4802 Federal Register / Vol. 62, No. 21 / Friday, January 31, 1997 / Notices

1The Department expresses no opinion herein as

to whether the acquisition of the Units by the Plan

violated any of the provisions of Part 4 of Title I

in the Act.

State(s) of interest, since subscriptions

may be ordered for any or all of the six

separate volumes, arranged by State.

Subscriptions include an annual edition

(issued in January or February) which

includes all current general wage

determinations for the States covered by

each volume. Throughout the remainder

of the year, regular weekly updates are

distributed to subscribers.

Signed at Washington, D.C. this 24th day

of January, 1997.

Margaret Washington,

Chief, Branch of Construction Wage

Determinations.

[FR Doc. 97–2094 Filed 1–30–97; 8:45 am]

BILLING CODE 4510–27–M

Pension and Welfare Benefits

Administration

[Application No. D–10341, et al.]

Proposed Exemptions; Orders

Distributing Co., Inc. Profit Sharing

Plan and 401(k) Retirement Savings

Plan (the Plan)

AGENCY: Pension and Welfare Benefits

Administration, Labor.

ACTION: Notice of proposed exemptions.

SUMMARY: This document contains

notices of pendency before the

Department of Labor (the Department) of

proposed exemptions from certain of the

prohibited transaction restriction of the

Employee Retirement Income Security

Act of 1974 (the Act) and/or the Internal

Revenue Code of 1986 (the Code).

Written Comments and Hearing

Requests

Unless otherwise stated in the Notice

of Proposed Exemption, all interested

persons are invited to submit written

comments, and with respect to

exemptions involving the fiduciary

prohibitions of section 406(b) of the Act,

requests for hearing within 45 days from

the date of publication of this Federal

Register Notice. Comments and request

for a hearing should state: (1) the name,

address, and telephone number of the

person making the comment or request,

and (2) the nature of the person’s

interest in the exemption and the

manner in which the person would be

adversely affected by the exemption. A

request for a hearing must also state the

issues to be addressed and include a

general description of the evidence to be

presented at the hearing. A request for

a hearing must also state the issues to

be addressed and include a general

description of the evidence to be

presented at the hearing.

ADDRESSES: All written comments and

request for a hearing (at least three

copies) should be sent to the Pension

and Welfare Benefits Administration,

Office of Exemption Determinations,

Room N–5649, U.S. Department of

Labor, 200 Constitution Avenue, N.W.,

Washington, D.C. 20210. Attention:

Application No. stated in each Notice of

Proposed Exemption. The applications

for exemption and the comments

received will be available for public

inspection in the Public Documents

Room of Pension and Welfare Benefits

Administration, U.S. Department of

Labor, Room N–5507, 200 Constitution

Avenue, N.W., Washington, D.C. 20210.

Notice to Interested Persons

Notice of the proposed exemptions

will be provided to all interested

persons in the manner agreed upon by

the applicant and the Department

within 15 days of the date of publication

in the Federal Register. Such notice

shall include a copy of the notice of

proposed exemption as published in the

Federal Register and shall inform

interested persons of their right to

comment and to request a hearing

(where appropriate).

SUPPLEMENTARY INFORMATION: The

proposed exemptions were requested in

applications filed pursuant to section

408(a) of the Act and/or section

4975(c)(2) of the Code, and in

accordance with procedures set forth in

29 CFR Part 2570, Subpart B (55 FR

32836, 32847, August 10, 1990).

Effective December 31, 1978, section

102 of Reorganization Plan No. 4 of

1978 (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.

Therefore, these notices of proposed

exemption are issued solely by the

Department.

The applications contain

representations with regard to the

proposed exemptions which are

summarized below. Interested persons

are referred to the applications on file

with the Department for a complete

statement of the facts and

representations.

Orders Distributing Co., Inc. Profit

Sharing Plan and 401(k) Retirement

Savings Plan (the Plan) Located in

Greenville, South Carolina

[Application No. D–10341]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 408(a) of the Act

and section 4975(c)(2) of the Code and

in accordance with the procedures set

forth in 29 CFR Part 2570, Subpart B (55

FR 32836, 32847, August 10, 1990). If

the exemption is granted, the

restrictions of section 406(a), 406(b)(1)

and (b)(2) of the Act and the sanctions

resulting from the application of section

4975 of the Code, by reason of section

4975(c)(1)(A) through (E) of the Code,

shall not apply to the past sale by the

Plan of certain units of limited

partnership interests (the Units) to

Orders Distributing Co., Inc. (the

Employer), a party in interest with

respect to the Plan, provided that the

following conditions are satisfied:

(1) The terms of the sale were at least

as favorable to the Plan as those the Plan

could have obtained in a comparable

arm’s length transaction with an

unrelated party; (2) the sale was a onetime transaction for cash; (3) the Plan

paid no commissions nor other

expenses relating to the sale; (4) the

Plan received an amount no less than

the fair market value of the Units as of

the date of the sale, as determined by an

independent appraisal; and (5) within

30 days of publication in the Federal

Register of the notice of the grant of this

exemption, the Employer makes an

additional cash contribution to the Plan

to make up for opportunity costs

attributable to the Units.

EFFECTIVE DATE: The proposed

exemption, if granted, will be effective

as of January 1, 1995.

Summary of Facts and Representations

1. The Plan is a profit sharing/401(k)

plan sponsored by the Employer. The

Employer, a South Carolina corporation,

is engaged in the business of marketing

and selling products for the floor

covering industry, including carpeting,

vinyl, wood and tile flooring, and

installation materials, and is located in

Greenville, South Carolina. As of

September 5, 1996, the Plan had

approximately 155 participants and

beneficiaries and total assets of

approximately $3,525,785. The trustees

of the Plan are William H. Orders, the

chairman of the board of directors and

a shareholder of the Employer, and C.

Michael Smith, an officer, director, and

shareholder of the Employer.

2. Among the assets of the Plan were

the Units, which were two shares in

GolfSouth 1994, L.P. (GolfSouth)

purchased in May 1994 by the Plan

directly from GolfSouth in a private

offering (the Offering) for a total of

$95,000. 1 GolfSouth is a limited

partnership that owns and operates

three golf courses. On January 1, 1995,
Federal Register / Vol. 62, No. 21 / Friday, January 31, 1997 / Notices 4803

2 The Department notes the applicant’s

representation that the figure of $3,163 was

calculated based upon the short-term applicable

federal rate (AFR) for May 1994, or 4.95%. The AFR

is used by the Internal Revenue Service for

determining reasonable rates of interest. The

applicant represents, therefore, that the AFR is an

appropriate measure for calculating opportunity

costs attributable to the Units.

the Employer purchased the Units from

the Plan for $95,000, their cost to the

Plan.

3. As documented by the minutes of

the Plan’s Administrative Committee

(the Committee) dated December 15,

1994, the decision to sell the Units was

made in anticipation of a proposed

modification to the Plan. Effective as of

April 1, 1995, the Plan permitted

participants to direct the investment of

their respective individual accounts.

The applicant was a convenient and

willing buyer, and Messrs. Orders and

Smith, who comprise the members of

the Committee, approved a sale of the

Units to the Employer.

4. The applicant represents that the

Employer’s purchase price of $95,000

was not less than the fair market value

of the Units as of the date of the sale,

as determined by an independent

appraisal. By letter dated December 29,

1994, GolfSouth Capital, Inc., the

General Partner of GolfSouth, opined

that the fair market value of the Units

on or near December 31, 1994 remained

at $95,000, the price paid for the Units.

