval of the IM; an ECO has been appointed to report on compliance with the terms of the exemption and the EPPs; and the IM will review compliance reports, pass upon corrections of Violations, and if necessary, contact the Department. Granting the proposed exemption requires no additional monitoring by the Department.

(b)
In the interest of plans and participants and beneficiaries.
The Applicants believe that the proposed exemption is in the interest of plans and participants and beneficiaries because the proposed exemption would allow BlackRock Managers to continue to engage in Covered Transactions with major participants in the financial markets which are necessary and beneficial to plans and their participants and beneficiaries. While many Covered Transactions (although perhaps not all) could be engaged in with parties other than MPSs, in numerous cases such transactions would be quantitatively or qualitatively inferior to the same transactions with an MPS.

(c)
Protective of the rights of participants and beneficiaries of such plans.
Each of the Covered Transactions is protective of the rights of participants and beneficiaries because specific conditions have been tailored to their respective natures. More broadly, the rights of participants and beneficiaries are protected by the general conditions, modeled on the QPAM Exemption, that are applicable to all Covered Transactions. The general protective conditions include compensation restrictions, development of EPPs, and implementation of EPPs with the cooperation and approval of the IM. Further, the ECO will report on compliance with the exemption and the EPPs, and the IM will review compliance reports, pass upon corrections of Violations, and if necessary, contact the Department.

Proposed Exemption

Based on the facts and representations set forth in the application, the Department is considering granting the following exemption under the authority of ERISA section 408(a), Code section 4975(c)(2) and FERSA section 8477(c)(3), and in accordance with the procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, 32847, August 10, 1990), as follows:

Section I: Covered Transactions Generally

If the proposed exemption is granted, effective as of March 31, 2012 (or, in the case of Covered Transactions described in Section III.K or Section III.S. of this exemption, October 1, 2011), the restrictions of ERISA sections 406(a)(1) and 406(b), FERSA section 8477(c)(1) and (2), and the sanctions resulting from the application of Code section 4975, by reason of Code section 4975(c)(1),
29

shall not apply to the Covered Transactions set forth in Section III and entered into on behalf of or with the assets of a Client Plan; provided, that (x) the generally applicable conditions of Section II of this exemption are satisfied, and, as applicable, the transaction-specific conditions set forth below in Sections III and IV of this exemption are satisfied, or (y) the Special Correction Procedure set forth in Section V of this exemption is satisfied.

29
For purposes of this proposed exemption, references to ERISA section 406 should be read to refer as well to the corresponding provisions of Code section 4975 and FERSA section 8477(c).

Section II: Generally Applicable Conditions

A.
Compliance with the QPAM Exemption.
The following conditions of Part I of Prohibited Transaction Exemption 84-14, as amended (PTE 84-14 or the QPAM Exemption),
30

must be satisfied with respect to each Covered Transaction:

30
49 FR 9494 (Mar. 13, 1984), as amended, 70 FR 49305 (Aug. 23, 2005), and as amended, 75 FR 38837 (July 6, 2010).

1. The BlackRock Manager engaging in the Covered Transaction is a Qualified Professional Asset Manager;

2. Except as set forth in Section III of this exemption, at the time of the Covered Transaction (as determined under Section VI(i) of the QPAM Exemption) with or involving an MPS, such MPS, or its affiliate (within the meaning of Section VI(c) of the QPAM Exemption),
31

does not have the authority to:

31
Solely for purposes of Section II.A.2. and Section II.A.3. of this exemption, no BlackRock Entity will be deemed to be an affiliate of an MPS. The Department is not making herein a determination as to whether any BlackRock Entity is an affiliate of an MPS under ERISA.

(a) Appoint or terminate the BlackRock Manager as a manager of the Client Plan assets involved in the Covered Transaction, or

(b) Negotiate on behalf of the Client Plan the terms of the management agreement with the BlackRock Manager (including renewals or modifications thereof) with respect to the Client Plan assets involved in the Covered Transaction;

3. (a) Notwithstanding the foregoing, in the case of an investment fund (as defined in Section VI(b) of the QPAM Exemption) in which two or more unrelated Client Plans have an interest, and which is a Pooled Fund, a Covered Transaction with an MPS will be deemed to satisfy the requirements of Section II.A.2. of this exemption if the assets of a Client Plan on behalf of which the MPS or its affiliate possesses the authority set forth in Section II.A.2.(a) and/or (b) above, and which are managed by the BlackRock Manager in the investment fund, when combined with the assets of other Client Plans established or maintained by the same employer (or an affiliate thereof described in Section VI(c)(1) of the QPAM Exemption) or by the same employee organization, on behalf of

which the same MPS and/or its affiliates possess such authority and which are managed by the BlackRock Manager in the same investment fund, represent less than ten percent (10%) of the assets of the investment fund; and

(b) the conditions set forth in Subsections 14. and 15. of Section III.H., Subsections 2(e) and 3. of Section III.K., Section III.L.2.(b) and Subsections 1. and 2. of Section III.S. of this exemption shall be deemed satisfied if, with respect to the Covered Transaction in question, Section II.A.2. of this exemption is satisfied by reason of Section II.A.3.(a) of this exemption.

4. The terms of the Covered Transaction are negotiated on behalf of the investment fund by, or under the authority and general direction of, the BlackRock Manager and either the BlackRock Manager or (so long as the BlackRock Manager retains full fiduciary responsibility with respect to the Covered Transaction) a property manager acting in accordance with written guidelines established and administered by the BlackRock Manager, makes the decision on behalf of the investment fund to enter into the Covered Transaction, provided that the Covered Transaction is not part of an agreement, arrangement or understanding designed to benefit the MPS;

5. The Covered Transaction is not entered into with an MPS which is a party in interest or disqualified person with respect to any Client Plan whose assets managed by the BlackRock Manager, when combined with the assets of other Client Plans established or maintained by the same employer (or affiliate thereof described in Section VI(c)(1) of the QPAM Exemption) or by the same employee organization, and managed by the BlackRock Manager, represent more than twenty percent (20%) of the total client assets managed by the BlackRock Manager at the time of the Covered Transaction;

6. At the time the Covered Transaction is entered into, and at the time of any subsequent renewal or modification thereof that requires the consent of the BlackRock Manager, the terms of the Covered Transaction are at least as favorable to the investment fund as the terms generally available in arm's length transactions between unrelated parties; and

7. Neither the BlackRock Manager nor any affiliate thereof (as defined in Section VI(d) of the QPAM Exemption),
32

nor any owner, direct or indirect, of a five percent (5%) or more interest in the BlackRock Manager
33

is a person who within the ten (10) years immediately preceding the Covered Transaction has been either convicted or released from imprisonment, whichever is later, as a result of: Any felony involving abuse or misuse of such person's employee benefit plan position or employment, or position or employment with a labor organization; any felony arising out of the conduct of the business of a broker, dealer, investment adviser, bank, insurance company or fiduciary; income tax evasion; any felony involving the larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent concealment, embezzlement, fraudulent conversion, or misappropriation of funds or securities; conspiracy or attempt to commit any such crimes or a crime in which any of the foregoing crimes is an element; or any other crime described in ERISA section 411. For purposes of this section, a person shall be deemed to have been “convicted” from the date of the judgment of the trial court, regardless of whether that judgment remains under appeal.

