14780 Federal Register / Vol. 60, No. 53 / Monday, March 20, 1995 / Notices

notice was published in the Federal

Register pursuant to Section 6(b) of the

Act on January 12, 1994 (60 F.R. 2986).

Constance K. Robinson,

Director of Operations, Antitrust Division.

[FR Doc. 95–6736 Filed 3–17–95; 8:45 am]

BILLING CODE 4410–01–M

Notice Pursuant to the National

Cooperative Research and Production

Act of 1993—Microelectronics and

Computer Technology Corporation

Notice is hereby given that, on

November 17, 1994, pursuant to Section

6(a) of the National Cooperative

Research and Production Act of 1993,

14 U.S.C. 4301 et seq. (‘‘the Act’’),

Microelectronics and Computer

Technology Corporation (‘‘MCC’’) has

filed written notifications

simultaneously with the Attorney

General and the Federal Trade

Commission disclosing changes in its

membership. The notifications were

filed for the purpose of extending the

Act’s provisions limiting the recovery of

antitrust plaintiffs to actual damages

under specified circumstances.

Specifically, the changes are as follows:

Abelstik Laboratories; Amoco

Production Company; EDEN

International Corporation; Itasca

Systems, Inc.; and Occidental Chemical

Corporation have not renewed their

Associate memberships with MCC.

No other changes have been made in

either membership or planned activity

of the group research project.

Membership remains open and MCC

intends to file additional written

notification disclosing all changes in

membership.

On December 21, 1984, MCC filed its

original notification pursuant to Section

6(a) of the Act. The Department of

Justice published a notice in the Federal

Register pursuant to Section 6(b) of the

Act on January 17, 1985 (50 FR 2633).

The last notification was filed with

the Department on July 15, 1994. A

Federal Register notice pursuant to

Section 6(b) of the Act has not yet been

published.

Constance K. Robinson,

Director of Operations, Antitrust Division.

[FR Doc. 95–6739 Filed 3–17–95; 8:45 am]

BILLING CODE 4410–01–M

Notice Pursuant to the National

Cooperative Research and Production

Act of 1993—The Smart Valley

Commercenet Consortium, Inc.

Notice is hereby given that, on

January 18, 1995, pursuant to Section

6(a) of the National Cooperative

Research and Production Act of 1993,

15 U.S.C. 4301 et seq. (‘‘the Act’’), The

Smart Valley CommerceNet Consortium,

Inc. (the ‘‘Consortium’’) has filed

written notifications simultaneously

with the Attorney General and the

Federal Trade Commission disclosing

certain changes in its membership. The

notifications were filed for the purpose

of extending the Act’s provisions

limiting the recovery of antitrust

plaintiffs to actual damages under

specified circumstances. Specifically,

the identities of the additional members

at the sponsor level are: Ameritech,

Chicago, IL; Delphi Internet Services

Corporation, Cambridge, MA; InterNex

Information Services, Menlo Park, CA;

Lawrence Livermore Laboratory,

Livermore, CA; MasterCard

International, New York, NY; Social

Security Administration, Baltimore,

MD; Solectron, Milpitas, CA; The

General Electric Company, Rockville,

MD; and Trusted Information Systems,

Mountain View, CA. The following

organizations have joined the

Consortium as associate members:

Arroyo Seco/Fore Play Golf, South

Pasadena, CA; Boomerang Information

Services, Palo Alto, CA; CONNECT,

Inc., Cupertino, CA; CyberCash, Inc.,

Vienna, VA; CyberMark, Inc.,

Washington, D.C.; Equifax, Inc., Atlanta,

GA; National Association of Purchasing

Management Silicon Valley, Inc., San

Jose, CA; National Housewares

Manufacturers Association, Rosemont,

IL; O’Reilly & Associates, Sebastopol,

CA; Process Software Corporation,

Framingham, MA; Sybase, Emeryville,

CA; Telequip, Hollis, NH; UC Berkeley

Center for Information Technology and

Management (CITM), Berkeley, CA; and

Wave Systems Corporation, New York,

NY. In error, in the October 18, 1994,

notice, Financial Services Technology

Consortium, New York, NY was listed

as a sponsor. It is actually a member at

the associate level.

No other changes have been made in

either the membership or planned

activities of the Consortium.

Membership remains open, and the

Consortium intends to file additional

written notifications disclosing all

changes in membership.

On June 13, 1994 the Consortium filed

its original notification pursuant to

Section 6(a) of the Act. The Department

of Justice published a notice in the

Federal Register pursuant to Section

6(b) of the Act on August 31, 1994 (59

Fed. Reg. 45012).

The last notification was filed with

the Department on October 19, 1994. A

notice was published in the Federal

Register pursuant to section 6(b) of the

Act on January 12, 1995 (60 F. R. 2986).

Constance K. Robinson,

Director of Operations, Antitrust Division.

[FR Doc. 95–6738 Filed 3–17–95; 8:45]

BILLING CODE 4410–01–M

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

[Application No. D–09358, et al.]

Proposed Exemptions; NCNB Real

Estate Fund, 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 restriction of the

Employee Retirement Income Security

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

Revenue Code of 1986 (the Code).

Written Comments and Hearing

Requests

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

request for a hearing should state: (1)

The name, address, and telephone

number of the person making the

comment or request, and (2) the nature

of the person’s interest in the exemption

and the manner in which the person

would be adversely affected by the

exemption. A request for a hearing must

also state the issues to be addressed and

include a general description of the

evidence to be presented at the hearing.

A request for a hearing must also state

the issues to be addressed and include

a general description of the evidence to

be presented at the hearing.

ADDRESSES: All written comments and

request for a hearing (at least three

copies) should be sent to the Pension

and Welfare Benefits Administration,

Office of Exemption Determinations,

Room N–5649, U.S. Department of

Labor, 200 Constitution Avenue, N.W.,

Washington, D.C. 20210. Attention:

Application No. stated in each Notice of

Proposed Exemption. The applications

for exemption and the comments

received will be available for public

inspection in the Public Documents

Room of Pension and Welfare Benefits
Federal Register / Vol. 60, No. 53 / Monday, March 20, 1995 / Notices 14781

Administration, U.S. Department of

Labor, Room N–5507, 200 Constitution

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

Notice to Interested Persons

Notice of the proposed exemptions

will be provided to all interested

persons in the manner agreed upon by

the applicant and the Department

within 15 days of the date of publication

in the Federal Register. Such notice

shall include a copy of the notice of

proposed exemption as published in the

Federal Register and shall inform

interested persons of their right to

comment and to request a hearing

(where appropriate).

SUPPLEMENTARY INFORMATION: The

proposed exemptions were requested in

applications filed pursuant to section

408(a) of the Act and/or section

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

accordance with procedures set forth in

29 CFR Part 2570, Subpart B (55 FR

32836, 32847, August 10, 1990).

Effective December 31, 1978, section

102 of Reorganization Plan No. 4 of

1978 (43 FR 47713, October 17, 1978)

transferred the authority of the Secretary

of the Treasury to issue exemptions of

the type requested to the Secretary of

Labor. Therefore, these notices of

proposed exemption are issued solely

by the Department.

The applications contain

representations with regard to the

proposed exemptions which are

summarized below. Interested persons

are referred to the applications on file

with the Department for a complete

statement of the facts and

representations.

NCNB Real Estate Fund (the Fund),

NationsBank Pension Plan,

NationsBank Retirement Savings Plan

Located in Charlotte, North Carolina

[Exemption App. Nos. D–09358, D–09359

and D–09360, respectively]

Proposed Exemption

Based on the facts and representations

set forth in the application, the

Department and the Service are

considering granting the following

requested exemptions 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, August 10, 1990) and

Revenue Procedure 75–26, 1975–1 C.B.

722.

Section I: Covered Transactions

1. 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 (the

Sale) of units in the Fund (Units) by

plans participating in the Fund (the

Plans) pursuant to an Option election

made available by NationsBank of North

Carolina, N.A. (the Bank), to a standby

trust (the Standby Trust) established

and maintained by NationsBank,

Corporation (the Holding Company), a

party in interest with respect to the

Plans. This proposed exemption is

subject to the conditions set forth in

Section II.

2. If the exemption is granted, the

restrictions of sections 406(a)(1)(D), 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) (D) and (E) of the

Code shall not apply to any decision by

the Bank to sell a property held by the

Fund to a third party, and jointly owned

by the Plans and the Holding Company,

provided that: each Plan receives no less

than fair market value for its interest in

the property; and the Independent

Fiduciary approves the reasonableness

and propriety of the sale of the property.

Section II: Conditions

(a) The properties held by the Fund

(the Properties) shall be appraised by an

independent and qualified appraiser

within twelve months and updated

within fifteen days before the

Settlement Valuation Date.

(b) The Plans selling Units pursuant

to the Options will receive a price equal

to the value of each Unit sold based on

the value of the Fund as of the

Settlement Valuation Date (the Unit

Purchase Price) plus the Interest

Amount which will be calculated by the

Bank and reviewed and approved by the

Independent Fiduciary who has been

retained to represent the interests of the

Plans with respect to the Sale and the

subsequent activities of the Fund related

to the Fund’s liquidation.

(c) Plans selling Units pursuant to

Options 1 or 2 will receive the Unit

Purchase Price plus the Interest Amount

for each Unit sold on the settlement date

(Settlement Date) which will be no more

than 120 days after the Settlement

Valuation Date.

(d) If Options 2 or 4 are elected, the

Plans involved will receive the final

payment, if any, within sixty days after,

the two year anniversary of the

Settlement Valuation date for Option 2,

or the date of complete liquidation of

the Fund for Option 4.

(e) Prior to the Settlement Valuation

Date, the Bank will provide each Plan

with written information regarding the

terms of the Sale. Such information

includes, but is not limited to:

(i) notice that each Plan will be

entitled to elect one or more Options

which will permit the Plan to sell all or

part of its Units to the Stand-by Trust,

or to continue to hold all or part of its

Units in the Fund until the Fund’s

liquidation is complete, provided that if

multiple Options are elected they must

be uniform with respect to the grant, or

failure to grant, a Release to the Bank,

(ii) a description of each Option,

(iii) the date by which a Plan must

elect an Option (Option Election Date),

and

(iv) forms for electing the Options.

(f) Except for Plans with respect to

which the Bank or any of its Affiliates

is an employer, the decision whether to

authorize the Independent Fiduciary to

make an Option election on behalf of

the Plan will be made by a fiduciary

independent of the Bank and its

Affiliates and the Independent

Fiduciary.

(g) The Bank and any Affiliate which

is an employer with respect to a Plan

will authorize the Independent

Fiduciary to choose among all of the

Options.

(h) A Plan’s Option election will be

made by a Plan fiduciary who is

independent of the Bank and its

Affiliates or by the Independent

Fiduciary.

(i) The Independent Fiduciary’s

duties and responsibilities include, but

are not limited to:

(1) Reviewing and determining

whether to approve the appraisals of the

Properties;

(2) Ordering a new appraisal in cases

in which it has determined not to

approve an existing appraisal;

(3) Reviewing and approving all of the

disclosures, written explanations, and

forms furnished to the Plans by the

Bank;

(4) Furnishing information to an

independent Plan fiduciary, in advance

of any date by which the independent

Plan fiduciary is required to respond in

order to authorize the Independent

Fiduciary to make a decision on behalf

of the Plan. Such information includes,

but is not limited to:

(i) the Unit Purchase Price;

(ii) a description and explanation of

the Options;

(iii) dates by which the Plans must act

in order to make Option elections and

authorize the Independent Fiduciary to

make Option elections on behalf of the

Plan;

(iv) information summarizing: the

effect of failing to authorize the

Independent Fiduciary to make Option

elections on behalf of the Plan, the effect
14782 Federal Register / Vol. 60, No. 53 / Monday, March 20, 1995 / Notices

of failing to make an Option election

after informing the Independent

Fiduciary that the independent Plan

fiduciary would make the decision to

select an Option election, and the

availability and effect of the different

Option election authorizations which

the Plan may provide to the

Independent Fiduciary, in language

calculated to be reasonably understood

by the average independent Plan

fiduciary responsible for making

decisions on behalf of a Plan with

regard to Units of the Fund held by the

Plan;

(4) making Option elections on behalf

of any Plan if: (a) The Bank or any of

its Affiliates is an employer with respect

to the Plan; (b) the independent Plan

fiduciary authorizes the Independent

Fiduciary to make an Option elections

on behalf of that Plan; or (c) the

independent Plan fiduciary does not

reserve the right to make an Option

election and fails to make an Option

election prior to the Option Election

Date;

(5) providing guidance regarding the

four Options, to those independent Plan

fiduciaries who wish to make their own

Option elections;

(6) reviewing and determining

whether to approve the Unit Purchase

Price as of the Settlement Valuation

Date, and the value of a Unit in the

Fund as of two years from the Sale of

the Units by the Plans to the Standby

Trust (for purposes of determining the

amount which is due to those Plans

electing Option 2);

(7) reviewing and determining

whether to approve the Interest Amount

payable to any Plan which elected either

Option 1 or 2;

(8) exercising its veto authority with

regard to the proposed Unit Purchase

Price, Interest Amount, or value of Fund

Units pursuant to Option 2, which it has

determined not to approve;

(9) monitoring the Bank’s efforts to

dispose of the Properties during the

liquidation of the Fund;

(10) approving the reasonableness and

propriety of sales of the Properties

during the period in which the Standby

Trust owns units in the Fund.