The Offering for GolfSouth was still in

progress at that time. After the First and

Second Closings for the Offering had

transpired, a Third and Final Closing

made investments in GolfSouth

available at the same per unit price at

which the Units held by the Plan were

acquired. The letter dated December 29,

1994 states, ‘‘[T]here is no apparent

diminution in value of the investment at

this time, but it is too early to assign any

increase in value.’’ The applicant

maintains, therefore, that the terms of

the sale were at least as favorable to the

Plan as those the Plan could have

obtained in a comparable arm’s length

transaction with an unrelated party. The

sale was a one-time transaction for cash,

and the Plan paid no commissions nor

other expenses relating to the sale.

Because the Plan did not receive a

rate of return on its investment in the

Units, the Employer will make, within

30 days of publication in the Federal

Register of the notice of the grant of this

exemption, an additional payment of

$3,163 to the Plan for opportunity costs

attributable to the Units for the period

from May to December, 1994. 2 The costs

of this exemption application will be

borne by the Employer.

5. The applicant represents that

selling the Units to the Employer was in

the interests of the Plan because the sale

enabled the Plan to divest itself of

illiquid and indivisible assets that were

difficult to value, thus facilitating the

implementation of participant-directed

accounts.

The applicant represents they were

not aware that the sale would constitute

a violation of the prohibited transaction

provisions of the Act until July 1996,

after Ernst and Young, L.L.P., the

Employer’s accountants, had conducted

the annual audit of the Plan. Upon the

recommendation of legal counsel, the

Employer expeditiously filed an

application for a retroactive exemption

with the Department.

6. In summary, the applicant

represents that the subject transaction

satisfied the statutory criteria for an

exemption under section 408(a) of the

Act for the following reasons:

(1) The terms of the sale were at least

as favorable to the Plan as those the Plan

could have obtained in a comparable

arm’s length transaction with an

unrelated party; (2) the sale was a onetime transaction for cash; (3) the Plan

paid no commissions nor other

expenses relating to the sale; (4) the

Plan received an amount no less than

the fair market value of the Units as of

the date of the sale, as determined by

the General Partner of GolfSouth; and

(5) within 30 days of publication in the

Federal Register of the notice of the

grant of this exemption, the Employer

will make an additional cash

contribution to the Plan to make up for

opportunity costs attributable to the

Units.

Tax Consequences of Transaction

The Department of the Treasury has

determined that if a transaction between

a qualified employee benefit plan and

its sponsoring employer (or affiliate

thereof) results in the plan either paying

less than or receiving more than fair

market value, such excess may be

considered to be a contribution by the

sponsoring employer to the plan and

therefore must be examined under

applicable provisions of the Code,

including sections 401(a)(4), 404 and

415.

Notice to Interested Persons

Notice of the proposed exemption

shall be given to all interested persons

by first-class mail within 15 days of the

date of publication of the notice of

pendency in the Federal Register. Such

notice shall include a copy of the notice

of proposed exemption as published in

the Federal Register and shall inform

interested persons of their right to

comment and/or request a hearing with

respect to the proposed exemption.

Comments and requests for a hearing are

due within 45 days of the date of

publication of this notice in the Federal

Register.

FOR FURTHER INFORMATION CONTACT: Ms.

Karin Weng of the Department,

telephone (202) 219–8881. (This is not

a toll-free number.)

Thompson, Siegel and Walmsley, Inc.

(TS&W) Located in Richmond, Virginia

[Application No. D–10369]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 408(a) of the Act

and section 4975(c)(2) of the Code and

in accordance with the procedures set

forth in 29 CFR Part 2570, Subpart B (55

FR 32836, 32847, August 10, 1990).

Section I—Transactions

If the exemption is granted, the

restrictions of section 406(a) and 406(b)

of the Act and the sanctions resulting

from the application of section 4975 of

the Code, by reason of section

4975(c)(1)(A) through (F) of the Code,

shall not apply to the following

transactions which occurred between

April 16, 1996 and August 26, 1996,

provided that the conditions set forth in

Section II below were met:

(a) The acquisition by the Lewis-Gale

Clinic, Inc. Profit Sharing Plan (the

Plan) on April 16, 1996, of shares of the

TS&W Equity Portfolio and Fixed

Income Portfolio (the TS&W Portfolios),

each a series of the UAM Funds, Inc.

(the UAM Funds), an open-end

investment company registered under

the Investment Company Act of 1940

(the ’40 Act), with respect to which

TS&W serves as the investment adviser,

through the in-kind transfer of assets of

a separate account known as ‘‘Fund E’’

managed by TS&W as a fiduciary for the

Plan;

(b) The subsequent sale of shares of

the TS&W Portfolios by Fund E of the

Plan on a cash basis;

(c) The acquisition and sale of shares

of the DSI Money Market Portfolio (the

DSI Portfolio), another series of the

UAM Funds whose investment

adviser—Dewey Square Investors

Corporation (DSI)—is an affiliate of

TS&W, by Fund E of the Plan on a cash

basis;

(d) The receipt of fees from the TS&W

Portfolios and the DSI Portfolio

(collectively, the Portfolios) by TS&W

and DSI, respectively, for acting as an

investment adviser for the Portfolios;

and
4804 Federal Register / Vol. 62, No. 21 / Friday, January 31, 1997 / Notices

3PTE 77–4, in pertinent part, permits the

purchase and sale by an employee benefit plan of

shares of a registered, open-end investment

company when a fiduciary with respect to the plan

is also the investment adviser for the investment

company, provided that certain conditions are met.

(e) The receipt of fees from the

Portfolios by UAM Fund Services, Inc.

(UAM Fund Services), an affiliate of

TS&W and DSI, for performing

secondary services for the Portfolios

(e.g. administrative, fund accounting,

dividend disbursing and transfer agent

services).

Section II—Conditions

(a) The Plan’s in-kind acquisition of

shares of the TS&W Portfolios were onetime transactions; the initial cash

acquisition of shares of the DSI Portfolio

was a one-time transaction; and all

subsequent cash acquisitions and sales

of the Portfolios were the result of

routine contributions and withdrawals

by Plan participants and beneficiaries

which were not subject to the control or

influence of TS&W and the routine

reallocation of assets of Fund E by

TS&W pursuant to its responsibility to

allocate assets of Fund E between the

TS&W Portfolios, the TS&W

International Portfolio and the DSI

Portfolio.

(b) No sales commissions or other fees

were paid by the Plan in connection

with the acquisition of shares of the

Portfolios and no redemption fees were

paid by the Plan in connection with the

sale by the Plan of such shares.

(c) A fiduciary of the Plan who was

independent of and unrelated to TS&W

(the Second Fiduciary) received

advance notice of the transactions and

full disclosure of information

concerning the Portfolios which

included, but was not limited to, the

following:

(1) A current prospectus for each

Portfolio;

(2) The fees for investment advisory

and other services charged to and paid

by the Plan (and by the Portfolios) to

TS&W, DSI, UAM Fund Services or an

affiliate, including the nature and extent

of any differential between the rates of

the fees; and

(3) The reasons why TS&W

considered investments in the Portfolios

to be appropriate for the Plan.

(d) On the basis of the information

described in paragraph (c) above, the

Second Fiduciary approved the

transactions, including the initial inkind transfer of Fund E’s assets to the

TS&W Portfolios in exchange for shares

of such Portfolios, prior to the

transactions.

(e) The Second Fiduciary

acknowledged in a writing dated August

26, 1996, that it received the

information described in paragraph (c)

above prior to the transactions and that

it approved all of the subject

transactions involving the Portfolios in

advance. In addition, the Second

Fiduciary adopted resolutions

approving, ratifying and affirming the

in-kind transfer of assets of Fund E to

the TS&W Equity and Fixed Income

Portfolios (in exchange for shares of

such Portfolios) and the cash purchases

of the shares of the DSI Portfolio as of

April 15, 1996.