32
For the avoidance of doubt, all MPSs are excluded from the term “affiliate” for these purposes.

33
For the avoidance of doubt, all MPSs are excluded from the term “owner” for these purposes.

B.
Compensation.
None of the employees of a BlackRock Manager receives any compensation that is based on any Covered Transaction having taken place between Client Plans and any of the MPSs (as opposed to with another institution that is not an MPS). The fact that a specific Covered Transaction occurred with an MPS as opposed to a non-MPS counterparty is ignored by BlackRock and BlackRock Managers for compensation purposes. None of the employees of BlackRock or a BlackRock Manager receive any compensation from BlackRock or a BlackRock Manager which consists of equity Securities issued by an MPS, which fluctuates in value based on changes in the value of equity Securities issued by an MPS, or which is otherwise based on the financial performance of an MPS independent of BlackRock's performance, provided that this condition shall not fail to be met because the compensation of an employee of a BlackRock Manager fluctuates with the value of a broadly-based index which includes equity Securities issued by an MPS.

C.
Exemption Policies and Procedures.
BlackRock adopts and implements Exemption Policies and Procedures (EPPs) which address each of the types of Covered Transactions and which are designed to achieve the goals of: (1) Compliance with the terms of the exemption, (2) ensuring BlackRock's decision-making with respect to the Covered Transactions on behalf of Client Plans with MPSs or BlackRock Entities is done in the interests of the Client Plans and their participants and beneficiaries, and (3) to the extent possible, verifying that the terms of such Covered Transactions are at least as favorable to the Client Plans as the terms generally available in arm's length transactions with unrelated parties. The EPPs are developed with the cooperation of both the Exemption Compliance Officer (ECO) and the Independent Monitor (IM), and such EPPs are subject to the approval of the IM. The EPPs need not address transactions which are not within the definition of the term Covered Transactions.

Transgressions of the EPPs which do not result in Violations require correction only if the amount involved in the transgression and the extent of deviation from the EPPs is material, taking into account the amount of Client Plan assets affected by such transgressions (EPP Corrections). The ECO will make a written determination as to whether such transgressions require EPP Correction, and, if the ECO determines an EPP Correction is required, the ECO will provide written notice to the IM of the EPP Correction. The ECO will provide summaries for the IM of any such EPP Corrections as part of the quarterly report referenced in Section II.D.11.

D.
Exemption Compliance Officer.
BlackRock appoints an Exemption Compliance Officer (ECO) with respect to the Covered Transactions. If the ECO resigns or is removed, BlackRock shall appoint a successor ECO within a reasonable period of time, not to exceed thirty (30) days, which successor shall be subject to the affirmative written approval of the IM. With respect to the ECO, the following conditions shall be met:

1. The ECO is a legal professional with at least ten years of experience and extensive knowledge of the regulation of financial services and products, including under ERISA and FERSA;

2. A committee made up exclusively of members of the BlackRock Board of Directors (the Board) who are independent of BlackRock and the MPSs determines the ECO's compensation package, with input from the general counsel of BlackRock; the ECO's compensation is not set by BlackRock business unit heads, and there is no direct or indirect input regarding the identity or compensation of the ECO from any MPS;

3. The ECO's compensation is not based on performance of any BlackRock Entity or MPS, although a portion of the ECO's compensation may be provided in the form of BlackRock stock or stock equivalents;

4. The ECO can be terminated by BlackRock only with the approval of the IM;

5. The EPPs prohibit any officer, director or employee of BlackRock or any MPS or any person acting under such person's direction from directly or indirectly taking any action to coerce, manipulate, mislead, or fraudulently influence the ECO or any member of the ECO Function in the performance of his or her duties;

6. The ECO is responsible for monitoring Covered Transactions and shall determine whether Violations have occurred, and the appropriate correction thereof, consistent with the requirements of Section V of this exemption;

7. If the ECO determines a Violation has occurred, the ECO must determine why it occurred and what steps should be taken to avoid such a Violation in the future (
e.g.,
additional training, additional procedures, additional monitoring, or additional and/or changed processes or systems);

8. The ECO is responsible for monitoring and overseeing the implementation of the EPPs and carrying out such other responsibilities stipulated or described in Section III of this exemption. The ECO may delegate such responsibilities to the ECO Function, but the ECO will remain responsible for monitoring and overseeing the ECO Function's implementation of the EPPs. When appropriate, the ECO will recommend changes to the EPPs to BlackRock and the IM. The ECO will consult with the IM regarding the need for, timing, and form of EPP Corrections;

9. The ECO, with the assistance of the ECO Function, carries out the responsibilities required of the ECO described in: (a) The definition of “Index” in this exemption and (b) with respect to loans of Securities to an MPS in Section III.L. of this exemption;

10. The ECO, with the assistance of the ECO Function, monitors Covered Transactions and situations resulting from Covered Transactions with or involving an MPS with respect to which, because of the investment of the MPS in BlackRock, an action or inaction on the part of a BlackRock Manager might be thought to be motivated by an interest which may affect the exercise of such BlackRock Manager's best judgment as a fiduciary. If a situation is identified by the ECO which poses the potential for a conflict, as specified in Section III of this exemption, the ECO shall consult with the IM, or refer decision-making to the discretion of the IM;

11. The ECO provides a quarterly report to the IM summarizing the material activities of the ECO for the preceding quarter and setting forth any Violations discovered during the quarter and actions taken to correct such Violations. With respect to Violations, the ECO report details changes to process put in place to guard against a substantially similar Violation occurring again, and recommendations for additional training, additional procedures, additional monitoring, or additional and/or changed processes or systems or training changes and BlackRock management's actions on such recommendations. In connection with providing the quarterly report for the second quarter and fourth quarter of each year, upon the request of the IM, the ECO and the IM shall meet in person to review the content of the report. Other members of the ECO Function may attend such meetings at the request of either the ECO or the IM;

12. In each quarterly report, the ECO certifies in writing to his or her knowledge that (a) the quarterly report is accurate; (b) BlackRock's compliance program is working in a manner which is reasonably designed to prevent Violations; (c) any Violations discovered during the quarter and the related corrections taken to date have been identified in the report; and (d) BlackRock has complied with the EPPs in all material respects;

13. No less frequently than annually, the ECO certifies to the IM as to whether BlackRock has provided the ECO with adequate resources, including, but not limited to, adequate staffing of the ECO Function, and, in connection with the quarterly report for the fourth quarter of each year, the ECO shall identify to the IM those BlackRock Managers that relied upon this exemption during the prior year and those that the ECO reasonably anticipates relying on this exemption during the current year; and

14. The ECO or ECO Function provides any further information regarding Covered Transactions that is reasonably requested by the IM.

