Federal Register / Vol. 66, No. 125 / Thursday, June 28, 2001 / Notices 34471

benefit plans. As of December 31, 1999,

the Pasadena Plans had 87 participants.

After giving full consideration to the

entire record, including the written

comments, the Department has decided

to grant the exemption. In this regard,

the comment letters submitted to the

Department have been included as part

of the public record of the exemption

application. The complete application

file, including all supplemental

submissions received by the

Department, is made available for public

inspection in the Public Disclosure

Room of the Pension and Welfare

Benefits Administration, Room N–1513,

U.S. Department of Labor, 200

Constitution Avenue, N.W.,

Washington, D.C. 20210.

For Further Information Contact:

Karen Lloyd of the Department,

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

a toll-free number).

General Information

The attention of interested persons is

directed to the following:

(1) The fact that a transaction is the

subject of an exemption under section

408(a) of the Act and/or section

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

a fiduciary or other party in interest or

disqualified person from certain other

provisions to which the exemptions

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) These exemptions are

supplemental to and not in derogation

of, any other provisions of the Act and/

or the Code, including statutory or

administrative exemptions and

transactional 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

(3) The availability of these

exemptions is subject to the express

condition that the material facts and

representations contained in each

application accurately describes all

material terms of the transaction which

is the subject of the exemption.

Signed at Washington, DC, this 25th day of

June, 2001.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

Department of Labor.

[FR Doc. 01–16236 Filed 6–27–01; 8:45 am]

BILLING CODE 4510–29–P

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

[Application No. D–10935, et al.]

Proposed Exemptions; The Walston &

High, P.A. Profit Sharing Plan (the

Plan) et al.

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, NW.,

Washington, DC 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 the Pension and

Welfare Benefits Administration, U.S.

Department of Labor, Room N–5638,

200 Constitution Avenue, NW.,

Washington, DC 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, 5 U.S.C. App. 1 (1996), transferred

the authority of the Secretary of the

Treasury to issue exemptions of the type

requested to the Secretary of Labor.

Therefore, these notices of proposed

exemption are issued solely by the

Department.

The applications contain

representations with regard to the

proposed exemptions which are

summarized below. Interested persons

are referred to the applications on file

with the Department for a complete

statement of the facts and

representations.

The Walston & High, P.A. Profit Sharing

Plan (the Plan) Located in Wilson,

North Carolina

[Application No. D–10935]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 408(a) of the Act

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

in accordance with the procedures set

forth in 29 CFR part 2570, subpart B (55

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

the exemption is granted, the

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

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

resulting from the application of section

4975 of the Code, by reason of section

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

shall not apply to the Sale (the Sale) by

the Plan to A.J. Walston and Arthur T.

High, the trustees of the Plan (the

Trustees), of three parcels of improved

real property (the Parcels). This

proposed exemption is conditioned

upon adherence to the material facts

and representations described herein

34472 Federal Register / Vol. 66, No. 125 / Thursday, June 28, 2001 / Notices

1The applicant has provided consolidated net

income statements for the Parcels from 1977

through 1989. These statements indicate that during

this time period the Parcels generated net income

of $140,244.

2 In addition to all of Dime’s common

stockholders as of December 22, 2000 receiving

Warrants pursuant to the Warrant Distribution, any

person or entity (including the Plans) who brought

the common stock of Dime (the Stock) during the

period from December 20, 2000 through December

29, 2000 received such Stock with certain

accompanying ‘‘due bills’’ reflecting the seller’s

obligation to deliver Warrants to the buyer upon the

seller’s receipt of such Warrants pursuant to the

Warrant Distribution, and therefore also received

Warrant’s in connection with such purchases of

Stock. Accordingly, the exemption proposed herein

shall also apply to the acquisition, holding,

disposition and exercise of Warrants acquired by

the Plans in connection with the purchase of Stock

with due bills.

and upon the satisfaction of the

following requirements:

(a) The Sale is a one-time transaction

for cash;

(b) The Plan does not pay any

commissions, costs or other expenses in

connection with the Sale; and

(c) The Plan will receive an amount

equal to the greater of:

(i) $234,000; or (ii) The current fair

market value of the Property, as

established by an independent,

qualified, appraiser at the time of the

Sale.

Summary of Facts and Representations

1. Walston & High, P.A., the sponsor

of the Plan, is a certified public

accounting company located in Wilson,

North Carolina. The Plan is a defined

benefit pension plan which, as of

September 27, 2000, has 5 participants.

The Plan’s assets have an aggregate fair

market value of $727,102.04.

2. The Plan’s real property holdings

consist of three parcels of real property.

The Parcels have an estimated fair

market value of $234,000 and

constitutes approximately 32% of the

total value of Plan assets.

3. The Trustees represent that the Sale

is in the interest of the Plan, and its

participants and beneficiaries. The

Trustees represent that they are seeking

to terminate the Plan and that the

Parcels cannot be subdivided to achieve

a distribution of assets. The Trustees

have attempted to sell the Parcels to

unrelated third parties but have been

unsuccessful. As a result the Trustees

are seeking to purchase the Parcels from

the Plan for cash, allowing the Plan to

distribute the assets upon termination.

There will be no commissions, costs or

other expenses incurred by the Plan in

connection with the Sale.

4. The Parcels consist of:

A 862 square foot parcel of improved

real property located at 1112 Churchill

Avenue, Wilson, North Carolina

(Churchill). The property was acquired

by the Plan for investment purposes on

September 12, 1979 for $27,584.23 from

an unrelated third party. The property

has generated a net income of $19,235

from 1990 through 1999;

A 1,670 square foot parcel of

improved real property located at 401–

403 Maplewood Avenue, Wilson, North

Carolina (Maplewood). The property

was acquired by the Plan for investment

purposes on August 27, 1976 for

$35,600.86 from an unrelated third

party. The property has generated a net

income of $37,987 from 1990 through

1999; and

A 3,264 square foot parcel of

improved real property located on 2213

Candlewood Drive, Wilson, North

Carolina (Candlewood). The property

was acquired by the Plan for investment

purposes on January 30, 1981 for

$132,500 from an unrelated third party.

The property has generated a net

income of $112,781 from 1990 through

1999. 1

5. The Property was appraised (the

Appraisal) on July 19, 2000, by Fred W.

Morgan (Mr. Morgan), a North Carolina

state Certified Residential Real Estate

Appraiser. Mr. Morgan is independent

of the Employer and is an appraiser

with the Bissette Appraisal Services

located in Wilson, North Carolina.

Mr. Morgan determined the best use

and highest value of the Property was

associated with valuing the Property

with the so-called direct sales

comparison method. In this method,

sales of similar use land in the market

area are compared to the subject to

arrive at an indication of value. In

arriving at value conclusions, the tracts

are compared as to the rights conveyed,

financing terms, sale conditions, market

conditions, location, and physical

characteristics. Therefore, based on the

valuation procedure, the fair market

value of the Parcels was determined as

follows: (i) Churchill = $39,000; (ii)

Maplewood = $62,500; and (iii)

Candlewood = $132,500. Therefore, the

total fair market value of the Parcels is

$234,000 as of July 19, 2000 ($39,000 +

$62,500 + $132,500 = $234,000). The

Plan will receive an amount equal to the

greater of: (i) $234,000; or (ii) The

current fair market value of the

Property, as established by an

independent, qualified, appraiser at the

time of the Sale.

6. In summary, the Trustees represent

that the subject transaction satisfies the

statutory criteria contained in section

408(a) of the Act and section 4975(c)(2)

of the Code for the following reasons:

(a) The Sale is a one-time transaction

for cash;

(b) The Plan does not pay any

commissions, costs or other expenses in

connection with the Sale; and

(c) The Plan will receive an amount

equal to the greater of:

(i) $234,000; or (ii) The current fair

market value of the Property, as

established by an independent,

qualified, appraiser at the time of the

Sale.

Notice to Interested Persons: Notice of

the proposed exemption shall be given

to all interested persons in the manner

agreed upon by the applicant and

Department within 15 days of the date

of publication in the Federal Register.

Comments and requests for a hearing are

due forty-five (45) days after publication

of the notice in the Federal Register.

FOR FURTHER INFORMATION CONTACT:

Khalif Ford of the Department,

telephone (202) 219–8883 (this is not a

toll-free number).

Retirement Plan of Dime Bancorp, Inc.

(The Dime Plan); Retirement 401(k)

Plan of Dime Bancorp, Inc. (the Dime

401(k) Plan); North American Mortgage

Company Retirement and 401(k)

Savings Plan (the NAMCO Plan); and

Lakeview Savings Bank Employee

Stock Ownership Plan (the ESOP;

together, the Plans) Located in New

York, New York

[Application Nos. D–10962 through D–

10965]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 408(a) of the Act

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

in accordance with the procedures set

forth in 29 CFR Part 2570, Subpart B (55

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

the exemption is granted, the

restrictions of 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, as of

December 29, 2000, to: (1) The past

receipt by the Plans of certain Litigation

Tracking Warrants (the Warrants)

pursuant to the distribution of Warrants

(the Warrant Distribution) by Dime

Bancorp, Inc. (Dime) to all of its

common stockholders as of December

22, 2000 (the Record Date); 2 (2) the past

and proposed future holding of the

Warrants by the Plans; and (3) the

disposition or exercise of the Warrants

by the Plans; provided that the

following conditions are satisfied:

(A) The Plans’ acquisition and

holding of the Warrants resulted from

an independent act of Dime as a

corporate entity, and all holders of

Federal Register / Vol. 66, No. 125 / Thursday, June 28, 2001 / Notices 34473

3On January 1, 2001, the NAMCO Plan was

merged with and into the Dime 401(k) Plan. As a

result, for a period of time, there was temporary

administrative freeze period (the Freeze Period)

during which former participants of the NAMCO

Plan (the Former NAMCO Participants) could not

direct the investment of their accounts under the

Dime 401(k) Plan, including any Warrants allocated

to such accounts. During such Freeze Period, an

independent fiduciary had the authority to hold,

sell or exercise (to the extent the Warrants were

then exercisable) all of the Warrants transferred

from the NAMCO Plan and allocated to the

accounts of the Former NAMCO Participants under

the Dime 401(k) Plan. Once the Freeze Period

ceased, the Former NAMCO Participants

immediately regained the ability to direct the

investment of their accounts under the Dime 401(k)

Plan, including any Warrants allocated to such

accounts.

4Warburg Pincus Equity Partners, L.P. (Warburg)

recently made an aggregate $238 million investment

in Dime for which it received 13,607.664 shares of

series B junior voting preferred stock (series B

Stock) of Dime, as well as warrants to purchase

8,142.738 shares of Series C junior nonvoting

preferred stock (Series C Stock) and warrants to

purchase 5,464.926 shares of Series D junior

nonvoting preferred stock (Series D Stock). Each

share of Series B Stock has the same economic

rights equivalent to 1,000 shares of Stock subject to

antidilution adjustments. The shares of Series B

Stock will convert into restricted shares of Stock

upon, among other events, the distribution of the

Warrants. Each share of Series C and Series D Stock

will also have the economic rights equivalent to

1,000 shares of Stock. However, one of the terms

of Warburg’s investment was that it would not

receive any Warrants with respect to the shares it

acquired or will thereby acquire.