(f) With respect to the in-kind transfer

of securities from Fund E to the TS&W

Portfolios, the Plan received shares of

each of the Portfolios which had a total

net asset value equal to the value of all

of the Plan’s assets transferred in-kind

to such Portfolio on the date of the

transfer (i.e. April 16, 1996).

(g) The assets of the Plan transferred

to the TS&W Portfolios were publiclytraded securities that were valued at

their closing prices on the day they were

accepted by the Portfolios (i.e. April 16,

1996), as determined by independent

market sources in accordance with Rule

17a–7(b), issued by the Securities and

Exchange Commission (SEC) under the

’40 Act, by a party unrelated to TS&W

and its affiliates.

(h) The terms of the transactions were

no less favorable to the Plan than those

which were obtainable in an arm’slength transaction with an unrelated

party at the time of such transactions.

(i) TS&W sent by regular mail to the

Second Fiduciary, not more than seven

(7) days after the completion of the inkind transfers to the TS&W Portfolios, a

written confirmation which contained

the following information: (1) Date of

the transfers, (2) the number of shares of

each Portfolio acquired by the Plan, (3)

the price paid per share in each

Portfolio, and (4) the total dollar amount

involved in each transfer.

(j) Cash acquisitions and sales of

shares of the Portfolios were reported to

the Second Fiduciary in the normal

course by means of regular transaction

statements issued by the UAM Funds.

(k) The combined total of all fees

received by TS&W and its affiliates for

the provision of services to the Plan,

and in connection with the provision of

services to the Portfolios in which the

Plan invested, was not in excess of

‘‘reasonable compensation’’ within the

meaning of section 408(b)(2) of the Act.

(l) The Plan did not pay any planlevel investment management fees,

investment advisory fees, or similar fees

to TS&W or an affiliate with respect to

any of the assets of such Plan which

were invested in shares of any of the

Portfolios. This condition does not

preclude the payment of investment

advisory fees or similar fees by the

Portfolios to TS&W or an affiliate under

the terms of an investment advisory

agreement adopted in accordance with

section 15 of the ’40 Act.

(m) Within 10 days of the date that

this proposed exemption is granted,

TS&W pays the Plan an amount equal to

the additional net fees attributable to

Fund E which TS&W and its affiliates

received during the period covered by

this proposed exemption (i.e., April 17,

1996 until August 26, 1996) as a result

of the investment of Fund E’s assets in

the Portfolios, plus a reasonable rate of

interest on such amount which is at

least equal to the rate of return such

assets would have earned as assets held

in Fund E during this period.

(n) Neither TS&W, DSI nor any

affiliate thereof received fees payable

pursuant to Rule 12b–1 under the ’40

Act in connection with the transactions

involving the Portfolios.

(o) All dealings between the Plan and

the Portfolios were on a basis no less

favorable to the Plan than dealings with

other shareholders of the Portfolios.

(p) TS&W provides the Second

Fiduciary of the Plan with the

following:

(1) A copy of the proposed exemption

and/or the final exemption, if granted,

when such documents become

available;

(2) A copy of an updated prospectus

of each Portfolio at least annually; and

(3) A report or statement (which may

take the form of the most recent

financial report, the current Statement

of Additional Information, or some

other written statement) which contains

a description of all fees paid by the

Portfolios to TS&W, DSI or any affiliate

thereof, upon the request of the Second

Fiduciary.

(q) All acquisitions and sales of shares

of the Portfolios on and after August 26,

1996 are made in compliance with the

terms and conditions of Prohibited

Transaction Exemption (PTE) 77–4 (42

FR 18732, April 8, 1977).3

(r) TS&W and its affiliates maintain

for a period of six years the records

necessary to enable the persons

described below in paragraph (s) to

determine whether the conditions of

this exemption have been met, except

that (1) a prohibited transaction will not

be considered to have occurred if, due

to circumstances beyond the control of

TS&W or an affiliate, the records are lost

or destroyed prior to the end of the sixyear period, and (2) no party in interest

other than TS&W or an affiliate shall be

subject to the civil penalty that may be

assessed under section 502(i) of the Act

or to the taxes imposed by section
Federal Register / Vol. 62, No. 21 / Friday, January 31, 1997 / Notices 4805

4The Second Fiduciary which acted for the Plan

was the Lewis-Gale Clinic, Inc. (the Plan Sponsor)

and the individuals who acted for the Plan Sponsor

in carrying out its responsibilities as the named

fiduciary for the Plan.

5The UAM Funds were formerly known as ‘‘The

Regis Fund, Inc.’’

4975(a) and (b) of the Code if the

records are not maintained or are not

available for examination as required by

paragraph (s) below.

(s) (1) Except as provided in

paragraph (b)(2) and notwithstanding

any provisions of section 504(a)(2) and

(b) of the Act, the records referred to in

paragraph (r) are unconditionally

available at their customary location for

examination during normal business

hours by—

(i) Any duly authorized employee or

representative of the Department or the

Internal Revenue Service,

(ii) Any fiduciary of the Plan who has

authority to acquire or dispose of shares

of the Portfolios owned by the Plan, or

any duly authorized employee or

representative of such fiduciary, and

(iii) Any participant or beneficiary of

the Plan or duly authorized employee or

representative of such participant or

beneficiary.

(2) None of the persons described in

paragraph (s)(1)(ii) and (iii) shall be

authorized to examine trade secrets of

TS&W or its affiliates, or commercial or

financial information which is

privileged or confidential.

Section III—Definitions

For purposes of this proposed

exemption:

(a) The term ‘‘TS&W’’ means

Thompson, Siegel and Walmsley, Inc.

and any affiliate thereof as defined

below in paragraph (b) of this section.

(b) An ‘‘affiliate’’ of a person includes:

(1) Any person directly or indirectly

through one or more intermediaries,

controlling, controlled by, or under

common control with the person;

(2) Any officer, director, employee,

relative, or partner in any such person;

and

(3) Any corporation or partnership of

which such person is an officer,

director, partner, or employee.

(c) The term ‘‘control’’ means the

power to exercise a controlling

influence over the management or

policies of a person other than an

individual.

(d) The term ‘‘Portfolios’’ means the

TS&W Equity and Fixed Income

Portfolios and the DSI Money Market

Portfolio, each a series of the UAM

Funds, Inc., an open-end series

investment company registered under

the ’40 Act, with respect to which

TS&W and DSI, respectively serve as the

investment adviser and for which UAM

Fund Services provides certain

‘‘secondary services’’ as defined below

in paragraph (h).

(e) The term ‘‘net asset value’’ means

the amount for purposes of pricing all

purchases and sales calculated by

dividing the value of all securities,

determined by a method as set forth in

the Portfolio’s prospectus and statement

of additional information, and other

assets belonging to the Portfolio, less the

liabilities charged to each such

Portfolio, by the number of outstanding

shares.

(f) The term ‘‘relative’’ means a

‘‘relative’’ as that term is defined in

section 3(15) of the Act (or a ‘‘member

of the family’’ as that term is defined in

section 4975(e)(6) of the Code), or a

brother, a sister, or a spouse of a brother

or a sister.

(g) The term ‘‘Second Fiduciary’’

means a fiduciary acting for the Plan

who is independent of and unrelated to

TS&W and its affiliates. 4 For purposes

of this proposed exemption, the Second

Fiduciary will not be deemed to be

independent of and unrelated to TS&W

if:

(1) Such fiduciary directly or

indirectly controls, is controlled by, or

is under common control with TS&W or

an affiliate;

(2) Such fiduciary, or any officer,

director, partner, employee, or relative

of the fiduciary is an officer, director,

partner or employee of TS&W or an

affiliate (or is a relative of such persons);

(3) Such fiduciary directly or

indirectly receives any compensation or

other consideration for his or her own

personal account in connection with

any transaction described in this

proposed exemption.