E.
Independent Monitor.
BlackRock retains an Independent Monitor (IM) with respect to the Covered Transactions. If the IM resigns or is removed, BlackRock shall appoint a successor IM within a reasonable period of time, not to exceed thirty (30) days. The IM:

1. Agrees in writing to serve as IM, and he or she is independent within meaning of Section VI.TT.;

2. Approves the ECO selected by BlackRock, and as part of the approval process and annually thereafter approves in general terms the reasonableness of the ECO's compensation, taking into account such information as the IM may request of BlackRock and which BlackRock must supply, and approves any termination of the ECO by BlackRock;

3. Assists in the development of, and the granting of written approval of, the EPPs and any material alterations of the EPPs by determining that they are reasonably designed to achieve the goals of (a) compliance with the terms of the exemption, (b) ensuring BlackRock's decision-making with respect to Covered Transactions on behalf of Client Plans with MPSs or BlackRock Entities is done in the interests of the Client Plans and their respective participants and beneficiaries and, (c) requiring, to the extent possible, verification that the terms of such Covered Transactions are at least as favorable to the Client Plans as the terms generally available in comparable arm's length transactions with unrelated parties;

4. Consults with the ECO regarding the need for, timing and form of any EPP Corrections. The IM has the responsibilities with respect to corrections of Violations, as set forth in Section V of this exemption. In response to EPP Corrections or Violations, the IM considers whether, and must have the authority, to require further sampling, testing or corrective action if necessary;

5. Exercises discretion for Client Plans in situations specified in Section III of this exemption where BlackRock Managers may be thought to have conflicts;

6. Performs certain monitoring functions described in Section III, and carries out the responsibilities required of the IM, as set forth in the definition of “Index” in this exemption, and with respect to loans of Securities to an MPS as set forth in Section III.L. of this exemption, and carries out such other responsibilities stipulated in Section III of this exemption;

7. Reviews the quarterly reports of the ECO, obtains and reviews representative samples of the data underlying the quarterly reports of the ECO, and, if the IM deems it appropriate, obtains additional factual information on either an ad hoc basis or on a systematic basis;

8. Reviews the certifications of the ECO as to whether (a) the quarterly report is accurate; (b) BlackRock's compliance program is working in a

manner which is reasonably designed to prevent Violations; (c) any Violations discovered during the quarter and the related corrections taken to date have been identified in the report; (d) BlackRock has complied with the EPPs in all material respects; and (e) BlackRock has provided the ECO with adequate resources, including, but not limited to, adequate staffing of the ECO Function;

9. Determines, on the basis of the information supplied to the IM by BlackRock and the ECO or the ECO Function, whether there has occurred a pattern or practice of insufficient diligence in adhering to the EPPs and/or the conditions of the exemption, and if such a determination is made, reports the same to the Department, and informs BlackRock and the ECO of any such report;

10. Determines whether the purchases of equity Securities issued by an MPS on behalf of Client Plans that are Other Accounts or Funds by a BlackRock Manager has had a positive material impact on the market price for such Securities, notwithstanding any volume limitations imposed by Section III.R. of the exemption and/or imposed by the IM with respect to such equity Securities. The IM makes this determination based upon its review of the relevant monthly reports required by the exemption with respect to such Covered Transactions provided by the ECO and publicly available information materially related to the trading of the Securities of an MPS on its primary listing exchange (or market);

11. Issues an annual compliance report, to be timely delivered to (i) the Chairman of the Board, (ii) the Chief Executive Officer of BlackRock and (iii) the General Counsel of BlackRock. The annual compliance report shall be based on a review of the EPPs, the quarterly reports provided by the ECO, any transactions reviewed by the IM as well as any additional information the IM requests from BlackRock, and certifying to each of the following (or describing any exceptions thereto) that:

(a) The EPPs are reasonably designed to achieve the goals of (i) compliance with the terms of the exemption, (ii) ensuring BlackRock's decision-making with respect to Covered Transactions on behalf of Client Plans with MPSs or BlackRock Entities is done in the interests of the Client Plans and the respective participants and beneficiaries, and (iii) requiring to the extent possible, verification that the terms of any Covered Transaction are at least as favorable to Client Plans as the terms generally available in comparable arm's length transactions with unrelated parties;

(b) The EPPs and the other terms of the exemption were complied with, with any material exceptions duly noted;

(c) The IM has made the determination referred to in Section II.E.9. and the results of that determination;

(d) BlackRock has provided the ECO with adequate resources, including but not limited to adequate staffing of the ECO Function; and

(e) The compensation package for the ECO for the prior year is reasonable;

12. The annual compliance report of the IM, as described in Section II.E.11., shall contain a summary of Violations and a summary of any corrections of Violations required by the IM and/or the ECO at any time during the prior year. In addition, the IM further certifies that BlackRock correctly implemented the prescribed corrections, based in part on certification from the ECO; and

13. The annual compliance report of the IM shall also be timely delivered by the IM to the chief executive officer, the general counsel and the members of the board of directors of each of the BlackRock Managers identified to the IM by the ECO or ECO Function as having relied upon this exemption during the prior year and those that the ECO reasonably anticipates will be relying on this exemption during the current year. The copies of the compliance report described in this Section II.E.13. shall be accompanied by a cover letter from the IM calling the attention of the recipients to any Violations, material exceptions to compliance with the EPPs, or other shortfalls in compliance with the exemption to assist such officers and directors in carrying out their respective responsibilities.