5By proposing this exemption, the Department is

providing no opinion or comment on, or support

for, the merits of the allegations made against the

U.S. government with respect to the Goodwill

Litigation. The purpose of this proposed exemption,

if granted, is merely to facilitate the rights and

benefits inuring to the Plans through the receipt of

the Warrants as holders of the Stock in order to

capitalize on whatever economic value the

Warrants may have.

6 Dime will retain the remaining 15%, and will

not issue shares in connection with it.

Stock, including the Plans, were treated

in a like manner with respect to the

Warrant Distribution (with the

exception of one holder of Stock, who

did not receive Warrants);

(B) With respect to Warrants allocated

to the Dime 401(k) Plan and the

NAMCO Plan, the Warrants were

acquired solely for the accounts of

participants who had directed

investment of all or a portion of their

account balances in Stock pursuant to

Plan provisions for individuallydirected investment of participant

accounts;

(C) With respect to Warrants allocated

to the Dime Plan and the ESOP, the

authority for all decisions regarding the

holding, disposition or exercise of the

Warrants by such Plans will be

exercised by an independent fiduciary

acting on behalf of such Plans; and

(D) With respect to Warrants allocated

to the Dime 401(k) Plan and the

NAMCO Plan, all decisions regarding

the holding, disposition or exercise of

the Warrants have been, and will

continue to be made, in accordance with

Plan provisions for individuallydirected investment of participant

accounts, by the individual Plan

participants whose accounts in the Plan

received Warrants in connection with

the Warrant Distribution, including all

determinations regarding the exercise or

sale of the Warrants received through

the Warrant Distribution,3 except for

those participants who fail to file timely

and valid instructions concerning the

exercise of the Warrants, with respect to

whom the Warrants allocated to their

accounts will, to the extent a public

trading market for the Warrants exists,

be sold.

Effective Date: This exemption, if

granted, will be effective as of December

29, 2000.

Summary of Facts and Representations

1. Dime is a Delaware corporation and

a savings and loan holding company

with its headquarters located in New

York, New York. Dime is the parent of

the Dime Savings Bank of New York,

FSB (Dime Savings), a federally

chartered bank currently serving

consumers and businesses in the greater

New York City metropolitan area.

Through Dime Savings and its

subsidiaries, including North American

Mortgage Company (i.e., NAMCO),

Dime provides consumer loans,

insurance products and mortgage

banking services throughout the United

States.

2. On December 29, 2000, Dime

distributed the Warrants to all of its

holders of common stock (i.e., the

Stock), par value $0.01 per share.4 The

Warrants are litigation tracking warrants

to purchase shares of Stock at an

exercise price of $.01 per share of Stock

that will be issued in connection with

a warrant exercise (the Exercise Price)

during a period of 60 days after the

holders of the Warrants are given notice

of the occurrence of the Triggering

Event (as defined in representation 6,

below). If the Warrants are not exercised

by the end of the 60-day period (the

Expiration Date), they will lapse and be

canceled. The Warrants have been

approved for listing as separately

tradeable on the NASDAQ National

Market under the trading symbol

‘‘DIMEZ.’’ The Stock is currently traded

on the New York Stock Exchange under

the trading symbol ‘‘DME.’’

3. The Warrants are referred to as

‘‘Litigation Tracking Warrants’’ because

the number of shares of Stock for which

the Warrants will be converted will

depend upon Dime’s recovery, if any, in

connection with a lawsuit that Dime, as

the successor to Anchor Savings Bank

FSB (Anchor), maintains in the United

States Court of Federal Claims (the

Claims Court) against the United States

(U.S.) government, whereby it alleges a

breach of contract and the taking of

property without compensation in

contravention of the Fifth Amendment

to the U.S. Constitution (the Goodwill

Litigation). The action arose because of

Anchor’s assertion that the passage of

the Financial Institutions Reform,

Recovery, and Enforcement Act of 1989

(FIRREA) and the regulations adopted

by the Office of Thrift Supervision

pursuant to FIRREA, deprived Anchor

of the ability to include supervisory

goodwill and certain other assets when

computing its regulatory capital. The

Federal Savings and Loan Insurance

Corporation had previously agreed to let

Anchor use such assets when

computing its regulatory capital ratios.

The direct effect was to cause Anchor to

go from an institution that substantially

exceeded its regulatory capital

requirements to one that was critically

undercapitalized upon the effectiveness

of the FIRREA-mandated capital

requirements. Dime has asked the

Claims Court to enter partial summary

judgment against the U.S. government

based on the existence of a contract

between the U.S. government and Dime

and the inconsistency of the

government’s actions with respect to

that contract. If the Claims Court grants

Dime’s request, Dime will then present

the evidence as to damages. It is

believed that Dime may receive a

potentially large recovery of damages in

connection with the Goodwill

Litigation.5

4. The Warrants will, upon the

Triggering Event, entitle the holders

thereof to purchase shares of Stock with

an aggregate market value equal to the

Adjusted Litigation Recovery (as

defined in representation 5, below), if

any. Each Warrant will be exercisable at

a fixed Exercise Price for the number of

shares of Stock with a market value

equal to the Adjusted Litigation

Recovery divided by the number of

Warrants issued or reserved for issuance

on the Record Date, with cash to be paid

for fractional shares resulting from a

holder’s Warrant exercise.

5. The ‘‘Adjusted Litigation Recovery’’

will equal 85%6 of the amount obtained

from the following equation:

(a) The aggregate amount of any cash

payment and the fair market value of

any property actually received by Dime

pursuant to a final, non-appealable

judgment in or final settlement of the

Goodwill Litigation (including any postjudgment interest actually received by

34474 Federal Register / Vol. 66, No. 125 / Thursday, June 28, 2001 / Notices

7As noted in footnote 3, Warburg will not receive

Warrants.

Dime on any cash payment) (the Total

Payment), minus

(b) The sum of the following: (i) The

aggregate expenses incurred previously

and hereafter by Dime in prosecuting

the Goodwill Litigation and obtaining

the Total Payment, (ii) the aggregate

expenses incurred by Dime in

connection with the creation, issuance

and trading of the Warrants, and (iii) an

amount equal to the net Total Payment

(Total Payment less the expenses

described in the preceding clauses (i)

and (ii)) multiplied by the highest,

combined statutory rate of federal, state

and local income taxes applicable to

Dime during the tax year in which the

full total payment is received.

6. The ‘‘Triggering Event’’ is defined

as the occurrence of all of the following:

(i) receipt by Dime of the full Total

Payment, (ii) calculation by Dime of the

full amount of the Adjusted Litigation

Recovery, and (iii) Receipt of all

regulatory approvals necessary to issue

the shares of Stock to be issued upon

the exercise of the Warrants, including

the effectiveness of a registration

statement relating to the issuance of

such Stock under the Securities Act of

1933, as amended.

7. Once the Triggering Event occurs,

Dime will publicly announce, by means

of a press release and by written notice

mailed to each holder of Warrants: (i)

That the Triggering Event has occurred,

(ii) the aggregate number of shares for

which the Warrants are exercisable, (iii)

the number of shares of Stock for which

each Warrant is exercisable, (iv) the

exercise price per Warrant, (v) the

manner in which the Warrants are

exercisable, and (vi) the Expiration Date.

8. Dime sponsors the Dime Plan and

the Dime 401(k) Plan, while Dime

Savings sponsors the Lakeview ESOP

and NAMCO sponsors the NAMCO

Plan. Dime Savings is a wholly-owned

subsidiary of Dime, and NAMCO is a

wholly-owned subsidiary of Dime

Savings. All or a portion of the assets of

each of the Plans is invested in the

Stock. The Dime Plan currently has

approximately 5,234 participants and

$182,039,800 in total assets, and the

Stock represents approximately 10.5%

of the assets of the Dime Plan. The Dime

401(k) Plan has approximately 3,000

participants and total assets of

approximately $147,955,000, and the

Stock represents approximately 15% of

its total assets. The NAMCO Plan had

approximately 3,160 Former

Participants at the time of its merger

into the Dime 401(k) Plan. The NAMCO

Plan had approximately $68,080,600 in

total assets, and the Stock represented

approximately 0.72% of the NAMCO

Plan’s assets. The ESOP has

approximately 57 participants and

approximately $8,193,745 in total

assets. The Stock represents

approximately 96% of the fair market

value of the assets of the ESOP. As

shareholders of Dime, each of the Plans

will receive Warrants in the same

manner as all other shareholders of

Dime.7

9. The assets of the Dime 401(k) Plan

and the NAMCO Plan are held in

accounts for which investments are

participant-directed among various

investment funds, one of which is a

fund invested in Stock. With respect to

accounts of participants in these two

plans (which were merged on January 1,

2001, as described in representation 10,

below), and except as provided below,

participants will make all decisions

regarding the disposition or exercise of

the Warrants allocated to their accounts

(with, and as is the case with other

investments under the Plans, absence of

affirmative instruction deemed to be

direction to continue to hold the

Warrants). If the participants do not

direct the disposition or exercise of the

Warrants prior to the Expiration Date,

the Warrants will be sold by the trustee

for the particular Plan so that they do

not lapse without receipt of some value,

assuming there is then a market for the

Warrants.

10. As noted in footnote 2, on January

1, 2001, the NAMCO Plan was merged

with and into the Dime 401(k) Plan. As

a result, for a period of time, there was

an administrative Freeze Period during

which former participants of the

NAMCO Plan (the Former NAMCO

Participants) could not direct the

investment of their accounts under the

Dime 401(k) Plan, including any

Warrants allocated to such accounts.

During the Freeze Period, HSBC Bank

USA (HSBC), acting as an independent

fiduciary with respect to such accounts,

had the authority to hold, sell or

exercise (to the extent the Warrants

were then exercisable) all of the

Warrants transferred from the NAMCO

Plan and allocated to the accounts of the

Former NAMCO Participants under the

Dime 401(k) Plan. Once the Freeze

Period ceased, the Former NAMCO

Participants immediately regained the

ability to direct the investment of their

accounts under the Dime 401(k) Plan,

including any Warrants allocated to

such accounts.

11. HSBC’s U.S. headquarters are

located in New York, NY. HSBC has

been in existence for 150 years. The

trust department of HSBC has $15

billion of assets under management, of

which $7 billion is held by HSBC as

fiduciary of approximately 400 plans

that are subject to the Act. HSBC is not

in any way related to Dime, Dime

Savings or NAMCO.