(j) The Independent Fiduciary may be

removed by a majority vote of the Plans

‘‘for cause.’’

(i) The term ‘‘for cause’’ shall mean

that there must be sufficient and

reasonable grounds for removal and the

grounds must be related to the ability

and fitness of the Independent

Fiduciary to perform his required

duties.

(ii) Each Plan’s vote for or against

removal will be proportionate to it’s

ownership interest in the Fund

exclusive of Units owned by the

Standby Trust.

(k) The Bank and the Holding

Company will be bound by the

decisions and determinations made by

the Independent Fiduciary.

(l) The Bank will continue its efforts,

with due diligence to liquidate the

Fund.

(m) Any distributions made by the

Fund will be made pro rata, in cash.

(n) Any payment made pursuant to

any of the Options will be made in cash.

(o) The Independent Fiduciary is

responsible for monitoring compliance

with the terms and conditions of the

exemption at all times.

Section II. Definitions

For purposes of this exemption:

(a) Affiliate of the Bank includes:

(1) Any person directly or indirectly

through one or more intermediaries

controlling, controlled by, or under

common control with the Bank;

(2) Any officer, director or employee

of the Bank, or of a person described in

paragraph (a)(1) of Section II; and

(3) Any partnership in which the

Bank is a partner;

(b) Control means the power to

exercise a controlling influence over the

management or policies of a person

other than an individual.

(c) Affiliate of the Independent

Fiduciary includes:

(1) Any person directly or indirectly

through one or more intermediaries

controlling, controlled by, or under

common control with the Independent

Fiduciary;

(2) Any officer or director of the

Independent Fiduciary;

(3) Any partner in the Independent

Fiduciary, or any other related

individual, with the authority to make,

or who actually makes, fiduciary

decisions which are within the scope of

the Independent Fiduciary’s duties and

responsibilities under this exemption,

or who holds a five percent (5%) or

greater interest in the Independent

Fiduciary;

(d) Independent Fiduciary means a

person who:

(1) Is not an Affiliate of the Bank as

defined in section II(a);

(2) does not have an ownership

interest in the Bank or its Affiliates;

(3) is not a corporation or partnership

in which the Bank or any of its Affiliates

has an ownership interest;

(4) is not a fiduciary with respect to

any of the Plans other than in

connection with the transactions

described in this exemption;

(5) has acknowledged in writing

acceptance of fiduciary responsibility;

(6) is either:

(i) A business organization which has

at least (5) years of experience with

respect to commercial real estate

investments or other relevant

experience;

(ii) a committee comprised of three to

five individuals who each have at least

five (5) years of experience with respect

to commercial real estate investments or

other relevant experience; or

(iii) a committee comprised both of a

business organization or organizations

and individuals having the

qualifications described in paragraphs

(d)(1) through (6)(ii) above.

(7) An individual acting in a fiduciary

capacity with respect to the Fund on

behalf of, and at the direction of, an

Independent Fiduciary meeting the

conditions of paragraphs (d)(1) through

(6)(iii) above shall be considered an

Independent Fiduciary.

For purposes of this definition, no

organization or individual may serve as

an Independent Fiduciary for the Fund

for any fiscal year, if the gross income

received by such organization or

individual (or by any partnership or

corporation of which such organization

or individual is an officer, director, or

ten percent (10%) or more partner or

shareholder) from the Bank, or any

Affiliate, for that fiscal year exceeds five

percent (5%) of its or his annual gross

income from all sources for the prior

fiscal year. If such organization or

individual has no income for the prior

fiscal year, the 5% limitation shall be

applied with reference to the fiscal year

in which such organization or

individual serves as an independent

fiduciary. The income limitation will

include income received for services

rendered to the Plans and the Fund as

Independent Fiduciary, as described in

this exemption.

In addition, no organization or

individual who is an Independent

Fiduciary or an Affiliate of such

Independent Fiduciary, and no

partnership or corporation of which

such Independent Fiduciary is an

officer, director, or ten percent (10%) or

more partner or shareholder with the

authority to cause such corporation or

partnership to engage in the following

transactions, or who exercises such

authority in conjunction with others,

may:

(1) Acquire any property from, sell

any property to, or borrow any funds

from, the Bank, its Affiliates, or any

collective investment vehicle or

separate trust maintained or advised by

the Bank or its Affiliates, during the

period that such organization or

individual serves as an Independent

fiduciary and continuing for a period of

six (6) months after such organization or
Federal Register / Vol. 60, No. 53 / Monday, March 20, 1995 / Notices 14783

individual ceases to be an Independent

Fiduciary; or

(2) Negotiate any such transaction,

described above in paragraph (1) above

during the period that such organization

or individual serves as Independent

Fiduciary.

No Plan fiduciary or sponsor of a Plan

or a designee of such Plan fiduciary,

sponsor or Plan may serve as the

Independent Fiduciary with respect to

the Fund.

(e) Option(s) means the following:

Option 1: A Plan will accelerate the

liquidation of its investment in the

Fund by selling each of its Units subject

to this Option to the Standby Trust for

an amount equal to the Unit Purchase

Price plus the Interest Amount. A Plan

electing this Option will reserve all

rights it may have with respect to the

Fund, the Bank and other appropriate

persons. However, with respect to a

participant directed account Plan, the

Plan sponsor and an authorized

independent Plan fiduciary will provide

a Release to the Fund, the Bank and

other appropriate persons without any

affect on the rights of the participants or

beneficiaries regarding the matters

covered by the Release.

Option 2: A Plan will accelerate the

liquidation of its investment in the

Fund by selling each of its Units subject

to this Option to the Standby Trust for

an amount equal to the Unit Purchase

Price plus the Interest Amount. In

addition, the Bank will pay promptly

following the second anniversary of the

Settlement Valuation Date, an amount

equal to the excess, if any, of (A) the

sum of (1) the value that the Unit would

have had at the Valuation Date two

years after the Settlement Valuation

Date if such Unit had not been sold,

plus (2) the amount of any distributions

made with respect to such Unit during

such two year period, over (B) the Unit

Purchase Price plus the Interest

Amount. The Bank will pay Litigation

Expenses to the Plan, if any. Under this

Option, a Plan will release the Fund, the

Bank and other appropriate persons

with respect to all matters relating to the

investment in the Fund occurring prior

to the Sale.

Option 3: A Plan will continue its

investment in the Fund through the end

of the liquidation process. Under this

Option, a Plan reserves all rights with

respect to the Fund, the Bank and all

other appropriate persons. However,

with respect to a participant directed

account Plan, the Plan sponsor and an

authorized independent Plan fiduciary

will provide a Release to the Fund, the

Bank and other appropriate persons

without any affect on the rights of the

participants or beneficiaries regarding

the matters covered by the Release.

Option 4: A Plan will continue its

investment in the Fund through the end

of the liquidation process. For a Plan

electing this Option, the Bank will agree

to pay promptly following the

completion of the liquidation of the

Fund, with respect to each Unit subject

to this Option, an amount equal to the

excess, if any, of the (i) the value of a

Unit on September 28, 1990 over (ii) the

value of all distributions made to the

Plan with respect to such Unit since

September 29, 1990 and during the

liquidation of the Fund. The Bank will

also pay Litigation Expenses to the Plan,

if any. Plans electing this Option will

release the Fund, the Bank and other

appropriate persons with respect to all

matters related to the investment in the

Fund occurring prior to the Sale.

(f) Unit Purchase Price means the

amount which is calculated by dividing

the value of all of the assets of the Fund,

as reviewed and approved by the

Independent Fiduciary, by the total

number of units in the Fund.

(g) Interest Amount means the amount

approved by the Independent Fiduciary,

equal to the net income earned on a

Fund unit during the period

commencing on the Settlement

Valuation Date and ending on the day

immediately preceding the Settlement

Date, exclusive of realized or unrealized

appreciation or depreciation.

(h) Settlement Valuation Date means

the date on which the value of the Fund

will be determined by the Bank in order

to establish the Unit Purchase Price in

connection with the Sale. The

Settlement Valuation Date will be the

last business day of the calendar month

following the calendar month in which

final prospective approval will be

granted by the Office of the Comptroller

of the Currency subsequent to a final

grant of this proposed exemption and

approval of the transaction which is the

subject of this proposed exemption by

the Federal Reserve Board.

(i) Litigation Expenses means the outof-pocket expenses of litigation

instituted before November 24, 1992 by

or on behalf of a Plan against the Bank

or the Fund with respect to the Plan’s

investment in the Fund exclusive of any

expense of litigation with respect to a

case which has proceeded to trial, or

with respect to which there is a

judgment against the Bank or the Fund,

prior to the Option Election Date, plus

interest. The total amount of Litigation

Expenses, the rate of interest and the

period for which interest is paid must

be agreed to in writing between the

Bank and the Plan prior to the Plan’s

election of Options 2 or 4. However, in

the event there has never been a written

settlement agreement specifying the

amount of Litigation Expenses, prior to

the date on which the Plan elects

Option 2 or 4, Litigation Expenses will

be the amounts requested by the Plan,

unless such expenses are unreasonable.

(j) Option Election Date means the

date as communicated to the Plans, at

least Ninety (90) days subsequent to the

Settlement Valuation Date and at least

sixty (60) days subsequent to the

completion of the mailing of the general

post Settlement Valuation Date

disclosure to all of the Plans by the

Independent Fiduciary, on or prior to

which a Plan must submit its Option

election forms to the Bank.

(k) Settlement Date means the date, no

more than 120 days after the Settlement

Valuation Date, on which the transfer of

the Units to the Standby Trust and

delivery of Releases to the Bank will be

effected pursuant to the Options.

(l) Release means a release covering

activities and transactions in connection

with the Fund prior to, and during, the

Fund’s liquidation, but in no case shall

be effective on or after the Settlement

Date. In this regard, the Release does not

cover activities and transactions

necessary to comply with the

exemption, the conditions of the

exemption, and the material

representations made in connection

therewith, which form the basis for the

Department’s decision to propose an

exemption for the Sale and subsequent

dispositions of properties owned by the

Fund.

Summary of Facts and Representatives

1. The applicants are the Bank and

The Holding Company. The Holding

Company is a North Carolina

corporation registered under the Bank

Holding Company Act of 1956, as

amended. The Holding Company

maintains its principal office in

Charlotte, North Carolina. The Holding

Company represents that it is the largest

banking company in the south and

southwest and the fourth largest in the

United States with banking subsidiaries

providing full-service banking centers in

nine states: Florida, Georgia, Kentucky,

Maryland, North Carolina, South

Carolina, Tennessee, Texas, Virginia

and the District of Columbia. As of

December 31, 1992, total assets of the

Holding Company and its subsidiaries

were approximately $118 billion.

2. The Bank is a wholly-owned

subsidiary of the Holding Company

with its principal offices in Charlotte,

North Carolina. As of September 30,

1993 the Bank had total assets of

approximately $20 billion. On February

28, 1974, the Bank established the Fund
14784 Federal Register / Vol. 60, No. 53 / Monday, March 20, 1995 / Notices

1Neither the Department nor the Service is

expressing an opinion as to whether the investment

decision made by a participant of a Plan which

holds an interest in the Fund would be subject to

relief provided by section 404(c) of the Act or

applicable regulations.

2On December 14, 1992, the Bank entered into an

agreement settling claims relating to the Fund with

Teamsters Joint Council No. 83 of Virginia Pension

Fund. In addition, NationsBank of Florida, N.A., an

affiliate of the Bank and wholly owned subsidiary

of the Holding Company, entered into a settlement

agreement with Kenny Nachwalter Seymour &

Crichlow, P.A. Employees’ Trust and its trustees.

The terms of the settlement agreements contain the

same terms and conditions provided in this notice

of proposed exemption, and are contingent upon

the granting of the exemption.

3The Department notes that the exemptive relief

being granted herein extends only to those

transactions described above. Also, the Applicants

represent that the Bank is a national bank which is

subject to the authority of the Office of the

Comptroller of the Currency (the OCC). The OCC

has informed the Department that a transaction that

may be prohibited under the Act may also be a

violation of the National Bank Act or constitute an

unsafe or unsound banking practice. The proposed

exemption does not address the safety and

soundness or the legality of the transaction under

the National Bank Act. Accordingly, the Bank

should satisfy itself that the transaction does not

violate the National Bank Act or constitute an

unsafe or unsound banking practice.