Section III: Covered Transactions

A.
Purchases and Holdings by BlackRock Managers of Fixed Income Obligations Issued by an MPS in an Underwriting on Behalf of Client Plans Invested in an Index Account or Fund, or in a Model-Driven Account or Fund.
Relief under Section I of this exemption is available for a purchase and holding by BlackRock Managers of Fixed Income Obligations issued by an MPS in an underwriting on behalf of Client Plans for an Index Account or Fund, or a Model-Driven Account or Fund, provided that:

1. Such purchase is for the sole purpose of maintaining quantitative conformity with the weight of such Securities prescribed by the relevant Index, for Index Accounts or Funds, or the weight of such Securities prescribed by the relevant Model, for Model-Driven Accounts or Funds; and such purchase is reasonably calculated not to exceed the purchase amount necessary for such Model or quantitative conformity by more than a
de minimis
amount;

2. Such purchase is not made from any MPS;

3. No BlackRock Entity is in the selling syndicate;

4. After purchase, the responsible BlackRock Manager notifies the ECO if circumstances arise in which an action or inaction on the part of the BlackRock Manager regarding an MPS Fixed Income Obligation so acquired might be thought to be motivated by an interest which may affect the exercise of such BlackRock Manager's best judgment as a fiduciary, and complies with decisions of the ECO regarding the taking, or the refraining from taking, of actions in such circumstances; and

5. After purchase, any decision regarding conversion of an MPS Fixed Income Obligation into equity in the MPS is made by the IM.

B.
Purchase and Holding by BlackRock Managers of Fixed Income Obligations Issued by an MPS in an Underwriting on Behalf of Client Plans Invested in an Other Account or Fund.
Relief under Section I of this exemption is available for a purchase and holding by BlackRock Managers of Fixed Income Obligations issued by an MPS in an underwriting on behalf of Client Plans invested in an Other Account or Fund provided that:

1. The conditions of Section IV.A. of this exemption are satisfied, except that for purposes of Section IV.A.4.(a) and Section IV.A.5.(c), the MPS-issued Fixed Income Obligations at the time of purchase must be rated in one of the three highest rating categories by a Rating Organization and none of the Rating Organizations may rate the Fixed Income Obligations lower than in the third highest rating category;

2. Such purchase is not made from an MPS;

3. No BlackRock Entity is in the selling syndicate;

4. After purchase, the responsible BlackRock Manager notifies the ECO if circumstances arise in which an action or inaction on the part of the BlackRock Manager regarding an MPS Fixed Income Obligation so acquired might be thought to be motivated by an interest which may affect the exercise of such BlackRock Manager's best judgment as a fiduciary, and complies with decisions of the ECO regarding the taking, or the refraining from taking, of actions in such circumstances; and

5. After purchase, any decision regarding conversion of an MPS Fixed Income Obligation into equity in the MPS is made by the IM.

C.
Certain Transactions in the Secondary Market by BlackRock Managers of Fixed Income Obligations including Fixed Income Obligations Issued by and/or Traded with an MPS, and/or Under Which an MPS has Either an Ongoing Function or Can Potentially Incur Liability.
Relief under Section I of this exemption is available for a purchase or sale in the secondary market or the holding by BlackRock Managers on behalf of Client Plans of (i) Fixed Income Obligations issued by an MPS, (ii) Fixed Income Obligations issued by a third party or an MPS and purchased from or sold to an MPS, and/or (iii) Fixed Income Obligations under which an MPS has either an ongoing function or can potentially incur liability, provided that:

1. If the Fixed Income Obligations are purchased from or sold to an MPS, it is as a result of the Three Quote Process.

2. With respect to Fixed Income Obligations that are issued by an MPS and are purchased and held by a BlackRock Manager for a Client Plan -

(a) After purchase, the responsible BlackRock Manager notifies the ECO if circumstances arise in which an action or inaction on the part of the BlackRock Manager regarding an MPS Fixed Income Obligation so acquired might be thought to be motivated by an interest which may affect the exercise of such BlackRock Manager's best judgment as a fiduciary, and complies with the decisions of the ECO regarding the taking, or the refraining from taking, of actions in such circumstances;

(b) After purchase, any decision regarding conversion of an MPS Fixed Income Obligation into equity in the MPS is made by the IM; and

(c) If purchased for an Index Account or Fund, or a Model-Driven Account or Fund, such purchase is for the sole purpose of maintaining quantitative conformity with the weight of such Securities prescribed by the relevant Index, for Index Accounts or Funds, or the weight of such Securities prescribed by the relevant Model, for Model-Driven Accounts or Funds and such purchase is reasonably calculated not to exceed the purchase amount necessary for such Model or quantitative conformity by more than a
de minimis
amount.

3. With respect to Fixed Income Obligations (whether or not issued by an MPS) held by a BlackRock Manager for a Client Plan under which an MPS has an ongoing function, such as servicing of collateral for asset-backed debt, or the potential for liability, such as under representations or warranties made by an MPS with respect to collateral for such asset-backed debt which the MPS originated, the taking of or refraining from taking any action by the responsible BlackRock Manager which could have a material positive or negative effect upon the MPS is decided upon by the ECO.

4. With respect to any Fixed Income Obligation acquired under this Section III.C. which is a guaranteed governmental mortgage pool certificate within the meaning of 29 CFR 2510.3-101(i) which is accompanied by an implicit U.S. Government guarantee as opposed to an explicit U.S. Government guarantee, (a) the BlackRock Manager initiating a purchase of such Securities makes a determination that such Securities are of substantially similar credit quality as guaranteed governmental mortgage pool certificates accompanied by an explicit U.S. Government guarantee, (b) the ECO (in regular consultation with and under the supervision of the IM) monitors the credit spread between such implicitly and explicitly guaranteed certificates, and (c) each of the ECO and the IM (independently) has the authority and responsibility to determine whether purchases of implicitly guaranteed certificates should not be permitted due to such credit spread, and such authority and responsibility is reflected in the EPPs.

5. For purposes of this Section III.C., Asset-Backed Securities are not Fixed Income Obligations.

D.
Purchase in an Underwriting and Holding by BlackRock Managers of Fixed Income Obligations Issued by a Third Party when an MPS is Underwriter, in Either a Manager or a Member Capacity, and/or Under Which an MPS has Either an Ongoing Function or Can Potentially Incur Liability.
Relief under Section I of this exemption is available for the purchase and holding by BlackRock Managers of Fixed Income Obligations issued by third parties in an underwriting when an MPS is an underwriter, in either a manager or a member capacity, and/or Fixed Income Obligations under which an MPS has either an ongoing function or can potentially incur liability, provided that:

1. The conditions of Section IV.A. are satisfied.

2. Such purchase is not made from an MPS.

3. No BlackRock Entity is in the selling syndicate.

4. With respect to Fixed Income Obligations under which an MPS has either an ongoing function, such as debt trustee, servicer of collateral for asset-backed debt, or the potential for liability, such as under representations or warranties made by an MPS with respect to collateral for such asset-backed debt which the MPS originated, the taking of or refraining from taking any action by the responsible BlackRock Manager which could have a material positive or negative effect upon the MPS is decided upon by the ECO.

