42068 Federal Register / Vol. 63, No. 151 /Thursday, August 6, 1998 / Notices

transmitted by facsimile to (202) 219–

5046.

FOR FURTHER INFORMATION CONTACT:

Theda Kenney, Directorate of Safety

Standards Programs, Occupational

Safety and Health Administration, U.S.

Department of Labor, Room N–3605,

200 Constitution Avenue, NW,

Washington, DC 20210, telephone (202)

219–8061. A copy of the referenced

information collection request is

available for inspection and copying in

the Docket Office and will be mailed to

persons who request copies by

telephoning Theda Kenney at (202) 219–

8061, extension 100, or Barbara Bielaski

at (202) 219–8076, extension 142. For

electronic copies of the Information

Collection Request on the Electrical

Standards for Construction (29 CFR part

1926, Subpart K), contact OSHA’s

WebPage on the Internet at http://

www.osha.gov and click on

‘‘Regulations and Compliance.’’

SUPPLEMENTARY INFORMATION:

I. Background

The Occupational Safety and Health

Act of 1970 (the Act) authorizes the

promulgation of such health and safety

standards as are necessary or

appropriate to provide safe or healthful

employment and places of employment.

The statute specifically authorizes

information collection by employers as

necessary or appropriate for the

enforcement of the Act or for developing

information regarding the causes and

prevention of occupational injuries,

illnesses, and accidents.

The written description of the

Assured Equipment Grounding

Conductor Program (AEGP) required by

§ 1926.404(b)(1)(iii) allows employers,

employees, and OSHA compliance

officers to determine how the

requirements of the standard are being

met, including the method of recording

tests. For example, the employer’s

written program might specify the use of

yellow tape to color code every tool and

cord set. By referring to the written

program, OSHA compliance officers and

other persons can easily determine if the

employer is complying with the

program.

The posting of warning signs enables

employees to avoid accidental contact of

electrical equipment used on

construction sites. Contact with

unguarded live electrical parts,

especially at high voltage, can be

hazardous to employees.

The tagging of controls, equipment

and circuits is intended to prevent the

inadvertent reactivation of the controls,

equipment and circuits while they are

being serviced.

II. Current Actions

This notice requests public comment

on OSHA’s burden hour estimates prior

to OSHA seeking Office of Management

and Budget (OMB) approval of the

information collection requirements

contained in the Electrical Standards for

Construction (29 CFR part 1926, Subpart

K).

Type of Review: Extension of a

Currently Approved Collection.

Agency: U.S. Department of Labor,

Occupational Safety and Health

Administration.

Title: Electrical Standards for

Construction (29 CFR part 1926, Subpart

K).

OMB Number: 1218–0130.

Agency Number: Docket Number ICR–

98–31.

Affected Public: Business or other forprofit.

Number of Respondents: 278,500.

Frequency: Initially, On Occasion.

Average Time per Response: Varies

from .02 to .17 hour.

Estimated Total Burden Hours:

53,001.

Total Annualized Capital/Startup

Costs: $0.

Comments submitted in response to

this notice will be summarized and

included in the request for Office of

Management and Budget (OMB)

approval of the information collection

request. The comments will become a

matter of public record.

Signed at Washington, DC, this 15th day of

July 1998.

Charles N. Jeffress,

Assistant Secretary of Labor.

[FR Doc. 98–20959 Filed 8–5–98; 8:45 am]

BILLING CODE 4510–26–M

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

[Application No. D–10349, et al.]

Proposed Exemptions; Harris Trust &

Savings Bank

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 restrictions 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

All interested persons are invited to

submit written comments or request for

a hearing on the pending exemptions,

unless otherwise stated in the Notice of

Proposed Exemption, within 45 days

from the date of publication of this

Federal Register Notice. Comments and

requests for a hearing should state: (1)

the name, address, and telephone

number of the person making the

comment or request, and (2) the nature

of the person’s interest in the exemption

and the manner in which the person

would be adversely affected by the

exemption. A request for a hearing must

also state the issues to be addressed and

include a general description of the

evidence to be presented at the hearing.

ADDRESSES: All written comments and

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. lll, 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
Federal Register / Vol. 63, No. 151 /Thursday, August 6, 1998 / Notices 42069

1 17 CFR 270.17a–7.

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.

Harris Trust & Savings Bank and Its

Affiliates (Harris Trust) Located in

Chicago, Illinois

[Application No. D–10349]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 408(a) of the Act

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

in accordance with the procedures set

forth in 29 CFR Part 2570, Subpart B (55

FR 32836, 32847, August 10, 1990).

Section I—Exemption for Acquisition of

Fund Shares With Assets Transferred

in-Kind From a CIF

If the exemption is granted, the

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

of the Act and the sanctions resulting

from the application of section 4975 of

the Code, by reason of section

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

shall not apply, as of March 21, 1997,

to the acquisition by employee benefit

plans (the Plans), including two plans

sponsored by Harris Trust for its own

employees (the In-house Plans), of

shares of any open-end investment

companies (the Funds) registered under

the Investment Company Act of 1940

(the ’40 Act) for which Harris Trust is

an investment adviser and may provide

other services, with Plan assets

transferred in-kind to the Funds from

certain collective investment funds

maintained by Harris Trust (the CIFs), in

connection with the termination of the

CIFs, provided that the following

conditions are satisfied:

(a) For each Plan, a second fiduciary

who is unrelated to, and independent

of, Harris Trust (the Independent

Fiduciary) receives prior written notice

of the in-kind transfer of Plan assets

from a CIF to a Fund in exchange for

shares of the Fund, as well as the

disclosures described in Section II(f).

(b) On the basis of the information

described in Section II(f), the

Independent Fiduciary gives prior

written approval for each acquisition of

Fund shares with Plan assets transferred

from a CIF and the fees to be received

by Harris Trust in connection with its

services to the Fund. Such approval

must be consistent with the general

fiduciary responsibility provisions

imposed on fiduciaries by Part 4 of Title

I of the Act.

(c) No sales commissions are paid by

the Plans in connection with the

acquisition of Fund shares with Plan

assets transferred from a CIF.

(d) All or a pro rata portion of the

assets of a CIF are transferred in-kind to

a Fund in exchange for shares of the

Fund.

(e) Each Plan receives Fund shares

having a total net asset value equal to

the value of the Plan’s pro rata share of

the corresponding CIF’s assets on the

date of the in-kind transfer, based on the

current market value of the CIF’s assets

as determined in a single valuation

performed in the same manner and as of

the close of business of the same day,

using independent sources in

accordance with Securities and

Exchange Commission (SEC) Rule 17a–

7 1 of the ’40 Act and the procedures

established by the Fund pursuant to

Rule 17a–7. Such procedures require

that all securities for which a current

market value cannot be obtained by

reference to the last sales price for

transactions reported on a recognized

securities exchange or quoted in the

NASDAQ system, must be valued based

upon an average of the highest current

independent bid and lowest current

independent offer, as of the close of

business on the last business day

preceding the in-kind transfer,

determined on the basis of reasonable

inquiry from at least three sources that

are broker-dealers or pricing services

independent of Harris Trust;

(f) Within 30 days after completion of

each acquisition of Fund shares with

Plan assets transferred in-kind from a

CIF, Harris Trust sends by regular mail

to the Independent Fiduciary a written

confirmation containing the following

information:

(1) The identity of each security that

was valued for purposes of the

transaction in accordance with Rule

17a–7(b)(4);

(2) The market price, as of the date of

the in-kind transfer, of each such

security; and

(3) The identity of each pricing

service or market-maker consulted in

determining the value of such securities.

(g) Within 90 days after completion of

each acquisition of Fund shares with

Plan assets transferred in-kind from a

CIF, Harris Trust sends by regular mail

to the Independent Fiduciary a written

confirmation containing the following

information:

(1) The number of CIF units held by

the Plan immediately before the in-kind

transfer, the related per unit value, and

the total dollar amount of such CIF

units; and

(2) The number of shares in the Funds

that are held by the Plan immediately

after the in-kind transfer, the related per

share net asset value, and the total

dollar amount of such shares.

(h) The conditions set forth in

paragraphs (c), (d), (e), (f), (i), (o), (p),

and (q) of Section II are satisfied.

Section II—Exemption for Receipt of

Fees From the Funds

If the exemption is granted, the

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

of the Act and the sanctions resulting

from the application of section 4975 of

the Code, by reason of section

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

shall not apply, as of March 21, 1997,

to the receipt of fees by Harris Trust

from the Funds for acting as an

investment adviser for the Funds, as

well as for acting as the custodian,

transfer agent, sub-administrator for the

Funds, or for providing any other

‘‘secondary service’’ (as defined in

Section III(i), below) to the Funds, in

connection with the investment in

shares of the Funds by Plans for which

Harris Trust is a fiduciary (the Client

Plans), other than the In-house Plans,

provided that the following conditions

are satisfied:

(a) No sales commissions are paid by

the Client Plans in connection with the

purchase or sale of shares of the Funds,

and no redemption fees are paid in

connection with the sale of such shares

by the Client Plans to the Funds.