In this regard, the applicants represent that they

are currently obtaining any and all regulatory

approvals from applicable governmental agencies,

in order to effect the Sale, including approval from

the Office of the Comptroller of the Currency, the

Internal Revenue Service and the Federal Reserve

Board.

4The Bank represents that there are only four

litigants which potentially will be eligible to receive

Litigation Expenses. In this regard, only four

lawsuits were filed (on a consolidated basis) before

November 24, 1992. Three of the four lawsuits have

been settled conditioned on the opportunity to sell

units to the Standby Trust. Each settlement

agreement provides that payment of Litigation

Expenses will be made with respect to the election

of Option 2 or Option 4 by, or on behalf of, the Plan

within ten days after the Bank and the Independent

Fiduciary determine that all payments under the

relevant Option have been paid. In this regard, the

Department expects that a settlement of the fourth

law suit would provide terms at least as favorable

to the Plan as the arrangement described in this

proposed exemption.

as a common trust fund exempt from

federal income taxation under section

584 of the Internal Revenue Code, and

serves as trustee of the Fund. The Fund

is a vehicle for the collective investment

of tax-qualified retirement plans with

respect to which the Bank or its

affiliates are trustees. The Fund is

divided into units of equal value

(Units). The proportionate interest of

each Plan is represented by the number

of Units owned by that Plan.

3. As of March 1992, approximately

589 defined benefit plans and defined

contribution plans held Units in the

Fund. Some of these Plans include

participant directed accounts and may

elect to meet the requirements of section

404(c) of the Act (Section 404(c) Plans).

In relevant part, section 404(c) of the

Act and the regulations promulgated

thereunder at 57 FR 46906 (October 13,

1992) provide that where a participant

or beneficiary of a Section 404(c) Plan

in fact exercises control over the assets

in his or her account, then (1) the

participant or beneficiary shall not be

deemed to be a fiduciary by reason of

his or her exercise of control; and (2) no

person who is otherwise a fiduciary

shall be liable under the fiduciary

responsibility provisions of the Act for

any loss, or by reason of any breach

which results from such participant’s or

beneficiary’s exercise of control.

Because section 404(c) of the Act

applies only to the provisions of Part 4

of Title I, there is no provision in the

Code corresponding to section 404(c).

Thus, there is no statutory exemption

from the excise taxes imposed under

section 4975 of the Code with respect to

prohibited transactions involving a

Section 404(c) Plan. In this regard, the

Department notes that the authority to

grant administrative exemptions for

section 404(c) transactions remains with

the Treasury Department pursuant to

Reorganization Plan No. 4 of 1978 (43

FR 47713, October 17, 1978).

Accordingly, the Department has no

authority to provide exemptive relief

with respect to a transaction that results

from a participant’s or beneficiary’s

exercise of control within the meaning

of section 404(c) and applicable

regulations. In this regard, the

Department has solicited the views of

the Service with respect to the

transactions described herein as they

relate to Section 404(c) Plans. The

Service has reviewed this notice of

proposed exemption and concurs with

the exemptive relief provided.

Accordingly, the Service has

determined that it will join the

Department in publishing this pendency

notice in the Federal Register.1

4. The assets of the Fund have been

primarily invested in real estate and real

estate related securities. According to

the Bank, the Fund experienced

excellent returns through the second

quarter of 1990. However, due to market

conditions and investor uncertainty, the

Fund experienced increased withdrawal

requests and decreased new investment

commitments during the third quarter of

1990. As a result, the Bank suspended

admissions to and withdrawals from the

Fund, and no Unit transactions have

been effected since June 30, 1990.

After considering several alternative

courses of action, the Bank determined

in July of 1991 that it was in the best

interests of the Plans to terminate the

Fund. Accordingly, the Fund is in the

process of liquidating pursuant to a Plan

of liquidation which provides for the

orderly disposition of the assets of the

Fund and periodic partial liquidating

distributions to Plans on a pro rata basis

until the Fund has been completely

liquidated. As of December 31, 1993, the

value of the Fund was $172,907,000. As

part of its plan of liquidation, during the

year ending on December 31, 1992, the

Fund distributed assets worth

$222,000,000. The Bank anticipates that

the liquidation will take several more

years.

6. Due to the inability to liquidate

their investments in the Fund, many

Plans have experienced administrative

difficulties. Certain Plans have made

claims and filed lawsuits against the

Bank alleging breach of fiduciary duty

by the Bank in its management of the

Fund.2 Consequently, some Plans have

expressed a desire to accelerate the

liquidation of their investment in the

Fund by selling all or part of their Units

for cash equal to the current value of the

Plan’s Units, and in lieu of receiving

proceeds during the liquidation process.

7. In order to accommodate the Plans

and to respond to those claims against

the Bank and the Holding Company, the

Bank proposes the Sale whereby the

Holding Company would establish the

Stand-by Trust and contribute funds in

a sufficient amount to enable the Standby Trust to acquire the Units held by the

Plans desiring to accelerate liquidation

of their Fund investment.3 The trustee

of the Stand-by Trust will be

NationsBank of Tennessee, N.A., a

national banking association organized

under the laws of the United States with

its principal office located in Nashville,

Tennessee. NationsBank of Tennessee,

N.A., as trustee of the Standby Trust, is

to execute Sale transactions pursuant to

the Option election forms timely filed.

The Grantor of the trust is the Holding

Company which has agreed to provide

assets sufficient for the Stand-by Trust

to meet its obligations.

8. Following the establishment of the

Stand-by Trust, each Plan will be

offered the opportunity to select from

four Options which will permit each

Plan to elect to sell all or part of its

Units in the Fund to the Stand-by Trust,

or to continue to hold all or part of its

Units in the Fund. Options 1 and 2

involve selling the Fund units to the

Standby Trust. Options 3 and 4 involve

continuation of a Plan’s investment in

the Fund.

Options 2 and 4 always involve the

provision of a Release 4 whereby the

Plan sponsor, an authorized

independent Plan fiduciary and the
Federal Register / Vol. 60, No. 53 / Monday, March 20, 1995 / Notices 14785

5The Department notes that the selection of the

Options made by the independent Plan fiduciaries

or the Independent Fiduciary is governed by the

fiduciary responsibility provisions of Part 4,

Subtitle B, Title I of the Act. Section 404 of the Act

requires, in part, that a fiduciary of a plan act

prudently, solely in the interest of and for the

exclusive purpose of providing benefits to

participants and beneficiaries. In this regard, the

Department notes that in order to act prudently, a

fiduciary must consider, among other factors, the

risk and potential return of the alternative Options

for its Plan.

Further, the Department is expressing no opinion,

herein, on the decision by a fiduciary in electing an

Option involving the Release. In this regard, the

Department notes that the election by a plan

fiduciary of an Option involving the Release does

not preclude the Department from taking any action

with respect to past transactions involving the

Fund.

Finally, the Department notes that a

determination by a Plan fiduciary to settle litigation

and enter into an agreement which provides for the

release of the Bank and the Fund is subject to the

fiduciary responsiblity requirements of section 404

of the Act.

6The Department expects that each participant or

beneficiary of a participant directed account Plan

will be treated similarly with respect to the

availability of the opportunity to elect Options, and

those participants and beneficiaries who are

responsible for making Option elections will

receive information that is adequate to make an

informed decision with regard to the Options.

participants and beneficiaries release

the Fund, the Bank and other

appropriate persons with respect to

matters relating to the Fund which

occurred prior to the Settlement Date in

exchange for certain consideration

provided by the Bank.5

No release is involved in Options 1 or

3 except with respect to participant

directed account Plans. In this regard, in

connection with Options 1 and 3, the

Plan sponsor and an authorized

independent Plan fiduciary will provide

a Release to the Fund, the Bank and

other appropriate persons, without any

affect on the rights of participants or

beneficiaries with respect to the matters

covered by the Release.

A Plan may elect one Option with

respect to its entire investment in the

Fund. Alternatively, a Plan may elect

one Option with respect to a portion of

that Plan’s investment in the Fund and

another Option with respect to the

remainder. However, if a Plan elects

multiple Options, it must be a

combination of either Options 1 and 3

or Options 2 and 4.

The Independent Fiduciary will

provide each Plan with the information

necessary to evaluate the four Options.

Plans which desire to liquidate all or

part of their investment in the Fund by

selling their Units to the Stand-by Trust

may elect a combination of the four

Options by submitting an Option

election form prior to the Option

Election Date. For those Plan sponsors

of participant directed Plans who wish

to allow the participants and

beneficiaries of their Plans to make their

own Option elections, the Plan sponsor

will establish four sub trusts each of

which will accommodate the

participants’ and beneficiaries’ election

of the different Options.6 Each

participant’s election of an Option will

then be represented by an interest in the

sub trust designated for that Option. If

a Plan sponsor does not elect to have

participants and beneficiaries make

Option elections, then the Plan will be

treated as any other Plan, and Option

elections will be made by the

independent Plan fiduciary or the

Independent Fiduciary.

The Bank will be directed with

respect to each Plan’s election of one or

more Options by an independent Plan

fiduciary or by the Independent

Fiduciary who will represent the Plans

interest for purposes of the Sale.

9. In order to determine the value of

the Units which will be sold pursuant

to the Option elections, the Unit

Purchase Price, the assets of the Fund

will be appraised by independent and

qualified appraisers selected by the

Bank. Such appraisals will be

completed within twelve months of and

updated within fifteen days of the Sale.

The Independent Fiduciary will review

and approve the professional

qualifications of the appraisers and their

technical analyses and methodologies

employed. As part of this approval

process, the Independent Fiduciary will

determine whether such appraisals are

reasonable and adequate to establish the

fair market value of the Properties.

Additionally, the Independent

Fiduciary will review and consider any

capital improvement programs,

environmental issues, preemptive liens,

debt obligations and accrued expenses

which may impact the value of the

Properties. In the event that the

Independent Fiduciary finds that any

appraisal is deficient or unsuitable, the

Independent Fiduciary has the authority

to request the revision of such appraisal

or the commission of a new appraisal.

These appraisals will then be used by

the Bank to calculate the overall value

of the Fund.

The Bank will calculate the Unit

Purchase Price based on the value of the

Fund on the Settlement Valuation Date.

The Unit Purchase Price will be

approved by the Independent Fiduciary.

Such approval will be accomplished by

reviewing the appraisals of the assets of

the Fund and the procedures and

methodologies to be employed by the

Bank in determining the Unit Purchase

Price. Further, if the Independent

Fiduciary believes that the Unit

Purchase Price proposed by the Bank is

not accurate, the Independent Fiduciary

has the authority to order the Bank to

recalculate the Unit Purchase Price. In

addition, the Independent Fiduciary

will review and approve the Bank’s

calculation of the Interest Amount

payable to those Plans which elected

Options 1 or 2. The Independent

Fiduciary will also participate in the

quarterly meetings held by the Bank in

order to remain current on issues and

developments relating to the Fund.

10. Arthur Andersen, LLP (Arthur

Andersen) has been retained to serve as

the Independent Fiduciary on behalf of

the Plans with respect to the Sale.

Arthur Andersen represents that it has

extensive experience in the business of

commercial real estate consulting,

appraisal and related activities. Arthur

Andersen is an experienced counselor

to institutional owners of real estate and

has negotiated terms and conditions of

various real estate transactions.

Specifically, Arthur Andersen has

served as independent fiduciary on

behalf of numerous clients. In addition,

Arthur Andersen acknowledges that in

acting as the Independent Fiduciary, it

is a fiduciary within the meaning of

section 3(21) of the Act.

11. In its capacity as the Independent

Fiduciary, Arthur Andersen will review

all disclosures made by the Bank to the

Plans in connection with the Sale. In

addition, Arthur Andersen will

distribute to all Plans written

disclosures providing general

information regarding the proposed

transaction, the circumstances under

which the Independent Fiduciary will

make an Option election for the Plan,

and among which Options the

Independent Fiduciary may elect for the

Plan under various circumstances.

Arthur Andersen will also provide

general information to all Plans

regarding the various factors that each

Plan may wish to consider in deciding

whether to authorize Arthur Andersen

to select from the four Options. This

information will include the cost/

benefit considerations relating to

pursuing an action against the Bank if

the independent Plan fiduciary does not

release the Bank, and the relative

attractiveness of the additional features

of Options 2 and 4. In addition, Arthur

Andersen will send a survey/profile to

all Plans to determine the type of Plan,

degree of participant involvement in

investment elections, Plan liquidity

needs and the preferences of the

independent Plan fiduciary. However,

an independent Plan fiduciary that

decides to make its own decision and
14786 Federal Register / Vol. 60, No. 53 / Monday, March 20, 1995 / Notices

declines to receive the survey/profile

will not receive it.

12. Arthur Andersen will make

Option elections for (1) Any Plan with

respect to which the Bank or its

Affiliates is an employer; (2) Plans that

have authorized Arthur Andersen to

make an Option election on their behalf;

or (3) Any Plan which does not reserve

the right to make an Option election and

fails to make an Option election prior to

the Option Election Date.