5. With respect to any Fixed Income Obligation acquired under this Section III.D. which is a guaranteed governmental mortgage pool certificate within the meaning of 29 CFR 2510.3-101(i) which is accompanied by an implicit U.S. Government guarantee as opposed to an explicit U.S. Government guarantee, (a) the BlackRock Manager initiating a purchase of such Securities makes a determination that such Securities are of substantially similar credit quality as guaranteed governmental mortgage pool certificates accompanied by an explicit U.S. Government guarantee, (b) the ECO (in regular consultation with and under the supervision of the IM) monitors the credit spread between such implicitly and explicitly guaranteed certificates, and (c) each of the ECO and the IM (independently) has the authority and responsibility to determine whether purchases of implicitly guaranteed certificates should not be permitted due to such credit spread, and such authority and responsibility is reflected in the EPPs.

6. For purposes of this Section III.D., Asset-Backed Securities are not Fixed Income Obligations.

E.
Purchase in an Underwriting and Holding by BlackRock Managers of Asset-Backed Securities, when an MPS is an Underwriter, in the Capacity as Either a Manager or a Member of the Selling Syndicate, Trustee, or, in the Case of Asset-Backed Securities Which are CMBS, Servicer.
Relief under Section I of this exemption is available for the purchase and holding by BlackRock Managers of Asset-Backed Securities issued in an underwriting where an MPS is (i) An underwriter, in the capacity as either a manager or a member of the selling syndicate, (ii) trustee, or (iii) solely in the case of Asset-Backed Securities which are CMBS, serves as servicer of a trust that issued such CMBS, provided that:

1. The conditions of Section IV.A. are satisfied, except that (a) for purposes of Section IV.A.4.(a), the Asset-Backed Securities at the time of purchase must be rated in one of the three highest rating categories by a Rating Organization and none of the Rating Organizations may rate the Asset-Backed Securities lower than the third highest rating category, (b) in the case of

Asset-Backed Securities which are CMBS and for which the MPS is servicer, the conditions of Section IV.B. are satisfied instead of the conditions of Section IV.A., and (c) if an MPS is an underwriter and an MPS is a servicer as described in clause (b), the conditions of both Section IV.A., as modified by Section III.E.1.(a), and Section IV.B. must be satisfied;

2. Such purchase is not made from an MPS;

3. No BlackRock Entity is in the selling syndicate;

4. In the case of Asset-Backed Securities with respect to which an MPS has either an ongoing function, such as trustee, servicer of collateral for CMBS, or the potential for liability, such as under representations or warranties made by an MPS with respect to collateral for CMBS which collateral the MPS originated, the taking of or refraining from taking of any action by a responsible BlackRock Manager which could have a material positive or negative effect upon the MPS is decided upon by the ECO; and

5. The purchase meets the conditions of an applicable Underwriter Exemption.

F.
Purchase and Holding by BlackRock Managers of Equity Securities Issued by an Entity which is not an MPS and is Not a BlackRock Entity, in an Underwriting when an MPS is an Underwriter, in either a Manager or a Member Capacity.
Relief under Section I of this exemption is available for the purchase and holding by BlackRock Managers of equity Securities issued by an entity which is not an MPS and which is not a BlackRock Entity in an underwriting when an MPS is an underwriter, in either a manager or a member capacity, provided that:

1. The conditions of Section IV.A. are satisfied;

2. Such purchase is not made from an MPS;

3. No BlackRock Entity is in the selling syndicate; and

4. The Securities are not Asset-Backed Securities.

G.
Purchase and Sale by BlackRock Managers of Asset-Backed Securities in the Secondary Market, from or to an MPS, and/or when an MPS is Sponsor, Servicer, Originator, Swap Counterparty, Liquidity Provider, Trustee or Insurer, and the Holding Thereof.
Relief under Section I of this exemption is available for a sale of Asset-Backed Securities by a BlackRock Manager to an MPS, or the purchase of Asset-Backed Securities by BlackRock Managers from an MPS and the holding thereof, and/or any such purchase or sale in the secondary market or holding when an MPS is a sponsor, a servicer, an originator, a swap counterparty, a liquidity provider, a trustee or an insurer, provided that:

1. If the Asset-Backed Securities are purchased from or sold to an MPS, the purchase or sale is as a result of the Three Quote Process.

2. Regardless of from whom the BlackRock Manager purchases the Asset-Backed Securities, the purchase and holding of the Asset-Backed Security otherwise meets the conditions of an applicable Underwriter Exemption.

3. Regardless of from whom the BlackRock Manager purchased the Asset-Backed Securities, if an MPS is, with respect to such Asset-Backed Securities, a sponsor, servicer, originator, swap counterparty, liquidity provider, insurer or trustee, as those terms are utilized or defined in the Underwriter Exemptions, and circumstances arise in which the taking of or refraining from taking of any action by the responsible BlackRock Manager could have a material positive or negative effect upon the MPS, the taking of or refraining from taking of any such action is decided upon by the ECO.

H.
Repurchase Agreements when an MPS is the Seller.
Section I of this exemption applies to an investment by a BlackRock Manager of Client Plan assets which involves the purchase or other acquisition, holding, sale, exchange or redemption by or on behalf of a Client Plan of a repurchase agreement (or Securities or other instruments under cover of a repurchase agreement) in which the seller of the underlying Securities or other instruments is an MPS which is a bank supervised by the United States or a State, a broker-dealer registered under the 1934 Act, or a dealer who makes primary markets in Securities of the United States government or any agency thereof, or in banker's acceptances, and reports daily to the Federal Reserve Bank of New York its positions with respect to these obligations, provided that each of the following conditions are satisfied:

1. The repurchase agreement is embodied in, or is entered into pursuant to a written agreement, and such written agreement is a standardized industry form;

2. The repurchase agreement has a term of one year or less;

3. The Client Plan receives interest no less than that which it would receive in a comparable arm's length transaction with an unrelated party;

4. The Client Plan receives Securities, banker's acceptances, commercial paper or certificates of deposit having a market value equal to not less than one hundred percent (100%) of the purchase price paid by the Client Plan;

5. Upon expiration of the repurchase agreement and return of the Securities or other instruments to the seller, the seller transfers to the Client Plan an amount equal to the purchase price plus the appropriate interest;

6. The Securities, banker's acceptances, commercial paper or certificates of deposit received by the Client Plan:

(a) Could be acquired directly by the Client Plan in a transaction not covered by this Section III.H. without violating ERISA sections 406(a)(1)(E), 406(a)(2) or 407(a); and,

(b) If the Securities are subject to the provisions of the 1933 Act, they are obligations that are not “restricted securities” within the meaning of Rule 144 under the 1933 Act.

7. If the market value of the underlying Securities or other instruments falls below the purchase price at any time during the term of the agreement, the Client Plan may, under the written agreement required by Section III.H.1., require the MPS seller to deliver, by the close of business on the following business day (as such term is defined for purposes of the relevant written agreement), additional Securities or other instruments the market value of which, together with the market value of Securities or other instruments previously delivered or sold to the Client Plan under the repurchase agreement, equals at least one hundred percent (100%) of the purchase price paid by the Client Plan.