(h) The term ‘‘Secondary Service’’

means a service other than an

investment management, investment

advisory, or similar service, which was

provided by TS&W’s affiliate, UAM

Fund Services, to the Portfolios.

EFFECTIVE DATE: The proposed

exemption, if granted, will be effective

for the subject transactions from April

16, 1996 until August 26, 1996.

Summary of Facts and Representations

1. TS&W is an investment adviser

registered under the Investment

Advisers Act of 1940. TS&W is a

wholly-owned subsidiary of United

Asset Management Corporation (UAM).

Several of UAM’s wholly-owned

subsidiaries, including TS&W, serve as

investment advisers to series of UAM

Funds, Inc. (the UAM Funds),5 an openend, series management investment

company registered under the ’40 Act.

Another wholly-owned subsidiary of

UAM Funds, UAM Fund Distributors,

Inc. (UAM Distributors) serves as sole

distributor of shares of the UAM Funds.

TS&W serves as an investment adviser

to several individual and institutional

clients, including employee benefit

plans covered under the Act. Another of

UAM’s wholly-owned subsidiaries,

Dewey Square Investors Corporation

(i.e. DSI), is the investment adviser for

additional series of the UAM Funds. As

discussed further below, the

transactions which are the subject of

this proposed exemption involve the

acquisition and sale of shares of a series

of the UAM Funds by a single employee

benefit plan—the Lewis-Gale Clinic, Inc.

Profit Sharing Plan (i.e. the Plan)—for

which TS&W serves as a fiduciary under

the Act.

2. The UAM Funds, for which TS&W

acts as an investment adviser, that are

involved in the transactions covered by

this proposed exemption, are the TS&W

Equity Portfolio, the TS&W Fixed

Income Portfolio, and the TS&W

International Equity Portfolio (referred

to hereafter collectively as ‘‘the

Portfolios’’ or individually as a ‘‘TS&W

Portfolio’’).

TS&W is paid an asset-based annual

fee for its investment advisory services

to each of the Portfolios. These fees,

which are a specified percentage of the

net asset value of the particular

Portfolio, are as follows: (i) 0.75 percent

for the TS&W Equity Portfolio; (ii) 1.00

percent for the TS&W International

Equity Portfolio; and (iii) 0.45 percent

for the TS&W Fixed Income Portfolio.

Each TS&W Portfolio is sold on a

completely no-load basis. The applicant

states that there are no redemption fees

or exchange fees, and no distribution

costs or ‘‘12b–1 fees’’ (fees payable

pursuant to a distribution plan

described in SEC Rule 12b–1 under the

’40 Act) incurred by the Portfolios.

Each TS&W Portfolio may issue

shares to investors in exchange for

securities—i.e. on an in-kind basis—if

such securities are eligible for

acquisition by that Portfolio. Securities

acquired by a TS&W Portfolio on an inkind basis must be valued at the closing

price for such securities as determined

by independent market sources on the

day on which they are accepted by the

Portfolio. All valuations of such

securities must be made in accordance

with SEC Rule 17a–7(b).

DSI also acts as the investment

adviser to a series of the UAM Funds

known as the DSI Money Market

Portfolio (i.e. the DSI Portfolio). DSI is

paid an asset-based annual fee for its

investment advisory services to the DSI

Portfolio. This fee is currently 0.18

percent of the net asset value of the DSI
4806 Federal Register / Vol. 62, No. 21 / Friday, January 31, 1997 / Notices

6As disclosed in the prospectus for the DSI

Portfolio, DSI’s gross fee is actually 0.40 percent.

However, since July 1, 1995 and until further

notice, DSI has voluntarily agreed to waive a

portion of its fee such that its actual fee, taking into

account the waiver, is only 0.18 percent.

7The Department is not providing any opinion in

this proposed exemption as to whether the fees

received by TS&W and its affiliates were reasonable

in connection with the services provided to the

Plan, during the period covered by the proposed

exemption, nor whether the conditions of section

408(b)(2) of the Act and the regulations thereunder

were met (see 29 CFR 2550.408b–2).

8As noted in footnote 1 above, PTE 77–4 permits

the purchase and sale by an employee benefit plan

of shares of a registered, open-end investment

company when a fiduciary with respect to the plan

is also the investment adviser for the investment

company, provided that certain conditions are met.

Such conditions require, among other things, that

the plan may not pay an investment management,

investment advisory or similar fee with respect to

the plan assets invested in such shares for the entire

period of such investment. However, Section II(c)

of PTE 77–4 states that this condition does not

preclude the payment of investment advisory fees

by the investment company under the terms of an

investment advisory agreement adopted in

accordance with section 15 of the ’40 Act. In

addition, Section II(c) states further that this

condition does not preclude payment of an

investment advisory fee by the plan based on total

plan assets from which a credit has been subtracted

representing the plan’s pro rata share of investment

advisory fees paid by the investment company.

9The Department is expressing no opinion in this

proposed exemption regarding whether any

transactions with the TS&W International Equity

Portfolio under the circumstances described herein

were covered by PTE 77–4.

Portfolio.6 The DSI Portfolio is also sold

on a no-load basis, and there are no

redemption fees or exchange fees, and

no distribution costs or ‘‘12b–1 fees’’

incurred for the Portfolio.

3. Prior to April 15, 1996, the

administrator of the UAM Funds was

Chase Global Funds Service Company

(Chase Global), a subsidiary of Chase

Manhattan Bank, the UAM Funds’

custodian. Chase Global and Chase

Manhattan Bank are not related to

TS&W or UAM. In its capacity as

administrator, Chase Global provided

administrative, fund accounting,

dividend disbursing and transfer agent

services to the UAM Funds. Since April

15, 1996, UAM Fund Services, Inc. (i.e.

UAM Fund Services), a wholly-owned

subsidiary of UAM, has been

responsible for performing and

overseeing these ‘‘secondary services’’

for the UAM Funds. UAM Fund

Services has subcontracted the

performance of certain of the

‘‘secondary services’’ to Chase Global.

TS&W states that the decision to engage

UAM Fund Services to provide these

‘‘secondary services’’ to the UAM

Funds, including the Portfolios, as well

as the decision to subcontract certain of

such services to Chase Global, was made

by the Board of Directors of the UAM

Funds—the majority of whose members

are independent of TS&W.

Each TS&W Portfolio pays a fee for

administrative services to UAM Fund

Services which is comprised of two

parts: (i) A Portfolio-specific asset-based

fee which is retained by UAM Fund

Services, and (ii) a sub-administration

asset-based fee which UAM Fund

Services pays to Chase Global. The

Portfolio-specific fees which are

retained by UAM Fund Services are .06

percent for the TS&W Equity and

International Equity Portfolios and .04

percent for the TS&W Fixed Income

Portfolio. Chase Global’s fee is based on

a sliding scale that is applied to the total

assets of the UAM Funds, which is

allocated to the various series of the

UAM Funds, including the Portfolios,

on the basis of their relative assets.

The applicant represents that the

combined total of all fees received by

TS&W and its affiliates for the provision

of services to the Plan, and in

connection with the provision of

services to the Portfolios in which the

Plan invests, is not in excess of

‘‘reasonable compensation’’ within the

meaning of section 408(b)(2) of the Act.7

4. The Plan is a defined contribution,

profit sharing plan maintained by the

Lewis-Gale Clinic, Inc. (the Plan

Sponsor). The Plan Sponsor is a

provider of medical services located at

1802 Braeburn Drive in Salem, Virginia.

As of September 1, 1996, there were

approximately 935 Plan participants,

555 of whom were invested in Fund E

through their Plan accounts. The value

of the Plan’s assets was approximately

$69,442,775, as of April 1, 1996.