If the Plan reserves the right to make

its own Option election and

subsequently fails to make an Option

election by the Option Election Date, the

Plan will be deemed to have elected

Option 3. If the Plan does not reserve

the right to make its own Option

election and the Plan fails to make: a

sufficiently broad authorization; any

authorization at all; or fails to complete

the profile survey, Arthur Andersen will

elect only between Options 1 and 3 for

the Plan. However, Arthur Andersen

will choose among all four Options if

the independent Plan fiduciary

completes and returns timely all

required parts of the profile/survey and

the related authorization form expressly

authorizing Arthur Andersen to choose

among all four Options. The Bank

represents that it will authorize Arthur

Andersen to choose among all four

Options for Plans with respect to which

the Bank or any of its Affiliates is an

employer.

Arthur Andersen will review all

surveys returned by the Plans for

completeness and contact Plan

fiduciaries regarding any unclear or

incomplete information. In the event

that the Plan fiduciaries do not respond

to the surveys, Arthur Andersen will

make the Option election based on the

information available, and will notify

each Plan of the Option election which

it has selected for the Plan and the basis

for such election in writing.

With respect to those independent

Plan fiduciaries who notify Arthur

Andersen that they will be making their

own Option elections, Arthur Andersen

is prepared to counsel any Plan

fiduciary regarding the election process.

Finally, as the Independent Fiduciary,

Arthur Andersen’s duties will also

include monitoring property sales and

disposition activities during the

liquidation of the Fund.

13. The Bank represents that it will

provide securities disclosure forms and

option elections forms, reviewed and

approved by Arthur Andersen, to the

Plan within ten days after the date on

which final approval for the Sale will be

granted by the Office of the Comptroller

of the Currency which will be

subsequent to a final grant of this

proposed exemption and approval of the

transactions covered by this proposed

exemption by the Federal Reserve Board

(the Initiation Date).

The Bank represents that the

Settlement Valuation Date will be the

last business day of the calendar month

following the calendar month in which

the Initiation Date occurs.

The Bank states that the Independent

Fiduciary will mail a notice of right to

make election, forms, supplemental

disclosures and profile/surveys within

thirty (30) days subsequent to the

Settlement Valuation Date. The Plans

will have at least thirty (30) days

subsequent to the mailing of the Option

Election Information to return the

profile/survey to the Independent

Fiduciary. The Plans will have at least

sixty (60) days after the date on which

the Option Election Information is

mailed by the Independent Fiduciary in

order to make their own Option

elections.

The Bank states that the date on

which the Plans will receive in cash the

Unit Purchase Price plus the Interest

Amount for their units in the Fund will

be no more than 120 days after the

Settlement Valuation Date.

14. The Standby Trustee will be

obligated to acquire the Units in

accordance with the Option Election

Forms, and sales will be effected only

pursuant to the Option Election Forms

filed with the Bank on or prior to the

Option Election Date. A Plan may

rescind an Option election at any time

prior to the Option Election Date.

15. The Bank agrees to be bound by

the decisions and determinations made

by Arthur Andersen, as the Independent

Fiduciary. In the event that any action

or inaction by the Bank or by the

Holding Company with respect to the

liquidation of the Fund or the Stand-by

Trust is determined by the Independent

Fiduciary to impede or conflict with any

action or inaction required of the

Independent Fiduciary in order to carry

out and comply with the terms and

provisions of this proposed transaction,

the Independent Fiduciary shall so

notify the Bank and demand that the

Bank cease and desist from such action

or take such action as is requested by

the Independent Fiduciary.

16. In summary, it is represented that

the proposed transaction will meet the

statutory criteria for an exemption

under section 408(a) of the Act and

section 4975(c)(2) of the Code because:

(a) The Properties will be appraised by

an independent and qualified appraiser;

(b) The Plans selling Units pursuant to

the Options will receive a price at least

equal to the Unit Purchase Price plus

the Interest Amount; (c) Prior to the

Sale, the Plans will receive written

information regarding the terms of the

Sale; (d) An Independent Fiduciary has

been retained to represent the Plans’

interests with respect to the Sale and

ongoing disposition of the Properties in

the Fund; (e) The duties of the

Independent Fiduciary shall include:

reviewing and approving the appraisals

of the Properties; monitoring the sales

of, and disposition activities with

respect to, the Properties during the

Fund’s liquidation; making Option

elections on behalf of any Plan if the

Bank or its affiliates have sole

investment discretion with respect to

that Plan, the independent plan

Fiduciary authorizes the Independent

Fiduciary to make an Option election on

behalf of that Plan, the independent

Plan fiduciary does not indicate

whether the Independent Fiduciary is

authorized to make an Option election

on behalf of the Plan, or the Bank or any

Affiliate is an employer with respect to

the Plan; (f) The Bank and the Holding

Company will be bound by the

decisions and determinations made by

the Independent Fiduciary; and (g) The

Bank will continue its efforts to

liquidate the Fund.

FURTHER INFORMATION CONTACT: Eric

Berger of the Department, telephone

(202) 219–8971. (This is not a toll-free

number.)

The First National Bank of Boston and

Its Affiliates (Collectively, the Bank)

Located in Boston, Massachusetts

[App. No. D–09682]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 408(a) of the Act

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

in accordance with the procedures set

forth in 29 CFR Part 2570, Subpart B (55

FR 32836, 32847, August 10, 1990).

Section I—Exemption for Receipt of

Fees

If the exemption is granted, the

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

of the Act and the sanctions resulting

from the application of section 4975 of

the Code, by reason of section

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

shall not apply as of April 1, 1994 to:

(1) the receipt by the Bank of fees from

the 1784 Funds (the Funds), investment

companies registered under the

Investment Company Act of 1940 (the

1940 Act), for acting as an investment

adviser to the Funds in connection with

the investment by plans for which the

Bank serves as a fiduciary (the Client

Plans) in shares of the Funds; and (2)

the receipt and retention of fees by the
Federal Register / Vol. 60, No. 53 / Monday, March 20, 1995 / Notices 14787

7 In addition, the Department notes that Section

404(a) of the Act requires, among other things, that

a fiduciary of a plan act prudently, solely in the

interest of the plan’s participants and beneficiaries,

and for the exclusive purpose of providing benefits

to participants and beneficiaries when making

investment decisions on behalf of a plan. Thus, the

Department believes that the Bank should ensure,

prior to any investments made by a Client Plan for

which it acts as a trustee or investment manager,

that all fees paid by the Funds, including fees paid

to parties unrelated to the Bank and its affiliates,

are reasonable. In this regard, the Department is

providing no opinion as to whether the total fees

to be paid by a Client Plan to the Bank, its affiliates,

and third parties under the arrangements described

herein would be either reasonable or in the best

interests of the participants and beneficiaries of the

Client Plans.

Bank from the Funds for acting as

custodian and accountant to the Funds

as well as for any other services to the

Funds which are not investment

advisory services (i.e. ‘‘secondary

services’’ as defined in Section III(h)

below) in connection with the

investment by the Client Plans in shares

of the Funds, provided that the

following conditions and the General

Conditions of Section II below are met:

(a) No sales commissions are paid by

the Client Plans in connection with the

purchase or sale of shares of the Funds

and no redemption fees are paid in

connection with the sale of shares by

the Client Plans to the Funds.

(b) The price paid or received by a

Client Plan for shares in a Fund is the

net asset value per share at the time of

the transaction, as defined in Section

III(e), and is the same price which

would have been paid or received for

the shares by any other investor at that

time.

(c) Neither the Bank nor an affiliate,

including any officer or director of the

Bank, purchases or sells shares of the

Funds to any Client Plan.

(d) Each Client Plan receives a credit,

through a cash rebate, of such Plan’s

proportionate share of all fees charged

to the Funds by the Bank for investment

advisory services, including any

investment advisory fees paid by the

Bank to third party sub-advisors, no

later than one business day after the

receipt of such fees by the Bank. The

crediting of all investment advisory fees

to the Client Plans by the Bank is

audited by an independent accounting

firm on at least an annual basis to verify

the proper crediting of the fees to each

Client Plan.

(e) The combined total of all fees

received by the Bank for the provision

of services to a Client Plan, and in

connection with the provision of

services to the Funds in which the

Client Plan may invest, are not in excess

of ‘‘reasonable compensation’’ within

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

Act.7

(f) The Bank does not receive any fees

payable pursuant to Rule 12b–1 under

the 1940 Act in connection with the

transactions.

(g) The Client Plans are not employee

benefit plans sponsored or maintained

by the Bank.

(h) A second fiduciary acting for the

Client Plan which is independent of and

unrelated to the Bank (the Second

Fiduciary) receives, in advance of any

investment by the Client Plan in a Fund,

full and detailed written disclosure of

information concerning the Funds,

including but not limited to:

(1) A current prospectus for each

Fund in which a Client Plan is

considering investing;

(2) A statement describing the fees for

investment advisory or similar services,

any secondary services as defined in

Section III(h), and all other fees to be

charged to or paid by the Client Plan

and by the Funds, including the nature

and extent of any differential between

the rates of such fees;

(3) The reasons why the Bank may

consider such investment to be

appropriate for the Client Plan;

(4) A statement describing whether

there are any limitations applicable to

the Bank with respect to which assets of

a Client Plan may be invested in the

Funds, and if so, the nature of such

limitations; and

(5) Upon request of the Second

Fiduciary, a copy of the proposed

exemption and/or a copy of the final

exemption, if granted, once such

documents are published in the Federal

Register.

(i) On the basis of the information

described above in paragraph (h) of

Section I, the Second Fiduciary

authorizes in writing the investment of

assets of the Client Plan in each

particular Fund, the fees to be paid by

such Fund to the Bank, and the cash

rebate to the Client Plan of fees received

by the Bank from the Funds for

investment advisory services.

(j) All authorizations made by a

Second Fiduciary regarding investments

in a Fund and the fees paid to the Bank

are subject to an annual reauthorization

wherein any such prior authorization

referred to in paragraph (i) of Section I

shall be terminable at will by the Client

Plan, without penalty to the Client Plan,

upon receipt by the Bank of written

notice of termination. A form expressly

providing an election to terminate the

authorization described in paragraph (i)

above (the Termination Form) with

instructions on the use of the form must

be supplied to the Second Fiduciary no

less than annually. The instructions for

the Termination Form must include the

following information:

(1) The authorization is terminable at

will by the Client Plan, without penalty

to the Client Plan, upon receipt by the

Bank of written notice from the Second

Fiduciary; and

(2) Failure to return the Termination

Form will result in continued

authorization of the Bank to engage in

the transactions described in paragraph

(i) of Section I on behalf of the Client

Plan.

(k) The Second Fiduciary of each

Client Plan invested in a particular

Fund receives full written disclosure, in

a statement separate from the Fund

prospectus, of any proposed increases in

the rates of fees charged by the Bank to

the Funds for secondary services at least

30 days prior to the effective date of

such increase, accompanied by a copy

of the Termination Form, and receives

full written disclosure in a Fund

prospectus or otherwise of any increases

in the rates of fees charged by the Bank

to the Funds for investment advisory

services even though such fees will be

rebated as required by paragraph (d) of

Section I above.

(l) In the event that the Bank provides

an additional secondary service to a

Fund for which a fee is charged or there

is an increase in the amount of fees paid

by the Funds to the Bank for any

secondary services resulting from a

decrease in the number or kind of

services performed by the Bank for such

fees in connection with a previously

authorized secondary service, the Bank

will, at least thirty days in advance of

the implementation of such additional

service or fee increase, provide written

notice to the Second Fiduciary

explaining the nature and the amount of

the additional service for which a fee

will be charged or the nature and

amount of the increase in fees of the

affected Fund. Such notice shall be

accompanied by the Termination Form,

as defined in Section III(i) below.

However, if the Termination Form has

been provided to the Second Fiduciary

pursuant to this paragraph or paragraph

(k) above, then the Termination Form

need not be provided again for an

annual reauthorization pursuant to

paragraph (j) above unless at least six

months has elapsed since the form was

provided in connection with the fee

increase.

(m) On an annual basis, the Bank

provides the Second Fiduciary of a

Client Plan investing in the Funds with:

(1) A copy of the current prospectus

for the Funds and, upon such

fiduciary’s request, a copy of the

Statement of Additional Information for

such Funds which contains a

description of all fees paid by the Funds

to the Bank;
14788 Federal Register / Vol. 60, No. 53 / Monday, March 20, 1995 / Notices

8The Bank’s current affiliates include: Rhode

Island Hospital Trust National Bank; Bank of

Boston, Connecticut; Casco Northern Bank, N.A.;

Bank of Boston, Florida, N.A.; South Shore Bank;

Multibank West; and Mechanics Bank.

(2) A copy of the annual financial

disclosure report prepared by the Bank

which includes information about the

Fund portfolios as well as audit findings

of an independent auditor within 60

days of the preparation of the report;

and

(3) Oral or written responses to

inquiries of the Second Fiduciary as

they arise.

