EXHIBIT 8 (K)
BLACKROCK FUNDS(SM)
EXPENSE LIMITATION AGREEMENT
EXPENSE LIMITATION AGREEMENT, dated as of January 28, 1999, by and
between BlackRock Advisors, Inc. ("BlackRock") and BlackRock FundsSM (the
"Company"), on behalf of each portfolio of the Company set forth in Schedule A
(each a "Portfolio", and collectively, the "Portfolios").
WHEREAS, the Company is a Massachusetts Business Trust organized under
a Declaration of Trust dated December 22, 1988 (the "Declaration"), and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company; and
WHEREAS, the Company and BlackRock have entered into an Investment
Advisory Agreement (the "Advisory Agreement"), pursuant to which BlackRock will
render investment advisory services to each Portfolio for compensation based on
the value of the average daily net assets of each such Portfolio; and
WHEREAS, the Company and BlackRock have determined that it is
appropriate and in the best interests of each Portfolio and its shareholders to
maintain certain expenses of each Portfolio at a level below the level to which
each such Portfolio would normally be subject.
NOW, THEREFORE, the parties hereto agree as follows:
1. EXPENSE LIMITATION.
1.1 APPLICABLE EXPENSE LIMIT. To the extent that the aggregate
expenses incurred by a Portfolio in any one year period beginning on February 1
(each, an "Applicable Year") which are not specifically allocated to a class of
shares of a Portfolio under the Company's Rule 18f-3 Plan, including but not
limited to investment advisory fees of BlackRock (but excluding: (i) interest,
taxes, brokerage commissions, and other expenditures which are capitalized in
accordance with generally accepted accounting principles; (ii) expenses
specifically allocated to a class of shares of a Portfolio under the Company's
Rule 18f-3 Plan such as Rule 12b-1 expenses and transfer agency fees; and (iii)
other extraordinary expenses not incurred in the ordinary course of such
Portfolio's business) ("Portfolio Operating Expenses"), exceed the Operating
Expense Limit, as defined in Section 1.2 below, such excess amount (the "Excess
Amount") shall be the liability of BlackRock.
1.2 OPERATING EXPENSE LIMIT. The Operating Expense Limit in any
Applicable Year shall be as set forth in Schedule A as to each Portfolio, or
such other rate as may be agreed to in writing by the parties.
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1.3 METHOD OF COMPUTATION. To determine BlackRock's liability with
respect to the Excess Amount, each month the Portfolio Operating Expenses for
each Portfolio shall be annualized for the Applicable Year as of the last day of
the month. If such annualized Portfolio Operating Expenses for any month of a
Portfolio exceed the Operating Expense Limit of such Portfolio, BlackRock shall
first waive or reduce its investment advisory management fee for such month by
an amount sufficient to reduce the annualized Portfolio Operating Expenses for
the Applicable Year to an amount no higher than the Operating Expense Limit. If
the amount of the waived or reduced investment advisory fee for any such month
is insufficient to pay the Excess Amount, BlackRock may also remit to the
appropriate Portfolio or Portfolios an amount that, together with the waived or
reduced advisory fee, is sufficient to pay such Excess Amount.
1.4 YEAR-END ADJUSTMENT. If necessary, on or before the last day of
the first month of each Applicable Year, an adjustment payment shall be made by
the appropriate party in order that the amount of the advisory fees waived or
reduced and other payments remitted by BlackRock to the Portfolio or Portfolios
with respect to the previous Applicable Year shall equal the Excess Amount.
2. REIMBURSEMENT OF FEE WAIVERS AND EXPENSE REIMBURSEMENTS.
2.1 REIMBURSEMENT. If in any Applicable Year during which the total
assets of a Portfolio are greater than $50 million and in which the Advisory
Agreement is still in effect, the estimated aggregate Portfolio Operating
Expenses of such Portfolio for the Applicable Year are less than the Operating
Expense Limit for that Applicable Year, subject to quarterly approval by the
Company's Board of Trustees as provided in Section 2.2 below, BlackRock shall be
entitled to reimbursement by such Portfolio, in whole or in part as provided
below, of the advisory fees waived or reduced and other payments remitted by
BlackRock to such Portfolio pursuant to Section 1 hereof. The total amount of
reimbursement to which BlackRock may be entitled (the "Reimbursement Amount")
shall equal, at any time, the sum of all investment advisory fees previously
waived or reduced by BlackRock and all other payments remitted by BlackRock to
the Portfolio, pursuant to Section 1 hereof, during any of the previous two (2)
Applicable Years, less any reimbursement previously paid by such Portfolio to
BlackRock, pursuant to Sections 2.2 or 2.3 hereof, with respect to such waivers,
reductions, and payments. The Reimbursement Amount shall not include any
additional charges or fees whatsoever, including, e.g., interest accruable on
the Reimbursement Amount.
2.2 BOARD APPROVAL. No reimbursement shall be paid to BlackRock
pursuant to this provision unless the Company's Board of Trustees has determined
that the payment of such reimbursement is in the best interests of the Portfolio
or Portfolios and their shareholders. The Company's Board of Trustees shall
determine quarterly in advance whether any reimbursement may be paid to
BlackRock for the relevant succeeding quarterly period.