Approximately 30.8 percent of the value

of the Plan’s total assets (i.e.

$21,368,628) was held in Fund E as of

such date. The Plan’s trustee and

custodian was and continues to be First

Union National Bank of North Carolina

(First Union).

5. The applicant represents that since

1979 TS&W has been retained by the

Plan Sponsor to manage a balanced

portfolio of Plan assets on a separate

account basis, known as ‘‘Fund E’’ for

Plan administration purposes,

consisting of a mix of equity and fixed

income securities and cash equivalents.

The most recent version of the

investment management agreement

between the Plan Sponsor and TS&W

was executed on March 23, 1992 (the

Management Agreement). Pursuant to

the Management Agreement, TS&W has

full power to supervise and direct the

investment of the assets comprising

Fund E, in its discretion, in accordance

with such objectives as the Plan

Sponsor may, from time to time, furnish

TS&W in writing. Consistent with the

Plan Sponsor’s objectives, TS&W

invested the assets of Fund E in a mix

of equity and fixed income securities

and cash equivalents. TS&W has met

and continues to meet with the Plan

Sponsor twice a year to report on the

performance of Fund E and other

matters relating to its administration,

and to discuss the Plan Sponsor’s

objectives for Fund E and any changes

thereto.

Pursuant to the Management

Agreement, TS&W receives an assetbased annual fee from the Plan that is

based on a sliding scale. This fee

schedule is as follows:

Assets under management Fee

(percent)

first $500,000 ............................ 1.00

Assets under management Fee

(percent)

next $500,000 ........................... 0.75

next $4,000,000 ........................ 0.60

next $10,000,000 ...................... 0.50

next $15,000,000 ...................... 0.40

next $20,000,000 ...................... 0.30

next $50,000,000 ...................... 0.25

Pursuant to a letter agreement dated

September 13, 1993 (the Letter

Agreement), the Plan Sponsor

authorized TS&W to invest a portion of

the assets of Fund E in shares of the

TS&W International Equity Portfolio.

The applicant states that it was the

intention of the parties that by executing

the Letter Agreement, and by the

disclosures made by TS&W relating

thereto, that the subsequent investments

of Fund E assets in the TS&W

International Equity Portfolio would

comply with the conditions of PTE 77–

4.8 Since September 13, 1993, various

cash purchases and sales of shares of the

TS&W International Equity Portfolio

have been made on behalf of the Plan.

TS&W represents that these transactions

have been made in compliance with the

terms and conditions of PTE 77–4.

Therefore, the applicant is not

requesting an individual exemption for

such transactions.9

6. The applicant states that at all

times relevant to the transactions by the

Plan to which this proposed exemption

relates, the Plan permitted participants

to self-direct the investment of their

respective account balances among

various investment choices made

available by the Plan Sponsor, one of

which is Fund E. The Plan Sponsor is

the named fiduciary responsible for

designating the investment options

made available to participants and

beneficiaries and for hiring and firing
Federal Register / Vol. 62, No. 21 / Friday, January 31, 1997 / Notices 4807

10The applicant states that the ‘‘market’’ risk is

the risk that the securities would appreciate in

value during the approximately three-day period

following their sale by the Plan and ending upon

the purchase of comparable securities by the TS&W

Portfolios. In that event, the value of Fund E and

each participant’s interest in Fund E would drop by

an amount roughly equal to the amount by which

it would have increased had the securities not been

sold.

11The applicant has submitted a written

statement from Horace Whitworth (Mr. Whitworth),

the TS&W investment professional with primary

responsibility for the firm’s relationship with the

Plan Sponsor and the Plan, which summarizes the

relevant events leading up to the subject

transactions. Mr. Whitworth states that the

appropriate representatives of the Plan Sponsor

orally approved all aspects of the transactions in

advance during the course of numerous telephone

conversations and personal meetings with him

during February, March and April 1996.

Representatives of the Plan Sponsor have also

confirmed their approval of the transactions, and

the events leading to the transactions, in a separate

declaration (see Paragraph 8 above).

12The applicant states that for purposes of

determining the ‘‘closing price’’ for all of the

securities on the date of the transfer, the timing of

the valuations was based on the close of the market

for the New York Stock Exchange (i.e. 4:00 pm

EST). At this time, all of the various securities were

valued in accordance with the requirements of Rule

17a-7.

the Plan’s investment managers. The

applicant states further that neither

TS&W, DSI, the UAM Funds, nor any of

their affiliates, is related to the Plan

Sponsor and its affiliates. Therefore, for

purposes of the conditions of this

proposed exemption, the applicant

maintains that the Plan Sponsor acted as

a Second Fiduciary which was

independent of and unrelated to TS&W

and its affiliates (see Section III(g) and

footnote 2 above).

7. The circumstances which prompted

the prohibited transactions that would

be covered by the requested exemption,

if granted, are described in the following

paragraphs.

In June 1995, the Plan Sponsor

informed TS&W that it was considering

a change in the self-direction feature of

the Plan whereby participants would be

able to make investment elections and

changes thereto on a daily basis, in lieu

of the quarterly election procedures

then in place, and that it wished to

retain Fund E as an investment option

after the shift to a daily election format

was achieved. Specifically, the Plan

Sponsor wished to retain TS&W to

continue to manage a balanced

investment fund which would be made

available to participants as an

investment option, provided that such

investment fund could be structured to

accommodate daily transactions by

participants into and out of that Fund.

TS&W agreed to work with First Union

to structure Fund E so that it could

accommodate daily transactions during

1996.

During the early part of 1996, TS&W

met with the Plan Sponsor to propose a

restructuring of Fund E to accommodate

the Plan’s daily transaction format. The

essence of the proposal was that this

accommodation would be achieved by

converting the individual equity and

fixed income securities held by Fund E

to shares of the TS&W Equity and Fixed

Income Portfolios. The applicant states

that the primary basis for this proposal

was that the TS&W Equity and Fixed

Income Portfolios (as well as the TS&W

International Equity Portfolio, shares of

which were already held by Fund E)

were already subject to daily valuation

requirements under the ’40 Act, and that

nearly all of the securities held by Fund

E were held by the TS&W Equity and

Fixed Income Portfolios. In addition,

TS&W proposed that the conversion of

the equity and fixed income securities

held by Fund E to shares of the TS&W

Equity and Fixed Income Portfolios

would be accomplished by transferring

those securities to such Portfolios on an

in-kind basis. The in-kind transfer was

proposed in order to avoid the brokerage

costs and market risk 10 that would

result if the securities in Fund E were

sold for cash and the cash used to

purchase shares of the Portfolios, which

cash would then be used by the

Portfolios to purchase additional

securities.

The applicant states that after further

discussions between TS&W, First Union

and Chase Global over the following two

months (i.e. February and March 1996),

TS&W also proposed that the cash

equivalent holdings of Fund E, which

had been invested in the Federated

Treasury Obligation Fund, should be

invested in the DSI Portfolio upon the

conversion of Fund E’s equity and fixed

income holdings as described above.

The rationale for this aspect of TS&W’s

proposal was that the use of the DSI

Portfolio would facilitate the daily

valuation of Fund E necessitated by the

Plan’s daily valuation structure, as well

as Fund E’s cash management. Such

transactions would involve the

investment of new money coming into

Fund E, the transfer of cash out of Fund

E in connection with investments by

participants in other Plan investment

options or Plan distributions, and the

shifting of Fund E’s holdings between

the Portfolios. These goals would be

facilitated in this manner because the

TS&W Portfolios and the DSI Portfolio,

all being series of the UAM Funds,

shared a single mutual fund custodian

(i.e. Chase Manhattan Bank) and a single

mutual fund administrator (i.e. UAM

Fund Services).