(b) The price paid or received by a

Client Plan for shares of a Fund is the

net asset value per share, as defined in

Section III(f), at the time of the

transaction, and is the same price which

would have been paid or received for

the shares by any other investor at that

time.

(c) Neither Harris Trust nor an

affiliate (including officers or directors,

and other persons, as defined in Section

III(b), below) purchases from or sells to

the Client Plans shares of the Funds.

(d) For each Client Plan, the

combined total of all fees received by

Harris Trust for its services to the Client

Plan, and in connection with its services

to any of the Funds in which the Client

Plan may invest, constitutes no more

than ‘‘reasonable compensation’’ within

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

Act.

(e) Harris Trust receives no fees

payable pursuant to Rule 12b–1 under

the 40 Act (12b–1 fees) in connection

with the transactions.

(f) Prior to the initial investment by a

Client Plan in any of the Funds, the

Independent Fiduciary receives full and
42070 Federal Register / Vol. 63, No. 151 /Thursday, August 6, 1998 / Notices

detailed written disclosure of

information concerning the Fund,

including, but not limited to

(1) A current prospectus for the Fund;

(2) A statement describing the fees for

investment management, investment

advisory, or other similar services, any

fees for Secondary Services, as defined

in Section III(i), and all other relevant

fees to be paid by the Client Plan and

by the Fund to Harris Trust, including

the nature and extent of any differential

between the rates of such fees;

(3) The reasons why Harris Trust

considers an investment in the Fund to

be appropriate for the Client Plan;

(4) A statement describing whether

there are any limitations applicable to

Harris Trust with respect to which

assets of a Client Plan may be invested

in the Fund, and, if so, the nature of

such limitations; and

(5) Upon request of the Independent

Fiduciary, a copy of the notice of

exemption, if granted (and a copy of this

notice of proposed exemption), once

published in the Federal Register.

(g) On the basis of the information

described in paragraph (f), the

Independent Fiduciary gives prior

written authorization for

(1) The investment of assets of the

Client Plan in shares of a Fund;

(2) The Funds in which the assets of

the Client Plan may be invested; and

(3) The fees to be paid to Harris Trust

in connection with its services to the

Funds.

Such authorization by the

Independent Fiduciary must be

consistent with the general fiduciary

provisions of Part 4 of Title I of the Act.

(h) The authorization described in

paragraph (g) is terminable by the

Independent Fiduciary at will without

penalty to the Client Plan, upon written

notice of termination to Harris Trust.

Harris Trust shall effect such

termination by selling the shares of the

Fund held by the Client Plan by the

close of the business day following the

date of receipt by Harris Trust of the

termination form (the Termination

Form), as defined in Section III(j), or any

other written notice of termination.

However, if, due to circumstances

beyond the control of Harris Trust, the

sale cannot be executed within one

business day, Harris Trust shall have

one additional business day to complete

such sale.

(i) Each Client Plan receives a credit,

either through cash, or, if applicable, the

purchase of additional shares of the

Funds pursuant to an annual election

made by the Client Plan (which may be

revoked at any time), of such Client

Plan’s proportionate share of all

investment advisory fees charged to the

Funds by Harris Trust, including any

investment advisory fees paid by Harris

Trust to third party sub-advisers, within

one business day of the receipt of such

fees by Harris Trust. The crediting of all

such fees to the Client Plans by Harris

Trust must be audited by an

independent accounting firm at least

annually to verify the proper crediting

of the fees to each Client Plan.

(j) In the event of an increase in the

rate of any fees paid by the Funds to

Harris Trust for any investment

management services, investment

advisory services, or other similar

services above the rate which has been

approved previously by an Independent

Fiduciary, in accordance with paragraph

(g), Harris Trust will provide at least 30

days’ written notice (separate from the

Fund Prospectus) to each Client Plan

invested in a Fund which is increasing

such fees.

(k) In the event of an addition of a

Secondary Service by Harris Trust to a

Fund for which a fee is charged, or in

the event of an increase in a fee paid by

the Funds to Harris Trust for any

Secondary Service (which may result

from either an increase in the rate of

such fee or a decrease in the number or

kind of services performed for such fee)

above the rate which has been approved

previously by an Independent

Fiduciary, in accordance with paragraph

(g), Harris Trust will provide at least 30

days’ written notice (separate from the

Fund Prospectus) to each Client Plan

invested in a Fund which is adding a

service or increasing its fees. Such

notice shall be accompanied by the

Termination Form.

(l) The Independent Fiduciary is

supplied with a Termination Form at

the times specified in paragraphs (k), (l),

and (m), which expressly provides an

election to terminate the authorization

described in paragraph (g), with

instructions regarding the use of the

Termination Form, including the

following information:

(1) The authorization is terminable by

the Independent Fiduciary at will

without penalty to the Client Plan, upon

written notice of termination to Harris

Trust. Harris Trust shall effect such

termination by selling the shares of the

Fund held by the Client Plan by the

close of the business day following the

date of receipt by Harris Trust of the

Termination Form, or any other written

notice of termination. However, if, due

to circumstances beyond the control of

Harris Trust, the sale cannot be

executed within one business day,

Harris Trust shall have one additional

business day to complete such sale; and

(2) Failure of the Independent

Fiduciary to return the Termination

Form will be deemed to be an approval

of the additional Secondary Service for

which a fee is charged or an increase in

the rate of any fees, if such Termination

Form is supplied pursuant to

paragraphs (k) and (l), and will result in

continuation of authorization, as

described in paragraph (g), for Harris

Trust to engage in the transactions on

behalf of the Client Plan.

(m) The Independent Fiduciary is

supplied annually with a Termination

Form during the first quarter of each

calendar year, beginning with the

calendar year immediately following the

date of publication in the Federal

Register of a notice of exemption for the

subject transactions. However, the

Termination Form need not be supplied

to the Independent Fiduciary sooner

than six months after it has been

supplied pursuant to paragraphs (k) and

(l), except to the extent required to

disclose either an additional Secondary

Service for which a fee is charged or an

increase in fees.

(n)(1) With respect to each of the

Funds in which a Client Plan invests,

Harris Trust will provide the

Independent Fiduciary of such Client

Plan:

(A) at least annually, a copy of an

updated prospectus of the Fund;

(B) upon the request of the

Independent Fiduciary, with 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 Fund to Harris

Trust; and

(2) With respect to each of the Funds

in which a Client Plan invests, in the

event such Fund places brokerage

transactions with Harris Trust, Harris

Trust, at least annually, will provide the

Independent Fiduciary of such Client

Plan with a statement specifying:

(A) the total dollar amount of

brokerage commissions of each Fund’s

investment portfolio paid to Harris

Trust by such Fund;

(B) the total dollar amount of

brokerage commissions of each Fund’s

investment portfolio that are paid by

such Fund to brokerage firms unrelated

to Harris Trust;

(C) the average brokerage

commissions per share, in cents per

share, paid to Harris Trust by each

portfolio of a Fund; and

(D) the average brokerage

commissions per share, in cents per

share, paid by each portfolio of a Fund

to brokerage firms unrelated to Harris

Trust.

(o) All dealings between the Client

Plans and the Funds are on a basis no
Federal Register / Vol. 63, No. 151 /Thursday, August 6, 1998 / Notices 42071

less favorable to the Client Plans than

dealings between the Fund and its other

shareholders holding shares of the same

class as the Client Plans.

(p) Harris Trust maintains for a period

of six years the records necessary to

enable the persons described in

paragraph (q) to determine whether the

conditions of this exemption have been

satisfied, except that

(1) a party in interest with respect to

a Plan, other than Harris Trust, shall not

be subject to a civil penalty under

section 502(i) of the Act or to the taxes

imposed by section 4975 (a) and (b) of

the Code, if such records are not

maintained or are not available for

examination, as required by paragraph

(q); and

(2) a prohibited transaction shall not

be deemed to have occurred if, due to

circumstances beyond Harris Trust’s

control, such records are lost or

destroyed prior to the end of the six year

period;

(q) Notwithstanding any provisions of

subsections (a)(2) and (b) of section 504

of the Act, Harris Trust makes the

records referred to in paragraph (p)

unconditionally available during normal

business hours at their customary

location to the following persons or a

duly authorized representative thereof:

(A) the Department or the Internal

Revenue Service; (B) any fiduciary of a

Client Plan with the authority to acquire

or dispose of shares of the Funds owned

by the Client Plan; and (C) any

participant or beneficiary of a Client

Plan. However, none of the persons

described in (B) or (C) are authorized to

examine the trade secrets of Harris

Trust, or commercial or financial

information which is privileged or

confidential.

Section III—Definitions

For purposes of this proposed

exemption:

(a) The term ‘‘Harris Trust’’ means

Harris Trust & Savings Bank and any

affiliate thereof, as ‘‘affiliate’’ is defined

in paragraph (b).

(b) The term ‘‘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 ‘‘collective investment

fund’’ or ‘‘CIF’’ means a common or

collective trust fund or pooled

investment fund maintained by Harris

Trust.

