[Federal Register Volume 77, Number 153 (Wednesday, August 8, 2012)]
[Notices]
[Pages 47442-47444]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-19366]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30160; 812-13964]


BlackRock Preferred Partners LLC, et al.; Notice of Application

August 2, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from sections 18(c) 
and 18(i) of the Act and for an order pursuant to section 17(d) of the 
Act and rule 17d-1 under the Act.

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SUMMARY:  Summary of Application: Applicants request an order to permit 
certain registered closed-end management investment companies to issue 
multiple classes of shares and to impose asset-based distribution and 
service fees and contingent deferred sales loads (``CDSCs'').
    Applicants: BlackRock Preferred Partners LLC (the ``Fund''), 
BlackRock Advisors, LLC (the ``Adviser'') and BlackRock Investments, 
LLC (the ``Distributor'').

DATES:  Filing Dates: The application was filed on September 23, 2011, 
and amended on June 22, 2012.
    Hearing or Notification of Hearing: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on August 27, 2012, and should be accompanied by proof of 
service on the applicants, in the form of an affidavit, or, for 
lawyers, a certificate of service. Hearing requests should state the 
nature of the writer's interest, the reason for the request, and the 
issues contested. Persons who wish to be notified of a hearing may 
request notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090; Applicants, c/o Janey Ahn, Esq., 
BlackRock Advisors, LLC, 55 East 52nd Street, New York, New York 10055.

FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Senior Counsel, at 
(202) 551-6868 or Daniele Marchesani, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. The Fund is a continuously offered non-diversified closed-end 
management investment company registered under the Act and organized as 
a Delaware limited liability company. The Adviser is registered as an 
investment adviser under the Investment Advisers Act of 1940 and serves 
as investment adviser to the Fund. The Distributor, a broker-dealer 
registered under the Securities Exchange Act of 1934, acts as principal 
underwriter to the Fund. The Distributor is under common control with 
the Adviser and is an affiliated person, as defined in section 2(a)(3) 
of the Act, of the Adviser.
    2. The Fund continuously offers its limited liability company 
interests (``Units'') to the public pursuant to a registration 
statement under the Securities Act of 1933. The Units of the Fund are 
not listed on any securities exchange and are not traded on an over-
the-counter system such as NASDAQ. Applicants do not expect that any 
secondary market will develop for the Units.
    3. The Fund currently offers an initial class of Units (``Initial 
Class'') at net asset value subject to a front-end sales load and an 
ongoing asset-based distribution fee and proposes to offer multiple 
classes of Units. The Fund would offer new Unit classes (``New Class'') 
at net asset value and may also charge a front-end sales load and an 
annual service and/or distribution fee. The Fund intends to continue to 
offer Initial Class Units, subject to minimum purchase requirements.
    4. In order to provide a degree of liquidity to members 
(``Members''), the Fund may from time to time offer to repurchase Units 
at net asset value in accordance with rule 13e-4 under the Exchange Act 
of 1934 Act, as amended (the ``1934 Act'').\1\ A Fund will repurchase 
Units at the times, in the amounts and on the terms as may be 
determined by the Board of Directors (``Board'') of the Fund in its 
sole discretion. The Adviser expects to recommend ordinarily that the 
Board authorize each Fund to offer to repurchase Units from Members 
quarterly.
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    \1\ For the Initial Class, a 2% early repurchase fee will be 
charged to any Member that tenders its Units to the Fund in 
connection with a tender offer with a valuation date that is prior 
to the business day immediately preceding the one-year anniversary 
of the Member's purchase of the respective Units. Any early 
repurchase fee, and the Fund's waiver of, scheduled variation in, or 
elimination of, such early repurchase fee, will equally apply to all 
Members of the Fund, within the applicable category of Members, 
regardless of class, consistent with section 18 of the Act and rule 
18f-3 thereunder.
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    5. Applicants request that the order also apply to any other 
continuously offered registered closed-end management investment 
companies existing now or in the future for which