2.3 METHOD OF COMPUTATION. To determine each Portfolio's payments,
if any, to reimburse BlackRock for the Reimbursement Amount, each month the
Portfolio Operating Expenses of each Portfolio shall be annualized for the
Applicable Year as of the last day of the month. If such annualized Portfolio
Operating Expenses of a Portfolio for any month
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are less than the Operating Expense Limit of such Portfolio, such Portfolio,
only with the prior approval of the Board, shall pay to BlackRock an amount
sufficient to increase the annualized Portfolio Operating Expenses of that
Portfolio to an amount no greater than the Operating Expense Limit of that
Portfolio, provided that such amount paid to BlackRock will in no event exceed
the total Reimbursement Amount. In the event the Operating Expense Limit for a
Portfolio is increased subsequent to an Applicable Year in which BlackRock
becomes entitled to reimbursement hereunder for fees waived or reduced or
amounts otherwise remitted to that Portfolio, the amount available to reimburse
BlackRock in accordance with this Section 2.3 shall be calculated by reference
to the Operating Expense Limit for that Portfolio in effect at the time
BlackRock became entitled to receive such reimbursement, rather than the
subsequently increased Operating Expense Limit for that Portfolio.
2.4 YEAR-END ADJUSTMENT. If necessary, on or before the last day of
the first month of each Applicable Year, an adjustment payment shall be made by
the appropriate party in order that the actual Portfolio Operating Expenses of a
Portfolio for the prior Applicable Year (including any reimbursement payments
hereunder with respect to such Applicable Year) do not exceed the Operating
Expense Limit.
3. TERM AND TERMINATION OF AGREEMENT.
This Agreement shall continue in effect until February 1, 2000 and
from year to year thereafter provided such continuance is specifically approved
by a majority of the Trustees of the Company who (i) are not "interested
persons" of the Company or any other party to this Agreement, as defined in the
1940 Act, and (ii) have no direct or indirect financial interest in the
operation of this Agreement ("Non-Interested Trustees). Nevertheless, this
Agreement may be terminated by either party hereto, without payment of any
penalty, upon 90 days' prior written notice to the other party at its principal
place of business; provided that, in the case of termination by the Company,
such action shall be authorized by resolution of a majority of the Non-
Interested Trustees of the Company or by a vote of a majority of the outstanding
voting securities of the Company.
4. MISCELLANEOUS.
4.1 CAPTIONS. The captions in this Agreement are included for
convenience of reference only and in no other way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
4.2 INTERPRETATION. This Agreement shall be construed in accordance
with the laws of the State of New York. Nothing herein contained shall be
deemed to require the Company or any Portfolio to take any action contrary to
the Company's Declaration or By-Laws, or any applicable statutory or regulatory
requirement to which it is subject or by which it is bound, or to relieve or
deprive the Company's Board of Trustees of its responsibility for and control of
the conduct of the affairs of the Company or the Portfolios.
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4.3 DEFINITIONS. Any questions of interpretation of any term or
provision of this Agreement, including but not limited to the investment
advisory fee, the computations of net asset values, and the allocation of
expenses, having a counterpart in or otherwise derived from the terms and
provisions of the Advisory Agreement or the 1940 Act, shall have the same
meaning as and be resolved by reference to such Advisory Agreement or the 1940
Act.
4.4 CERTAIN LIABILITIES. The names "BlackRock Funds" and "Trustees
of BlackRock Funds" refer specifically to the trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under a
Declaration of Trust dated December 22, 1988, which is hereby referred to and a
copy of which is on file at the office of the State Secretary of the
Commonwealth of Massachusetts and at the principal office of the Company. The
obligations of "BlackRock Funds" entered into in the name or on behalf thereof
by any of the Trustees, officers, representatives or agents are not made
individually, but in such capacities, and are not binding upon any of the
Trustees, shareholders, representatives or agents of the Company personally, but
bind only the Trust property (as defined in the Declaration of Trust), and all
persons dealing with any Fund or class of shares of the Company must look solely
to the Trust property belonging to such Fund or class for the enforcement of any
claims against the Company.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
signed by their respective officers thereunto duly authorized and their
respective corporate seals to be hereunto affixed, as of the day and year first
above written.
ATTEST: BLACKROCK FUNDS(SM)
ON BEHALF OF ITS PORTFOLIOS
________________________ By:______________________________
Secretary
ATTEST: BLACKROCK ADVISORS, INC.
________________________ By:______________________________
Secretary
SCHEDULE A
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This Agreement relates to the following Portfolios of the Company Operating Expense
Limit
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MONEY MARKET
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Money Market 31
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U.S. Treasury Money Market 29.5
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Municipal Money Market 29.5
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NJ Municipal Money Market 26.5
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NC Municipal Money Market 19.5
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OH Municipal Money Market 26.5
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PA Municipal Money Market 29.5
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VA Municipal Money Market 20.5
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FIXED INCOME
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Low Duration Bond 38.5
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Intermediate Government Bond 47.5
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Intermediate Bond 43.5
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Core Bond 38
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Gov't Income 55
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Managed Income 48.5
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International Bond 86.5
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Tax-Free Inc. 48.5
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PA Tax-Free Income 47
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NJ Tax-Free Income 47.5
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OH Tax-Free Income 51.5
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DE Tax-Free Income 58.5
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KY Tax-Free Income 58.5
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GNMA Portfolio 48.5
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High Yield Bond 52.5
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EQUITY
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Large Cap Value Equity 63
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Large Cap Growth Equity 65
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Mid-Cap Value Equity 99.5
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Mid-Cap Growth Equity 99.5
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Small Cap Value Equity 70.5
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Small Cap Growth Equity 69
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International Equity 90
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International Small Cap Equity 115.5
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International Emerging Market 156.5
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Select Equity 64.5
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Index Equity 15
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Balanced 69
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Micro-Cap Equity 130.5
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