(e) The term ‘‘Fund’’ or ‘‘Funds’’

means any diversified open-end

management investment company or

companies registered under the ‘40 Act

for which Harris Trust serves as an

investment adviser, and may also

provide custodial or other services

approved by the Funds.

(f) The term ‘‘net asset value’’ per

share means the amount which is

calculated by dividing the value of all

securities (determined by a method set

forth in a Fund’s prospectus and

statement of additional information) and

other assets belonging to each portfolio

in the Fund, less the liabilities

chargeable to each such Fund portfolio,

by the number of outstanding shares.

(g) The term ‘‘relative’’ means a

‘‘relative’’ as defined in section 3(15) of

the Act (or a ‘‘member of the family’’ as

defined in section 4975(e)(6) of the

Code), or a brother, a sister, or a spouse

of a brother or a sister.

(h) The term ‘‘Independent Fiduciary’’

means a fiduciary of a Plan who is

unrelated to, and independent of, Harris

Trust. For purposes of this proposed

exemption, a Plan fiduciary will not be

deemed to be unrelated to, and

independent of, Harris Trust if

(1) such fiduciary directly or

indirectly controls, is controlled by, or

is under common control with Harris

Trust;

(2) such fiduciary, or any officer,

director, partner, employee, or relative

of such fiduciary is an officer, director,

partner, or employee of Harris Trust (or

is a relative of such persons); or

(3) Such fiduciary directly or

indirectly receives any compensation or

other consideration from Harris Trust

for his or her own personal account in

connection with any transaction

described in this proposed exemption.

However, with respect to the In-house

Plans, the Independent Fiduciary may

receive compensation from Harris Trust

in connection with the subject

transactions, provided that the amount

or payment of such compensation is not

contingent upon, nor in any way

affected by, the Independent Fiduciary’s

ultimate decision regarding the Plans’

participation in the transactions.

With the exception of the In-house

Plans, if an officer, director, partner or

employee of Harris Trust (or relative of

such persons) is a director of the Plan

fiduciary and abstains from

participation in (i) the choice of the

Plan’s investment adviser, (ii) the

approval of any purchase or sale

between the Plan and the Funds, and

(iii) the approval of any change in fees

paid by the Plan in connection with any

of the subject transactions, then

paragraph (g)(2) shall not apply.

(i) The term ‘‘Secondary Service’’

means a service other than an

investment management, investment

advisory, or similar service, which is

provided by Harris Trust to the Funds,

including, but not limited to, custodial,

accounting, transfer agent,

administrative, brokerage, or any other

service.

(j) The term ‘‘Termination Form’’

means the form supplied to the

Independent Fiduciary, at the times

specified in Section II(k), (l), and (m),

which expressly provides to the

Independent Fiduciary an election to

terminate at will the authorization

described in Section II(g) without

penalty to the Plan. The Independent

Fiduciary may use such Termination

Form to provide written notice of

termination to Harris Trust and instruct

Harris Trust to effect the termination by

selling the shares of a Fund held by the

Plan by the close of the business day

following the date of receipt by Harris

Trust of the Termination Form.

However, if, due to circumstances

beyond the control of Harris Trust, the

sale cannot be executed within one

business day, Harris Trust shall have

one additional business day to complete

such sale.

(k) The term ‘‘security’’ shall have the

same meaning as defined in section

2(36) of the ’40 Act, as amended, 15

USC 80a–2(36)(1996).

Effective Date: The proposed

exemption, if granted, will be effective

as of March 21, 1997.

Summary of Facts and Representations

1. Harris Trust & Savings Bank is an

Illinois state-chartered bank, a member

of the Federal Reserve system, and the

largest of 14 banks owned by Harris

Bankcorp, Inc. Harris Bankcorp, Inc. is

a wholly owned subsidiary of Bankmont

Financial Corp., which, in turn, is a

wholly owned subsidiary of Bank of

Montreal, a publicly traded Canadian

banking institution. Harris Trust &

Savings Bank and its affiliates are

hereafter collectively referred to as

Harris Trust.

As of December 30, 1995, Harris Trust

had total assets of approximately $17.1

billion. Harris Trust serves as trustee,

investment manager, and/or custodian

for approximately 600 Plans. As of

December 30, 1995, Harris Trust had

approximately $162 billion in Plan

assets under management, of which
42072 Federal Register / Vol. 63, No. 151 /Thursday, August 6, 1998 / Notices

2Prohibited Transaction Class Exemptions 77–4

and 97–41 (PTCE 77–4, 42 FR 18732, April 8, 1977

and PTCE 97–41, 62 FR 42830, August 8, 1997)

permit, under certain conditions, the purchase or

sale by an employee benefit plan of shares of a

registered, open-end investment company whose

investment adviser is also a fiduciary of such plan

(but not an employer of employees covered by the

plan). In Advisory Opinion 94–35A, the Department

expressed the view that the relief provided by PTCE

77–4 is unavailable for the purchase of investment

company shares other than for cash. PTCE 97–41

provides, under certain conditions, specific relief

for the purchase of investment company shares

with assets transferred in-kind from a collective

investment fund, but, like PTCE 77–4, does not

extend to in-house plans, and also requires that the

other conditions of PTCE 77–4 are satisfied (see

Section III of PTCE 97–41, 62 FR 42836). Thus,

Harris Trust has requested that all the conversion

transactions described herein, as well as its fee

arrangement (which is outside the scope of relief

afforded by either PTCE 77–4 or PTCE 97–41), be

covered by a single individual exemption.

3Prohibited Transaction Exemption 77–3 (PTCE

77–3, 42 FR 18734, April 8, 1977) permits, under

certain conditions, the acquisition or sale of shares

of a registered, open-end investment company by an

employee benefit plan covering only employees of

such investment company, employees of the

investment adviser or principal underwriter for

such investment company, or employees of any

affiliated person (as defined therein) of such

investment adviser or principal underwriter.

However, the Department, at this time, offers no

opinion as to whether PTCE 77–3 covers the

purchase of investment company shares other than

for cash.

4 In addition, Harris intends to offer Client Plans

which are invested in certain non-terminating CIFs

the opportunity to redeem for cash all or a portion

of their interests in these CIFs and purchase shares

of a corresponding Fund. These redemption

transactions will not involve in-kind exchanges and

are mentioned only in connection with the

requested exemption for the receipt of fees.

approximately $2 billion was invested

in the CIFs.

2. On January 11, 1996, the sale of a

portion of Harris Trust’s investment

management business to Citibank, N.A.

was announced. In connection with

such sale, Harris Trust terminated

certain CIFs on March 21, 1997 and

transferred the CIFs’ assets in-kind to

the Funds in exchange for shares of the

Funds. Harris Trust requests an

exemption for the in-kind transfer of

assets of Plans that were invested in

these CIFs who received shares of the

Funds. Harris Trust was a fiduciary for

Plan assets that were held in these CIFs,

and was also an investment adviser for

the Funds in which the Plans invested.2

The Plans that invested in the

terminated CIFs included not only the

Client Plans of Harris Trust but also two

In-house Plans.3 In addition, Harris

Trust represents that conversions of

other CIFs to Funds, through an in-kind

transfer of the CIFs’ assets to those

Funds in exchange for Fund shares, may

occur in the future. Thus, Harris Trust

requests that the proposed exemption

cover these future conversions,

provided that the same terms and

conditions discussed herein are

satisfied.4

Harris Trust also requests an

exemption for Harris Trust to receive

fees from the Funds for services

rendered to the Funds, in connection

with the investments made in Fund

shares by Plans for which Harris Trust

is a fiduciary. This exemption would

include those Client Plans whose assets

were transferred from a terminated CIF

but would not include assets transferred

by the In-house Plans. One affiliate of

Harris Trust, Harris Trust Bank of

Arizona, and a number of the

community banks of Harris Trust which

have trust departments, may offer shares

of the Funds to their Client Plans. These

banks include Harris Bank Naperville,

Harris Bank Wilmette, N.A., Harris Bank

Barrington, N.A., Harris Bank Winnetka,

N.A., Harris Bank St. Charles, Harris

Bank Batavia, N.A. and Harris Trust

Company of Florida.

3. The terminated CIFs consisted of

the five portfolios of an entity known as

the Harris Trust and Savings Bank Trust

for Collective Investment of Employee

Benefit Accounts. These portfolios were

(i) the Government/Agency Intermediate

Fund, (ii) the Convertible Fund, (iii) the

International Equity Fund, (iv) the

Balanced Blend Fund, and (v) the

Special Capital Fund.

The Funds corresponding to the

terminated CIFs consisted of five

portfolios of Harris Insight Funds (the

Insight Funds). These portfolios are (i)

the Intermediate Government Bond

Fund, (ii) the Convertible Securities

Fund, (iii) the International Fund, (iv)

the Balanced Fund, and (v) the SmallCap Value Fund.

The Insight Funds further consist of

the Harris Insight Funds Trust and HT

Insight Funds, Inc., both open-end,

diversified management investment

companies registered under the ‘‘40 Act.

Harris Trust serves as investment

adviser to each of the Insight Funds.