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the Adviser, the Distributor, or any entity controlling, controlled by 
or under common control with the Adviser or the Distributor acts as 
investment adviser or principal underwriter, and which provides 
periodic liquidity with respect to its Units pursuant to rule 13e-4 
under the 1934 Act (such investment companies, together with the Fund, 
the ``Funds'').\2\
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    \2\ Any Fund relying on this relief in the future will do so in 
a manner consistent with the terms and conditions of the 
application. Applicants represent that any investment company 
presently intending to rely on the requested relief is listed as an 
applicant.
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    6. Applicants represent that any asset-based service and 
distribution fees will comply with the provisions of rule 2830(d) of 
the Conduct Rules of the National Association of Securities Dealers, 
Inc. (``NASD Conduct Rule 2830'').\3\ Applicants also represent that 
each Fund will disclose in its prospectus, the fees, expenses and other 
characteristics of each class of Units offered for sale by the 
prospectus as is required for open-end multiple class funds under Form 
N-1A. The Fund will disclose fund expenses in Member reports as if it 
were an open-end management investment company, and disclose any 
arrangements that result in breakpoints in, or elimination of, sales 
loads in its prospectus.\4\ The Fund and the Distributor will also 
comply with any requirements that may be adopted by the Commission or 
FINRA regarding disclosure at the point of sale and in transaction 
confirmations about the costs and conflicts of interest arising out of 
the distribution of open-end investment company shares, and regarding 
prospectus disclosure of sales loads and revenue sharing arrangements 
as if those requirements applied to the Fund and the Distributor.\5\
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    \3\ All references to NASD Conduct Rule 2830 include any 
successor or replacement rule that may be adopted by the Financial 
Industry Regulatory Authority (``FINRA'').
    \4\ See Shareholder Reports and Quarterly Portfolio Disclosure 
of Registered Management Investment Companies, Investment Company 
Act Release No. 26372 (Feb. 27, 2004) (adopting release) (requiring 
open-end investment companies to disclose fund expenses in 
shareholder reports); and Disclosure of Breakpoint Discounts by 
Mutual Funds, Investment Company Act Release No. 26464 (June 7, 
2004) (adopting release) (requiring open-end investment companies to 
provide prospectus disclosure of certain sales load information).
    \5\ See, e.g., Confirmation Requirements and Point of Sale 
Disclosure Requirements for Transactions in Certain Mutual Funds and 
Other Securities, and Other Confirmation Requirement Amendments, and 
Amendments to the Registration Form for Mutual Funds, Investment 
Company Act Release No. 26341 (Jan. 29, 2004) (proposing release).
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    7. The Fund will allocate all expenses incurred by it among the 
various classes of Units based on the respective net assets of the Fund 
attributable to each class, except that the net asset value and 
expenses of each class will reflect distribution fees, service fees, 
and any other incremental expenses of that class. Expenses of the Fund 
allocated to a particular class of Units will be borne on a pro rata 
basis by each outstanding Unit of that class. Applicants state that the 
Fund will comply with the provisions of rule 18f-3 under the Act as if 
it were an open-end investment company.
    8. In the event the Fund imposes a CDSC, the Applicants will comply 
with the provisions of rules 6c-10, as if that rule applied to closed-
end management investment companies. With respect to any waiver of, 
scheduled variation in, or elimination of the CDSC, the Fund will 
comply with rule 22d-1 under the Act as if the Fund were an open-end 
investment company.