TS&W also proposed that, in

accordance with the Management

Agreement, it would continue to

exercise authority to maintain the

desired balance of equity, fixed income,

international and cash equivalent

holdings for Fund E by making

adjustments to Fund E’s holdings of

shares of the TS&W Portfolios and the

DSI Portfolio, to take into account

fluctuations in the relative net asset

values of the Portfolios and any changes

in the Plan Sponsor’s stated objectives

with respect to the composition of Fund

E. Finally, TS&W proposed that it

would not charge a fee for these

allocation services, it would not charge

any Plan-level advisory fee with respect

to assets invested in the TS&W

Portfolios or the DSI Portfolio, and it

would incur any additional costs

required to value Fund E and units

thereof on a daily basis.

After receiving copies of current

prospectuses for the TS&W Portfolios

and the DSI Portfolio, and additional

information with respect to the fee

structures of the Portfolios, the Plan

Sponsor agreed orally to all aspects of

TS&W’s conversion proposal as

described above.11 Therefore, on April

16, 1996, TS&W directed First Union to

transfer the fixed income assets of Fund

E to the TS&W Fixed Income Portfolio

in exchange for shares of that Portfolio,

and directed First Union to transfer the

equity assets of Fund E to the TS&W

Equity Portfolio in exchange for shares

of that Portfolio.

Each of TS&W’s directions to First

Union was confirmed in writing the

next day (April 17, 1996). TS&W’s

confirming letter to First Union, and the

enclosures thereto, included a listing of

all fixed income and equity securities

held by Fund E as of April 16, 1996. The

trade date for the transfers was April 16,

1996. TS&W’s instructions were carried

out by First Union on the dates

indicated. The value of each security

transferred to the TS&W Equity and

Fixed Income Portfolios was determined

in accordance with SEC Rule 17a-7(b)

under the ’40 Act. In this regard, the

applicant states that the Fund E assets

were all publicly and actively traded

stocks and debt securities which were

readily valued by reference to the

closing price for such securities as

determined by independent market

sources on the date of the transfer.12 The

Plan received shares of each of the

TS&W Portfolios which had a total net

asset value equal to the value of all of

the Plan’s assets transferred in-kind to

such Portfolio on the date of the transfer

(i.e. April 16, 1996). The actual

valuation of the securities and the

determination of the number of shares
4808 Federal Register / Vol. 62, No. 21 / Friday, January 31, 1997 / Notices

13 Information supplied by TS&W indicates that

after the in-kind transfer of Fund E’s assets to

TS&W Equity and Fixed Income Portfolios, there

were no subsequent cash purchases of these

Portfolios by Fund E during the period covered by

this proposed exemption. However, there were

subsequent sales of shares of the TS&W Portfolios

and there were both purchases and sales of shares

of the DSI Portfolio on a cash basis during this

period.

14TS&W represents that its compliance officer

reviewed TS&W’s procedural checklist at the time

of such transactions and erroneously assumed that

the written authorization required by PTE 77–4

already existed for all of the TS&W Portfolios. In

this regard, TS&W states that although the Letter

Agreement only specifically authorized investments

by Fund E in the TS&W International Equity

Portfolio, there was a mutual fund registration form

and other information in TS&W’s file for the Plan

which appeared to indicate that authorization had

been made by the Plan Sponsor for all three TS&W

Portfolios. Therefore, TS&W states that the

transactions were carried out in good faith.

15See DOL Opinion Letter 94–35A, n. 3

(November 3, 1994).

of each Portfolio to be issued to Fund

E were determined by Chase Global.

TS&W’s confirmation of the April 16

transfers was dated April 22, 1996 and

was delivered by mail to the Plan

Sponsor within seven (7) days (see

Section II(i) above).

The Plan’s holding in the Federated

Treasury Obligation Fund were

redeemed shortly thereafter. By letter

dated April 29, 1996, TS&W directed

First Union to purchase shares of the

DSI Portfolio for the Plan for cash. This

transaction occurred the following day

(April 30). A confirmation statement for

the transaction dated April 30, 1996,

was delivered by mail to the Plan

Sponsor within seven (7) days (see

Section II(i) above).

The applicant represents that the

value of Fund E’s investment in the

TS&W Equity and Fixed Income

Portfolios made on April 16, 1996,

taking into account the reinvestment of

dividends, increased by 5.2 percent and

2.1 percent, respectively, through

September 30, 1996.

The applicant states that after the

initial acquisition of shares of the TS&W

Equity Portfolio, the TS&W Fixed

Income Portfolio, and the DSI Portfolio,

TS&W directed certain additional

purchases and sales of shares of the

Portfolios in connection with routine

Fund E administration. These

transactions were occasioned by

additions to and withdrawals from Fund

E attributable to participant-directed

investments or distributions, and by the

reallocation of Fund E holdings between

the TS&W Portfolios and the DSI

Portfolio.13 TS&W is requesting that the

proposed exemption cover these

subsequent transactions by Fund E with

the Portfolios for the period from April

17, 1996 until August 26, 1996, since

the Letter Agreement at that time only

covered transactions with the TS&W

International Equity Portfolio. TS&W

states that the appropriate TS&W

personnel at this time erroneously

believed that all transactions with the

Portfolios had been authorized under

the Letter Agreement and were covered

under PTE 77–4.14

8. On August 12, 1996, the Board of

Directors of the Plan Sponsor executed

by unanimous consent a resolution

approving, ratifying and affirming the

in-kind transfer of assets of Fund E to

the TS&W Equity Portfolio and the

TS&W Fixed Income Portfolio, as well

as the cash purchases of shares of the

DSI Portfolio as of April 15, 1996.

Further, in a new letter agreement

between the parties dated August 26,

1996 (the New Letter Agreement), the

Plan Sponsor acknowledged that it had

received the then current prospectuses

for the TS&W Equity and Fixed Income

Portfolios and the DSI Portfolio prior to

the April 1996 transactions, and that the

in-kind transfers of securities to the

TS&W Equity and Fixed Income

Portfolios and the cash transfers to the

DSI Portfolio (in exchange for shares of

such Portfolios) were carried out with

its knowledge and consent. Pursuant to

the New Letter Agreement, all future

purchases and redemptions of shares of

the Portfolios will be effected in

accordance with the requirements of

PTE 77–4. TS&W represents in the New

Letter Agreement that it will provide

advance notice to the Plan Sponsor of

any increase in the investment advisory

or other fees for the Portfolios and, in

such event, will attempt to secure the

Plan Sponsor’s written authorization to

continue the investment of the Plan’s

assets in the corresponding Portfolios,

as required by the conditions of PTE 77–

4.

9. The applicant represents that the

subject transactions for which an

individual exemption is requested

occurred without TS&W realizing that

the requirements of PTE 77–4 had not

been met at the time of the transactions.

Following the completion of the April

1996 transactions, the applicant states

that in May 1996 First Union suggested

to TS&W that such transactions raised

additional prohibited transaction issues

under the Act because the assets of

Fund E were transferred in-kind to the

TS&W Equity and Fixed Income

Portfolios. TS&W states that this was the

first time that it had any knowledge that

additional prohibited transaction issues

were involved with the asset transfers.

TS&W consulted with its present legal

counsel who then advised that the

protections of PTE 77–4 were not

applicable for in-kind transfers of

assets.15

The applicant states that the subject

transactions were carried out by TS&W

in good faith and that TS&W acted in

the best interests of the Plan and its

participants and beneficiaries.