12. In contrast to the Dime 401(k) Plan

and the NAMCO Plan, the investments

of the Dime Plan and the ESOP are not

participant-directed. The Dime Plan

investments are managed either by

investment managers selected by Dime’s

Benefits Committee (the Benefits

Committee) or are directed by the

Benefits Committee itself. The

investment in the Stock is directed by

the Benefits Committee. The ESOP,

which is required to be invested

primarily in Stock, has its investments

directed by the Benefits Committee or

by the Plan’s trustee, HSBC. In this

regard, the trust agreement for the ESOP

has been amended to clarify that HSBC,

as the ESOP’s trustee, will have all

investment authority with respect to the

Warrants.

13. HSBC also has been retained by

Dime for the purpose of acting as the

independent fiduciary on behalf of the

Dime Plan with respect to the Warrants

to be received by that Plan. HSBC has

the authority to direct the holding, sale

or exercise of the Warrants received by

both the Dime Plan and the ESOP.

14. HSBC has represented that it is

fully aware of its duties and

responsibilities as a fiduciary under the

Act with respect to the Dime Plan, the

Dime 401(k) Plan, and the ESOP. In

fulfilling its duties, HSBC reviewed the

terms and conditions of the Warrants

and the Warrant Distribution and

reviewed the most recent financial

statements of Dime and other material it

considered appropriate to determine the

financial condition of Dime and the

possible market value of the Warrants.

Based on this review, HSBC concluded,

as of December 20, 2000, that it was in

the best interests of the participants and

beneficiaries of the Dime Plan, the ESOP

and the Dime 401(k) Plan for such Plans

to acquire and retain all Warrants issued

to such Plans pursuant to the Warrant

Distribution.

15. HSBC has represented that it will

continue to monitor the holding of the

Warrants by the Dime Plan and the

ESOP. In this regard, HSBC represents

that it monitored the holding of the

Warrants by the Dime 401(k) Plan

during the Freeze Period. In exercising

its discretion as a fiduciary under the

Act, HSBC will on an on-going basis

review all relevant financial information

related to Dime and all relevant

information related to the market value

of the Warrants to determine whether

those Plans should hold, sell, or, when

exercisable, exercise the Warrants.

Federal Register / Vol. 66, No. 125 / Thursday, June 28, 2001 / Notices 34475

8For the purposes of this proposed exemption,

references to specific provisions of Title I of the

Act, unless otherwise specified, refer to the

corresponding provisions of the Code.

16. In the event that HSBC is relieved

of its obligation to act as the

independent fiduciary on behalf of the

Dime Plan and the ESOP, Dime and

Dime Savings have established a process

to replace HSBC as independent

fiduciary. Dime and Dime Savings

represent that any new independent

fiduciary will be an established

institution that has substantial

experience as a fiduciary of plans that

are subject to the Act, and that is not

related to, or otherwise controlling of,

controlled by or under common control

with Dime, Dime Savings or NAMCO.

Dime further represents that any new

independent fiduciary will be in place

at the time HSBC’s departure as

independent fiduciary so that there will

be no period of time without an

independent fiduciary acting on behalf

of the Dime Plan and the ESOP with

respect to the Warrants.

17. The applicants represent that the

Plans are all holders of Stock. As a

result of Dime’s corporate business

decision to distribute the Warrants to all

of its common stockholders, the Plans

received Warrants through no request or

action on their part, but solely as a

result of their ownership of Stock. Thus,

the Plans’ acquisition of the warrants

was not volitional on the part of any of

the Plans or their respective trustees or

other fiduciaries.

18. The applicants represent that each

Plan’s acquisition of the Warrants

enables its participants to have the same

economic investment opportunities

offered to other holders of Stock. With

respect to the Dime 401(k) Plan and, to

the extent applicable, the NAMCO

401(k) Plan, the sale or exercise

direction opportunities will be passed

through under each Plan to participants

who had account balances invested in

the Plan’s Stock Fund as of the Record

Date, thereby affording them the same

rights and privileges as other holders of

Stock as well as the same investment

rights and privileges they have with

respect to other amounts credited to

their accounts. With respect to the Dime

Plan and the ESOP, the applicants state

that participants will be able to reap the

potential economic rewards of their

Plan’s acquisition and ultimate

disposition or exercise of the warrants.

To deny the Plans’ ability to participate

in the warrant Distribution would deny

participants the opportunity to be

treated in the same manner as other

holders of Stock. It is noted that, while

the Warrants are expected to trade on a

national securities market, an

exemption is not being requested to

permit the Plans to acquire additional

Warrants on the market. Thus, the

requested exemption relates only to the

past distribution of Warrants to the

Plans by Dime.

19. In summary, the applicants

represent that the transactions satisfy

the criteria of section 408(a) of the Act

for the following reasons: (a) The Plans’

acquisition of the Warrants resulted

from an independent act of Dime as a

corporate entity, and all holders of

Stock, including the Plans, were treated

in a like manner with respect to the

Warrant Distribution (with the

exception of one holder of Stock (i.e.,

Warburg), who did not receive

Warrants); (b) with respect to Warrants

allocated to the Dime 401(k) Plan and

the NAMCO Plan, the Warrants were

acquired solely for the accounts of

participants who had directed

investment of all or a portion of their

account balances in Stock pursuant to

plan provisions for individuallydirected investment of participant

accounts; (c) with respect to Warrants

allocated to the Dime Plan and the

ESOP, the authority for all decisions

regarding the holding, disposition or

exercise of the Warrants by such Plans

will be exercised by an independent

fiduciary (i.e., HSBC or its successor)

acting on behalf of such Plans; and (d)

with respect to Warrants allocated to the

Dime 401(k) Plan and the NAMCO Plan,

all decisions regarding the holding,

disposition or exercise of the Warrants

have been made (other than during the

Freeze Period), and will continue to be

made, in accordance with Plan

provisions for individually-directed

investment of participant accounts, by

the individual Plan participants whose

accounts in the Plan received Warrants

in connection with the Warrant

Distribution.

FOR FURTHER INFORMATION CONTACT: Gary

H. Lefkowitz of the Department,

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

a toll-free number.

Barclays Bank PLC and Barclays

Capital Inc. Located in London,

England and New York, New York

[Application No. D–10966]

Proposed Exemption

The Department of Labor 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 as set forth in 29 C.F.R. Part

2570, Subpart B (55 Fed. Reg. 32836,

32847, August 10, 1990).8

Section I—Transactions

If the exemption is granted, the

restrictions of section 406(a)(1)(A)

through (D) 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 (D) of the Code,

shall not apply as of January 24, 2001,

to:

(a) The lending of securities, under

certain exclusive borrowing

arrangements, to:

(1) Barclays Bank PLC (Barclays);

(2) Barclays Capital Inc. (BCI) and any

other affiliate of Barclays that, now or in

the future, is a U.S. registered brokerdealer or a government securities broker

or dealer or U.S. bank;

(3) Barclays Capital Securities

Limited, which is subject to regulation

in the United Kingdom by the Securities

and Futures Authority of the United

Kingdom (the UK SFA); and

(4) Any broker-dealer or bank that,

now or in the future, is an affiliate of

Barclays which is subject to regulation

by the UK SFA or the Bank of England,

(each such affiliated foreign brokerdealer or bank referred to as a ‘‘Foreign

Borrower,’’ and, together with Barclays

and BCI, collectively referred to as the

‘‘Borrowers’’), by employee benefit

plans, including commingled

investment funds holding assets of such

plans (Plans), with respect to which

Barclays or any of its affiliates is a party

in interest; and

(b) The receipt of compensation by

Barclays or any of its affiliates in

connection with securities lending

transactions, provided that the

following conditions set forth in Section

II, below, are satisfied.

Section II—Conditions

(a) For each Plan, neither the

Borrower nor any affiliate has or

exercises discretionary authority or

control over the Plan’s investment in the

securities available for loan, nor do they

render investment advice (within the

meaning of 29 CFR 2510.3–21(c)) with

respect to those assets.

(b) The party in interest dealing with

the Plan is a party in interest with

respect to the Plan (including a

fiduciary) solely by reason of providing

services to the Plan, or solely by reason

of a relationship to a service provider

described in section 3(14)(F), (G), (H) or

(I) of the Act.

(c) The Borrower directly negotiates

an exclusive borrowing agreement (the

Borrowing Agreement) with a Plan

fiduciary which is independent of the

Borrower and its affiliates.

(d) The terms of each loan of

securities by a Plan to a Borrower are at

34476 Federal Register / Vol. 66, No. 125 / Thursday, June 28, 2001 / Notices

9PTE 81–6 provides an exemption under certain

conditions from section 406(a)(1)(A) through (D) of

the Act and the corresponding provisions of section

4975(c) of the Code for the lending of securities that

are assets of an employee benefit plan to a U.S.

broker-dealer registered under the Securities

Exchange Act of 1934 (the 1934 Act) (or exempted

from registration under the 1934 Act as a dealer in

exempt Government securities, as defined therein)

or to a U.S. bank, that is a party in interest with

respect to such plan.

10The Department notes the Applicants’

representation that dividends and other

distributions on foreign securities payable to a

lending Plan are subject to foreign tax withholdings

and that the Borrower will always put the Plan back

in at least as good a position as it would have been

had it not loaned securities.

least as favorable to such Plan as those

of a comparable arm’s-length transaction

between unrelated parties, taking into

account the exclusive arrangement.

(e) In exchange for granting the

Borrower the exclusive right to borrow

certain securities, the Plan receives from

the Borrower either (i) a flat fee (which

may be equal to a percentage of the

value of the total securities subject to

the Borrowing Agreement from time to

time), (ii) a periodic payment that is

equal to a percentage of the value of the

total balance of outstanding borrowed

securities, or (iii) any combination of (i)

and (ii) (collectively, the Exclusive Fee).

If the Borrower deposits cash collateral,

all the earnings generated by such cash

collateral shall be returned to the

Borrower; provided that the Borrower

may, but shall not be obligated to, agree

with the independent fiduciary of the

Plan that a percentage of the earnings on

the collateral may be retained by the

Plan or the Plan may agree to pay the

Borrower a rebate fee and retain the

remaining earnings on the collateral (the

Shared Earnings Compensation). If the

Borrower deposits non-cash collateral,

all earnings on the non-cash collateral

shall be returned to the Borrower;

provided that the Borrower may, but

shall not be obligated to, agree to pay

the Plan a lending fee (the Lending Fee)

(the Lending Fee and the Shared

Earnings Compensation are collectively

referred to as the ‘‘Transaction Lending

Fee’’). The Transaction Lending Fee, if

any, shall be either in addition to the

Exclusive Fee or an offset against such

Exclusive Fee. The Exclusive Fee and

the Transaction Lending Fee may be

determined in advance or pursuant to

an objective formula, and may be

different for different securities or

different groups of securities subject to

the Borrowing Agreement. Any change

in the Exclusive Fee or the Transaction

Lending Fee that the Borrower pays to

the Plan with respect to any securities

loan requires the prior written consent

of the independent fiduciary of the Plan,

except that consent is presumed where

the Exclusive Fee or the Transaction

Lending Fee changes pursuant to an

objective formula. Where the Exclusive

Fee or the Transaction Lending Fee

changes pursuant to an objective

formula, the independent fiduciary of

the Plan must be notified at least 24

hours in advance of such change and

such independent Plan fiduciary must

not object in writing to such change,

prior to the effective time of such

change.