8. If the MPS seller does not deliver additional Securities or other instruments as required above, the Client Plan may terminate the agreement, and, if upon termination or expiration of the agreement, the amount owing is not paid to the Client Plan, the Client Plan may sell the Securities or other instruments and apply the proceeds against the obligations of the MPS seller under the agreement, and against any expenses associated with the sale.

9. The MPS seller agrees to furnish the Client Plan with the most recent available audited statement of its financial condition as well as its most recent available unaudited statement, agrees to furnish additional audited and unaudited statements of its financial condition as they are issued and either: (a) Agrees that each repurchase agreement transaction pursuant to the agreement shall constitute a representation by the MPS seller that there has been no material adverse change in its financial condition since

the date of the last statement furnished that has not been disclosed to the Client Plan with whom such written agreement is made; or (b) prior to each repurchase agreement transaction, the MPS seller represents that, as of the time the transaction is negotiated, there has been no material adverse change in its financial condition since the date of the last statement furnished that has not been disclosed to the Client Plan with whom such written agreement is made.

10. In the event of termination and sale as described in Section III.H.9., the MPS seller pays to the Client Plan the amount of any remaining obligations and expenses not covered by the sale of the Securities or other instruments, plus interest at a reasonable rate.

11. If an MPS seller involved in a repurchase agreement covered by this exemption fails to comply with any condition of this exemption in the course of engaging in the repurchase agreement, the BlackRock Manager who caused the plan to engage in such repurchase agreement shall not be deemed to have caused the plan to engage in a transaction prohibited by ERISA sections 406(a)(1)(A) through (D) or ERISA section 406(b), Code section 4975, or FERSA section 8477(c) solely by reason of the MPS seller's failure to comply with the conditions of the exemption.

12. In the event of any dispute between a BlackRock Manager and an MPS seller involving a Covered Transaction under this Section III.H., the IM has the responsibility to decide whether, and if so how, BlackRock is to pursue relief on behalf of the Client Plan(s) against the MPS seller.

13. At time of entry into or renewal of each Covered Transaction under this Section III.H., including both term repurchase transactions and daily renewals for “open” or “overnight” transactions, either (a) each Covered Transaction under this Section III.H., is as a result of the Three Quote Process, or, (b) the BlackRock Manager determines that the yield on the proposed transaction, or the renewal thereof, is at least as favorable to the Client Plans as the yield of the Client Plan on two (2) other available transactions which are comparable in terms of size, collateral type, credit quality of the counterparty, term and rate. The methodology employed for purposes of the comparison in (b) above must (c) be approved in advance by the ECO Function and (d), to the extent possible, refer to objective external data points, such as the Eurodollar overnight time deposit bid rate, the rate for repurchase agreements with U.S. government Securities, or rates for commercial paper issuances or agency discount note issuances sourced from Bloomberg, or another third party pricing service or market data provider (which providers may use different terminology to refer to these same external data points). The applicable BlackRock Manager must record a description of the comparable transactions, if reliance is placed upon same, and such data must be periodically reviewed by the ECO Function. The procedures described in this Section III.H.13. must be designed to ensure that BlackRock Managers determine to only enter into Covered Transactions with MPS sellers which are in the interests of Plan Clients, and such procedures must be reviewed and may be commented on by the IM.

14. Neither the MPS Seller nor a member of the same MPS Group as the MPS Seller has discretionary authority or control with respect to the investment of Client Plan assets involved in a Covered Transaction under this Section III.H; provided that, this condition will be deemed met if a Client Plan meets the condition of Section II.A.2. by reason of Section II.A.3. of this exemption.

15. The Client Plan is not an MPS Plan of the MPS with whom the purchase or sale takes place, or an MPS Plan of another MPS member of the same MPS Group as such MPS; provided that, this condition will be deemed met if a Client Plan meets the condition of Section II.A.2. by reason of Section II.A.3. of this exemption.

I.
Responding to Tender Offers and Exchange Offers Solicited by an MPS.
Relief under Section I of this exemption is available for participation by BlackRock Managers on behalf of Client Plans in tender offers or exchange offers or similar transactions where an MPS acts as agent for the entity (which entity may not be an MPS) making the offer, provided that:

1. The Client Plan pays no fees to the MPS in connection with this Covered Transaction;

2. The BlackRock Manager submits to the ECO in advance of participation a written explanation of the reasons for such participation; and

3. The ECO Function determines that the reasons for participation by the BlackRock Manager in the Covered Transaction are appropriate from the vantage point of the Client Plans, with such determination affirmatively made in writing prior to the BlackRock Manager participating in the Covered Transactions under this Section III.I.

J.
Purchase in Underwritings of Securities Issued by an Entity Which Is Not an MPS When the Proceeds Are Used To Repay a Debt to an MPS.
Relief under Section I of this exemption is available for the purchase by BlackRock Managers of Securities in underwritings issued by an entity which is not an MPS, but where the proceeds of the offering are used to repay a debt owed to an MPS, and the payment of such proceeds to the MPS, provided that the BlackRock Manager does not know that the proceeds will be applied to the repayment of debt owed to an MPS. If the BlackRock Manager does know that proceeds of the offering will be applied to the repayment of debt owed to an MPS, the purchase of the Securities and the payment of the proceeds to the MPS are exempt under Section I of this exemption provided that no more than twenty percent (20%) of the offering is purchased by BlackRock Managers for Client Plans, and no more than fifty percent (50%) of the offering in the aggregate is purchased by BlackRock, BlackRock Managers and other BlackRock Entities for Client Plans, other clients of BlackRock Managers, or as proprietary investments.

K.
Bank Deposits and Commercial Paper.
Relief under Section I of this exemption is available for an investment by a BlackRock Manager of Client Plan assets which involves the purchase or other acquisition, holding, sale, exchange or redemption by or on behalf of a Client Plan of certificates of deposit, time deposits or other bank deposits at an MPS and/or placed by an MPS and/or sold to or purchased from an MPS, or in commercial paper issued by an MPS or with respect to which an MPS acts in some continuing capacity such as placement agent or administrator and/or which is sold to or purchased from an MPS, provided that:

1. With respect to bank deposits, either:

(a)(i) The bank is supervised by the United States or a State, and at the outset of the Covered Transaction or renewal thereof of, such bank has a credit rating in one of the top two (2) categories by at least one of the Rating Organizations; and (ii) such deposit bears a reasonable interest rate, or—

(b) The BlackRock Manager and the MPS comply with ERISA section 408(b)(4).