Harris Trust retains subadvisers for

certain of the Insight Funds to whom it

pays a direct fee. Harris Trust has also

entered into portfolio management

contracts with an affiliate, Harris

Investment Management, Inc., to whom

Harris Trust pays the investment

advisory fees it receives from the Funds.

Harris Trust requests that the

exemption cover not only the Insight

Funds but any mutual fund with respect

to which Harris Trust may be the

investment adviser.

The Conversion Transactions

4. Harris Trust represents that

permitting the acquisition by the Plans

of Fund shares with Plan assets

transferred in-kind to the Funds will

avoid the transaction costs that would

otherwise be incurred in liquidating CIF

assets and making the same investments

for the Funds, thus resulting in

significant savings, direct and indirect,

to the Plans. No sales commissions

(other than customary transfer charges

to parties other than Harris Trust) will

be paid by the Plans in connection with

the acquisition of Fund shares with Plan

assets transferred from a CIF. Harris

Trust believes that the Funds will offer

the Plans advantages over the CIFs as

pooled investment vehicles. In addition

to readily obtainable daily price

quotations, ease of trading, and faster

distributions (shares of a Fund may be

distributed in-kind), the Plans as

shareholders of a Fund would have the

opportunity to exercise voting and other

shareholder rights.

5. With respect to both the past

conversion of CIFs to Funds that

occurred on March 21, 1997, and the

potential conversion of other CIFs to

Funds that may occur in the future,

Harris Trust makes the following

representations regarding disclosures to

the Independent Fiduciaries for the

Plans. Prior to any conversion, Harris

Trust will provide to the Independent

Fiduciary of each Plan (including that of

the In-house Plans) written notice of

termination of the CIF, as well as full

and detailed written disclosure of

information concerning the Fund,

including, but not limited to

(1) A current prospectus for the Fund;

(2) A statement describing the fees for

investment management, investment

advisory, or other similar services,

Secondary Services, and all relevant

other fees to be paid by the Plan and by

the Fund to Harris Trust, including the

nature and extent of any differential

between the rates of such fees;

(3) The reasons why Harris Trust

considers an investment in the Fund to

be appropriate for the Plan;

(4) A statement describing whether

there are any limitations applicable to

Harris Trust with respect to which

assets of a Plan may be invested in the

Fund, and, if so, the nature of such

limitations; and

(5) Upon request of the Independent

Fiduciary, a copy of the notice of

exemption, if granted (and a copy of this

notice of proposed exemption), once

published in the Federal Register.

On the basis of this information, the

Independent Fiduciary must give prior

written approval for each acquisition of

Fund shares with Plan assets transferred

from a CIF and the fees to be received

by Harris Trust in connection with its

services to the Fund. Such approval

must be consistent with the general
Federal Register / Vol. 63, No. 151 /Thursday, August 6, 1998 / Notices 42073

5Rule 17a–7 provides an exemption from the

prohibited transaction provisions of section 17(a) of

the ’40 Act (15 U.S.C. 80a–7(a)), which prohibit,

among other things, transactions between an

investment company and its investment adviser or

affiliates of its investment adviser. Thus, Rule 17a–

7 permits transactions between the Funds and other

accounts that use the same or affiliated investment

advisers, subject to certain conditions that are

designed to insure fair valuation of the assets

involved in the transaction.

6Rule 17a–7 also includes the following

requirements: (a) the transaction must be consistent

with the investment objectives and policies of the

Fund, as described in its registration statement; (b)

the security that is the subject of the transaction

must be one for which market quotations are readily

available; (c) no brokerage commissions or other

remuneration may be paid in connection with the

transaction; and (d) the Fund’s board of directors

(i.e., those directors who are independent of the

Fund’s investment adviser) must adopt procedures

to insure that the requirements of Rule 17a–7 are

followed, and determine no less frequently than

quarterly that the transactions during the preceding

quarter were in compliance with such procedures.

fiduciary responsibility provisions of

Part 4 of Title I of the Act. Plans whose

Independent Fiduciaries do not consent

to their participation in the CIF

conversion will have their interests in

the CIF redeemed in accordance with

the terms of the CIF prior to the

conversion.

Specifically, with respect to the Inhouse Plans, Harris Trust appointed

Magna Trust Company (Magna),

formerly known as Illinois State Trust

Company, as the Independent Fiduciary

to oversee and approve the in-kind

transfer of CIF assets attributable to the

In-house Plans that were involved in the

conversions that occurred on March 21,

1997. Magna provides various services

to more than 4,900 fiduciary accounts.

These services include employee benefit

plan administration, investment

management services, and serving as

custodian of securities and investment

advisor for two bank proprietary mutual

funds. Magna is responsible for more

than $2 billion in assets, with $1.2

billion in discretionary assets.

As part of its written report, dated

January 24, 1997, Magna confirmed both

its independence from Harris Trust and

its qualifications to serve as the

Independent Fiduciary for the In-house

Plans. Magna also represented that it

understood and accepted the duties,

responsibilities, and liabilities in acting

as a fiduciary under the Act for the Inhouse Plans. Based on the disclosures

made by Harris Trust regarding the

conversion transactions, Magna

determined that participation therein

was in the best interests of, and

appropriate for, each In-house Plan.

In a supplemental report, dated July 7,

1997, Magna represented that following

the conversion transactions, it was

provided by Harris Trust with the

required confirmation statements. In

addition, Magna confirmed that the

conversion transactions were performed

in accordance with the proposed

exemption.

6. With respect to both the past

conversion of CIFs to Funds that

occurred on March 21, 1997, and any

future conversions of other CIFs to

Funds that may occur, Harris Trust

makes the following representations

regarding the valuation and other

procedures for such transactions.

All or a pro rata portion of the assets

of a CIF are transferred in-kind to a

Fund in exchange for shares of the Fund

distributed to the Plans. The assets

transferred consist entirely of cash and

marketable securities. Other CIF assets,

or assets which do not meet the

investment objectives of the Fund, are

sold on the open market through an

unaffiliated brokerage firm prior to the

conversion. The current market value of

the CIF assets is determined by a single

valuation for each asset, with all

valuations performed in the same

manner and as of the close of business

of the same day, in accordance with

Rule 17a–7 of the ’40 Act 5 and the

procedures established by the Fund

pursuant to Rule 17a–7. Rule 17a–7

requires, among other things, that such

transactions be effected at the

‘‘independent current market price’’ for

each security.6 In this regard, the

‘‘independent current market price’’ for

specific types of CIF securities involved

in the conversion is determined as

follows:

(a) If the security is a ‘‘reported security,’’

as the term is defined in Rule 11Aa3–1 under

the Securities Exchange Act of 1934 (the ’34

Act)(17 C.F.R. 240.11Aa3–1), the last sale

price with respect to such security reported

in the consolidated transaction reporting

system (the Consolidated System; or, if there

are no reported transactions in the

Consolidated System that day, the average of

the highest current independent bid and the

lowest current independent offer for such

security (reported pursuant to Rule 11Ac1–

1), as of the close of business on the CIF

valuation date; or

(b) If the security is not a reported security,

and the principal market for such security is

an exchange, then the last sale on such

exchange or, if there are no reported

transactions on such exchange that day, the

average of the highest current independent

bid and lowest current independent offer on

the exchange as of the close of business on

the CIF valuation date; or

(c) If the security is not a reported security

and is quoted in the NASDAQ system, then

the average of the highest current

independent bid and lowest current

independent offer reported on Level 1 of

NASDAQ as of the close of business on the

CIF valuation date; or

(d) For all other securities, the average of

the highest current independent bid and

lowest current independent offer determined

on the basis of reasonable inquiry from at

least three independent sources as of the

close of business on the CIF valuation date.

Harris Trust represents that the values

for the securities established in

determining the amount transferred

from the CIF are the same values used

in determining the amount received by

the Fund. Thus, each Plan receives

Fund shares having a total net asset

value equal to the value of the Plan’s

pro rata share of the CIF’s assets on the

date of the in-kind transfer.

Within 30 days after completion of

each acquisition of Fund shares with

Plan assets transferred in-kind from a

CIF, Harris Trust sends by regular mail

to the Independent Fiduciary a written

confirmation containing the following

information:

(1) The identity of each security that

was valued for purposes of the

transaction in accordance with Rule

17a–7(b)(4);

(2) The market price, as of the date of

the in-kind transfer, of each such

security; and

(3) The identity of each pricing

service or market-maker consulted in

determining the value of such securities.

Within 90 days after completion of

each acquisition of Fund shares with

Plan assets transferred in-kind from a

CIF, Harris Trust sends by regular mail

to the Independent Fiduciary a written

confirmation containing the following

information:

(1) The number of CIF units held by

the Plan immediately before the in-kind

transfer, the related per unit value, and

the total dollar amount of such CIF

units; and

(2) The number of shares in the Funds

that are held by the Plan immediately

after the in-kind transfer, the related per

share net asset value, and the total

dollar amount of such shares.