(f) The Borrower may, but shall not be

required to, agree to maintain a

minimum balance of borrowed

securities subject to the Borrowing

Agreement. Such minimum balance

may be a fixed U.S. dollar amount, a flat

percentage or other percentage

determined pursuant to an objective

formula.

(g) By the close of business on or

before the day the loaned securities are

delivered to the Borrower, the Plan

receives from the Borrower (by physical

delivery, book entry in a securities

depository located in the United States,

wire transfer, or similar means)

collateral consisting of U.S. currency,

securities issued or guaranteed by the

U.S. Government or its agencies or

instrumentalities, irrevocable bank

letters of credit issued by a U.S. bank

other than Barclays or any affiliate

thereof, or any combination thereof, or

other collateral permitted under

Prohibited Transaction Exemption 81–6

(46 FR 7527, Jan. 23, 1981, as amended

at 52 FR 18754, May 19, 1987) (PTE 81–

6) (as amended or superseded).9 Such

collateral will be deposited and

maintained in an account which is

separate from the Borrower’s accounts

and will be maintained with an

institution other than the Borrower. For

this purpose, the collateral may be held

on behalf of the Plan by an affiliate of

the Borrower that is the trustee or

custodian of the Plan.

(h) The market value (or in the case

of a letter of credit, the stated amount)

of the collateral initially equals at least

102 percent of the market value of the

loaned securities on the close of

business on the day preceding the day

of the loan and, if the market value of

the collateral at any time falls below 100

percent (or such higher percentage as

the Borrower and the independent

fiduciary of the Plan may agree upon) of

the market value of the loaned

securities, the Borrower delivers

additional collateral on the following

day to bring the level of the collateral

back to at least 102 percent. The level

of the collateral is monitored daily by

the Plan or its designee, which may be

Barclays or any of its affiliates which

provides custodial or directed trustee

services in respect of the securities

covered by the Borrowing Agreement for

the Plan. The applicable Borrowing

Agreement shall give the Plan a

continuing security interest in and lien

on the collateral.

(i) Before entering into a Borrowing

Agreement, the Borrower furnishes to

the Plan the most recent publicly

available audited and unaudited

statements of its financial condition, as

well as any publicly available

information which it believes is

necessary for the independent fiduciary

to determine whether the Plan should

enter into or renew the Borrowing

Agreement.

(j) The Borrowing Agreement contains

a representation by the Borrower that, as

of each time it borrows securities, there

has been no material adverse change in

its financial condition since the date of

the most recently furnished financial

statements.

(k) The Plan receives the equivalent of

all distributions made during the loan

period, including, but not limited to,

cash dividends, interest payments,

shares of stock as a result of stock splits,

and rights to purchase additional

securities, that the Plan would have

received (net of tax withholdings)10 had

it remained the record owner of the

securities.

(l) The Borrowing Agreement and/or

any securities loan outstanding may be

terminated by either party at any time

without penalty (except for, if the Plan

has terminated its Borrowing

Agreement, the return to the Borrower

of a pro-rata portion of the Exclusive

Fee paid by the Borrower to the Plan)

whereupon the Borrower delivers

securities identical to the borrowed

securities (or the equivalent thereof in

the event of reorganization,

recapitalization, or merger of the issuer

of the borrowed securities) to the Plan

within the lesser of five business days

of written notice of termination or the

customary settlement period for such

securities.

(m) In the event that the Borrower

fails to return securities in accordance

with the Borrowing Agreement, the Plan

will have the right under the Borrowing

Agreement to purchase securities

identical to the borrowed securities and

apply the collateral to payment of the

purchase price. If the collateral is

insufficient to satisfy the Borrower’s

obligation to return the Plan’s securities,

the Borrower will indemnify the Plan in

the U.S. with respect to the difference

between the replacement cost of

securities and the market value of the

collateral on the date the loan is

declared in default, together with

Federal Register / Vol. 66, No. 125 / Thursday, June 28, 2001 / Notices 34477

11The Department notes the Applicants’

representation that, under the proposed exclusive

borrowing arrangements, neither the Borrower nor

any of its affiliates will perform the essential

functions of a securities lending agent, i.e., the

Applicants will not be the fiduciary who negotiates

the terms of the Borrowing Agreement on behalf of

the Plan, the fiduciary who identifies the

appropriate borrowers of the securities or the

fiduciary who decides to lend securities pursuant

to an exclusive arrangement. However, the

Applicants or their affiliates may monitor the level

of collateral and the value of the loaned securities.

expenses incurred by the Plan plus

applicable interest at a reasonable rate,

including reasonable attorneys’ fees

incurred by the Plan for legal action

arising out of default on the loans, or

failure by the Borrower to properly

indemnify the Plan.

(n) Except as otherwise provided

herein, all procedures regarding the

securities lending activities, at a

minimum, conform to the applicable

provisions of PTE 81–6 (as amended or

superseded), as well as to applicable

securities laws of the United States and/

or the United Kingdom, as appropriate.

(o) Only Plans with total assets having

an aggregate market value of at least $50

million are permitted to lend securities

to the Borrowers; provided, however,

that—

(1) In the case of two or more Plans

which are maintained by the same

employer, controlled group of

corporations or employee organization

(the Related Plans), whose assets are

commingled for investment purposes in

a single master trust or any other entity

the assets of which are ‘‘plan assets’’

under 29 CFR 2510.3–101 (the Plan

Asset Regulation), which entity is

engaged in securities lending

arrangements with the Borrowers, the

foregoing $50 million requirement shall

be deemed satisfied if such trust or

other entity has aggregate assets which

are in excess of $50 million; provided

that if the fiduciary responsible for

making the investment decision on

behalf of such master trust or other

entity is not the employer or an affiliate

of the employer, such fiduciary has total

assets under its management and

control, exclusive of the $50 million

threshold amount attributable to plan

investment in the commingled entity,

which are in excess of $100 million.

(2) In the case of two or more Plans

which are not maintained by the same

employer, controlled group of

corporations or employee organization

(the Unrelated Plans), whose assets are

commingled for investment purposes in

a group trust or any other form of entity

the assets of which are ‘‘plan assets’’

under the Plan Asset Regulation, which

entity is engaged in securities lending

arrangements with the Borrowers, the

foregoing $50 million requirement is

satisfied if such trust or other entity has

aggregate assets which are in excess of

$50 million (excluding the assets of any

Plan with respect to which the fiduciary

responsible for making the investment

decision on behalf of such group trust

or other entity or any member of the

controlled group of corporations

including such fiduciary is the

employer maintaining such Plan or an

employee organization whose members

are covered by such Plan). However, the

fiduciary responsible for making the

investment decision on behalf of such

group trust or other entity—

(i) Has full investment responsibility

with respect to plan assets invested

therein; and

(ii) Has total assets under its

management and control, exclusive of

the $50 million threshold amount

attributable to plan investment in the

commingled entity, which are in excess

of $100 million. (In addition, none of

the entities described above are formed

for the sole purpose of making loans of

securities.)

(p) Prior to any Plan’s approval of the

lending of its securities to the

Borrowers, a copy of this exemption, if

granted, (and the notice of pendency) is

provided to the Plan, and the Borrower

informs the independent fiduciary that

the Borrower is not acting as a fiduciary

of the Plan in connection with its

borrowing securities from the Plan.11

(q) The independent fiduciary of the

Plan receives monthly reports with

respect to the securities lending

transactions, including but not limited

to the information set forth in the

following sentence, so that an

independent Plan fiduciary may

monitor such transactions with the

Borrowers. The monthly report will list

for a specified period all outstanding or

closed securities lending transactions.

The report will identify for each open

loan position, the securities involved,

the value of the security for

collateralization purposes, the current

value of the collateral, the rebate or

premium (if applicable) at which the

security is loaned, and the number of

days the security has been on loan. At

the request of the Plan, such a report

will be provided on a daily or weekly

basis, rather than a monthly basis. Also,

upon request of the Plan, the Borrower

will provide the Plan with daily

confirmations of securities lending

transactions.

(r) In addition to the above

conditions, all loans involving Foreign

Borrowers must satisfy the following

supplemental requirements:

(1) Such Foreign Borrower is a bank

which is subject to regulation by the

Bank of England or is a registered

broker-dealer subject to regulation by

the UK SFA;

(2) Such Foreign Borrower is in

compliance with all applicable

provisions of Rule 15a–6 (17 CFR

240.15a–6) under the Securities

Exchange Act of 1934 (the 1934 Act)

which provides foreign broker-dealers a

limited exception from United States

registration requirements;

(3) All collateral is maintained in

United States dollars or in U.S. dollardenominated securities or letters of

credit;

(4) All collateral is held in the United

States and the situs of the Borrowing

Agreement is maintained in the United

States under an arrangement that

complies with the indicia of ownership

requirements under section 404(b) of the

Act and the regulations promulgated

under 29 CFR 2550.404(b)-1; and

(5) Prior to entering into a transaction

involving a Foreign Borrower, Barclays

or the Foreign Borrower must:

(i) Agree to submit to the jurisdiction

of the United States;

(ii) Agree to appoint an agent for

service of process in the United States,

which may be an affiliate (the Process

Agent);

(iii) Consent to the service of process

on the Process Agent; and

(iv) Agree that enforcement by a Plan

of the indemnity provided by Barclays

or the Foreign Borrower will occur in

the United States courts.

(s) Barclays or the Borrower

maintains, or causes to be maintained,

within the United States for a period of

six years from the date of such

transaction, in a manner that is

convenient and accessible for audit and

examination, such records as are

necessary to enable the persons

described in paragraph (t)(1) to

determine whether the conditions of the

exemption have been met, except that—

(1) A prohibited transaction will not

be considered to have occurred if, due

to circumstances beyond the control of

Barclays and/or its affiliates, the records

are lost or destroyed prior to the end of

the six year period; and

(2) No party in interest other than the

Borrower shall be subject to the civil

penalty that may be assessed under

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

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

the Code, if the records are not

maintained, or are not available for

examination as required below by

paragraph (t)(1).

(t)(1) Except as provided in

subparagraph (t)(2) of this paragraph

and notwithstanding any provisions of

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

of the Act, the records referred to in

34478 Federal Register / Vol. 66, No. 125 / Thursday, June 28, 2001 / Notices

paragraph (s) are unconditionally

available at their customary location for

examination during normal business

hours by—

(i) Any duly authorized employee or

representative of the Department, the

Internal Revenue Service or the

Securities and Exchange Commission

(SEC);

(ii) Any fiduciary of a participating

Plan or any duly authorized

representative of such fiduciary;

(iii) Any contributing employer to any

participating Plan or any duly

authorized employee representative of

such employer; and

(iv) Any participant or beneficiary of

any participating Plan, or any duly

authorized representative of such

participant or beneficiary.