Applicants' Legal Analysis

Multiple Classes of Shares
    1. Section 18(c) of the Act provides, in relevant part, that a 
closed-end investment company may not issue or sell any senior security 
if, immediately thereafter, the company has outstanding more than one 
class of senior security. Applicants state that the creation of 
multiple classes of Units of the Funds may be prohibited by section 
18(c).
    2. Section 18(i) of the Act provides that each share of stock 
issued by a registered management investment company will be a voting 
stock and have equal voting rights with every other outstanding voting 
stock. Applicants state that permitting multiple classes of Units of 
the Funds may violate section 18(i) of the Act because each class would 
be entitled to exclusive voting rights with respect to matters solely 
related to that class.
    3. Section 6(c) of the Act provides that the Commission may exempt 
any person, security or transaction or any class or classes of persons, 
securities or transactions from any provision of the Act, or from any 
rule under the Act, if and to the extent such exemption is necessary or 
appropriate in the public interest and consistent with the protection 
of investors and the purposes fairly intended by the policy and 
provisions of the Act. Applicants request an exemption under section 
6(c) from sections 18(c) and 18(i) to permit the Funds to issue 
multiple classes of Units.
    4. Applicants submit that the proposed allocation of expenses and 
voting rights among multiple classes is equitable and will not 
discriminate against any group or class of Members. Applicants submit 
that the proposed arrangements would permit the Fund to facilitate the 
distribution of its Units and provide investors with a broader choice 
of Member options. Applicants assert that the proposed closed-end 
investment company multiple class structure does not raise the concerns 
underlying section 18 of the Act to any greater degree than open-end 
investment companies' multiple class structures that are permitted by 
rule 18f-3 under the Act. Applicants state that each Fund will comply 
with the provisions of rule 18f-3 as if it were an open-end investment 
company.
CDSCs
    1. Applicants believe that the requested relief meets the standards 
of section 6(c) of the Act. Rule 6c-10 under the Act permits open-end 
investment companies to impose CDSCs, subject to certain conditions. 
Applicants state that any CDSC imposed by the Fund will comply with 
rule 6c-10 under the Act as if the rule were applicable to closed-end 
investment companies. The Fund also will disclose CDSCs in accordance 
with the requirements of Form N-1A concerning CDSCs as if the Fund were 
open-end investment companies. Applicants further state that the Fund 
will apply the CDSC (and any waivers or scheduled variations of the 
CDSC) uniformly to all Members in a given class and consistently with 
the requirements of rule 22d-1 under the Act.
Asset-Based Service and Distribution Fees
    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
an affiliated person of a registered investment company or an 
affiliated person of such person, acting as principal, from 
participating in or effecting any transaction in connection with any 
joint enterprise or joint arrangement in which the investment company 
participates unless the Commission issues an order permitting the 
transaction. In reviewing applications submitted under section 17(d) 
and rule 17d-1, the Commission considers whether the participation of 
the investment company in a joint enterprise or joint arrangement is 
consistent with the provisions, policies and purposes of the Act, and 
the extent to which the participation is on a basis different from or 
less advantageous than that of other participants.
    2. Rule 17d-3 under the Act provides an exemption from section 
17(d) and rule 17d-1 to permit open-end investment companies to enter 
into distribution arrangements pursuant to

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rule 12b-1 under the Act. Applicants request an order under section 
17(d) and rule 17d-1 under the Act to permit the Funds to impose asset-
based service and/or distribution fees. Applicants have agreed to 
comply with rules 12b-1 and 17d-3 as if those rules applied to closed-
end investment companies.

Applicants' Condition

    Applicants agree that any order granting the requested relief will 
be subject to the following condition:
    Applicants will comply with the provisions of rules 12b-1, 17d-3 
and 18f-3 under the Act, as amended from time to time or replaced, as 
if those rules applied to closed-end management investment companies, 
and will comply with NASD Conduct Rule 2830, as amended from time to 
time or replaced, as if that rule applied to all closed-end management 
investment companies. Additionally, in the event the Fund imposes a 
CDSC, the Applicants will comply with the provisions of rules 6c-10 and 
22d-1 under the Act, as amended from time to time or replaced, as if 
those rules applied to closed-end management investment companies, and 
to the extent the Fund may determine to waive, impose scheduled 
variations of, or eliminate the early repurchase fee, it will do so 
consistently with the requirements of rule 22d-1 under the Act, as 
amended from time to time or replaced.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-19366 Filed 8-7-12; 8:45 am]
BILLING CODE 8011-01-P