Harris Trust’s Receipt of Fees From the

Funds

7. Prior to the investment by a Client

Plan in any of the Funds, the

Independent Fiduciary receives a full

and detailed written disclosure of

information concerning the Fund, as

previously described in paragraph 5

above (with respect to the conversion

transactions). On the basis of this

information, the Independent Fiduciary

must give prior written approval for the

investment by the Client Plan in each

Fund and the fees to be paid to Harris

Trust in connection with its services to

the Fund. Such authorization must be

consistent with the general fiduciary

provisions of Part 4 of Title I of the Act.

The authorization is terminable by the

Independent Fiduciary at will without
42074 Federal Register / Vol. 63, No. 151 /Thursday, August 6, 1998 / Notices

7As previously noted in Footnote 2, PTCE 77–4

permits, under certain conditions, the purchase or

sale (for cash) by an employee benefit plan of shares

of a registered, open-end investment company

whose investment adviser is also a fiduciary of such

plan (but not an employer of employees covered by

the plan). PTCE 77–4 requires, among other things,

that the plan not pay an investment management,

investment advisory, or other similar fee with

respect to the plan assets invested in such shares

for the entire period of such investment. However,

Section II(c) of PTCE 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.

Section II(c) further states that this condition does

not preclude the payment of investment advisory

fees by the Client Plan, based on total plan assets,

where a credit representing the Client Plan’s pro

rata share of investment advisory fees paid by the

investment company has been subtracted.

8Harris Trust represents that all fees paid by the

Client Plans directly to Harris Trust for services

performed by Harris Trust are statutorily exempt

under section 408(b)(2) of the Act and the

regulations thereunder. However, the Department

expresses no opinion herein as to whether the fees

received by Harris Trust for the provision of

services to the Client Plans would comply with the

requirements of section 408(b)(2).

9See the Department’s letter dated August 1, 1986

to Robert S. Plotkin, Assistant Director, Division of

Banking Supervision and Regulation, Board of

Governors of the Federal Reserve System, which

states the Department’s views regarding the

application of the prohibited transaction provisions

of the Act to sweep services provided to employee

benefit plans by fiduciary banks and the potential

applicability of certain statutory exemptions.

penalty to the Client Plan, upon written

notice of termination to Harris Trust.

8. Harris Trust represents that there

are two levels of fees charged to a Client

Plan: (i) those fees which Harris Trust

charges for serving as a trustee,

investment manager, or custodian of the

Client Plan (the Plan-level fees); and (ii)

those fees which Harris Trust charges to

the Funds (the Fund-level fees) for

serving as an investment adviser to the

Fund, as well as for serving as a

custodian or transfer agent for the Funds

or for providing other Secondary

Services to the Funds. Harris Trust’s

rebate procedures relating to its Fundlevel fees are described below. These

rebate procedures insure that there is a

credit of Fund-level fees against all

Plan-level investment management fees

charged to a Client Plan by Harris Trust

and eliminates any ‘‘double fees’’ for

such services, similar to the

requirements of PTCE 77–4, Part II(c).7

The Rebate Procedures

In its capacity as a plan fiduciary,

Harris Trust charges each Client Plan a

fee for investment management/trustee

services, based upon its standard fee

schedules and the terms of the specific

agreement it has with the Client Plan. 8

Plan-level fees for investment

management, investment advisory, or

other similar services provided by

Harris Trust are currently charged in the

form of a single asset-based investment

management fee, which is billed on a

quarterly basis. There is also a Planlevel trustee fee for basic administrative

services provided by Harris Trust, as

well as other specific service fees.

Currently, the annual investment

management fee ranges from .375% to

.80% of the market value of the assets

calculated at the end of each calendar

quarter prior to the quarterly billing

date, depending upon the amount of

assets under management. Plan-level

fees are subject to annual minimums for

administration and management,

expressed as flat dollar amounts.

Harris Trust also provides ‘‘sweep’’

services to the Client Plans, which allow

idle cash to be automatically invested

temporarily in Fund shares, in order to

insure that a Client Plan’s assets are

fully invested at all times. Harris Trust

does not charge separate fees for the

provision of such sweep services.

Instead, charges for sweep services are

built into Harris Trust’s Plan-level

investment management and trustee

fees, and any investment advisory fees

received by Harris Trust from the Fund

into which idle cash is swept will be

credited back to the Client Plan in the

manner of other Fund investments. 9

For its services as investment adviser

to the Insight Funds, Harris Trust is

entitled to receive monthly advisory

fees from the Insight funds, as disclosed

in the prospectus, currently ranging

from approximately 0.11% to 1.05% of

the Funds’ assets under management,

subject to certain voluntary fee waivers.

In addition, Harris Trust may receive

fees from the Insight Funds for certain

Secondary Services. Harris Trust

receives no 12b-1 fees payable pursuant

to Rule 12b–1 under the ‘‘40 Act.

The Funds accrue daily as an expense

payable to Harris Trust a ratable portion

of Harris Trust’s investment advisory

and other administrative fees, based

upon the average daily net asset value

of the Funds. Such fees are paid by the

Fund to Harris Trust monthly in arrears.

Harris Trust intends that the Client

Plans generally will not incur any

increased fees for investing in the

Funds. Harris Trust rebates to each

Client Plan, on the same business day as

the receipt of such fees by Harris Trust,

the Client Plan’s proportionate share of

all advisory fees payable to Harris Trust

by the Funds as of such date. Such

rebate is effectuated through the

purchase of additional shares of the

Funds. This rebate procedure is

approved by the Independent Fiduciary

at the time it provides its original

written approval of the investment of a

Client Plan’s assets in the Funds. Harris

Trust continues to charge each Client

Plan (other than the In-house Plans) its

full investment management fee for all

assets under management, including

those assets invested in the Funds. The

net effect of these procedures is that no

Client Plan ever pays, in any period, a

‘‘double’’ investment advisory fee for

any Client Plan assets invested in the

Funds. Harris Trust represents that the

combined total of all fees it receives for

its services to a Client Plan, and for its

services to any of the Funds in which

the Client Plan invests, constitute no

more than ‘‘reasonable compensation’’

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

of the Act.

In the case of the In-house Plans, from

which Harris Trust receives no Planlevel fees, Harris Trust also rebates to

each In-house Plan its proportionate

share of all advisory fees payable to

Harris Trust by the Funds through the

purchase of additional shares of the

Funds, in accordance with the

procedures described above.

9. Harris Trust represents that it

maintains a system of internal

accounting controls for the crediting of

all Fund-level fees to the Client Plans.

Harris Trust is audited by its

independent accounting firm, currently

KPMG Peat Marwick LLP (the Auditor),

at least annually to verify the proper

crediting of the fees to each Client Plan.

Information regarding fees is used in the

preparation of required financial

disclosure reports of the Funds for the

benefit of the Client Plans.

Specifically, in performing its audit,

the Auditor: (a) reviews and tests

compliance with the specific

operational controls and procedures

established by the Harris Trust for

making credits; (b) verifies, on a test

basis, the daily credit factors

transmitted to Harris Trust by the

Funds; (c) verifies, on a test basis, the

credits paid in total to sum of all credits

paid to each Client Plans; (d) verifies, on

a test basis, the credits paid in total to

the sum of all credits paid to each Client

Plan; and (e) recomputes, on a test basis,

the amount of the credit determined for

selected Client Plans and verifies that

the proper credit was made to the

proper Client Plan.

In the event that either the internal

audit by Harris Trust or the independent

audit by the Auditor identifies an error

made in the crediting of fees to the

Client Plans, Harris Trust will correct

the error. With respect to any shortfall

in credited fees to a Client Plan, Harris

Trust will make a cash payment to the

Client Plan equal to the amount of the

error plus interest based on the greater

of either (a) the money market rate
Federal Register / Vol. 63, No. 151 /Thursday, August 6, 1998 / Notices 42075

10 The Department expresses no opinion herein

as to whether any transactions with the Funds by

the In-house Plans are covered by PTCE 77–3.

offered by Harris Trust for the period

involved, or (b) the total rate of return

for shares of the Funds, including

dividends, that would have been

acquired during such period. Any

excess credits made to a Client Plan will

be corrected by an appropriate

deduction and reallocation of cash

during the next payment period to

reflect accurately the amount of total

credits due to the Plan for the period

involved.

10. Harris Trust states that any

increase in the rate of fees paid by a

Fund to Harris Trust must receive the

prior written approval from every

Independent Fiduciary of every plan

investing in shares of the Fund. Harris

Trust uses a ‘‘negative consent’’

procedure to obtain such approvals.

This procedure is described as follows.

In the event of an increase in the rate

of any fees paid by the Funds to Harris

Trust for any investment management

services, investment advisory services,

or other similar services above that rate

which has been approved by an

Independent Fiduciary for a Client Plan,

Harris Trust provides at least 30 days’

written notice to each Client Plan

investing in shares of a Fund which is

increasing such fees. Such notice may

take the form of a proxy statement,

letter, or similar communication that is

separate from the Fund Prospectus and

must explain the nature and amount of

the additional service or the nature and

amount of the increase in fees.

In the event of an addition of a

Secondary Service by Harris Trust to a

Fund for which a fee is charged, or in

the event of an increase in a fee paid by

the Funds to Harris Trust for any

Secondary Service (which may result

from either an increase in the rate of

such fee or a decrease in the number or

kind of services performed for such fee)

above that rate which has been

approved by an Independent Fiduciary,

notice provided to Client Plans must be

accompanied by a Termination Form,

which is described in paragraph 11

below.