(2) None of the persons described

above in subparagraphs (t)(1)(ii)–

(t)(1)(iv) are authorized to examine the

trade secrets of Barclays or its affiliates

or commercial or financial information

which is privileged or confidential.

Section III—Definitions

(a) An ‘‘affiliate’’ of a person means:

(i) any person directly or indirectly,

through one or more intermediaries,

controlling, controlled by, or under

common control with the person. (For

purposes of this paragraph, the term

‘‘control’’ means the power to exercise

a controlling influence over the

management or policies of a person

other than an individual);

(ii) any officer, director, employee or

relative (as defined in section 3(15) of

the Act) of any such other person or any

partner in any such person; and

(iii) any corporation or partnership of

which such person is an officer, director

or employee, or in which such person

is a partner.

(b) The term ‘‘Foreign Borrower’’ or

‘‘Foreign Borrowers’’ means Barclays

Capital Securities Limited and any

broker-dealer or bank that, now or in the

future, is an affiliate of Barclays which

is subject to regulation by the UK SFA

or the Bank of England.

(c) The term ‘‘Borrower’’ includes

Barclays, BCI, the Foreign Borrowers

and any other affiliate of Barclays that,

now or in the future, is a U.S. registered

broker-dealer or a government securities

broker or dealer or U.S. bank.

Effective Date: This proposed

exemption, if granted, will be effective

as of January 24, 2001.

Summary of Facts and Representations

1. Barclays, a full-line investment

service firm, is an authorized institution

under the Banking Act of 1987 of the

United Kingdom and is regulated by the

Bank of England. As of June 30, 2000,

Barclays (based on its Consolidated

Balance Sheet) had approximately

£286,385 million in assets and £9,237

million in stockholder’s equity.

Barclays has several affiliates which

are broker-dealers or banks. BCI, a

subsidiary of Barclays, is incorporated

under the laws of the State of

Connecticut and is registered with and

regulated by the Securities and

Exchange Commission (the SEC) as a

U.S. broker-dealer under Section 15 of

the Securities Exchange Act of 1934, as

amended (the 1934 Act). As of

November 2000, BCI had approximately

$55 billion in assets. The affiliated

foreign broker-dealers of Barclays that

will be covered by this proposed

exemption (i.e., the Foreign Borrowers),

and their respective regulating entities,

are as follows: (a) Barclays Capital

Securities Limited (BCSL) is a foreign

broker-dealer affiliate of Barclays

located in London, and is subject to

regulation by the United Kingdom

Securities and Futures Authority (the

UK SFA) and (b) any broker-dealer or

bank that, now or in the future, is an

affiliate of Barclays which is subject to

regulation by the UK SFA or the Bank

of England. As of June 30, 2000, BCSL

had approximately £18,942 million in

assets. Barclays, BCI and the Foreign

Borrowers are collectively referred to as

the Borrowers or the Applicants.

2. The Borrowers, acting as principal,

actively engage in the borrowing and

lending of securities. The Borrowers

utilize borrowed securities either to

satisfy their own trading requirements

or to re-lend to other broker-dealers and

entities which need a particular security

for a certain period of time. The

Applicants represent that in the United

States, as described in the Federal

Reserve Board’s Regulation T, borrowed

securities are often used in short sales,

for non-purpose loans to exempted

borrowers, or in the event of a failure to

receive securities that a broker-dealer is

required to deliver.

The Applicants wish to enter into

exclusive borrowing arrangements with

employee benefit plans, including

commingled investment funds holding

assets of such plans (Plans), for which

Barclays or any affiliate of Barclays may

be a party in interest. For example,

Barclays or an affiliate of Barclays may

be an investment manager for assets of

a Plan that are unrelated to the assets

involved in the transaction. Barclays or

any of its affiliates may provide

securities custodial services, directed

trustee services, clearing and/or

reporting functions in connection with

securities lending transactions, or other

services to the Plan.

3. Barclays represents that it or any

other Foreign Borrower that is a bank is

regulated by the Bank of England whose

powers include licensing banks in the

United Kingdom, issuing directives to

address violations by or irregularities

involving such banks, requiring

information from a bank or its auditor

regarding supervisory matters and

revoking bank licenses. Barclays also

states that the Bank of England ensures

that it has procedures for monitoring

and controlling its worldwide activities

through various statutory and regulatory

standards. Among these standards are

requirements for adequate internal

controls, oversight, administration and

financial resources. Barclays further

states that it is required to provide the

Bank of England on a recurring basis

with information regarding capital

adequacy, country risk exposure and

foreign exchange exposures as well as

periodic, consolidated financial reports

on the financial condition of Barclays

and its affiliates.

4. The Applicants represent that

although the Foreign Borrowers that are

broker-dealers will not be registered

with the SEC, their activities are

governed by the rules, regulations and

membership requirements of the UK

SFA. In this regard, the Applicants state

that the Foreign Borrowers are subject to

the UK SFA rules relating to, among

other things, minimum capitalization,

reporting requirements, periodic

examinations, client money and safe

custody rules, and books and records

requirements with respect to client

accounts. The Applicants represent that

the rules and regulations set forth by the

UK SFA and the SEC share a common

objective: the protection of the investor

by the regulation of the securities

industry. The Applicants represent that

the UK SFA rules require each firm

which employs registered

representatives or registered traders to

have positive tangible net worth and to

be able to meet its obligations as they

may fall due, and that the UK SFA rules

set forth comprehensive financial

resource and reporting/disclosure rules

regarding capital adequacy. In addition,

to demonstrate capital adequacy, the

Applicants state that the UK SFA rules

impose reporting/disclosure

requirements on broker-dealers with

respect to risk management, internal

controls, and transaction reporting and

recordkeeping requirements. In this

regard, required records must be

produced at the request of the UK SFA

at any time. The Applicants further state

that the rules and regulations of the UK

SFA for broker-dealers are backed up by

Federal Register / Vol. 66, No. 125 / Thursday, June 28, 2001 / Notices 34479

12According to the Applicants, section 3(a)(4) of

the 1934 Act defines ‘‘broker’’ to mean ‘‘any person

engaged in the business of effecting transactions in

securities for the account of others, but it does not

include a bank.’’ Section 3(a)(5) of the 1934 Act

provides a similar exclusion for ‘‘banks’’ in the

definition of the term ‘‘dealer.’’ However, section

3(3)(6) of the 1934 Act defines ‘‘bank’’ to mean a

banking institution organized under the laws of the

United States or a State of the United States.

Further, Rule 15a–6(b)(3) provides that the term

‘‘foreign broker-dealer’’ means ‘‘any non-U.S.

resident person * * * whose securities activities, if

conducted in the United States, would be described

by the definition of ‘broker’ or ‘dealer’ in sections

3(a)(4) or 3(a)(5) of the [1934] Act.’’ Therefore, the

test of whether an entity is a ‘‘foreign broker’’ or

‘‘dealer’’ is based on the nature of such foreign

entity’s activities and, with certain exceptions, only

banks that are regulated by either the United States

or a State of the United States are excluded from

the definition of the term ‘‘broker’’ or ‘‘dealer.’’

Thus, for purposes of this exemption request, the

Applicants are willing to represent that they will

comply with the applicable provisions and relevant

SEC interpretations and amendments of Rule 15a–

6.

13Note that the categories of entities that qualify

as ‘‘major U.S. institutional investors’’ has been

expanded by a No-Action letter issued by the SEC.

See SEC No-Action Letter issued to Cleary, Gottlieb,

Steen & Hamilton on April 9, 1997 (April 9, 1997

No-Action Letter).

14 If it is determined that applicable regulation

under the 1934 Act does not require Barclays or the

borrower to comply with SEC Rule 15a–6, both

entities will nevertheless comply with

subparagraphs (a) and (b) of Representation 5 above.

15Under certain circumstances described in the

April 9, 1997 No-Action Letter (e.g., clearance and

settlement transactions), there may be direct

transfers of funds and securities between a Plan and

Barclays or between a Plan and the Foreign

Borrower. The Applicants note that in such

situations, the U.S. registered broker-dealer will not

be acting as principal with respect to any duties it

is required to undertake pursuant to Rule 15a–6.

16The term ‘‘foreign associated person’’ as

defined in Rule 15a–6(b)(2) means any natural

person domiciled outside the United States who is

an associated person, as defined in section 3(a)(18)

of the 1934 Act, of the foreign broker or dealer, and

who participates in the solicitation of a U.S.

institutional investor or a major U.S. institutional

investor under Rule 15a–6(a)(3)

potential fines and penalties as well as

a comprehensive disciplinary system.

5. The Applicants represent that in

addition to the protections afforded by

the Bank of England and the UK SFA,

compliance by the Applicants with the

requirements of Rule 15a–6 of the 1934

Act (and the amendments and

interpretations thereof) will offer further

protections to the Plans.12 SEC Rule

15a–6 provides an exemption from U.S.

registration requirements for a foreign

broker-dealer that induces or attempts to

induce the purchase or sale of any

security (including over-the-counter

equity and debt options) by a ‘‘U.S.

institutional investor’’ or a ‘‘major U.S.

institutional investor,’’ provided that

the foreign broker-dealer, among other

things, enters into these transactions

through a U.S. registered broker-dealer

intermediary. The term ‘‘U.S.

institutional investor,’’ as defined in

Rule 15a–6(b)(7), includes an employee

benefit plan within the meaning of the

Act if (a) the investment decision is

made by a plan fiduciary, as defined in

section 3(21) of the Act, which is either

a bank, savings and loan association,

insurance company or registered

investment advisor, or (b) the employee

benefit plan has total assets in excess of

$5 million, or (c) the employee benefit

plan is a self-directed plan with

investment decisions made solely by

persons that are ‘‘accredited investors’’

as defined in Rule 501(a)(1) of

Regulation D of the Securities Act of

1933, as amended. The term ‘‘major U.S.

institutional investor’’ is defined as a

person that is a U.S. institutional

investor that has, or has under

management, total assets in excess of

$100 million or an investment adviser

registered under section 203 of the

Investment Advisers Act of 1940 that

has total assets under management in

excess of $100 million.13 The

Applicants represent that the

intermediation of the U.S. registered

broker-dealer imposes upon the foreign

broker-dealer the requirement that the

securities transaction be effected in

accordance with a number of U.S.

securities laws and regulations

applicable to U.S. registered brokerdealers.