(n) All dealings between the Client

Plans and the Funds are on a basis no

less favorable to the Client Plans than

dealings with other shareholders of the

Funds.

Section II—General Conditions

(a) The Bank maintains for a period of

six years the records necessary to enable

the persons described below in

paragraph (b) of Section II to determine

whether the conditions of this

exemption have been met, except that

(1) a prohibited transaction will not be

considered to have occurred if, due to

circumstances beyond the control the

Bank, the records are lost or destroyed

prior to the end of the six-year period,

and (2) no party in interest other than

the Bank 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 by paragraph

(b) below.

(b)(1) Except as provided in paragraph

(b)(2) and notwithstanding any

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

the Act, the records referred to in

paragraph (a) of Section II are

unconditionally available at their

customary location for examination

during normal business hours by—

(i) Any duly authorized employee or

representative of the Department or the

Internal Revenue Service,

(ii) Any fiduciary of the Client Plans

who has authority to acquire or dispose

of shares of the Funds owned by the

Client Plans, or any duly authorized

employee or representative of such

fiduciary, and

(iii) Any participant or beneficiary of

the Client Plans or duly authorized

employee or representative of such

participant or beneficiary;

(2) None of the persons described in

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

authorized to examine trade secrets of

the Bank, or commercial or financial

information which is privileged or

confidential.

Section III—Definitions

For purposes of this proposed

exemption:

(a) The term ‘‘Bank’’ means the First

National Bank of Boston and any

affiliate thereof as defined below in

paragraph (b) of Section III.

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

(1) Any person directly or indirectly

through one or more intermediaries,

controlling, controlled by, or under

common control with the person;

(2) Any officer, director, employee,

relative, or partner in any such person;

and

(3) Any corporation or partnership of

which such person is an officer,

director, partner, or employee.

(c) The term ‘‘control’’ means the

power to exercise a controlling

influence over the management or

policies of a person other than an

individual.

(d) The term ‘‘Fund’’ or ‘‘Funds’’ shall

include the 1784 Funds, Inc., or any

other diversified open-end investment

company registered under the 1940 Act

for which the Bank serves as an

investment adviser and may also serve

as a custodian, Fund accountant,

transfer agent or provide some other

‘‘secondary service’’ (as defined below

in paragraph (h) of this Section) which

has been approved by such Funds.

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

the amount for purposes of pricing all

purchases and sales calculated by

dividing the value of all securities,

determined by a method as set forth in

the Fund’s prospectus and statement of

additional information, and other assets

belonging to the Fund or portfolio of the

Fund, less the liabilities charged to each

such portfolio or Fund, by the number

of outstanding shares.

(f) The term ‘‘relative’’ means a

‘‘relative’’ as that term is defined in

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

of the family’’ as that term is defined in

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

brother, a sister, or a spouse of a brother

or a sister.

(g) The term ‘‘Second Fiduciary’’

means a fiduciary of a Client Plan who

is independent of and unrelated to the

Bank. For purposes of this exemption,

the Second Fiduciary will not be

deemed to be independent of and

unrelated to the Bank if:

(1) Such fiduciary directly or

indirectly controls, is controlled by, or

is under common control with the Bank;

(2) Such fiduciary, or any officer,

director, partner, employee, or relative

of the fiduciary is an officer, director,

partner, employee or affiliate of the

Bank (or is a relative of such persons);

(3) Such fiduciary directly or

indirectly receives any compensation or

other consideration for his or her own

personal account in connection with

any transaction described in this

exemption.

If an officer, director, partner, affiliate

or employee of the Bank (or relative of

such persons), is a director of such

Second Fiduciary, and if he or she

abstains from participation in (i) the

choice of the Client Plan’s investment

adviser, (ii) the approval of any such

purchase or sale between the Client Plan

and the Funds, and (iii) the approval of

any change in fees charged to or paid by

the Client Plan in connection with any

of the transactions described in Sections

I and II above, then paragraph (g)(2) of

Section III shall not apply.

(h) The term ‘‘secondary service’’

means a service other than an

investment management, investment

advisory, or similar service, which is

provided by the Bank to the Funds.

However, for purposes of this

exemption, the term ‘‘secondary

service’’ will not include any brokerage

services provided to the Funds by the

Bank for the execution of securities

transactions engaged in by the Funds.

(i) The term ‘‘Termination Form’’

means the form supplied to the Second

Fiduciary which expressly provides an

election to the Second Fiduciary to

terminate on behalf of a Client Plan the

authorization described in paragraph (j)

of Section II. The Termination Form

shall be used at will by the Second

Fiduciary to terminate an authorization

without penalty to the Client Plan and

to notify the Bank in writing to effect a

termination by selling the shares of the

Funds held by the Client Plan

requesting such termination within one

business day following receipt by the

Bank of the form; provided that if, due

to circumstances beyond the control of

the Bank, the sale cannot be executed

within one business day, the Bank shall

have one additional business day to

complete such sale.

EFFECTIVE DATE: If the proposed

exemption is granted, the exemption

will be effective April 1, 1994.

Summary of Facts and Representations

1. The Bank is a national banking

association with its principal offices

located at 100 Federal Street, Boston,

Massachusetts, and is a subsidiary of

Bank of Boston Corporation, a registered

bank holding company. The Bank and

various affiliates (referred to herein as

‘‘the Bank’’),8 serve as trustee, directed

trustee, investment manager, or

custodian for approximately 800
Federal Register / Vol. 60, No. 53 / Monday, March 20, 1995 / Notices 14789

9Since the Client Plans generally are not subject

to federal or state income taxes and do not need to

seek tax-free income, the Bank does not anticipate

that the Client Plans will invest in The 1784 TaxExempt Medium-Term Income Fund, The 1784

Massachusetts Tax-Exempt Income Fund, The 1784

Tax-Free Money Market Fund, The Connecticut

Tax-Exempt Income Fund, The 1784 Rhode Island

Tax- Exempt Income Fund or any other tax-exempt

Fund.

10With respect to any fees paid by the Funds to

parties unrelated to the Bank and its affiliates, the

Department notes that the Bank, as a trustee or

investment manager for a Client Plan’s assets that

are invested in the Funds, has a fiduciary duty to

ensure that the fees indirectly paid by a plan to

third parties are reasonable. The Department notes

further that the Bank should ensure that services

performed by the Bank or an affiliate for a Fund are

not duplicative of any similar services performed by

third parties.

employee benefit plans. As of April 1,

1994, the Bank had total assets under

management of approximately $1.3

billion.

The Bank represents that its status as

a fiduciary with investment discretion

for a Client Plan arises out of its

relationship as a trustee or investment

manager for such Plan, but does not

result from the rendering of any

investment advice to a Plan fiduciary

that has investment discretion for the

Client Plan. As a custodian or directed

trustee of a Client Plan, the Bank has

custody of Plan assets, collects all

income, performs bookkeeping and

accounting services, generates periodic

statements of account activity and other

reports, and makes payments or

distributions from the account as

directed. However, the Bank has no

duty as custodian or directed trustee to

review investments or make

recommendations, acting only as

directed by an authorized Second

Fiduciary.

The Client Plans include various

pension, profit sharing, and stock bonus

plans as well as retirement plans for

self-employed individuals (i.e., Keogh

plans), and individual retirement

accounts (IRAs). The Bank, in its

capacity as a fiduciary of the Client

Plans, may exercise investment

discretion for all or a portion of the

assets of such Client Plans.

2. The Bank invests assets of Client

Plans for which it acts as a fiduciary in

shares of the Funds in instances where

the Bank provides investment advisory

and other services to the Funds. The

Client Plans’ pro rata share of fees paid

by the Funds to the Bank for investment

advisory services are rebated to all

Client Plans, subject to the conditions of

the proposed exemption, with respect to

the assets of the Client Plans involved

in such Fund investments. All

investments in the Funds on behalf of

the Client Plans are made by the Bank

pursuant to an initial written

authorization, and an annual

reauthorization (as discussed below), of

the investment by an independent Plan

fiduciary (i.e., the Second Fiduciary).

The Bank invests assets of a Client Plan

in any of the Funds for which it has

received prior written authorization for

such investment from the Second

Fiduciary during the period that such

authorization is effective.

3. The Funds are a Massachusetts

business trust organized on February 5,

1993, as an open-end, diversified

management investment company

registered under the 1940 Act. The

Funds consist of twelve separate series

of funds or investment portfolios with

combined assets of approximately $897

million. Each share of each Fund

represents an undivided, proportionate

interest in the assets of that Fund. The

current Funds are: (i) The 1784 Growth

and Income Fund; (ii) The 1784 Asset

Allocation Fund; (iii) The 1784 U.S.

Government Medium-Term Income

Fund; (iv) The 1784 Tax-Exempt

Medium-Term Income Fund; (v) The

1784 Massachusetts Tax-Exempt Income

Fund; (vi) The 1784 U.S. Treasury

Money Market Fund; (vii) The 1784

Institutional U.S. Treasury Money

Market Fund; (viii) The 1784 Tax-Free

Money Market Fund; (ix) The 1784

Short-Term Income Fund; (x) The 1784

Income Fund; (xi) The Connecticut TaxExempt Income Fund; and (xii) The

1784 Rhode Island Tax-Exempt Income

Fund.9 The Bank states that shares of

the Funds are offered to the Bank’s trust

customers, including the Client Plans,

under terms and conditions which are at

least as favorable to such customers as

the terms and conditions offered to

other customers of the Bank.

Additional Funds are in the process of

registration and other series of Funds

may be established in the future. The

Bank intends to offer such Funds to the

Client Plans, if deemed appropriate by

the Second Fiduciary, as a means of

obtaining an interest in a diversified

portfolio of debt or equity investments

consistent with the investment policies

and objectives of the Client Plans.

The Bank believes that there are

material advantages to the Client Plans

from the use of the Funds. The Funds

are valued on a daily basis, in contrast

to certain collective investment funds

maintained by the Bank which are

valued monthly. The daily valuation

permits (i) immediate investment of

Client Plan contributions in various

types of investments; (ii) greater

flexibility in transferring assets from one

type of investment to another; and (iii)

daily redemption of investments for

purposes of making distributions under

the Client Plan. In addition, information

concerning the investment performance

of the Funds is available in newspapers

of general circulation which allows

Client Plan fiduciaries to monitor the

investment performance of such assets

on a daily basis rather than monthly.

All investments of Client Plan assets

in the Funds will occur either through

the direct purchase of shares of the

Funds for a Client Plan by the Bank, the

transfer by the Bank of Client Plan

assets from one Fund to another Fund,

or a daily automated sweep of

uninvested cash of a Client Plan by the

Bank into one or more Funds previously

designated by the Client Plan for

sweeping such cash. Any such

investments for the Client Plans will be

made pursuant to the Second

Fiduciary’s prior written authorization

and annual reauthorization to the Bank.

4. No sales commissions or

redemption fees are charged in

connection with the purchase or sale of

shares of the Funds. However, the Bank

states that the Funds may pay a

distribution fee to the Funds’

distributor, provided that such

distributor is unrelated to the Bank and

the Client Plans. Thus, the Bank does

not and will not receive fees payable

pursuant to Rule 12b–1 in connection

with transactions involving any shares

of the Funds. The current distributor for

the Funds is SEI Financial Services

Company (the Distributor), a whollyowned subsidiary of SEI Corporation

(SEI). According to the distribution plan

adopted by the Funds pursuant to Rule

12b–1 under the 1940 Act, the

Distributor receives a distribution fee

equal to an annual rate of 0.25% of each

of the Funds’ average daily net assets.

The distribution fee is calculated daily

and paid monthly. For all of the current

Funds, the distribution fees have been

waived by the Distributor since the

formation of the Funds.

SEI Financial Management

Corporation, a wholly-owned subsidiary

of SEI, also serves as the administrator,

dividend disbursing agent, shareholder

servicing agent, and transfer agent for

the current Funds. The Bank states that

SEI and its subsidiaries are unrelated to

the Bank and its affiliates.10

5. The Bank serves as the investment

advisor for the Funds and charges the

Funds for this service in accordance

with investment advisory agreements

(the Agreements) between the Bank and

each Fund. The Bank is currently the

sole investment adviser to the Funds’

existing portfolios and presently

contemplates no change for such

portfolios. However, the Bank states that

it may utilize third party sub-advisers in

the future to enhance the investment
14790 Federal Register / Vol. 60, No. 53 / Monday, March 20, 1995 / Notices

11PTE 77–4, in pertinent part, permits the

purchase and sale by an employee benefit plan of

shares of a registered, open-end investment

company when a fiduciary with respect to the plan

is also the investment adviser for the investment

company, provided that, among other things, the

plan does not pay an investment management,

investment advisory or similar fee with respect to

the plan assets invested in such shares for the entire

period of such investment. Section II(c) of PTE 77–

4 states that this condition does not preclude the

payment of investment advisory fees by the

investment company under the terms of an

investment advisory agreement adopted in

accordance with section 15 of the 1940 Act. Section

II(c) states further that this condition does not

preclude payment of an investment advisory fee by

the plan based on total plan assets from which a

credit has been subtracted representing the plan’s

pro rata share of investment advisory fees paid by

the investment company.

