Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices 17809

Issued Under the Davis-Bacon and

Related Acts’’ being modified are listed

by Volume and State. Dates of

publication in the Federal Register are

in parentheses following the decisions

being modified.

Volume I

Massachusetts

MA950001 (Feb. 10, 1995)

MA950002 (Feb. 10, 1995)

MA950005 (Feb. 10, 1995)

MA950007 (Feb. 10, 1995)

MA950012 (Feb. 10, 1995)

MA950017 (Feb. 10, 1995)

MA950018 (Feb. 10, 1995)

MA950019 (Feb. 10, 1995)

New Jersey

NJ950002 (Feb. 10, 1995)

NJ950003 (Feb. 10, 1995)

NJ950004 (Feb. 10, 1995)

NJ950015 (Feb. 10, 1995)

New York

NY950003 (Feb. 10, 1995)

Volume II

Pennsylvanaia

PA950042 (Feb. 10, 1995)

Volume III

Tennessee

TN950016 (Feb. 10, 1995)

TN950017 (Feb. 10, 1995)

TN950057 (Feb. 10, 1995)

TN950059 (Feb. 10, 1995)

Volume IV

Illinois

IL950001 (Feb. 10, 1995)

IL950002 (Feb. 10, 1995)

IL950004 (Feb. 10, 1995)

IL950011 (Feb. 10, 1995)

IL950013 (Feb. 10, 1995)

IL950015 (Feb. 10, 1995)

IL950016 (Feb. 10, 1995)

IL950018 (Feb. 10, 1995)

IL950021 (Feb. 10, 1995)

IL950026 (Feb. 10, 1995)

IL950028 (Feb. 10, 1995)

IL950034 (Feb. 10, 1995)

IL950058 (Feb. 10, 1995)

IL950060 (Feb. 10, 1995)

IL950062 (Feb. 10, 1995)

IL950063 (Feb. 10, 1995)

IL950064 (Feb. 10, 1995)

IL950067 (Feb. 10, 1995)

IL950068 (Feb. 10, 1995)

IL950070 (Feb. 10, 1995)

IL950077 (Feb. 10, 1995)

IL950084 (Feb. 10, 1995)

IL950091 (Feb. 10, 1995)

IL950092 (Feb. 10, 1995)

IL950095 (Feb. 10, 1995)

Michigan

MI950001 (Feb. 10, 1995)

MI950002 (Feb. 10, 1995)

MI950003 (Feb. 10, 1995)

MI950005 (Feb. 10, 1995)

MI950007 (Feb. 10, 1995)

MI950012 (Feb. 10, 1995)

MI950031 (Feb. 10, 1995)

MI950046 (Feb. 10, 1995)

MI950047 (Feb. 10, 1995)

Volume V

Kansas

KS950012 (Feb. 10, 1995)

KS950022 (Feb. 10, 1995)

KS950028 (Feb. 10, 1995)

Missouri

MO950002 (Feb. 10, 1995)

MO950048 (Feb. 10, 1995)

MO950049 (Feb. 10, 1995)

MO950050 (Feb. 10, 1995)

Nebraska

NE950001 (Feb. 10, 1995)

New Mexico

NM950001 (Feb. 10, 1995)

Oklahoma

OK950035 (Feb. 10, 1995)

Texas

TX950100 (Feb. 10, 1995)

TX950114 (Feb. 10, 1995)

Volume VI

Alaska

AK950001 (Feb. 10, 1995)

California

CA950001 (Feb. 10, 1995)

CA950002 (Feb. 10, 1995)

CA950004 (Feb. 10, 1995)

CA950027 (Feb. 10, 1995)

Idaho

ID950001 (Feb. 10, 1995)

ID950003 (Feb. 10, 1995)

Montana

MT950006 (Feb. 10, 1995)

MT950008 (Feb. 10, 1995)

Oregon

OR950001 (Feb. 10, 1995)

OR950004 (Feb. 10, 1995)

Washington

WA950001 (Feb. 10, 1995)

WA950002 (Feb. 10, 1995)

WA950003 (Feb. 10, 1995)

WA950005 (Feb. 10, 1995)

WA950006 (Feb. 10, 1995)

WA950008 (Feb. 10, 1995)

WA950010 (Feb. 10, 1995)

WA950011 (Feb. 10, 1995)

WA950013 (Feb. 10, 1995)

Wyoming

WY950009 (Feb. 10, 1995)

General Wage Determination

Publication

General wage determinations issued

under the Davis-Bacon and related Acts,

including those noted above, may be

found in the Government Printing Office

(GPO) document entitled ‘‘General Wage

Determinations Issued Under The DavisBacon and Related Acts’’. This

publication is available at each of the 50

Regional Government Depository

Libraries and many of the 1,400

Government Depository Libraries across

the country.

The general wage determinations

issued under the Davis-Bacon and

related Acts are available electronically

by subscription to the FedWorld

Bulletin Board System of the National

Technical Information Service (NTIS) of

the U.S. Department of Commerce at

(703) 487–4630.

Hard-copy subscriptions may be

purchased from: Superintendent of

Documents, U.S. Government Printing

Office, Washington, D.C. 20402, (202)

512–1800.

When ordering hard-copy

subscription(s), be sure to specify the

State(s) of interest, since subscriptions

may be ordered for any or all of the six

separate volumes, arranged by State.

Subscriptions include an annual edition

(issued in January or February) which

includes all current general wage

determinations for the States covered by

each volume. Throughout the remainder

of the year, regular weekly updates will

be distributed to subscribers.

Signed at Washington, D.C. this 30th day

of March, 1995.

Alan L. Moss,

Director, Division of Wage Determinations.