2. With respect to commercial paper:

(a) The Client Plan is not an MPS Plan of the MPS issuing the commercial paper, provided that, this condition will be deemed to be met if such a Client Plan meets the conditions of Section II.A.2. and II.A.3. of this exemption;

(b) The commercial paper has a stated maturity date of nine (9) months or less from the date of issue, exclusive of days of grace, or is a renewal of an issue of

commercial paper the maturity of which is likewise limited;

(c) At the time it is acquired, the commercial paper is ranked in one of the two (2) highest rating categories by at least one of the Rating Organizations;

(d) If the seller or purchaser of the commercial paper is an MPS, purchases and sales are made pursuant to the Three Quote Process, provided that for purposes of this Section III.K.2., firm quotes on comparable short-term money market instruments rated in the same category may be used for purposes of the Three Quote Process; and

(e)(i) The Client Plan is not an MPS Plan of the MPS with whom the purchase or sale takes place, or an MPS Plan of another MPS member of the same MPS Group as such MPS; and (ii) the Client Plan is not an MPS Plan of an MPS which is acting in a continuing capacity, or an MPS Plan of another member of the same MPS Group as such MPS, provided that, the conditions set forth in clauses (i) and (ii) of this Section III.K.2.(e) will be deemed met if a Client Plan meets the condition of Section II.A.2. by reason of Section II.A.3. of this exemption.

3. Neither the MPS involved in the Covered Transaction nor any member of the same MPS Group as the MPS involved in the Covered Transaction has discretionary authority or control with respect to the investment of Client Plan assets involved in the Covered Transaction under this Section III.K.; provided that, this condition will be deemed met if a Client Plan meets the condition of Section II.A.2. by reason of Section II.A.3. of this exemption.

4. For purposes of the Covered Transactions set forth in this Section III.K. no BlackRock Entity shall be regarded as an affiliate of an MPS bank at which a deposit is made of Client Plan assets, nor of an MPS issuer of commercial paper in which a BlackRock Manager invests Client Plan assets.

L.
Securities Lending to an MPS.

1. Relief under Section I of this exemption is available for:

(a) The lending of Securities by a BlackRock Manager that are assets of an Index Account or Fund or a Model-Driven Account or Fund to an MPS which is a U.S. Broker-Dealer or a U.S. Bank provided that the conditions set forth in Section III.L.2. are met;

(b) The lending of Securities by a BlackRock Manager that are assets of an Index Account or Fund or a Model-Driven Account or Fund to an MPS which is a Foreign Broker-Dealer or Foreign Bank; provided that, the conditions set forth in Section III.L.2. and Section III.L.3. below are met; and

(c) The payment to a BlackRock Manager of compensation for services rendered in connection with loans of assets of an Index Account or Fund or a Model-Driven Account or Fund that are Securities to an MPS; provided that, the conditions set forth in Section III.L.4. below are met.

2. General Conditions for Covered Transactions Described in Sections III.L.1.(a) and (b).

(a) The length of a Securities loan to an MPS does not exceed one year in term.

(b) Neither the MPS borrower nor any MPS which is a member of the same MPS Group as the MPS borrower has or exercises discretionary authority or control with respect to the investment of the Client Plan assets involved in the transaction. This Section III.L.2.(b) shall be deemed satisfied notwithstanding the investment of the assets of an MPS Plan of the MPS which is the borrower under such Securities lending transaction in a Pooled Fund as of the date of the Acquisition, which Pooled Fund is a bank-maintained common or collective trust, provided that such assets when aggregated with the assets of all other MPS Plans of the same MPS Group as that of the MPS borrower and invested in such Pooled Fund, at all times since the date of the Acquisition, constitute less than ten percent (10%) of the assets of such Pooled Fund; provided that, this Subsection III.L.2.(b) will be deemed met if a Client Plan meets the condition of Section II.A.2. by reason of Section II.A.3. of this exemption.
34

34
For this purpose, MPS plans of Barclays MPSs and PNC MPSs are separately aggregated.

(c) The Client Plan receives from the MPS borrower by the close of the BlackRock Manager's business on the day in which the Securities lent are delivered to the MPS,

(i) U.S. Collateral having, as of the close of business on the preceding business day, a market value, or, in the case of bank letters of credit, a stated amount, equal to not less than one hundred percent (100%) of the then market value of the Securities lent; or

(ii) Foreign Collateral having as of the close of business on the preceding business day, a market value, or, in the case of bank letters of credit, a stated amount, equal to not less than:

(x) One hundred two percent (102%) of the then market value of the Securities lent as valued on a Recognized Securities Exchange or an Automated Trading System on which the Securities are primarily traded if the collateral posted is denominated in the same currency as the Securities lent, or

(y) One hundred five percent (105%) of the then market value of the Securities lent as valued on a Recognized Securities Exchange or an Automated Trading System on which the Securities are primarily traded if the collateral posted is denominated in a different currency than the Securities lent.

(d) Notwithstanding the foregoing, if the BlackRock Manager is a U.S. Bank, a Registered Investment Advisor, or a U.S. Broker-Dealer, and such BlackRock Manager indemnifies the Client Plan with respect to the difference, if any, between the replacement cost of the borrowed Securities and the market value of the collateral on the date of a borrower default, the Client Plan receives from the MPS borrower by the close of the BlackRock Manager's business on the day in which the Securities lent are delivered to the borrower, Foreign Collateral having as of the close of business on the preceding business day, a market value, or, in the case of bank letters of credit, a stated amount, equal to not less than:

(i) One hundred percent (100%) of the then market value of the Securities lent as valued on a Recognized Securities Exchange or an Automated Trading System on which the Securities are primarily traded if the collateral posted is denominated in the same currency as the Securities lent; or

(ii) One hundred one percent (101%) of the then market value of the Securities lent as valued on a Recognized Securities Exchange or an Automated Trading System on which the Securities are primarily traded if the collateral posted is denominated in a different currency than the Securities lent and such currency is denominated in Euros, British pounds, Japanese yen, Swiss francs or Canadian dollars; or

(iii) One hundred five percent (105%) of the then market value of the Securities lent as valued on a Recognized Securities Exchange or an Automated Trading System if the collateral posted is denominated in a different currency than the Securities lent and such currency is other than those specified above.

(e) (i) If the MPS borrower is a U.S. Bank or U.S. Broker-Dealer, the Client Plan receives such U.S. Collateral or Foreign Collateral from the MPS borrower by the close of the BlackRock Manager's business on the day in which the Securities are delivered to the MPS borrower. Such collateral is received by the Client Plan either by physical delivery, wire transfer or by book entry in a Securities depository located in the United States, or,

(ii) If the MPS borrower is a Foreign Bank or Foreign Broker-Dealer, the Client Plan receives U.S. Collateral or Foreign Collateral from the MPS borrower by the close of the BlackRock Manager's business on the day in which the Securities are delivered to the borrower. Such collateral is received by the Client Plan either by physical delivery, wire transfer or by book entry in a Securities depository located in the United States or held on behalf of the Client Plan at an Eligible Securities Depository. The indicia of ownership of such collateral shall be maintained in accordance with ERISA section 404(b) and 29 CFR 2550.404b-1.