Specifically, as discussed above, TS&W

caused the Plan to engage in the

transactions in order to accommodate

the Plan Sponsor’s dual objectives of: (i)

Changing the self-direction feature of

the Plan from a quarterly-exchange

format to a daily-exchange format, and

(ii) retaining the Plan’s assets in the

same type of equity and fixed income

securities as had been chosen by TS&W

as the investment manager for Fund E’s

portfolio. TS&W states that the most

practical option to achieve this result

was to convert the equity and fixed

income holdings of Fund E to shares of

the TS&W Equity and Fixed Income

Portfolios, an option which the Plan

Sponsor endorsed orally prior to the

transaction. In this regard, TS&W

informed the Plan Sponsor that it would

cost the Plan an additional $50,000 per

year, at a minimum, to implement a

daily valuation and investment format

for a separate account portfolio of a size

and type comparable to Fund E. This

amount would have been approximately

$158,225 annually (i.e. a total annual fee

of .740 percent), based on the value of

Fund E’s assets at that time, whereas the

investment advisory fees for managing

the assets through the Portfolios was

approximately $131,840 (i.e. a total

annual fee of .617 percent). Moreover, as

noted below, virtually all of the equity

and debt securities held by Fund E were

already held by the TS&W Equity and

Fixed Income Portfolios, respectively.

Thus, TS&W states that the most

efficient and economical method of

accomplishing the Plan Sponsor’s

objectives was to invest the Fund E

assets in the TS&W Portfolios on an inkind basis. Similarly, TS&W believed

that daily transfers into and out of, and

distributions from and valuations of,

Fund E would be facilitated if Fund E’s

cash equivalent holdings were invested

in the DSI Portfolio rather than a nonUAM money market fund.

TS&W represents that by converting

Fund E’s holdings of individual equity

and fixed income securities to shares of

the TS&W Equity and Fixed Income

Portfolios, respectively, Fund E’s

investment mix and market exposure

were not materially changed. TS&W

states that a comparison of TS&W’s

April 22, 1996 letter to the Plan Sponsor

confirming the initial in-kind transfers
Federal Register / Vol. 62, No. 21 / Friday, January 31, 1997 / Notices 4809

16 [132/365] × [$130,762¥$108,225] = $8,150.

17See, for example, PTE 94–82 involving

Marshall & Ilsley Trust Company (59 FR 62422,

December 5, 1994); PTE 94–86 involving The Bank

of California, N.A. (59 FR 65403, December 19,

1994); PTE 95–33 involving Bank South, N.A. (60

FR 20773, April 27, 1995); PTE 95–48 involving

Mellon Bank, N.A. (60 FR 32995, June 26, 1995);

and PTE 95–49 involving Norwest Bank (60 FR

33000, June 26, 1995). See also the Proposed Class

Exemption for Bank Collective Investment Fund

Conversion Transactions, (61 FR 58224, November

13, 1996), submitted on behalf of Federated

Investors.

to the list of holdings of the TS&W

Equity and Fixed Income Portfolios as of

April 12, 1996, reveals that the holdings

of Fund E and the TS&W Portfolios were

almost identical. In this regard, 47 out

of 50 of the equity securities transferred

in-kind to the TS&W Equity Portfolio,

representing approximately 98 percent

of the aggregate value of all such

securities, were held by the TS&W

Equity Portfolio as of April 12, 1996. In

addition, 23 out of 25 of the fixed

income securities transferred to the

TS&W Fixed Income Portfolio,

representing approximately 94 percent

of the aggregate value of such securities,

were held by the TS&W Fixed Income

Portfolio as of April 12, 1996. TS&W

also notes that the Plan and its

participants and beneficiaries have not

suffered a loss as a result of the subject

transactions and that the investment

performance of the assets during the

period covered by the proposed

exemption was comparable to the

performance of the securities markets in

general and to TS&W’s performance

outside of the Portfolios.

Within 10 days of the date that this

proposed exemption is granted, TS&W

has agreed to pay to the Plan an amount

equal to the additional net fees

attributable to Fund E which TS&W and

its affiliates (i.e. DSI and UAM Fund

Services) received during the period

from April 17, 1996 until August 26,

1996, as a result of the investment of

Fund E assets in the Portfolios. In

addition, TS&W has agreed to pay a

reasonable rate of interest on such

amount which is at least equal to the

rate of return such assets would have

earned as assets held in Fund E during

this period. TS&W estimates that the

amount of the additional fees during

this 132-day period was approximately

$8,150. This estimate is based on the

following data:

(i) the total investment management

fees that would have been charged by

TS&W at the Plan-level (prior to the

implementation of a daily valuation

arrangement) on an annual basis for the

total assets in Fund E (i.e. $21,368,628

as of April 16, 1996) was approximately

$108,225;

(ii) the total investment advisory and

other fees that would have been

received by TS&W and its affiliates from

the Portfolios for such assets on an

annual basis (less the $12,000 which

TS&W paid to Chase Global) was

approximately $130,762; and

(iii) the difference between the

amounts described above in (i) and (ii)

on an annual basis as adjusted for the

132-day period involved.16

10. TS&W represents that the Plan

and its participants and beneficiaries

were afforded protections comparable to

those provided by PTE 77–4 and various

individual exemptions granted by the

Department for the conversion of

collective investment funds maintained

by a bank to a mutual fund for which

such bank or an affiliate acts as an

investment adviser.17 Such protections

include: (i) No commissions or 12b–1

fees were paid by the Plan in connection

with the transactions; (ii) TS&W did not

collect a Plan-level fee on assets

invested in the TS&W Portfolios or the

DSI Portfolio; (iii) advance disclosures

were made to the Plan Sponsor, which

was an independent Plan fiduciary (i.e.

a Second Fiduciary); (iv) prior approval

was obtained from the Plan Sponsor, as

described herein; (v) the securities

transferred in-kind were valued in

accordance with the requirements of

SEC Rule 17a–7(b) under the ’40 Act;

(vi) the Plan received shares of each of

the TS&W Portfolios which had a total

net asset value equal to the value of all

of the Plan’s assets transferred in-kind

to such Portfolio on the date of the

transfer (i.e. April 16, 1996) and (vii) a

written confirmation of the initial inkind transfers was delivered by TS&W

within a matter of a few days after those

transfers were completed containing the

appropriate information to inform the

Plan Sponsor of the essential details

regarding the transactions. In addition,

pursuant to the New Letter Agreement

between TS&W and the Plan Sponsor

dated August 26, 1996, all future

acquisitions and redemptions of shares

of the Portfolios on behalf of the Plan’s

Fund E assets will be carried out in

accordance with the requirements of

PTE 77–4.