The Applicants represent that under

SEC Rule 15a–6, a foreign broker-dealer

that induces or attempts to induce the

purchase or sale of any security by a

U.S. institutional or major U.S.

institutional investor in accordance

with Rule 15a–6 14 must, among other

things:

(a) Consent to service of process for

any civil action brought by, or

proceeding before, the SEC or any selfregulatory organization;

(b) Provide the SEC with any

information or documents within its

possession, custody or control, any

testimony of any such foreign associated

persons, and any assistance in taking

the evidence of other persons, wherever

located, that the SEC requests and that

relates to the transactions effected

pursuant to the Rule;

(c) Rely on the U.S. registered brokerdealer through which the transactions

with the U.S. institutional and major

U.S. institutional investors are effected

to (among other things):

(1) Effect the transactions, other than

negotiating the terms;

(2) Issue all required confirmations

and statements;

(3) As between the foreign brokerdealer and the U.S. registered brokerdealer, extend or arrange for the

extension of credit in connection with

the transactions;

(4) Maintain required books and

records relating to the transactions,

including those required by SEC Rules

17a-3 (Records to be Made by Certain

Exchange Members) and 17a-4 (Records

to be Preserved by Certain Exchange

Members, Brokers and Dealers) of the

1934 Act;

(5) Receive, deliver, and safeguard

funds and securities in connection with

the transactions on behalf of the U.S.

institutional investor or major U.S.

institutional investor in compliance

with Rule 15c3–3 of the 1934 Act

(Customer Protection—Reserves and

Custody of Securities)15 and

(6) Participate in certain oral

communications (e.g., telephone calls)

between the foreign associated person

and the U.S. institutional investor (not

the major U.S. institutional investor),

and accompany the foreign associated

person on certain visits with both U.S.

institutional and major U.S.

institutional investors. The Applicants

represent that, under certain

circumstances, the foreign associated

person may have direct communications

and contact with the U.S. Institutional

Investor. 16 (See April 9, 1997 No-Action

Letter.)

6. An institutional investor, such as a

pension fund, lends securities in its

portfolio to a broker-dealer or bank in

order to earn a fee while continuing to

enjoy the benefits of owning the

securities (e.g., from the receipt of any

interest, dividends, or other

distributions due on those securities

and from any appreciation in the value

of the securities). The lender generally

requires that the securities loan be fully

collateralized, and the collateral usually

is in the form of cash or high quality

liquid securities, such as U.S.

Government or Federal Agency

obligations or irrevocable bank letters of

credit. If the borrower deposits cash

collateral, the lender invests the

collateral, and the borrowing agreement

may provide that the lender pay the

borrower a previously-agreed upon

amount or rebate fee and keep the

earnings on the collateral. If the

borrower deposits government

securities, the borrower is entitled to the

earnings on its deposited securities and

may pay the lender a lending fee. If the

borrower deposits irrevocable bank

letters of credit as collateral, the

borrower pays the lender a fee as

compensation for the loan of its

securities. These fees, defined below as

the Transaction Lending Fee, may be

determined in advance or pursuant to

an objective formula, and may be

different for different securities or

34480 Federal Register / Vol. 66, No. 125 / Thursday, June 28, 2001 / Notices

17PTE 81–6 requires in part that neither the

borrower nor an affiliate of the borrower may have

discretionary authority or control over the

investment of the plan assets involved in the

transaction.

different groups of securities subject to

the Borrowing Agreement.

7. The Borrowers request an

exemption for the lending of securities,

under certain exclusive borrowing

arrangements, by Plans with respect to

which Barclays or any of its affiliates is

a party in interest (including a

fiduciary) solely by reason of providing

services to the Plan, or solely by reason

of a relationship to a service provider

described in section 3(14)(F), (G), (H) or

(I) of the Act. For each Plan, neither the

Borrowers nor any of its affiliates will

have discretionary authority or control

over the Plan’s investment in the

securities available for loan, nor will

they render investment advice (within

the meaning of 29 CFR 2510.3–21(c))

with respect to those assets. The

Applicants represent that because the

Borrowers, by exercising their

contractual rights under the proposed

exclusive borrowing arrangements, will

have discretion with respect to whether

there is a loan of particular Plan

securities to the Borrowers, the lending

of securities to the Borrowers may be

outside the scope of relief provided by

PTE 81–6.17

8. For each Plan, the Borrowers will

directly negotiate a Borrowing

Agreement with a Plan fiduciary which

is independent of the Borrowers. Under

the Borrowing Agreement, the

Borrowers will have exclusive access for

a specified period of time to borrow

certain securities of the Plan pursuant to

certain conditions. The Borrowing

Agreement will specify all material

terms of the agreement, including the

basis for compensation to the Plan

under each category of securities

available for loan. The Borrowing

Agreement will also contain a

requirement that the Borrowers pay all

transfer fees and transfer taxes relating

to the securities loans. The terms of

each loan of securities by a Plan to a

Borrower will be at least as favorable to

such Plan as those of a comparable

arm’s-length transaction between

unrelated parties, taking into account

the exclusive arrangement.

9. The Borrowers may, but shall not

be required to, agree to maintain a

minimum balance of borrowed

securities subject to the Borrowing

Agreement. Such minimum balance

may be a fixed U.S. dollar amount, a flat

percentage or other percentage

determined pursuant to an objective

formula.

10. In exchange for granting the

Borrower the exclusive right to borrow

certain securities, the Borrower will pay

the Plan either (i) a flat fee (which may

be equal to a percentage of the value of

the total securities subject to the

Borrowing Agreement), (ii) a periodic

payment that is equal to a percentage of

the value of the total balance

outstanding borrowed securities, or (iii)

any combination of (i) and (ii) (i.e., the

Exclusive Fee).

If the Borrower deposits cash

collateral, all the earnings generated by

such cash collateral shall be returned to

the Borrower; provided that the

Borrower may, but shall not be obligated

to, agree with the independent fiduciary

of the Plan that a percentage of the

earnings on the collateral may be

retained by the Plan or the Plan may

agree to pay the Borrower a rebate fee

and retain the remaining earnings on the

collateral (the Shared Earnings

Compensation). If the Borrower deposits

non-cash collateral, all earnings on the

non-cash collateral shall be returned to

the Borrower; provided that the

Borrower may, but shall not be obligated

to, agree to pay the Plan a lending fee.

The Lending Fee, together with the

Shared Earnings Compensation, is

referred to as the Transaction Lending

Fee.

The Transaction Lending Fee, if any,

may be in addition to the Exclusive Fee

or an offset against such Exclusive Fee.

The Exclusive Fee and the Transaction

Lending Fee may be determined in

advance or pursuant to an objective

formula, and may be different for

different securities or different groups of

securities subject to the Borrowing

Agreement. For example, in addition to

the Borrower paying different fees to

different Plans, the Borrower may pay

different fees for different portfolios of

securities (i.e., the fee for a domestic

securities portfolio may be different

than the fee for a foreign securities

portfolio). The Borrower may also pay

different fees for securities of issuers in

different foreign countries; for example,

there may be a different fee for German

securities than for French securities. In

addition, with respect to, for example,

the French securities, there may be

different fees for liquid securities than

for illiquid securities.

Any change in the Exclusive Fee or

the Transaction Lending Fee that the

Borrower pays to the Plan with respect

to any securities loan requires the prior

written consent of the independent

fiduciary of the Plan, except that

consent is presumed where the

Exclusive Fee or the Transaction

Lending Fee changes pursuant to an

objective formula. Where the Exclusive

Fee or the Transaction Lending Fee

changes pursuant to an objective

formula, the independent fiduciary of

the Plan must be notified at least 24

hours in advance of such change and

such independent Plan fiduciary must

not object in writing to such change,

prior to the effective time of such

change.

The Plan will be entitled to the

equivalent of all distributions made to

holders of the borrowed securities

during the loan period, including, but

not limited to, cash dividends, interest

payments, shares of stock as a result of

stock splits, and rights to purchase

additional securities that the Plan

would have received (net of tax

withholdings in the case of foreign

securities), had it remained the record

owner of the securities.

11. By the close of business on or

before the day the loaned securities are

delivered to the Borrower, the Plan will

receive from the Borrower (by physical

delivery, book entry in a securities

depository located in the United States,

wire transfer, or similar means)

collateral consisting of U.S. currency,

securities issued or guaranteed by the

U.S. Government or its agencies or

instrumentalities, irrevocable bank

letters of credit issued by U.S. banks

other than Barclays or its affiliates, or

other collateral permitted under PTE

81–6 (as amended or superseded). Such

collateral will be deposited and

maintained in an account on behalf of

a Plan which is separate from the

Borrower’s accounts and will be

maintained with an institution other

than the Borrower. For this purpose, the

collateral may be held on behalf of the

Plan by an affiliate of the Borrower that

is the trustee or custodian of the Plan.

The market value (or in the case of a

letter of credit, a stated amount) of the

collateral on the close of business on the

day preceding the day of the loan will

be at least 102 percent of the market

value of the loaned securities. The Plan,

its independent fiduciary or its

designee, which may be Barclays or any

of its affiliates which provides custodial

or directed trustee services in respect of

the securities covered by the Borrowing

Agreement for the Plan, will monitor the

level of the collateral daily and, if the

market value of the collateral on the

close of a business day falls below 100

percent (or such higher percentage as

the Borrower and the independent

fiduciary of the Plan may agree upon) of

the market value of the loaned securities

at the close of business on such day, the

Borrower will deliver additional

collateral by the close of business on the

following day to bring the level of the

collateral back to at least 102 percent.

Federal Register / Vol. 66, No. 125 / Thursday, June 28, 2001 / Notices 34481

18An overnight REPO is an overnight repurchase

agreement that is an arrangement whereby

securities dealers and banks finance their

inventories of Treasury bills, notes and bonds. The

dealer or bank sells securities to an investor with

a temporary surplus of cash, agreeing to buy them

back the next day. Such transactions are settled in

immediately available Federal Funds, usually at a

rate below the Federal Funds rate (the rate charged

by the banks lending funds to each other).

The applicable Borrowing Agreement

will give the Plan a continuing security

interest in and lien on the collateral.

If the Borrower deposits cash

collateral, the Plan invests the collateral,

and all earnings on such cash collateral

shall be returned to the Borrower;

provided that the Borrowing Agreement

may provide that the Plan receive

Shared Earnings Compensation, which,

as discussed above, may be a percentage

of the earnings on the collateral which

may be retained by the Plan or the Plan

may agree to pay the Borrower a rebate

fee and retain the remaining earnings on

the collateral. The terms of the rebate

fee for each loan will be at least as

favorable to the Plan as those of

comparable arm’s length transactions

between unrelated parties taking into

account the exclusive arrangement, and

will be based upon an objective

methodology which takes into account

several factors, including potential

demand for the loaned securities, the

applicable benchmark cost of fund

indices (typically, the U.S. Federal

Funds rate established by the U.S.