However, with respect to the In-house

Plans, Harris Trust did not retain the

Independent Fiduciary for the In-house

Plans for purposes of reviewing Fundlevel fee changes on an on-going basis.

Harris Trust states that following

completion of the conversion

transactions on March 21, 1997, the Inhouse Plans’ investments in the Funds

were managed by in-house fiduciaries,

consistent with the requirements of

PTCE 77–3.10

11. Each Independent Fiduciary will

be supplied annually with a

Termination Form during the first

quarter of each calendar year, beginning

with the calendar year immediately

following the date of publication in the

Federal Register of a notice of

exemption for the subject transactions.

However, the Termination Form need

not be supplied to the Independent

Fiduciary sooner than six months after

it has already been supplied, except to

the extent required to disclose either an

additional Secondary Service for which

a fee is charged or an increase in fees.

The Termination Form, which

expressly provides an election to

terminate the authorization, provides

instructions regarding the use of the

Termination Form, including the

information discussed in Section II(l)(1)

and (2), above.

12. No sales commissions are paid by

the Client Plans in connection with the

purchase or sale of shares of the Funds,

and no redemption fees are paid in

connection with the sale of such shares

by the Client Plans to the Funds. In

addition, neither Harris Trust nor an

affiliate (including officers or directors,

and other persons) will be allowed to

directly purchase from or sell to the

Client Plans any shares of the Funds.

The price paid or received by a Client

Plan for shares of a Fund is the net asset

value per share at the time of the

transaction, and is the same price which

would have been paid or received for

the shares by any other investor at that

time. Finally, all dealings between the

Client Plans and the Funds are on a

basis no less favorable to the Client

Plans than dealings between the Fund

and its other shareholders.

13. To insure that the Independent

Fiduciary has the information necessary

to effectively monitor each of the Funds

in which a Client Plan invests, Harris

Trust provides to the Independent

Fiduciary certain on-going disclosures,

as discussed in Section II(n)(1) and (2),

above.

In this regard, a Harris Trust affiliate

may execute securities brokerage

transactions for the investment

portfolios of certain of the Funds. To the

extent that Harris Trust does not

currently execute securities brokerage

transactions with respect to any Fund

for which a fee is paid to Harris Trust,

but proposes to do so in the future,

Harris Trust will provide at least 30

days’ written notice to each Client Plan

investing in shares of such Fund. Such

notice will be accompanied by a

Termination Form allowing the Client

Plan an option to object to the addition

of brokerage services to a Fund, as a

Secondary Service, by Harris Trust.

Failure of the Independent Fiduciary to

return the Termination Form will be

deemed to be approval by the Client

Plan of brokerage services by Harris

Trust. Harris Trust currently has one

affiliated broker, Harris Investors Direct,

Inc. (Harris Investors). Harris Trust

represents that Harris Investors has not

provided any brokerage services with

respect to the transactions which have

taken place to date.

If any Harris Trust affiliate, including

Harris Investors, provides brokerage

services to a Fund, Harris Trust will

provide the Independent Fiduciary of

the Client Plan with a statement at least

annually that specifies information

about the commissions received by the

Harris Trust affiliate, as discussed in

Section II(n)(2)(A) through (D), above.

14. In summary, Harris Trust

represents that the subject transactions

satisfy the statutory criteria for an

exemption under section 408(a) of the

Act for the following reasons: (a) the

Funds provide the Client Plans and the

In-house Plans with a more

advantageous investment vehicle than

the CIFs, yet avoid the payment to

Harris Trust of any duplicative fees for

investment management, investment

advisory, or other similar services;

(b) with respect to the conversions of

CIFs to Funds, an Independent

Fiduciary approves in advance any

transfer of Plan assets in exchange for

Fund shares and only after full written

disclosure of information concerning

the Funds; (c) each Plan receives Fund

shares having a total net asset value

equal to the value of the Plan’s pro rata

share of the CIF’s assets on the date of

the in-kind transfer, as determined by a

single valuation for each asset, with all

valuations performed in the same

manner and as of the close of business

of the same day, in accordance with the

procedures established by the Fund

pursuant to Rule 17a–7 of the 40 Act

(requiring the use of independent

sources); (d) the Independent Fiduciary

receives written confirmation of the

entire transaction that discloses the

number of CIF units held by the Plan

immediately before the conversion and

the number of Fund shares held by the

Plan immediately after, the related per

unit and per share values, and the total

dollar amount of the CIF units and the

Fund shares involved in the transaction;

(e) with respect to any investments in

a Fund by the Client Plans and the

payment of any fees by the Fund to

Harris Trust, an Independent Fiduciary

approves such investments and fees in

advance and only after full written

disclosure of information concerning

the Fund, including a current

prospectus and a statement describing
42076 Federal Register / Vol. 63, No. 151 /Thursday, August 6, 1998 / Notices

11Because each IRA has only one participant,

there is no jurisdiction under 29 CFR § 2510.3–3(b).

However, there is jurisdiction under Title II of the

Act pursuant to section 4975 of the Code.

12The Department notes that the Units held in the

IRAs of Marcia, Larry L., and Laurence

Hendrichsen, are valued at $250 per Unit, based on

the Deloitte and Touche appraisal discussed below.

However, in the case of the remaining IRAs, the

participants carried the value of the Units at $200

per unit. This amount reflects the value of the Units

prior to the Deloitte and Touche appraisal, and is,

in effect, obsolete. Thus, the value of the Catfish

interests is $250 per Unit as reflected in the

aforementioned Deloitte and Touche appraisal.

13The Department notes that the Internal Revenue

Service has taken the position that a lack of

diversification of investments may raise questions

in regard to the exclusive benefit rule under section

401(a) of the Code. See, e.g. Rev. Rul. 73–532, 1973–

2 C.B. 128. The Department further notes that

all fees to be paid to Harris Trust; (f) any

authorizations made by a Client Plan

regarding investments in a Fund, fees

paid by the Fund to Harris Trust, or any

increases in fees for secondary services

provided to the Fund by Harris Trust,

are terminable by the Independent

Fiduciary at will, without penalty to the

Client Plan, upon written notice to

Harris Trust; (g) annual audits by an

independent accounting firm are

required to verify the proper crediting to

the Client Plans of fees charged by

Harris Trust to the Funds; (h) the Client

Plans and the In-house Plans do not pay

any commissions or redemption fees in

connection with their acquisition of

Fund shares (either through a direct

purchase of the shares or through a

transfer of CIF assets in exchange for the

shares) or the Plans’ sale of Fund shares;

and (i) all dealings between the Client

Plans and the In-house Plans and the

Funds are on a basis no less favorable

to the Plans than dealings between the

Fund and its other shareholders.

Notice to Interested Persons

Harris Trust will provide notice of the

proposed exemption to interested

persons by first-class or overnight mail

within 15 days of the date of publication

of this notice of pendency in the

Federal Register. Interested persons

consist of the Independent Fiduciaries

of all Plans which had investments in a

CIF which terminated on March 21,

1997. Interested persons also consist of

any other Independent Fiduciaries for

Plans which, at the time this notice is

published in the Federal Register, have

approved, or will approve, any transfer

of a Plan’s assets from a CIF to a Fund,

in connection with the termination of a

CIF prior to the date this proposed

exemption is granted. Such notice shall

include a copy of this notice of the

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.)

Individual Retirement Accounts (the

IRAs) for Marcia A. Hendrichsen, Larry

L. Hendrichsen, Lawrence D.

Hendrichsen, Located in Burlington,

Iowa, and William H. Napier, George

Rashid, Jr., Jake E. Rashid, Carl A.

Saunders, and John C. Schuldt, Located

in Fort Madison, Iowa (Collectively, the

Participants)

[Exemption Application Number: D–10547]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of 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, August

10, 1990). If the exemption is granted,

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 proposed cash sale (the Sale) of

certain membership units (the Units) in

the Catfish Bend Casinos, L.C. (Catfish

Bend), by the IRAs 11 to the Participants,

disqualified persons with respect to the

IRAs, provided that the following

conditions are met:

(a) The Sale of the Units by each IRA

is a one-time transaction for cash;

(b) The terms and conditions of each

Sale are at least as favorable to each IRA

as those obtainable in an arm’s length

transaction with an unrelated party;

(c) Each IRA receives the fair market

value of the Units at the time of each

Sale; and

(d) Each IRA is not required to pay

any commissions, costs or other

expenses in connection with each Sale.

Summary of Facts and Representations

1. The IRAs are individual retirement

accounts, as described in section 408(a)

of the Code. Among the assets of each

IRA are certain membership Units in

Catfish Bend, an Iowa limited liability

company which operates the riverboat

casino Catfish II. Currently, there are

66,521 Units outstanding which are

owned by 496 members.

The applicants describe the IRAs and

their holdings of the Units as follows:

(a) The IRA of Marcia A. Hendrichsen

currently holds assets valued at

approximately $59,127, which includes

20 Units. The IRA originally purchased

the Units on January 27, 1994 for

$2,000.