12The applicant represents that all fees paid by

Client Plans directly to the Bank for services

performed by the Bank are exempt from the

prohibited transaction provisions of the Act by

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

regulations thereunder (see 29 CFR 2550.408b–2).

The Department notes that to the extent there are

prohibited transactions under the Act as a result of

services provided by the Bank directly to the Client

Plans which are not covered by section 408(b)(2),

no relief is being proposed herein for such

transactions.

13See DOL Letter dated August 1, 1986 to Robert

S. Plotkin, Assistant Director, Division of Banking

Supervision and Regulation, Board of Governors of

the Federal Reserve System, stating the

Department’s views regarding the application of the

prohibited transaction provisions of the Act to

sweep services provided to plans by fiduciary banks

and the potential applicability of certain statutory

exemptions as described therein.

14 In this regard, the Department notes that the

combined total of all fees received by the Bank

directly and indirectly from the Client Plans for the

provision of services to the Plans and/or to the

Funds should not be in excess of ‘‘reasonable

compensation’’ within the meaning of section

408(b)(2) of the Act.

In addition, the fact that certain transactions and

fee arrangements are the subject of an

administrative exemption does not relieve a Client

Plan fiduciary from the general fiduciary

responsibility provisions of section 404 of the Act.

Thus, the Department cautions the fiduciaries of the

Client Plans investing in the Funds that they have

an ongoing duty under section 404 of the Act to

monitor the services provided to the Client Plans

to assure that the fees paid by the Client Plans for

such services are reasonable in relation to the value

of the services provided. Such responsibilities

would include determinations that the services

provided are not duplicative and that the fees are

reasonable in light of the level of services provided.

Finally, the Department notes that the Bank, as

a trustee and investment manager for a Client Plan

in connection with the decision to invest Client

alternatives and the investment advisory

services available to the Funds for

certain new portfolios. The Agreements

allow the Bank to receive monthly

investment advisory fees based on a

percentage of the average daily net

assets of each of the Funds. The

Agreements and the fees received by the

Bank are approved by the Board of

Directors of the Funds (the Funds’

Directors), in accordance with the

applicable provisions of the 1940 Act.

The Bank also serves as the custodian

and accountant for the Funds for which

it is entitled to receive additional fees.

Any changes in the fees received by the

Bank from the Funds are approved by

the Funds’ Directors. All of the Funds’

Directors are independent of the Bank.

The Bank states that while it may be

engaged by the Funds in the future to

perform additional secondary services,

it will not provide brokerage services to

the Funds. Therefore, all securities

transactions for a Fund’s portfolio will

be executed by broker-dealers unrelated

to the Bank and will not generate

commissions or other fees to the Bank.

6. The Bank represents that it has

designed a fee structure (the Fee

Structure) which is at least as

advantageous to the Client Plans as an

offset or credit arrangement, similar to

that described in Prohibited Transaction

Exemption 77–4 (PTE 77–4, 42 FR

18732, April 8, 1977), whereby

investment advisory fees paid by the

Funds to the Bank would be offset

against fees paid directly to the Bank by

the Client Plans.11

Under the Fee Structure, the Bank

charges its standard fees to the Client

Plans for serving as either a trustee,

directed trustee, investment manager, or

custodian.12 All fees are billed on a

quarterly basis. The annual charges for

a Client Plan account are individually

negotiated with the Bank based on the

Bank’s standard fee schedules. The

Bank provides services to the Client

Plans for which it acts as a trustee with

investment discretion, including sweep

services for uninvested cash balances in

such Plans, under a bundled or single

fee arrangement which is calculated as

a percentage of the market value of the

Plan assets under management. Thus, in

such instances, there are no separate

charges for the provision of particular

services to the Client Plans. However,

for Client Plans where investment

decisions are directed by a Second

Fiduciary, a separate charge is assessed

for particular services where the Second

Fiduciary specifically agrees to have the

Bank provide such services to the Client

Plan. With respect to sweep services,

the Bank represents that such services

are generally provided at no additional

charge and, in any event, are provided

only if approved by a Second Fiduciary

for the Client Plan after disclosure of the

services to be provided.13 The Bank

states that in some cases fees charged by

the Bank to a Client Plan are paid by the

Client Plan sponsor rather than by the

Client Plan.

The Bank charges the Funds for its

services to the Funds as investment

adviser, in accordance with the

Agreements between the Bank and the

Funds. Under the Agreements, the Bank

charges fees at a different rate for each

Fund, computed based on the average

daily net assets for the respective Fund.

The fee differentials among the Funds

result from the particular level of

services rendered by the Bank to the

Funds.

The investment advisory and other

fees paid by each of the existing Funds

are accrued on a daily basis and billed

by the Bank to the Funds at the

beginning of the month following the

month in which the fees accrued. The

applicant states that any additional

Funds will follow the same monthly

billing arrangement.

At the beginning of each month

(pursuant to the terms of the applicable

Agreements) and in no event more than

one business day following the receipt

of such fees by the Bank, the Bank

rebates to each Client Plan directly with

cash such Plan’s pro rata share of all

investment advisory fees charged by the

Bank to the Funds (the Rebate Program).

The Bank represents that each Client

Plan’s rebate of such investment

advisory fees will include any

investment advisory fees paid by the

Bank to third party sub-advisers.

The Bank retains fees received from

the Funds for custody and shareholder

services and will retain additional fees

received in the future for other

secondary services. The Bank states that

such secondary services are distinct

from the services provided by the Bank

as trustee to a Client Plan. Trustee

services rendered at the Plan-level

include maintaining custody of the

assets of the Client Plan (including the

Fund shares, but not the assets

underlying the Fund shares), processing

benefit payments, maintaining

participant accounts, valuing plan

assets, conducting non-discrimination

testing, preparing Forms 5500 and other

required filings, and producing

statements and reports regarding overall

plan and individual participant

holdings. These trustee services are

necessary regardless of whether the

Client Plan’s assets are invested in the

Funds. Thus, the Bank represents that

its proposed receipt of fees for both

secondary services at the Fund-level

and trustee services at the Plan-level

would not involve the receipt of

‘‘double fees’’ for duplicative services to

the Client Plans because a Fund is

charged for custody and other services

relative to the individual securities

owned by the Fund, while a Client Plan

is charged for the maintenance of Plan

accounts reflecting ownership of the

Fund shares and other assets.14
Federal Register / Vol. 60, No. 53 / Monday, March 20, 1995 / Notices 14791

Plan assets in the Funds, has a fiduciary duty to

monitor all fees paid by a Fund to the Bank, its

affiliates, and third parties for services provided to

the Fund to ensure that the totality of such fees is

reasonable and would not involve the payment of

any ‘‘double’’ fees for duplicative services to the

Fund by such parties.

15To the extent that the Department of the

Treasury determines that this arrangement should

be deemed a contribution by an employer to a

Client Plan of the rebated fees, the transaction must

be examined under the applicable provisions of the

Internal Revenue Code, including sections

401(a)(4), 404 and 415.

16 In this regard, the Auditor recomputes cash

received in connection with the rebate of each

Client Plan’s fees to ensure the proper amount of

cash was issued to the Client Plan under the Rebate

Program.

17With respect to increases in fees, the

Department notes that an increase in the amount of

a fee for an existing secondary service (other than

through an increase in the value of the underlying

assets in the Funds) or the imposition of a fee for

a newly-established secondary service shall be

considered an increase in the rate of such fees.

However, in the event a secondary service fee has

already been described in writing to the Second

Fiduciary and the Second Fiduciary has provided

authorization for the fee, and such fee was

temporarily waived, no further action by the Bank

would be required in order for the Bank to receive

such fee at a later time. Thus, for example, no

further disclosure would be necessary if the Bank

had received authorization for a fee for custodial

services from Plan investors and subsequently

determined to waive the fee for a period of time in

order to attract new investors but later charged the

fee.

The Bank states that the Rebate

Program ensures that the Bank does not

receive any investment advisory fees

from the Funds as a result of the

investment in the Funds by the Client

Plans. Thus, the Fee Structure with the

Rebate Program essentially has the same

effect in offsetting the Bank’s

investment advisory fees received from

the Funds as an arrangement allowing

for a credit of such fees against

investment management fees charged

directly to the Client Plans. The Bank

prefers the Fee Structure with the

Rebate Program because it allows fees

for fiduciary services charged at the

Plan-level to remain fixed without any

adjustments to such fees based on the

investment advisory fees paid by the

Funds to the Bank. The Bank notes that

the Fee Structure also allows a Client

Plan sponsor to pay the Client Plan’s

fees to the Bank for fiduciary services

and still allows the Client Plan to

receive a rebate of such Plan’s pro rata

share of the investment advisory fees

paid by the Funds to the Bank.15

7. The Bank has established a system

of internal accounting controls for the

Rebate Program. In addition, the Bank

has retained the services of Coopers &

Lybrand of Boston, Massachusetts (the

Auditor), an independent accounting

firm, to audit annually the rebating of

fees to the Client Plans under the Rebate

Program. The Bank states that such

audits provide independent verification

of the proper rebating to the Client Plans

of the investment advisory fees charged

by the Bank to the Funds. The Bank

states further that information obtained

from the audits is used in the

preparation of required financial

disclosure reports to the Client Plans’

fiduciaries.

By letter dated March 29, 1994, the

Auditor describes the procedures that

will be used in any annual audit of the

Rebate Program. The Auditor obtains: (i)

A calculation of the daily actual

balances for all the Funds and for the

total Client Plan shareholders of such

Funds; (ii) a detailed list of the expenses

charged to the Funds’ shareholders by

type of expense; and (iii) calculations of

the total expenses charged by the Bank

to each Fund which are reimbursable to

the Client Plans. The Auditor states that

every audit will include, but not

necessarily be limited to, an

examination of: (i) The daily rebate

factors; (ii) the proper identification of

Client Plan customers; (iii) the

calculation of the ratio used to

determine the amount of expenses to be

rebated to each Client Plan; (iv) the total

rebates paid and a comparison of this

amount to the sum of all rebates paid to

each Client Plan; 16 and (v) the amount

of rebated fees determined for selected

Client Plan customers of the Funds to

ensure that the rebated amounts were

made to the proper Client Plan account.

In the event either the internal audit

by the Bank or the independent audit by

the Auditor identifies that an error has

been made in the rebating of fees to the

Client Plans, the Bank will correct the

error. With respect to any shortfall in

rebated fees to a Client Plan, the Bank

will make a cash payment to the Plan

equal to the amount of the error with

interest computed on the same yield as

that paid by The 1784 Institutional U.S.

Treasury Money Market Fund for the

period involved. Any excess rebates

made to a Client Plan will be corrected,

to the extent possible, by an appropriate

reduction of cash to the Client Plan

during the next payment period to

accurately reflect the proper amount of

total rebates due to the Client Plan for

the period involved.

8. With respect to the receipt of fees

by the Bank from a Fund in connection

with any Client Plan’s investment in the

Fund, the Bank states that a Second

Fiduciary receives full and detailed

written disclosure of information

concerning the Fund in advance of any

investment by the Client Plan in the

Fund. On the basis of such information,

the Second Fiduciary authorizes in

writing the investment of assets of the

Client Plan in the Fund and the fees to

be paid by the Fund to the Bank. In

addition, the Bank represents that the

Second Fiduciary of each Client Plan

invested in a particular Fund will

receive full written disclosure, in a

statement separate from the Fund

prospectus, of any proposed increases in

the rates of fees charged by the Bank to

the Funds for secondary services, which

are above the rate reflected in the

prospectus for the Fund, at least 30 days

prior to the effective date of such

increase. In the event that the Bank

provides an additional secondary

service to a Fund for which a fee is

charged or there is an increase in the

amount of fees paid by the Funds to the

Bank for any secondary services,

resulting from a decrease in the number

or kind of services performed by the

Bank for such fees in connection with

a previously authorized secondary

service, the Bank will, at least thirty

days in advance of the implementation

of such additional service or fee

increase, provide written notice to the

Second Fiduciary explaining the nature

and the amount of the additional service

for which a fee will be charged or the

nature and amount of the increase in

fees of the affected Fund.17 Such notice

will be made separate from the Fund

prospectus and will be accompanied by

a Termination Form. The Second

Fiduciary will also receive full written

disclosure in a Fund prospectus or

otherwise of any increases in the rate of

fees charged by the Bank to the Funds

for investment advisory services even

though such fees will be credited, as

required by Section I(d) above.