Federal Reserve System (the Federal

Funds), the overnight REPO 18 rate, or

the like) and anticipated investment

return on overnight investments

permitted by the independent fiduciary

of the Plan. If the Borrower deposits

non-cash collateral, such as government

securities or irrevocable bank letters of

credit, the Borrower shall be entitled to

the earnings on its non-cash collateral;

provided that the Borrower may, but

shall not be obligated to, agree to pay

the Plan a Lending Fee. The Exclusive

Fee and the Transaction Lending Fee

may be determined in advance or

pursuant to an objective formula, and

may be different for different securities

or different groups of securities subject

to the Borrowing Agreement.

The Borrower will provide a monthly

report to the independent fiduciary of

the Plan which includes the following

information. The monthly report will

list for a specified period all outstanding

or closed securities lending

transactions. The report will identify for

each open loan position, the securities

involved, the value of the security for

collateralization purposes, the current

value of the collateral, the rebate or

premium (if applicable) at which the

security is loaned, and the number of

days the security has been on loan. At

the request of the Plan, such a report

will be provided on a daily or weekly

basis, rather than a monthly basis. Also,

upon request of the Plan, the Borrower

will provide the Plan with daily

confirmations of securities lending

transactions.

12. Before entering into a Borrowing

Agreement, the Borrower will furnish to

the Plan the most recent publicly

available audited and unaudited

statements of its financial condition, as

well as any publicly available

information which it believes is

necessary for the independent fiduciary

to determine whether the Plan should

enter into or renew the Borrowing

Agreement. Further, the Borrowing

Agreement will contain a representation

by the Borrower that as of each time it

borrows securities, there has been no

material adverse change in its financial

condition since the date of the most

recently furnished financial statements.

13. Prior to any Plan’s approval of the

lending of its securities to the

Borrowers, a copy of this exemption, if

granted, (and the notice of pendency) is

provided to the Plan, and the Borrower

informs the independent fiduciary that

the Borrower is not acting as a fiduciary

of the Plan in connection with its

borrowing securities from the Plan.

14. With regard to those Plans for

which Barclays or any of its affiliates

provides custodial, directed trustee,

clearing and/or reporting functions

relative to securities loans, Barclays and

a Plan fiduciary independent of

Barclays and its affiliates will agree in

advance and in writing to any fee that

Barclays or any of its affiliates is to

receive for such custodial, directed

trustee, clearing and/or reporting

services. Such fees, if any, would be

fixed fees (e.g., Barclays or any of its

affiliates might negotiate to receive a

fixed percentage of the value of the

assets with respect to which it performs

these services, or to receive a stated

dollar amount) and any such fee would

be in addition to any fee Barclays or any

of its affiliates has negotiated to receive

from any such Plan for standard

custodial or other services unrelated to

the securities lending activity. The

arrangement for Barclays or any of its

affiliates to provide such functions

relative to securities loans to the

Borrowers will be terminable by the

Plan within five (5) business days of the

receipt of written notice without penalty

to the Plan, except for the return to the

Borrowers of a pro-rata portion of the

Exclusive Fee paid by the Borrowers to

the Plan, if the Plan has also terminated

its exclusive borrowing arrangement

with the Borrowers.

15. The Borrowing Agreement and/or

any securities loan outstanding may be

terminated by either party at any time

without penalty. Upon termination of

any securities loan, the Borrower will

deliver securities identical to the

borrowed securities (or the equivalent

thereof in the event of reorganization,

recapitalization, or merger of the issuer

of the borrowed securities) to the Plan

within the lesser of five business days

of written notice of termination or the

customary settlement period for such

securities.

16. In the event that the Borrower fails

to return securities in accordance with

the Borrowing Agreement, the Plan will

have the right under the Borrowing

Agreement to purchase securities

identical to the borrowed securities and

apply the collateral to payment of the

purchase price. If the collateral is

insufficient to satisfy the Borrower’s

obligation to return the Plan’s securities,

the Borrower will indemnify the Plan in

the U.S. with respect to the difference

between the replacement cost of

securities and the market value of the

collateral on the date the loan is

declared in default, together with

expenses incurred by the Plan plus

applicable interest at a reasonable rate,

including reasonable attorneys’ fees

incurred by the Plan for legal action

arising out of default on the loans, or

failure by the Borrower to properly

indemnify the Plan.

17. Except as provided herein, all the

procedures under the Borrowing

Agreement will, at a minimum, conform

to the applicable provisions of PTE 81–

6 (as amended or superseded), as well

as to applicable securities laws of the

U.S. and/or the U.K., as appropriate. In

addition, in order to ensure that the

independent fiduciary representing a

Plan has the experience, sophistication,

and resources necessary to adequately

review the Borrowing Agreement and

the fee arrangements thereunder, only

Plans with total assets having an

aggregate market value of at least $50

million are permitted to lend securities

to the Borrowers; provided, however,

that—

(a) In the case of two or more Plans

which are maintained by the same

employer, controlled group of

corporations or employee organization

(the Related Plans), whose assets are

commingled for investment purposes in

a single master trust or any other entity

the assets of which are ‘‘plan assets’’

under 29 CFR 2510.3–101 (the Plan

Asset Regulation), which entity is

engaged in securities lending

arrangements with the Borrowers, the

foregoing $50 million requirement shall

be deemed satisfied if such trust or

34482 Federal Register / Vol. 66, No. 125 / Thursday, June 28, 2001 / Notices

other entity has aggregate assets which

are in excess of $50 million; provided

that if the fiduciary responsible for

making the investment decision on

behalf of such master trust or other

entity is not the employer or an affiliate

of the employer, such fiduciary has total

assets under its management and

control, exclusive of the $50 million

threshold amount attributable to plan

investment in the commingled entity,

which are in excess of $100 million.

(b) In the case of two or more Plans

which are not maintained by the same

employer, controlled group of

corporations or employee organization

(the Unrelated Plans), whose assets are

commingled for investment purposes in

a group trust or any other form of entity

the assets of which are ‘‘plan assets’’

under the Plan Asset Regulation, which

entity is engaged in securities lending

arrangements with the Borrowers, the

foregoing $50 million requirement is

satisfied if such trust or other entity has

aggregate assets which are in excess of

$50 million (excluding the assets of any

Plan with respect to which the fiduciary

responsible for making the investment

decision on behalf of such group trust

or other entity or any member of the

controlled group of corporations

including such fiduciary is the

employer maintaining such Plan or an

employee organization whose members

are covered by such Plan). However, the

fiduciary responsible for making the

investment decision on behalf of such

group trust or other entity—

(i) Has full investment responsibility

with respect to plan assets invested

therein; and

(ii) Has total assets under its

management and control, exclusive of

the $50 million threshold amount

attributable to plan investment in the

commingled entity, which are in excess

of $100 million. (In addition, none of

the entities described above are formed

for the sole purpose of making loans of

securities.)

The Applicants represent that the

opportunity for the Plans to enter into

exclusive borrowing arrangements with

the Borrowers under the flexible fee

structures described herein is in the

interests of the Plans because the Plans

will then be able to choose among an

expanded number of competing

exclusive borrowers, as well as

maximizing the volume of securities

lent and the return on such securities.

18. In addition to the above

conditions, all loans involving Foreign

Borrowers must satisfy the following

supplemental requirements:

(i) Such Foreign Borrower is a bank

which is subject to regulation by the

Bank of England or is a registered

broker-dealer subject to regulation by

the UK SFA;

(ii) Such Foreign Borrower is in

compliance with all applicable

provisions of Rule 15a–6 (17 C.F.R.

240.15a–6) under the 1934 Act which

provides foreign broker-dealers a

limited exception from United States

registration requirements;

(iii) All collateral is maintained in

United States dollars or in U.S. dollardenominated securities or letters of

credit;

(iv) All collateral is held in the United

States and the situs of the Borrowing

Agreement is maintained in the United

States under an arrangement that

complies with the indicia of ownership

requirements under Section 404(b) of

the Act and the regulations promulgated

under 29 C.F.R. 2550.404(b)–1; and

(v) Prior to entering into a transaction

involving a Foreign Borrower, Barclays

or the Foreign Borrower must:

(1) Agree to submit to the jurisdiction

of the United States;

(2) Agree to appoint an agent for

service of process in the United States,

which may be an affiliate (the Process

Agent);

(3) Consent to the service of process

on the Process Agent; and

(4) Agree that enforcement by a Plan

of the indemnity provided by Barclays

or the Foreign Borrower will occur in

the United States courts.

19. In addition to the protections cited

above, Barclays or the Borrower will

maintain, or cause to be maintained,

within the United States for a period of

six years from the date of a transaction,

such records as are necessary to enable

the Department and other persons (as

specified herein in Section II(t)(1)) to

determine whether the conditions of the

exemption have been met.

20. In summary, the Applicants

represent that the described transactions

satisfy the statutory criteria of section

408(a) of the Act because:

(a) The Borrower will directly

negotiate a Borrowing Agreement with

an independent fiduciary of each Plan;

(b) The Plans will be permitted to

lend to the Borrower, a major securities

borrower who will be added to an

expanded list of competing exclusive

borrowers, enabling the Plans to earn

additional income from the loaned

securities on a secured basis, while

continuing to enjoy the benefits of

owning the securities;

(c) In exchange for granting the

Borrower the exclusive right to borrow

certain securities, the Borrower will pay

the Plan the Exclusive Fee, which as

discussed above may be either (i) a flat

fee (which may be a percentage of the

value of the total securities subject to

the Borrowing Agreement), (ii) a

percentage of the value of the total

balance of outstanding borrowed

securities, or (iii) any combination of (i)

and (ii);

(d) Any change in the Exclusive Fee

or Shared Earnings Compensation that

the Borrower pays to the Plan with

respect to any securities loan will

require the prior written consent of the

independent fiduciary, except that

consent will be presumed where the

Exclusive Fee or Shared Earnings

Compensation changes pursuant to an

objective formula specified in the

Borrowing Agreement and the

independent fiduciary is notified at

least 24 hours in advance of such

change and does not object in writing

thereto, prior to the effective time of

such change;

(e) The Borrower will provide

sufficient information concerning its

financial condition to a Plan before a

Plan lends any securities to the

Borrower;

(f) The collateral posted with respect

to each loan of securities to the

Borrower initially will be at least 102

percent of the market value of the

loaned securities and will be monitored

daily by the independent fiduciary;

(g) The Borrowing Agreement and/or

any securities loan outstanding may be

terminated by either party at any time

without penalty, except for the return to

the Borrower of a pro-rata portion of the

Exclusive Fee paid by the Borrower to

the Plan, and whereupon the Borrower

will return any borrowed securities (or

the equivalent thereof in the event of

reorganization, recapitalization, or

merger of the issuer of the borrowed

securities) to the Plan within the lesser

of five business days of written notice

of termination or the customary

settlement period for such securities;

(h) Neither the Borrower nor any of its

affiliates will have discretionary

authority or control over the Plan’s

investment in the securities available for

loan;

(i) The minimum Plan size

requirement (as specified in Section

II(o) above) will ensure that the Plans

will have the resources necessary to

adequately review and negotiate all

aspects of the exclusive borrowing

arrangements; and

(j) All the procedures will, at a

minimum, conform to the applicable

provisions of PTE 81–6 (as amended or

superseded), as well as applicable

securities laws of the United States and/

or the United Kingdom, as appropriate.