(b) The IRA of Larry L. Hendrichsen

currently holds assets valued at

approximately $48,490, which includes

20 Units.

The IRA originally purchased the

Units on January 27, 1994 for $2000.

(c) The IRA of Lawrence D.

Hendrichsen currently holds assets

valued at approximately $49,832, which

includes 10 Units. The IRA originally

purchased the Units on January 27, 1994

for $1000.12

(d) The IRA of William H. Napier

currently holds assets valued at

approximately $20,000, which includes

100 Units. The IRA obtained the Units

when Mr. Napier rolled them over with

the rest of his assets from his individual

account in the Napier Wright & Wolf

law firm plan, which originally

purchased the Units on January 27, 1994

for $10,000.

(e) The IRA of George Rashid, Jr.

currently holds assets valued at

approximately $42,434, which includes

200 Units. The IRA originally purchased

the Units on January 28, 1994 for

$20,000.

(f) The IRA of Jake E. Rashid currently

holds assets valued at approximately

$619,014, which includes 300 Units.

The IRA originally purchased the Units

on January 28, 1994 for $30,000.

(g) The IRA of Carl A. Saunders

currently holds assets valued at

approximately $36,797, which includes

100 Units. The IRA originally purchased

the Units on January 31, 1994 for

$10,000.

(h) The IRA of John C. Schuldt,

president of Catfish Bend, currently

holds assets valued at approximately

$104,665, which includes 320 Units.

The IRA purchased the Units on June

13, 1994 for $32,000.

2. The applicants request exemptions

for the Sale of the Units by each

individual IRA to its respective

Participant. The applicants represent

that the IRAs have benefitted from

significant appreciation and returns

since purchasing the Units. The

applicants believe that at present price

levels, an excellent opportunity for the

Sale of the Units now exists.

Accordingly, they wish to sell the Units

from their respective IRAs to ensure that

each IRA realizes a substantial profit.13
Federal Register / Vol. 63, No. 151 /Thursday, August 6, 1998 / Notices 42077

section 408(a) of the Code, which describes the tax

qualification provisions for IRAs, mandates that the

trust be created for the exclusive benefit of an

individual or his beneficiaries. However, the

Department is expressing no opinion in this

proposed exemption regarding whether violations

of the Code have taken place with respect to the

purchase and subsequent retention of the Units by

some of the Participants.

14 In this regard, six of the eight IRAs have

previously incurred and paid UBIT as a result of

holding the Units. The other two IRAs did not incur

UBIT due to the fact that the earnings on the Units

failed to exceed the $1000 threshold for triggering

the tax.

In addition, the applicants represent

that the continued holding of the Units

will cause the IRAs to incur unrelated

business income tax (UBIT) pursuant to

section 512 of the Code.14 Therefore,

because of the aforementioned reasons,

the applicants seek an exemption to

purchase the Units from the IRAs.

3. Gary Hoyer, attorney for Catfish

Bend, engaged the Valuation Group of

Deloitte and Touche (D&T), an

independent, qualified appraiser located

in Chicago, Illinois, to determine the fair

market value of the Units. The

applicants represent that D&T has

previously provided services for Catfish

Bend. However, the applicants state that

payments made by Catfish Bend to D&T

constitute substantially less than one

percent (1%) of D&T’s annual gross

revenues. After a comprehensive review

of all relevant information, D&T valued

the interests on a per Unit basis at $250.

In its analysis, D&T sought to

determine the fair market value of a

Unit on a ‘‘nonmarketable minority

interest’’ basis. According to the report

submitted by D&T, a nonmarketable

minority interest refers to a minority

position in the equity of an enterprise

which is not actively traded on a public

exchange.

In valuing the Units, D&T considered

the factors described in the Internal

Revenue Service’s Revenue Ruling 59–

60, which provides general guidelines

for valuing ownership interests in

closely-held enterprises. In addition, the

report submitted by D&T indicates that

it reviewed the historical operational

and financial data of Catfish Bend, and

conducted a thorough onsite inspection

of the riverboat before arriving at a

conclusion as to the value of the Units.

4. The applicants represent that the

proposed transactions will be

administratively feasible in that each

Sale will be a one-time transaction for

cash. Furthermore, the applicants state

that the transactions will be in the best

interests of the IRAs as they will

provide each IRA with the opportunity

to dispose of the Units for a significant

profit and eliminate any potential UBIT

liability. Finally, the applicants assert

that the transactions will be protective

of the rights of each participant and

beneficiary as indicated by the fact that

each IRA will receive the fair market

value of the Units, as determined by a

qualified, independent appraiser on the

date of Sale and will incur no

commissions, costs, or other expenses as

a result of the Sale.

5. In summary, the applicants

represent that the proposed transactions

satisfy the statutory criteria of section

4975(c)(2) because: (a) the Sale of the

Units by each IRA will be a one-time

transaction for cash; (b) the terms and

conditions of each Sale will be at least

as favorable to each IRA as those

obtainable in an arm’s length

transaction with an unrelated party; (c)

each IRA will receive the fair market

value of the Units at the time of each

Sale; and (d) each IRA will not be

required to pay any commissions, costs

or other expenses in connection with

each Sale.

Notice to Interested Persons: Because

the applicants are the only Participants

in the IRAs, it has been determined that

there is no need to distribute the notice

of proposed exemption (the Notice) to

interested persons. Comments and

requests for a hearing are due thirty (30)

days after publication of the Notice in

the Federal Register.

For Further Information Contact: Mr.

James Scott Frazier, telephone (202)

219–8881. (This is not a toll-free

number).

Bernard Chaus, Inc. Employee Savings

Plan (the Plan) Located in New York,

New York

[Application No. D–10606]

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 C.F.R. Part 2570, Subpart B

(55 F.R. 32836, 32847, August 10, 1990).

If the exemption is granted, the

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

and (b)(2) and 407(a) 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, effective

December 24, 1997, to (1) the past

acquisition by the the Plan of certain

stock rights (the Rights) pursuant to a

stock rights offering (the Offering) by

Bernard Chaus, Inc. (the Employer), the

sponsor of the Plan; (2) the past holding

of the Rights by the Plan during the

subscription period of the Offering; (3)

the past disposition or exercise of the

Rights by the Plan; and (4) the proposed

payment by the Employer to the Plan of

an amount necessary to credit Plan

accounts of participants affected by an

administrative error relating to Rights

which were not exercised or sold prior

to the expiration of the Rights; provided

the following conditions are satisfied:

(A) The Plan’s acquisition and

holding of the Rights occurred in

connection with the Offering made

available to all shareholders of common

stock of the Employer;

(B) The acquisition and holding of the

Rights by the Plan resulted from an

independent act of the Employer as a

corporate entity and all holders of the

common stock of the Employer,

including the Plan, were treated in a

substantially similar manner with

respect to the Offering;

(C) All decisions regarding the

holding and disposition of the Rights by

the Plan were made, in accordance with

the Plan provisions for individuallydirected investment of participant

accounts, by the individual Plan

participants whose accounts in the Plan

received Rights in connection with the

Offering, including all determinations

regarding the exercise or sale of the

Rights received through the Offering,

except for those participants who failed

to file timely and valid instructions

concerning the Rights, in which case the

Rights were sold; and

(D) Within 30 days of the date of

publication of the final exemption in the

Federal Register, with respect to the

Plan accounts of participants affected by

an administrative error whereby 27

Rights (of the 17,041 Rights received by

the Plan) were not exercised or sold

prior to the expiration of the Rights, the

Employer credits the affected accounts

with an amount equal to the value such

accounts would have received if the

Rights had been sold on the last day of

the Offering, including interest thereon

through the date of such crediting at a

rate equal to the average rate of earnings

on all Plan assets during that period.

EFFECTIVE DATE: This exemption, if

granted, will be effective as of December

24, 1997.

Summary of Facts and Representation

1. The Employer is a designer,

manufacturer and marketer of women’s

apparel. The Employer is incorporated

in New York, with its corporate

headquarters in New York, New York.

2. The Plan is a defined contribution

employee benefit plan with provisions

intended to satisfy section 401(k) of the

Code. The trustee of the Plan is the

Prudential Trust Company of Moosic,

Pennsylvania (the Trustee), and the Plan

is administered by the Employer.
42078 Federal Register / Vol. 63, No. 151 /Thursday, August 6, 1998 / Notices

15Except that the Rights issued to Josephine

Chaus, the chair of the board of directors and

principal shareholder of the Employer, entitled her

to subscribe for and purchase 5.1811105 Additional

Shares.

16Oversubscription privileges were exercised by

only one Plan participant whose Account received

Rights.

3. The Plan provides for individual

participant accounts (the Accounts) and

participant-directed investment of the

Accounts among seven investment

funds (the Funds), one of which (the

Stock Fund) invests exclusively in

common stock of the Employer (the

Stock). As of December 19, 1998, the

Plan had total assets of approximately

$3.4 million, and the Accounts of 205

Plan participants had balances invested

or partially invested in the Stock Fund.