(f) Prior to making of any such loan, the MPS borrower shall have furnished the BlackRock Manager with:

(i) The most recent available audited statement of the MPS borrower's financial condition, as audited by a United States certified public accounting firm or in the case of an MPS borrower that is a Foreign Broker-Dealer or Foreign Bank, a firm which is eligible or authorized to issue audited financial statements in conformity with accounting principles generally accepted in the primary jurisdiction that governs the borrowing MPS Foreign Broker-Dealer or Foreign Bank;

(ii) The most recent available unaudited statement of its financial condition (if the unaudited statement is more recent than such audited financial statement); and

(iii) A representation that, at the time the loan is negotiated, there has been no material adverse change in its financial condition since the date of the most recent financial statement furnished to the BlackRock Manager that has not been disclosed to the BlackRock Manager. Such representations may be made by the MPS borrower's agreement that each loan shall constitute a representation by the MPS borrower that there has been no such material adverse change.

(g) The loan is made pursuant to a written loan agreement, the terms of which are at least as favorable to the Client Plan as an arm's-length transaction with an unrelated party would be. Such loan agreement states that the Client Plan has a continuing security interest in, title to, or the rights of secured creditor with respect to the collateral. Such agreement may be in the form of a master agreement covering a series of Securities lending transactions.

(h) The written loan agreement must be a standardized industry form; provided, that, with the approval of the ECO on or about the date of the Acquisition, written loan agreements with an MPS borrower that were in effect as of the date of the Acquisition may continue to be used until there is a material modification of the same, at which time standardized industry forms must be adopted.

(i) In return for lending Securities, the Client Plan:

(i) Receives a reasonable fee (in connection with the Securities lending transaction), and/or

(ii) Has the opportunity to derive compensation through the investment of the currency collateral. Where the Client Plan has that opportunity, the Client Plan may pay a loan rebate or similar fee to the MPS borrower, if such fee is not greater than the Client Plan would pay in a comparable transaction with an unrelated party.

(j) All fees and other consideration received by the Client Plan in connection with the loan of Securities are reasonable. The identity of the currency in which the payment of fees and rebates will be made is set forth in either the written loan agreement or the loan confirmation as agreed to by the MPS borrower and the BlackRock Manager prior to the making of the loan.

(i) Pricing of a loan to an MPS borrower is based on (i) rates for comparable loans of the same Security to non-MPS borrowers and (ii) third-party market data:

(x) For loans of liquid Securities (sometimes referred to as general collateral loans), an automatic system may be used to price loans so long as the resulting rate the Client Plan receives from the MPS borrower is at least as favorable to the Client Plan as the rate the BlackRock Managers are receiving for Client Plans or other clients from non-MPS borrowers of the same Security;

(y) For purposes of pricing loans of less liquid Securities (sometimes referred to as “special loans”), and for purposes of determining whether to terminate or continue a loan which does not have a set term, pricing may also be based on a BlackRock trader determination that continuing the loan is in the interest of the Client Plan based on all relevant factors, including price (provided that price is within the range of prices of other loans of the same Security to comparable non-MPS borrowers by BlackRock Managers for Client Plans or other clients) and potential adverse consequences to the Client Plan of terminating the loan, provided that the pricing data used in making these decisions is retained and made available for possible review by the ECO.

(ii) Automatic pricing mechanisms and pricing decisions by traders are subject to ongoing periodic review by the ECO Function, and the results of such review are included in reports by the ECO to the IM. Specifically, the quarterly reports by the ECO to the IM must address the lending patterns of illiquid Securities to the MPS borrowers from all Client Plans, including the percentage that loans of such Securities to the MPSs represent of all loans of such Securities from all Client Plans.

(k) The Client Plan receives the equivalent of all distributions made to holders of the borrowed Securities during the term of the loan including, but not limited to, dividends, interest payments, shares of stock as a result of stock splits and rights to purchase additional Securities;

(l) If the market value of the collateral at the close of trading on a business day is less than the applicable percentage of the market value of the borrowed Securities at the close of trading on that day (as described in this Section III.L.2.(c) of this exemption), then the MPS borrower shall deliver, by the close of business on the following business day, an additional amount of U.S. Collateral or Foreign Collateral the market value of which, together with the market value of all previously delivered collateral, equals at least the applicable percentage of the market value of all the borrowed Securities as of such preceding day.

Notwithstanding the foregoing, part of the U.S. Collateral or Foreign Collateral may be returned to the MPS borrower if the market value of the collateral exceeds the applicable percentage (described in this Section III.L.2.(c) of this exemption) of the market value of the borrowed Securities, as long as the market value of the remaining U.S. Collateral or Foreign Collateral equals at least the applicable percentage of the market value of the borrowed Securities.

(m) The loan may be terminated by the Client Plan at any time, whereupon the MPS borrower shall deliver certificates for Securities identical to the borrowed Securities (or the equivalent thereof in the event of reorganization, recapitalization or merger of the issuer of the borrowed Securities) to the Client Plan within the lesser of:

(i) The customary delivery period for such Securities,

(ii) Five business days, or

(iii) The time negotiated for such delivery by the BlackRock Manager for the Client Plan, and the borrower.

(n) In the event that the loan is terminated, and the MPS borrower fails to return the borrowed Securities or the equivalent thereof within the applicable time described in Section III.M.2.(m), the BlackRock Manager for the Client

Plan may, under the terms of the loan agreement:

(i) Purchase Securities identical to the borrowed Securities (or their equivalent as described above) and may apply the collateral to the payment of the purchase price, any other obligations of the borrower under the agreement, and any expenses associated with the sale and/or purchase, and

(ii) The MPS borrower is obligated, under the terms of the loan agreement, to pay, and does pay to the Client Plan the amount of any remaining obligations and expenses not covered by the collateral, including reasonable attorney's fees incurred by the Client Plan for legal action arising out of default on the loans, plus interest at a reasonable rate.

Notwithstanding the foregoing, the MPS borrower may, in the event the MPS borrower fails to return borrowed Securities as described above, replace collateral, other than U.S. currency, with an amount of U.S. currency that is not less than the then current market value of the collateral, provided such replacement is approved by the BlackRock Manager.

(o) If the MPS borrower fails to comply with any provision of a loan agreement which requires compliance with this exem

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2012-788. Public record. Not legal advice.