Any authorizations by a Second

Fiduciary regarding the investment of a

Client Plan’s assets in a Fund and the

fees to be paid to the Bank, including

any future increases in rates of fees for

secondary services, are or will be

terminable at will by the Second

Fiduciary, without penalty to the Client

Plan, upon receipt by the Bank of

written notice of termination. The Bank

states that a Termination Form

expressly providing an election to

terminate the authorization with

instructions on the use of the form is

supplied to the Second Fiduciary no

less than annually. The instructions for

the Termination Form include the

following information:

(a) The authorization is terminable at

will by the Client Plan, without penalty

to the Client Plan, upon receipt by the

Bank of written notice from the Second

Fiduciary; and

(b) Failure to return the form will

result in continued authorization of the
14792 Federal Register / Vol. 60, No. 53 / Monday, March 20, 1995 / Notices

18See section II(d) of PTE 77–4 which requires,

in pertinent part, that an independent plan

fiduciary receive a current prospectus issued by the

investment company and a full and detailed written

disclosure of the investment advisory and other fees

charged to or paid by the plan and the investment

company, including a discussion of whether there

are any limitations on the fiduciary/investment

adviser with respect to which plan assets may be

invested in shares of the investment company and,

if so, the nature of such limitations.

Bank to engage in the subject

transactions on behalf of the Client Plan.

The Termination Form may be used to

notify the Bank in writing to effect a

termination by selling the shares of the

Funds held by the Client Plan

requesting such termination within one

business day following receipt by the

Bank of the form. The Bank states that

if, due to circumstances beyond the

control of the Bank, the sale cannot be

executed within one business day, the

Bank will complete the sale within the

next business day.

Any disclosure of information

regarding a proposed increase in the rate

of any fees for secondary services will

be accompanied by an additional

Termination Form with instructions on

the use of the form as described above.

Therefore, the Second Fiduciary will

have prior notice of the proposed

increase and an opportunity to

withdraw from the Funds in advance of

the date the increase becomes effective.

Although the Second Fiduciary will also

have notice of any increase in the rates

of fees charged by the Bank to the Funds

for investment advisory services,

through an updated prospectus or

otherwise, such notice will not be

accompanied by a Termination Form

since all increases in investment

advisory fees will be rebated by the

Bank to the Client Plans and will be

subject to an annual reauthorization as

described above. However, if the

Termination Form has been provided to

the Second Fiduciary for the

authorization of a fee increase, then a

Termination Form for an annual

reauthorization will not be provided by

the Bank for that year unless at least six

months has elapsed since the

Termination Form was provided for the

fee increase.

The Bank states that the Second

Fiduciary always receives a current

prospectus for each Fund and a written

statement giving full disclosure of the

Fee Structure prior to any investment in

the Funds. The disclosure statement

explains why the Bank believes that the

investment of assets of the Client Plan

in the Funds is appropriate. The

disclosure statement also describes

whether there are any limitations on the

Bank with respect to which Client Plan

assets may be invested in shares of the

Funds and, if so, the nature of such

limitations.18

The Bank states further that the

Second Fiduciary receives an updated

prospectus for each Fund at least

annually and either annual or semiannual financial reports for each Fund,

which include information on the

Auditor’s findings as to the proper

rebating of the investment advisory fees

by the Bank to the Client Plan. The Bank

also provides monthly reports to the

Second Fiduciary of all transactions

engaged in by the Client Plan, including

purchases and sales of Fund shares.

9. No sales commissions are paid by

the Client Plans in connection with the

purchase or sale of shares of the Funds.

In addition, no redemption fees are paid

in connection with the sale of shares by

the Client Plans to the Funds. As noted

above in Paragraph 4, the Bank does not

receive any fees payable pursuant to

Rule 12b–1 under the 1940 Act in

connection with the transactions. The

applicant states further that all other

dealings between the Client Plans and

the Funds, the Bank or any affiliate, are

on a basis no less favorable to the Client

Plans than such dealings are with the

other shareholders of the Funds.

10. In summary, the applicant

represents that the transactions

described herein satisfy the statutory

criteria of section 408(a) of the Act and

section 4975(c)(2) of the Code because:

(a) The Funds provide the Client Plans

with a more effective investment vehicle

than collective investment funds

maintained by the Bank without any

increase in investment management,

advisory or similar fees paid to the

Bank; (b) the Bank requires annual

audits by an independent accounting

firm to verify the proper rebating to the

Client Plans of investment advisory fees

charged by the Bank to the Funds; (c)

with respect to any investments in a

Fund by the Client Plans and the

payment of any fees by the Fund to the

Bank, a Second Fiduciary receives full

written disclosure of information

concerning the Fund, including a

current prospectus and a statement

describing the Fee Structure, and

authorizes in writing the investment of

the Client Plan’s assets in the Fund and

the fees paid by the Fund to the Bank;

(d) any authorizations made by a Client

Plan regarding investments in a Fund

and fees paid to the Bank, or any

increases in the rates of fees for

secondary services which are retained

by the Bank, are or will be terminable

at will by the Client Plan, without

penalty to the Client Plan, upon receipt

by the Bank of written notice of

termination from the Second Fiduciary;

(e) no commissions or redemption fees

are paid by the Client Plan in

connection with either the acquisition

of Fund shares or the sale of Fund

shares; (f) the Bank does not receive any

fees payable pursuant to Rule 12b–1

under the 1940 Act in connection with

the transactions; and (g) all dealings

between the Client Plans, the Funds and

the Bank, are on a basis which is at least

as favorable to the Client Plans as such

dealings are with other shareholders of

the Funds.

Notice to Interested Persons

Notice of the proposed exemption

shall be given to all Second Fiduciaries

of Client Plans that are currently

invested in the Funds, as of the date the

notice of the proposed exemption is

published in the Federal Register,

where the Bank provides services to the

Funds and receives fees which would be

covered by the exemption, if granted.

Notice to interested persons shall be

provided by first class mail within

fifteen (15) days following the

publication of the proposed exemption

in the Federal Register. Such notice

shall include a copy of the notice of

proposed exemption as published in the

Federal Register and a supplemental

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

which informs all interested persons of

their right to comment on and/or

request a hearing with respect to the

proposed exemption. Comments and

requests for a public hearing are due

within forty-five (45) days following the

publication of the proposed exemption

in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Mr.

E. F. Williams of the Department,

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

a toll-free number.)

Amended Profit Sharing Plan and Trust

of Walker Products Co., Inc. (the P/S

Plan)

Located in Lincoln, Kansas

[App. No. D–09798]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 408(a) of the Act

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

in accordance with the procedures set

forth in 29 C.F.R. Part 2570, Subpart B

(55 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

certain farm land (the Land) by the
Federal Register / Vol. 60, No. 53 / Monday, March 20, 1995 / Notices 14793

19With regard to the Land being operated, the

applicant represents that for a short period of time

the employees of the Employer (the Employees)

were paid to provide farming services. However, the

applicant represents that the Employees were not

compensated for these farming services by either of

the Plans. It is further represented that no renter,

at any time, has been a party in interest with respect

to the Plans.

20The applicant represents that 82 acres shown

by Mr. Princ probably come from the Lincoln

County Appraiser’s office. The applicant also

maintains that their reference to the Land as

containing 79.6 acres is based on the number of

tillable acres on the Land.

21With respect to the Analysis, the applicant

represents that with respect to the period 1986

through 1994, the data was estimated to reflect pro

rata income and expenses for the Land, excluding

any unrealized gain due to the change in fair market

value of the Land.

22The Department expresses no opinion as to

whether the Plan’s acquisition and holding of the

Land, as well as the operation of the Land by the

Employees, violated any provision of part 4 of Title

I of the Act, and no relief is provided herein.

P/S Plan to Mr. Lloyd Walker, a 331⁄3%

shareholder of the P/S Plan sponsor and

a party in interest with respect to the P/

S Plan, provided that the following

conditions are satisfied:

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

(2) The P/S Plan will receive the fair

market value of the Land as determined

at the time of the sale by an

independent, qualified appraiser; and

(3) The P/S Plan will pay no expenses

associated with the sale.

Summary of Facts and Representations

1. The Plan, established in May, 1974,

is a profit sharing plan, which currently

has two participants. As of September 1,

1994, the P/S Plan had $101,468 in total

assets. The P/S Plan’s trustees are Albert

Walker, Craig Walker and Joyce Walker

(the P/S Plan Trustees). Craig Walker is

the president of Walker Products

Company Inc. (the Employer). Lloyd

Walker is a 331⁄3% shareholder of the

Employer. However, Lloyd Walker has

retired from the Employer on December

31, 1982, and received distributions

from the P/S Plan on February 28, 1983.

The Employer is a Subchapter ‘‘C’’

Kansas corporation which is in the

farming business. The applicant

represents that until approximately

August, 1985, the Employer maintained

two plans (collectively; the Plans), the

P/S Plan and the Money Purchase Plan

(M/P Plan). The M/P Plan was

terminated in August, 1985, and its

assets were rolled over into the P/S Plan

approximately May, 1986.

2. On May 5, 1975, the M/P Plan

purchased the 79.6 acre tract of Land for

$57,000 in cash from Edward Hamilton,

the executor of the Estate of Marie

Jensen, neither of which had any

relationship to the Plans, Lloyd Walker,

or the Employer. At the time that the

Land was purchased it represented

78.95% of the M/P Plan’s assets. It is

represented that the original decision to

purchase the Land was made by the

M/P Plan Trustees who deemed it a safe

investment which could produce

income from farming operations and a

reasonable rate of return. The Land was

held by the M/P Plan from the date of

original acquisition until approximately

May, 1986, when the M/P Plan’s assets,

including the Land, were transferred

into the P/S Plan.

3. The Land is currently encumbered

with a first mortgage which was entered

into on August 31, 1994, in the

principal amount of $30,000. The

applicant represents that the P/S Plan

Trustees borrowed the money (the Loan)

in order to pay out distributions. The

Loan was made by Farmers National

Bank, which is unrelated to the P/S Plan

and the Employer. The P/S Plan

Trustees intend to pay off the Loan with

the proceeds from the proposed sale.

4. It is represented that since its

original acquisition, the Land has been

rented or operated.19 Since April, 1985

and currently, the Land has been rented

on a crop share basis to Lowell Vonada

(Mr. Vonada), an unrelated third party.

Under this arrangement, Mr. Vonada as

the tenant receives 60% of the crops and

the P/S Plan receives 40% of the crops.

It is also represented that currently there

are no crops growing on the Land.

5. Lloyd Walker now desires to

purchase the Land from the P/S Plan in

a one-time cash purchase. The Land was

appraised (the Appraisal) on October 18,

1994, by Frank L. Princ (Mr. Princ), an

independent Kansas State Certified

General R.E. appraiser. Mr. Princ stated

that the purpose of the Appraisal is to

estimate the market value of the Land

on an ‘‘as is’’ basis. The Land, located

in Lincoln County, Kansas, contains

approximately 82 acres,20 of which 76.2

acres are in cultivation, and the

remaining acres are primarily woodland

and waste. In determining the fair

market value of the Land, Mr. Princ

utilized the sales comparison approach

and the income approach, but relied

mainly on the sales approach as the

primary basis for the value estimate of

the Land. Accordingly, as of October 18,

1994, Mr. Princ determined the fair

market value of the Land to be $64,000.

6. The applicant maintains that the

Land has yielded revenue for the Plans.

The applicant submitted a ‘‘return on

investment’’ analysis (the Analysis) on

the Land, covering the period 1976

through 1994. Return on investment

value ratios were derived by the

applicant by dividing the estimated net

income by the original acquisition price

of the Land for each year of

ownership.21 An average of the ‘‘return

on investment’’ figures was determined

to be 6.98%. Therefore, according to the

Analysis, the Plans received an average

yield of 6.98% for their investment in

the Land.

7. The applicant represents that the

transaction is administratively feasible,

in the interest and protective of the

P/S Plan. Lloyd Walker will purchase

the Land at its fair market value in a

one-time cash transaction. The

transaction is protective and in the best

interest of the P/S Plan because as a

result of this transaction the P/S Plan

will receive the fair market value of the

Land as determined at the time of the

sale by an independent, qualified

appraiser. The transaction would also be

in the interest of the P/S Plan because

it will enable the P/S Plan to sell an

illiquid asset which currently represents

in excess of 50% of the P/S Plan’s total

assets and which had little appreciation

in value over time.22 The sale will

enable the P/S Plan Trustees to pay off

the Loan and to acquire investments

with a higher yield. The applicant also

represents that the P/S Plan will incur

no expenses as a result of the

transaction described herein.

8. 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:

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

(2) The P/S Plan will receive the fair

market value of the Land as determined

at the time of the sale by an

independent, qualified appraiser; and

(3) The P/S Plan will pay no expenses

associated with the sale.

FOR FURTHER INFORMATION CONTACT:

Ekaterina A. Uzlyan of the Department,

telephone (202) 219–8883. (This is not

a toll-free number.)