As of December 17, 1997 (the Record

Date), there were 2,627,727 shares of

Stock issued and outstanding, of which

17,041 shares, or about 0.65%, were

owned by the Accounts participating in

the Stock Fund.

4. The Applicant represents that as

part of an effort to increase capital, the

Employer determined it was in the best

interests of its shareholders to provide

for the offering of rights to purchase

additional shares of newly-issued

common stock. Accordingly, on

December 24, 1997, the Employer

commenced the Offering by issuing to

all holders of Stock, as of the Record

Date, one transferable subscription Right

for each share of Stock held. Each Right

conferred upon its holder an entitlement

to purchase 5.464751 shares of

additional Stock (the Additional Shares)

at price of $1.4309 per share15. The

Employer authorized the issuance of up

to 13,977,270 Additional Shares through

the Offering. The provisions of the

Offering included oversubscription

privileges which were exercisable by

Plan participants, whose Accounts

received Rights, in the same manner as

other recipients of the Rights.16

5. The Employer represents that the

Offering did not involve any guarantee

or other assurance that any market in

the Rights would develop or remain

available during the Offering. However,

the Stock and the Rights were both

traded on the New York Stock Exchange

(NYSE) through the last trading day

prior to the expiration of the Offering.

The terms of the Offering permitted

exercise of the Rights commencing

December 24, 1997 until 5:00 p.m. EST

on January 23, 1998, at which time any

unexercised Rights expired.

6. In anticipation of the Offering, the

Plan was amended to permit each Plan

participant with an Account balance

invested in the Stock Fund (the Invested

Participants) as of the Record Date to

direct the Trustee either to exercise or

sell Rights attributable to his or her

Stock Fund account, and such

amendment also established the

procedure for such directions. The

Employer represents that on December

24, 1997, all Invested Participants were

sent, via first class mail, a copy of the

Offering circular published by the

Employer, a letter from the Plan

administrator providing information

about the Offering and describing the

procedures for participant directions

with respect to the Offering, and a

direction form. The direction forms sent

to the Invested Participants enabled

them to direct the Trustee either to

exercise the Rights allocated to their

Accounts or to sell such Rights on the

open market. As provided in the

amended Plan, with respect to any

Invested Participant who failed to

submit a direction form to the Trustee

by 5:00 p.m. EST on January 19, 1998,

or submitted an invalid direction form,

the Trustee was required to sell the

Rights on the open market. The

Employer represents that this required

sale was disclosed to the Invested

Participants in the informational

documents relating to the Offering that

were sent on December 24, 1997.

7. For each Invested Participant who

directed the Trustee to exercise Rights

allocated to his or her Account, the

funds needed to pay the exercise price

were obtained by redeeming specific

investments in one or more Funds in

which the Invested Participant’s

Account was invested. The Invested

Participants directed the Trustee to sell

any specific dollar amount from any

specific Fund for the cash needed to pay

the exercise price. Where amounts were

redeemed from the Funds prior to the

last day of the Offering, the amended

Plan provided that the Trustee deposit

the proceeds of such redemptions in a

special short-term investment account

pending the Trustee’s payment to the

subscription agent of the exercise price

for the Additional Shares.

8. Rights were exercisable by an

Invested Participant only to the extent

of funds available in his or her Account

in the Plan. If amounts in the Invested

Participant’s Account were insufficient

to pay the exercise price for the

Additional Shares subscribed for, the

amended Plan provided that the Trustee

was to attempt to sell any Rights not

exercised. The proceeds of any Rights

that were sold and any income from the

special short-term investment account

were credited, with respect to such sale

proceeds, to the Accounts of the

Invested Participants whose allocable

Rights were sold, and in the case of such

income, to the Accounts of the Invested

Participants whose redemption

proceeds were deposited in the special

short-term investment account.

9. In the event that the market price

of the Stock, including the effect of any

applicable brokerage commissions and

other expenses at the time the Trustee

would submit Rights for exercise, was

less than the exercise price under the

Offering, the amended Plan provided

that the Trustee would not exercise such

Rights. The Employer represents that at

5:00 p.m. EST on January 23, 1998, the

time of expiration of the Offering and

the date on which the Trustee exercised

Rights on behalf of the Invested

Participants directing the exercise of the

Rights, the exercise price of a Right to

obtain shares of the Stock was less than

the market price for shares of the Stock

on the NYSE, after giving effect to any

brokerage commissions and other

expenses relating to such transactions.

Accordingly, the Trustee exercised at

that time all Rights for which a direction

to exercise had been properly submitted

(i.e., with a valid direction form) by an

Invested Participant.

10. The Employer represents that, in

order to give the Trustee sufficient time

to perform the administrative

procedures required to review

participant direction forms and to

implement directions, including the

liquidation of other Plan assets as

required to enable an Account to

purchase the appropriate number of

shares of the Stock at the exercise price

with the Rights, the procedure for

participant direction with respect to the

Offering included timing deadlines for

the filing of instructions in advance of

the expiration of the Offering.

Accordingly, Invested Participants were

required to return the direction forms to

the Trustee by 5:00 p.m. EST on January

19, 1998. The Employer states that this

deadline for filing instructions with the

Trustee was specifically and

prominently disclosed to all Invested

Participants in the Offering materials

they received on December 24, 1997.

11. The Employer represents the

following summary of the Offering:

(a) All 2,627,727 Rights, including

overallotments, were exercised in the

Offering. Among the 205 Invested

Participants, 23 directed the exercise of

Rights allocated to their Accounts,

resulting in the exercise of 3,771 Rights,

including overallotments, or about

0.147% of the total number of Rights

exercised.

(b) Among the Invested Participants,

22 affirmatively directed that the Rights

allocated to their Accounts be sold,

resulting in the sale of 3,287 Rights.

(c) The remainder of the Invested

Participants did not respond. In
Federal Register / Vol. 63, No. 151 /Thursday, August 6, 1998 / Notices 42079

accordance with the amended Plan, the

Rights allocated to their Accounts were

sold, resulting in the sale of 9,956

Rights. Because of an administrative

error in the communications between

the Plan administrator and the Trustee,

27 Rights allocated to the Accounts

were not sold prior to the expiration of

the Rights. The Employer represents

that it shall credit the Accounts of the

participants affected by this

administrative error with an amount

equal to the value these Accounts would

have received if the Rights had been

sold as planned on the last day of the

Offering plus interest thereon through

the date of such crediting at a rate equal

to the average rate of earnings on all

Plan assets during that period.

(d) The Employer represents that all

directions and instructions which were

filed by the Invested Participants with

respect to the Offering were observed

and executed by the Trustee. In

addition, all Invested Participants had

been notified adequately in advance of

the Offering of the procedure for

directing and instructing the Trustee

with respect to their Accounts’ rights

under the Offering. Thus, the Employer

represents that all actions by the Trustee

relating to the Offering, with respect to

the Accounts, were pursuant to the

express participant directions, except

for the Accounts of participants who

failed to file timely and valid

instructions with the Trustee pursuant

to the direction procedure. The

Employer states that the Trustee’s action

on behalf of Accounts whose

participants failed to file instructions

with the Trustee, which was the sale of

the Rights received by such Accounts,

was disclosed in the explanatory

materials for the Offering and in the

direction forms sent to Invested

Participants. The Employer states

further that all actions taken by the

Trustee in connection with the Offering

were consistent with the participantdirected nature of investments under

the Plan.

12. In summary, the applicant

represents that the transactions satisfied

the criteria of section 408(a) of the Act

for the following reasons: (a) The Plan’s

acquisition of the Rights resulted from

an independent act of the Employer; (b)

With respect to all aspects of the

Offering, all holders of the Stock,

including the Accounts of Invested

Participants in the Plan, were treated in

a substantially similar manner; (c) All

decisions with respect to the Plan’s

acquisition, holding and control of the

Rights were made by the individual

Invested Participants with Account

balances invested in the Stock Fund,

except for those who failed to file timely

and valid instruction forms, in which

case the Rights were sold; (d) The

disposition or exercise of the Rights

received by the Invested Participants

was executed by the Trustee in an

orderly manner pursuant to the terms of

the Offering relating to the submission

of valid instruction forms by such

Participants; and (e) The acquisition and

holding of the Rights by the Plan

affected all of the Invested Participants,

and their Accounts held only about

0.65% of the Stock outstanding as of the

Record Date of the Offering.

For Further Information Contact:

Ronald Willett of the Department,

telephone (202) 219–8881 (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

that each application accurately

describes all material terms of the

transaction which is the subject of the

exemption.

Signed at Washington, DC, this 31st day of

July 1998.

Ivan Strasfeld,

Director of Exemption Determinations

Pension and Welfare Benefits Administration,

U.S. Department of Labor.

[FR Doc. 98–21001 Filed 8–5–98; 8:45 am]

BILLING CODE 4510–29–P

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

[Prohibited Transaction Exemption 98–38;

Exemption Application No. D–10558, et al.]

Grant of Individual Exemptions; Roark

Young, Russell Rice, Mary J. Rice,

Bruce Lamchick, Steven McKean,

David McKean & Burton Young

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.