11. In summary, the applicant

represents that the subject transactions

met the statutory criteria of section

408(a) of the Act because, among other

things: (a) No sales commissions or

other fees were paid by the Plan in

connection with the acquisition of

shares of the Portfolios and no

redemption fees were paid by the Plan

in connection with the sale by the Plan

of such shares; (b) the Plan Sponsor, as

an independent Plan fiduciary, received

advance notice of the transactions and

full disclosure of information

concerning the Portfolios; (c) on the

basis of the information referred to

above, the Plan Sponsor orally approved

the transactions, including the initial inkind transfer of Fund E’s assets to the

TS&W Portfolios in exchange for shares

of such Portfolios, prior to the

transactions; (d) the Plan Sponsor has

acknowledged and confirmed in writing

that it provided advance oral approval

of the transactions; (e) the assets of the

Plan transferred to the TS&W Portfolios

were publicly-traded securities that

were valued at their closing prices

(determined as of the close of the New

York Stock Exchange on the date of the

transfer) in accordance with

independent market sources pursuant to

the procedures described under SEC

Rule 17a–7(b); (f) the Plan received

shares of each of the TS&W Portfolios

which had a total net asset value equal

to the value of all of the Plan’s assets

transferred in-kind to such Portfolio on

the date of the transfer; (g) TS&W sent

by regular mail to the Plan Sponsor, not

more than seven (7) days after the

completion of the in-kind transfers to

the TS&W Portfolios, a written

confirmation which contained the

relevant information regarding the

transactions; (h) the Plan did not pay

any plan-level investment management

fees, investment advisory fees, or

similar fees to TS&W or an affiliate with

respect to any of the assets of such Plan

which were invested in shares of any of

the Portfolios; (i) the combined total of

all fees received by TS&W and its

affiliates for the provision of services to

the Plan, and in connection with the

provision of services to the Portfolios in

which the Plan invested, was not in

excess of ‘‘reasonable compensation’’

within the meaning of section 408(b)(2)

of the Act; (j) TS&W will pay the Plan

an amount equal to the additional net

fees attributable to Fund E which TS&W

and its affiliates received during the

period from April 17, 1996 until August

26, 1996, as a result of the investment

of Fund E’s assets in the Portfolios, plus

a reasonable rate of interest on such

amount; (k) neither TS&W, DSI nor any

affiliate thereof received fees payable

pursuant to Rule 12b–1 under the ’40

Act in connection with the transactions

involving the Portfolios; and (l) all

dealings between the Plan and the

Portfolios were on a basis no less

favorable to the Plan than dealings with

other shareholders of the Portfolios.

Notice to Interested Persons

Notice of the proposed exemption

shall be given to all interested persons,

including each Plan participant who
4810 Federal Register / Vol. 62, No. 21 / Friday, January 31, 1997 / Notices

had interests in Fund E during the

period covered by the proposed

exemption. Notice to interested persons

shall be provided by first class mail

and/or posting in the workplace within

sixty (60) days following the publication

of the proposed exemption in the

Federal Register. Such notice shall

include a copy of the notice of proposed

exemption as published in the Federal

Register and a supplemental statement

(see 29 CFR 2570.43(b)(2)) which

informs all interested persons of their

right to comment on and/or request a

hearing with respect to the proposed

exemption. Comments and requests for

a public hearing are due within ninety

(90) days following the publication of

the proposed exemption in the Federal

Register.

FOR FURTHER INFORMATION CONTACT: Mr.

E. F. Williams of the Department,

telephone (202) 219–8194. (This is not

a toll-free number.)

General Information

The attention of interested persons is

directed to the following:

(1) The fact that a transaction is the

subject of an exemption under section

408(a) of the Act and/or section

4975(c)(2) of the Code does not relieve

a fiduciary or other party in interest of

disqualified person from certain other

provisions of the Act and/or the Code,

including any prohibited transaction

provisions to which the exemption does

not apply and the general fiduciary

responsibility provisions of section 404

of the Act, which among other things

require a fiduciary to discharge his

duties respecting the plan solely in the

interest of the participants and

beneficiaries of the plan and in a

prudent fashion in accordance with

section 404(a)(1)(b) of the act; nor does

it affect the requirement of section

401(a) of the Code that the plan must

operate for the exclusive benefit of the

employees of the employer maintaining

the plan and their beneficiaries;

(2) Before an exemption may be

granted under section 408(a) of the Act

and/or section 4975(c)(2) of the Code,

the Department must find that the

exemption is administratively feasible,

in the interests of the plan and of its

participants and beneficiaries and

protective of the rights of participants

and beneficiaries of the plan;

(3) The proposed exemptions, if

granted, will be supplemental to, and

not in derogation of, any other

provisions of the Act and/or the Code,

including statutory or administrative

exemptions and transitional rules.

Furthermore, the fact that a transaction

is subject to an administrative or

statutory exemption is not dispositive of

whether the transaction is in fact a

prohibited transaction; and

(4) The proposed exemptions, if

granted, will be subject to the express

condition that the material facts and

representations contained in each

application are true and complete and

accurately describe all material terms of

the transaction which is the subject of

the exemption. In the case of continuing

exemption transactions, if any of the

material facts or representations

described in the application change

after the exemption is granted, the

exemption will cease to apply as of the

date of such change. In the event of any

such change, application for a new

exemption may be made to the

Department.

Signed at Washington, DC, this 28th day of

January, 1997.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

U.S. Department of Labor.

[FR Doc. 97–2387 Filed 1–30–97; 8:45 am]

BILLING CODE 4510–29–P

[Prohibited Transaction Exemption 97–07;

Exemption Application Nos. D–10079

Through D–10082, et al.]

Grant of Individual Exemptions;

Pikeville National Bank & Trust

Company; Trust Company of

Kentucky; and First American Bank

(Collectively, the Banks), et al.

AGENCY: Pension and Welfare Benefits

Administration, Labor.

ACTION: Grant of individual exemptions.

SUMMARY: This document contains

exemptions issued by the Department of

Labor (the Department) from certain of

the prohibited transaction restrictions of

the Employee Retirement Income

Security Act of 1974 (the Act) and/or

the Internal Revenue Code of 1986 (the

Code).

Notices were published in the Federal

Register of the pendency before the

Department of proposals to grant such

exemptions. The notices set forth a

summary of facts and representations

contained in each application for

exemption and referred interested

persons to the respective applications

for a complete statement of the facts and

representations. The applications have

been available for public inspection at

the Department in Washington, D.C. The

notices also invited interested persons

to submit comments on the requested

exemptions to the Department. In

addition the notices stated that any

interested person might submit a

written request that a public hearing be

held (where appropriate). The

applicants have represented that they

have complied with the requirements of

the notification to interested persons.

No public comments and no requests for

a hearing, unless otherwise stated, were

received by the Department.

The notices of proposed exemption

were issued and the exemptions are

being granted solely by the Department

because, effective December 31, 1978,

section 102 of 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 proposed to the

Secretary of Labor.

Statutory Findings

In accordance with section 408(a) of

the Act and/or section 4975(c)(2) of the

Code and the procedures set forth in 29

CFR Part 2570, Subpart B (55 FR 32836,

32847, August 10, 1990) and based upon

the entire record, the Department makes

the following findings:

(a) The exemptions are

administratively feasible;

(b) They are in the interests of the

plans and their participants and

beneficiaries; and

(c) They are protective of the rights of

the participants and beneficiaries of the

plans.

Pikeville National Bank & Trust

Company; Trust Company of Kentucky;

and First American Bank (Collectively,

the Banks) Located in Pikeville and

Ashland, Kentucky

[Prohibited Transaction Exemption 97–07;

Application Numbers D–10079 Through D–

10082]

Exemption

The restrictions of sections 406(a),

406(b)(1) and 406(b)(2) of the Act and

the sanctions resulting from the

application of section 4975 of the Code,

by reason of section 4975(c)(1)(A)

through (E) of the Code, shall not apply

to: (1) The cash sales on December 28,

1994 and January 13, 1995, of certain

collateralized mortgage obligations

(CMOs) and other mortgage-backed

securities (collectively, the Securities)

held by eighty-six (86) employee benefit

plans, Keogh plans and individual

retirement accounts (IRAs) for which

the Banks act as trustee (the Plans) to

Pikeville National Corporation (PKVL),

a party in interest with respect to the

Plans; (2) the ‘‘makewhole’’ payments

made by PKVL to the Plans on January

20, 1995, in connection with the sale of

certain Securities by the Plans on the

open market on November 2, 1994; and

(3) the proposed additional

‘‘makewhole’’ and interest payments to

be made by PKVL to the Plans, as of the