Delaware Trust Capital Management,

Inc. (DTCM)

Located in Wilmington, Delaware

[App. No. D–09853]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 4975(c)(2) of the

Code and in accordance with the

procedures set forth in 29 CFR Part

2570, Subpart B (55 FR 32836, 32847,

August 10, 1990). If the exemption is

granted, the sanctions resulting from the

application of section 4975 of the Code,

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

through (E) of the Code, shall not apply

to the proposed sale by certain rollover

individual retirement accounts (the
14794 Federal Register / Vol. 60, No. 53 / Monday, March 20, 1995 / Notices

23Pursuant to 29 CFR 2510.3–2(d), the IRAs are

not within the jurisdiction of Title I of the Act.

However, there is jurisdiction under Title II of the

Act pursuant to section 4975 of the Code.

24The applicant represents that, based on the

valuation methods described in rep. 4, the fair

market value of the Securities on June 30, 1994, was

at least as great as the fair market value of the

Securities on August 31, 1994, the date liquidation

of the Plan commenced.

IRAs) of their interests in certain

securities (the Securities) to DTCM, a

disqualified person with respect to the

IRAs, provided the following conditions

are satisfied: (1) The sale is a one-time

transaction for cash; (2) no commissions

or other expenses are paid by the IRAs

in connection with the sale; (3) the IRAs

receive the greater of: (a) the fair market

value of the Securities as of June 30,

1994, plus accrued interest, less

principal repayments received, or (b)

the fair market value of the Securities as

of the time of the sale as determined by

a qualified, independent expert.23

Summary of Facts and Representations

1. DTCM is a Delaware corporation

which is engaged in the business of

providing trust and other fiduciary

services to individuals, businesses and

non-profit entities, including employee

pension plans and individual retirement

accounts.

2. DTCM was the trustee of the USA

Training Academy, Inc. Profit Sharing

Plan (the Plan), and is the trustee of the

IRAs, which are rollover individual

retirement accounts for five former

participants (the Affected Participants)

in the Plan. DTCM (and its parent

company, Delaware Trust Company)

have served as trustee of the Plan and

the IRAs from November 1, 1984 until

the present. The applicant is a wholly

owned subsidiary of Delaware Trust

Company, which in turn is a wholly

owned subsidiary of Meridian Bancorp,

Inc.

3. In 1994, the Plan’s Administrator

advised the applicant, DTCM, that the

Plan’s sponsor intended to terminate the

Plan and, in that connection, would be

instructing DTCM to liquidate the Plan

assets and make distributions to the

remaining Plan participants. In

response, DTCM informed the Plan

Administrator that there was no readily

discernible market for the Securities.

The Securities included the following

two obligations:

(a) SEARS ROEBUCK & CO MTG SEC

PAR CTF (the Sears Securities), which

are mortgage-backed obligations issued

by the Sears Mortgage Securities Corp.

These Securities pay 10.36% in interest

and mature July 25, 2018. The Plan

acquired a participating certificate for

198,992 units of these obligations in

July, 1988 for $196,200 (unit

cost=$0.99). The Plan has received all

scheduled payments of principal and

interest.

(b) AMERICAN SVNGS & LOAN

ASSN BRAZOR CNTY PART CTF (the

American Securities), which are

mortgage-backed obligations issued by

American Savings and Loan Association

of Brazoria County, Texas. Each loan is

a guaranteed FHA Title I loan. These

Securities pay 9.5% in interest and

mature January 9, 2002. The Plan

acquired 198,161.88 units in April, 1987

at a unit cost of $1 per unit. The Plan

has received all scheduled payments of

principal and interest.

4. DTCM determined that as of June

30, 1994, the Sears Securities had a fair

market value of $24,163.78. This fair

market value was established by Sears’

mortgage subsidiary, a brokerage house

providing master servicing for Sears’

mortgage pass-through certificates

which is a sister subsidiary to Sears

Mortgage Securities Corp., the issuer of

the Sears Securities. DTCM also

determined that as of June 30, 1994, the

American Securities had a fair market

value of $49,416.80. The applicant

represents that this fair market value

was established by A.W. Dougherty, an

unrelated brokerage house specializing

in fixed- income securities.

5. DTCM, the Plan sponsor, the Plan

and the Affected Participants entered

into an agreement (the Agreement) in

1994 that provided for the orderly

liquidation of the Plan without the

delay that would have been caused by

attempting to convert the Securities to

cash. Following the execution of the

Agreement on August 30, 1994, the

applicant liquidated the Plan assets

(excluding the Securities). The Plan

Administrator then determined the

value of each participant’s account

based upon the cash proceeds of

liquidation and the fair market value of

the Securities as of June 30, 1994 (see

rep. 4, above).24 The Affected

Participants received pro rata shares of

(i) the cash proceeds of the liquidation

of the Plan’s assets and (ii) the

Securities. The value of each Affected

Participant’s account was distributed to

the IRAs, individual retirement rollover

accounts established by DTCM on

behalf of the Affected Participants and

for which DTCM serves as trustee. The

IRAs currently hold a total of 14,628.32

units of the Sears Securities and

41,501.40 units of the American

Securities.

6. The applicant has requested an

exemption to permit DTCM to purchase

the Securities from the IRAs. DTCM will

pay the greater of (i) the fair market

value as of June 30, 1994, increased by

any interest payments in arrears as of

the date of purchase by the applicant,

and reduced proportionately for any

principal repayments received, or (ii)

the fair market value of the Securities as

of the date of the sale as determined by

a qualified, independent expert. The

IRAs will pay no fees, commissions or

other expenses in connection with the

transaction. The applicant represents

that the Securities have been

determined by Ms. Janet Milanese, Vice

President of Starboard Capital Markets,

Inc., an independent expert in

Philadelphia, Pa., as having a fair

market value as of January 31, 1995

which is less per unit than the June 30,

1994 figure determined as described in

rep. 4, above. Accordingly, DTCM

proposes to pay to the IRAs the June 30,

1994 fair market value of the Securities,

plus any interest payments in arrears as

of the date of the transaction, less any

principal repayments received.

7. The applicant represents that the

Plan entered into the Agreement

because it allowed for the orderly

liquidation of its assets and distribution

of benefits while at the same time

protecting the Affected Participants

because they would receive at least as

much as they would have if the Plan

had been able to sell the Securities in an

arm’s-length transaction on the date of

the Plan’s liquidation. The proposed

transaction also benefits the IRAs since

it allows the Securities to be converted

to cash prior to maturity at a price at

least as great as could be obtained in an

arm’s-length transaction.

8. In summary, the applicant

represents that the proposed transaction

satisfies the criteria contained in section

4975 (c)(2) of the Code because: (a) The

sale is a one-time transaction for cash;

(b) no commissions or other expenses

will be paid by the IRAs in connection

with the sale; (c) the IRAs will be

receiving not less than the fair market

value of the Securities as determined by

a qualified, independent expert; and (d)

each of the Affected Participants is the

only participant in his/her own IRA,

and each has determined that the

proposed transaction is appropriate for

and in the best interest of his/her IRA

and desires that the transaction be

consummated.

NOTICE TO INTERESTED PERSONS: Because

each of the Affected Participants is the

only participant in his/her own IRA, it

has been determined that there is no

need to distribute the notice of proposed

exemption to interested persons.

Comments and requests for a hearing are

due 30 days after publication of this

notice in the Ferderal Register.
Federal Register / Vol. 60, No. 53 / Monday, March 20, 1995 / Notices 14795

FOR FURTHER INFORMATION CONTACT: Gary

H. Lefkowitz of the Department,

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

a toll-free number.)

General Information

The attention of interested persons is

directed to the following:

(1) The fact that a transaction is the

subject of an exemption under section

408(a) of the Act and/or section

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

a fiduciary or other party in interest of

disqualified person from certain other

provisions of the Act and/or the Code,

including any prohibited transaction

provisions to which the exemption does

not apply and the general fiduciary

responsibility provisions of section 404

of the Act, which among other things

require a fiduciary to discharge his

duties respecting the plan solely in the

interest of the participants and

beneficiaries of the plan and in a

prudent fashion in accordance with

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

it affect the requirement of section

401(a) of the Code that the plan must

operate for the exclusive benefit of the

employees of the employer maintaining

the plan and their beneficiaries;

(2) Before an exemption may be

granted under section 408(a) of the Act

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

the Department must find that the

exemption is administratively feasible,

in the interests of the plan and of its

participants and beneficiaries and

protective of the rights of participants

and beneficiaries of the plan;

(3) The proposed exemptions, if

granted, will be supplemental to, and

not in derogation of, any other

provisions of the Act and/or the Code,

including statutory or administrative

exemptions and transitional rules.

Furthermore, the fact that a transaction

is subject to an administrative or

statutory exemption is not dispositive of

whether the transaction is in fact a

prohibited transaction; and

(4) The proposed exemptions, if

granted, will be subject to the express

condition that the material facts and

representations contained in each

application are true and complete, and

that each application accurately

describes all material terms of the

transaction which is the subject of the

exemption.

Signed at Washington, DC, this 15th day of

March, 1995.

Ivan Strasfeld,

Director of Exemption Determinations

Pension and Welfare BenefitsAdministration,

U.S. Department of Labor.

[FR Doc. 95–6728 Filed 3–17–95; 8:45 am]

BILLING CODE 4510–29–P

NATIONAL CREDIT UNION

ADMINISTRATION

Guidelines for the Supervisory Review

Committee

AGENCY: National Credit Union

Administration (NCUA).

ACTION: Final Interpretive Ruling and

Policy Statement 95–1—Supervisory

Review Committee (IRPS 95–1).

SUMMARY: The Riegle Community

Development and Regulatory

Improvement of Act (Act) of 1994 was

signed into law on September 23, 1994.

Section 309 of the Act requires that

NCUA establish an independent

appellate process to review material

supervisory determinations. This

process must be established within 180

days of the Act’s passage or by March

22, 1995. The Act also requires that the

public be entitled to comment on the

proposed process. The NCUA Board

issued proposed IRPS 94–2 on

November 10, 1994. The proposed IRPS

would have established a Supervisory

Review Committee (Committee)

consisting of five senior staff members

to hear appeals of material supervisory

determinations. Material supervisory

determinations were defined in the

proposal to include composite CAMEL

ratings of 4 and 5, significant loan

classifications and adequacy of loan loss

reserves. The Board has expanded the

determinations subject to review in the

final IRPS to include composite CAMEL

ratings of 3, 4 and 5 and all component

ratings of those composite ratings. The

final IRPS reduces Committee

membership from five to three and

shortens the time-frames for Committee

action. Additional procedural and

technical changes are made in the final

IRPS as described in the Supplementary

Information.

EFFECTIVE DATE: March 22, 1995.

ADDRESSES: National Credit Union

Administration, 1775 Duke Street,

Alexandria, VA 22314–3428.

FOR FURTHER INFORMATION CONTACT:

Hattie M. Ulan, Special Counsel to the

General Counsel, at the above address or

telephone 703–518–6540.

SUPPLEMENTARY INFORMATION:

Background

The Riegle Community Development

and Regulatory Improvement Act of

1994, Public Law 103–325 (the Act) was

signed into law on September 23, 1994.

Section 309 of the Act requires, among

other things, that NCUA and the federal

banking agencies each establish an

independent appellate process to review

material supervisory determinations.

The Act requires that the agencies

provide the public with notice and

opportunity to comment on the

proposed guidelines for the appellate

process within 90 days of the Act’s

passage. The NCUA Board issued

proposed guidelines establishing a

Supervisory Review Committee

(Committee) (Interpretive Ruling and

Policy Statement (IRPS) 94–2) on

November 10, 1994 (59 FR 59437, 11/

17/94.) The guidelines were issued with

a 30-day comment period ending on

December 19, 1994. The NCUA Board

then extended the comment period until

January 18, 1995. (See 59 FR 61003, 11/

29/94.) The Act requires that each

agency’s appellate process be

established not later than 180 days after

the Act’s passage (by March 22, 1995).

Forty-nine commenters responded to

the proposed guidelines. The public

commenters consisted of 26 federally

chartered credit unions, 7 state

chartered, federally-insured credit

unions and 1 unidentified credit union,

8 state credit union leagues, 1 state

credit union regulator, 3 national trade

associations, 2 individual auditors and

one credit union manager. The

commenters generally approved of the

proposed Supervisory Review

Committee, however, there were several

areas where many of the commenters

suggested changes. The Board has

considered the public comments and

suggestions of NCUA staff as well as the

proposed guidelines of the federal

banking agencies (Federal Deposit

Insurance Corporation, Office of Thrift

Supervision, Office of Comptroller of

the Currency, and Federal Reserve

Board) in devising its final guidelines.

An explanation of the comments

received and the resolution of the issues

in the final IRPS follows.

Format—IRPS or Regulation

The Board specifically requested

comment on whether an IRPS was the

appropriate method to establish the

appeals process or whether the process

should be established through a

regulation. Sixteen commenters

addressed this issue and the response

was split 50/50. Several of the

commenters supporting use of a

regulation believe it would have greater

force of law. The Board believes that the

IRPS format is more appropriate since it

provides the Board with some

flexibility. The Board does not believe

enforceability of the IRPS will be a

problem since notice and comment

requirements of the Administrative

Procedure Act have been followed in its

promulgation.