FOR FURTHER INFORMATION CONTACT:

Karen Lloyd of the Department,

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

a toll-free number.)

Federal Register / Vol. 66, No. 125 / Thursday, June 28, 2001 / Notices 34483

19The Department is not providing any opinion

in this proposed exemption as to whether the

acquisition and holding of the Property by the Plan

violated any of the provisions of Part 4 of Title I

of the Act.

Gooch Enterprises, Inc. Money

Purchase Pension Plan (the Plan)

Located in Thomasville, North Carolina

[Application No. D–10969]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 408(a) of the Act

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

in accordance with the procedures set

forth in 29 CFR part 2570, subpart B (55

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

the exemption is granted, the

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

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

resulting from the application of section

4975 of the Code, by reason of section

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

shall not apply to the proposed sale of

two tracts of land (the Property) by the

Plan to Harold L. Gooch, Jr. and Susan

M. Gooch (collectively; the Gooches),

who are shareholders of the Plan

sponsor, the trustees of the Plan and,

therefore, parties in interest with respect

to the Plan; provided that the following

conditions are satisfied:

(a) the proposed sale is a one-time

cash transaction;

(b) the Plan receives the current fair

market value for the Property, as

established by an independent qualified

appraiser at the time of the sale; and

(c) the Plan pays no commissions or

other expenses associated with the sale.

Summary of Facts and Representations

1. The Plan was established on

February 1, 1983, and is a defined

contribution plan. As of February, 2001,

the Plan had 15 participants and

beneficiaries. As of December 31, 1999,

the Plan had $1,198,714 in total assets.

Gooch Enterprises Inc. (the Company) is

the sponsor of the Plan. The Plan’s

trustees are Harold L. Gooch, Jr. and

Susan M. Gooch (i.e., the Gooches). The

Company was incorporated on

November 24, 1982, and is a subchapter

‘‘C’’ North Carolina corporation which

is in the business of coordinating trade

shows.

2. In 1984, the Plan purchased the

Property from Austin T. and Leena

Batten, who were unrelated third

parties, for the amount of $25,000, of

which $22,500 was financed by a loan,

as evidenced by a note and deed of

trust, from North Carolina National

Bank (now Bank of America). The

applicant represents that the note on the

Property was paid and cancelled as of

November 1, 1988. It is represented that

the Gooches, as the Plan’s trustees,

made the decision to purchase the

Property as a investment for the Plan.

The Gooches believed that the Property

would be a good investment for the Plan

and would appreciate in value. At the

time of purchase, the Property

represented approximately 30% of the

Plan’s total assets. However, the

applicant states that as of the end of

1999, the Property represented

approximately 6.4% of the total value of

the Plan’s assets.

3. The applicant represents that the

Property has not been used or leased by

anyone, including the parties in interest

to the Plan described herein. Since it

was originally acquired by the Plan in

1984, the Property has not been an

income-producing asset. The Property is

undeveloped land that is adjacent to

property owned by the Gooches.19 The

applicant represents that the Plan paid

no expenses or taxes during the period

of time the Property has been a Plan

asset. All real estate and related taxes

and assessments were paid by the

Gooches personally.

4. The Property, which consists of

Lots 2 and 3, is located on Curtis Court

in Thomasville, North Carolina. The

Property is part of a semi-developed

residential area. The Property was

appraised on March 14, 2001 (the

Appraisal). The Appraisal was prepared

by Gerry C. Crowder, SRA (Mr.

Crowder), who is an independent

qualified appraiser. Mr. Crowder is with

Hylton-Crowder & Associates, Inc.,

located at 132 East Parris Avenue, P.O.

Box 5174, in High Point, North Carolina.

After inspecting the Property and using

a direct sales comparison analysis of

recent sales of similar properties (i.e.,

undeveloped land), Mr. Crowder

determined that the aggregate fair

market value of the Property was

$77,000 (i.e., $38,500 for each Lot) as of

March 7, 2001. Because the Property is

adjacent to property owned by the

Gooches, Mr. Crowder also considered

whether the adjacency factor merits a

premium above fair market value for

any sale of the Property to the Gooches.

However, Mr. Crowder determined that

no adjustments are necessary because of

the adjacency issue.

The applicant represents that the

Appraisal will be updated at the time of

the proposed transaction (the Update),

in order to ensure that the Plan receives

no less than the current fair market

value of the Property on the date of the

sale. The Update will take into

consideration any recent sales of similar

properties in the local real estate area

which may affect the Appraisal’s

conclusion regarding the fair market

value of the Property.

5. The applicant proposes that the

Gooches purchase the Property from the

Plan in a one-time cash transaction. The

applicant represents that the proposed

transaction would be in the best interest

and protective of the Plan because,

among other things, the Plan will pay no

expenses or commissions associated

with the sale. The Gooches will pay the

Plan an amount equal to the current fair

market value of the Property, as

established by an independent,

qualified appraiser. The sale of the

Property to the Gooches will enable the

Plan to sell an illiquid, non-income

producing asset and reinvest the sale

proceeds in other assets that may yield

greater returns. Thus, the sale will

enhance the liquidity of the Plan’s

investment portfolio and allow the

trustees to further diversify the Plan’s

assets.

6. In summary, the applicant

represents that the transaction satisfies

the statutory criteria of section 408(a) of

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

Code because:

(a) The proposed sale will be a onetime cash transaction;

(b) The Plan will receive the current

fair market value for each Property, as

established by an independent qualified

appraiser at the time of the sale;

(c) The Plan will pay no commissions

or other expenses associated with the

sale; and

(d) The sale will enable the Plan to

sell an illiquid, non-income producing

asset and reinvest the sale proceeds in

other assets that may yield greater

returns.

FOR FURTHER INFORMATION CONTACT:

Ekaterina A. Uzlyan of the Department

at (202) 219–8883. (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 or

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

34484 Federal Register / Vol. 66, No. 125 / Thursday, June 28, 2001 / Notices

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 25th day of

June, 2001.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

Department of Labor.

[FR Doc. 01–16235 Filed 6–27–01; 8:45 am]

BILLING CODE 4510–29–P

NATIONAL COUNCIL ON DISABILITY

International Watch Advisory

Committee; Notice of Meeting

AGENCY: National Council on Disability

(NCD).

Type: Advisory Committee Meetings/

Conference Calls.

SUMMARY: This notice sets forth the

schedule of the forthcoming meeting/

conference call for NCD’s advisory

committee—International Watch. Notice

of this meeting is required under

Section 10(a)(1)(2) of the Federal

Advisory Committee Act (P.L. 92–463).

International Watch: The purpose of

NCD’s International Watch is to share

information on international disability

issues and to advise NCD’s Foreign

Policy Team on developing policy

proposals that will advocate for a

foreign policy that is consistent with the

values and goals of the Americans with

Disabilities Act.

Work Group: Inclusion of People with

Disabilities in Foreign Assistance

Programs.

DATE AND TIME: July 19, 2001, 12 p.m.–

1 p.m. EDT.

For International Watch Information,

Contact: Kathleen A. Blank, Attorney/

Program Specialist, NCD, 1331 F Street

NW, Suite 1050, Washington, DC 20004;

202–272–2004 (Voice), 202–272–2074

(TTY), 202–272–2022 (Fax),

kblank@ncd.gov (e-mail).

Agency Mission: NCD is an

independent federal agency composed

of 15 members appointed by the

President of the United States and

confirmed by the U.S. Senate. Its overall

purpose is to promote policies,

programs, practices, and procedures that

guarantee equal opportunity for all

people with disabilities, regardless of

the nature of severity of the disability;

and to empower people with disabilities

to achieve economic self-sufficiency,

independent living, and inclusion and

integration into all aspects of society.

This committee is necessary to

provide advice and recommendations to

NCD on international disability issues.

We currently have balanced

membership representing a variety of

disabling conditions from across the

United States.

Open Meeting/Conference Call: This

advisory committee meeting/conference

call of NCD will be open to the public.

However, due to fiscal constraints and

staff limitations, a limited number of

additional lines will be available.

Individuals can also participate in the

conference call at the NCD office. Those

interested in joining this conference call

should contact the appropriate staff

member listed above.

Records will be kept of all

International Watch meetings/

conference calls and will be available

after the meeting for public inspection

at NCD.

Signed in Washington, DC, on June 25,

2001.

Ethel D. Briggs,

Executive Director.

[FR Doc. 01–16284 Filed 6–27–01; 8:45 am]

BILLING CODE 6820–MA–M

NATIONAL COUNCIL ON DISABILITY

Advisory Committee Meeting/

Conference Call

AGENCY: National Council on Disability

(NCD).

SUMMARY: This notice sets forth the

schedule of the forthcoming meeting/

conference call for NCD’s advisory

committee—International Watch. Notice

of this meeting is required under

Section 10(a)(1)(2) of the Federal

Advisory Committee Act (Pub. L. 92–

463).

International Watch: The purpose of

NCD’s International Watch is to share

information on international disability

issues and to advise NCD’s Foreign

Policy Team on developing policy

proposals that will advocate for a

foreign policy that is consistent with the

values and goals of the Americans with

Disabilities Act.

Date and Time: September 20, 2001,

12 p.m.–1 p.m. EDT.

For International Watch Information

Contact: Kathleen A. Blank, Attorney/

Program Specialist, NCD, 1331 F Street

NW, Suite 1050, Washington, DC 20004;

202–272–2004 (voice), 202–272–2074

(TTY), 202–272–2022 (fax),

kblank@ncd.gov (e-mail).

Agency Mission: NCD is an

independent federal agency composed

of 15 members appointed by the

President of the United States and

confirmed by the U.S. Senate. Its overall

purpose is to promote policies,

programs, practices, and procedures that

guarantee equal opportunity for all

people with disabilities, regardless of

the nature of severity of the disability;

and to empower people with disabilities

to achieve economic self-sufficiency,

independent living, and inclusion and

integration into all aspects of society.

This committee is necessary to

provide advice and recommendations to

NCD on international disability issues.

We currently have balanced

membership representing a variety of

disabling conditions from across the

United States.

Open Meeting/Conference Call: This

NCD advisory committee meeting/

conference call will be open to the

public. However, due to fiscal

constraints and staff limitations, a

limited number of additional lines will

be available. Individuals can also

participate in the conference call at the

NCD office, which is located at 1331 F

Street, NW, Suite 1050, Washington,

DC. Those interested in joining this

conference call should contact the

appropriate staff member listed above.

Records will be kept of all

International Watch meetings/

conference calls and will be available

after the meeting for public inspection

at NCD.