[FR Doc. 95–8440 Filed 4–6–95; 8:45 am]

BILLING CODE 4510–27–M

Pension and Welfare Benefits

Administration

[Application No. D–9511, et al.]

Proposed Exemptions; Bank of

America Illinois, 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
17810 Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices

copies) should be sent to the Pension

and Welfare Benefits Administration,

Office of Exemption Determinations,

Room N–5649, U.S. Department of

Labor, 200 Constitution Avenue NW.,

Washington, DC 20210. Attention:

Application No. stated in each Notice of

Proposed Exemption. The applications

for exemption and the comments

received will be available for public

inspection in the Public Documents

Room of Pension and Welfare Benefits

Administration, U.S. Department of

Labor, Room N–5507, 200 Constitution

Avenue NW., Washington, DC 20210.

Notice to Interested Persons

Notice of the proposed exemptions

will be provided to all interested

persons in the manner agreed upon by

the applicant and the Department

within 15 days of the date of publication

in the Federal Register. Such notice

shall include a copy of the notice of

proposed exemption as published in the

Federal Register and shall inform

interested persons of their right to

comment and to request a hearing

(where appropriate).

SUPPLEMENTARY INFORMATION: The

proposed exemptions were requested in

applications filed pursuant to section

408(a) of the Act and/or section

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

accordance with procedures set forth in

29 CFR Part 2570, Subpart B (55 FR

32836, 32847, August 10, 1990).

Effective December 31, 1978, section

102 of Reorganization Plan No. 4 of

1978 (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.

Bank of America Illinois, Located in

Chicago, IL

[Exemption Application Nos. D–9511, D–

9512 and D–9513]

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, August 10, 1990).

Section I—Exemption for Purchases and

Sales

If the exemption is granted, effective

September 1, 1993, the restrictions of

section 406(a)(1)(A) through (D) and

section 406(b) of the Act and the

sanctions resulting from the application

of section 4975 of the Code, by reason

of section 4975(c)(1)(A) through (F) of

the Code, shall not apply to the

purchase and sale by employee benefit

plans (the Plans), to which the Bank

serves as fiduciary, of shares in the

Prime Fund, the Government Securities

Fund, and the Treasury Fund, three

open-end money market mutual fund

portfolios (collectively referred to as the

Funds), to which the Bank of America

Illinois, and its affiliates (the Bank)

provide investment advisory and other

services, in connection with the

Supplemental Sweep Service (as

defined in paragraph (a) of section IV

below), provided that the conditions of

Section III are met.

Section II—Exemption for Receipt of

Fees

If the exemption is granted, effective

September 1, 1993, the restrictions of

section 406(a)(1)(A) through (D) and

section 406(b) of the Act and the

sanctions resulting from the application

of section 4975 of the Code, by reason

of section 4975(c)(1)(A) through (F) of

the Code, shall not apply to the receipt

of fees by the Bank from the Funds for

providing investment advisory and

other services to the Funds, in

connection with the investment of the

assets of the Plans in the Funds, for

which the Bank provides investment

advisory and other services, provided

that the conditions of Section III are

met.

Section III—Conditions

(a) The Bank does not have

investment discretion or render

investment advice (within the meaning

of 29 CFR 2510.3–21(c)) with respect to

the Plan assets invested in the Funds

pursuant to this proposed exemption.

(b) No sales commissions or

redemption fees are paid by the Plans in

connection with the purchase or sale of

shares in the Funds.

(c) The Bank does not receive any fees

payable pursuant to Rule 12b-1 under

the Investment Company Act of 1940

(the 12b-1 Fees) in connection with the

transactions.

(d) The price paid or received by a

Plan for shares in a Fund is the net asset

value per share on the date of the

transaction, as defined in section IV(a),

and is the same price which would have

been paid or received for the shares by

any other investor on that date.

(e) Prior to the Bank’s receipt of fees

paid by each Fund with respect to Plan

assets invested therein, each Plan

receives a credit of such Plan’s

proportionate share of all fees charged

to the Fund by the Bank.

(f) The Plans are not employee benefit

plans sponsored or maintained by the

Bank.

(g) A second fiduciary who is

independent of and unrelated to the

Bank or any of its affiliates (the Second

Fiduciary), receives full written

disclosure of information concerning

the Fund(s), including but not limited

to:

(1) A current prospectus for each fund

in which a Plan is considering

investing;

(2) A statement describing the fees for

investment advisory or similar services,

and all other fees to be charged to or

paid by the Plan or the Funds, including

the nature and extent of any differential

between the rates of such fees;

(3) The reason why the Bank may

consider such investment to be

appropriate for the Plan; and

(4) 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 become available.

(h) On the basis of the information

described above in paragraph (g) of

section III, the Second Fiduciary

authorizes in writing the investment of

assets of the Plan in each particular

Fund, the fees to be paid by the Fund

and the Plan to the Bank, and the credit

to the Plan of fees received by the Bank

from the Funds for investment advisory

and other services, consistent with the

responsibilities, obligations, and duties

imposed on fiduciaries by part 4 of Title

I of the Act.

(i) The Second Fiduciary referred to

in paragraph (g) of section III, or any

successor thereto, is notified of any

change in the rates of the fees referred

to in paragraph (g) of section III and

approves in writing the continued

holding of any Fund shares acquired by

the Plan prior to such change and still

held by the Plan.

(j) The Bank provides annually,

written disclosures to the Second

Fiduciary which are provided to all

shareholders of the Fund(s), which

establish the rate of return of the

Fund(s) absent the credit paid to the

Plans for fees paid by the Funds to the

Bank.

(k) The combined total of all fees

received by the Bank for the provision

of services to the Plans, and in

connection with the provision of

services to any of the Funds in which

the Plans may invest, are not in excess
Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices 17811

of ‘‘reasonable compensation’’ within

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

Act.

(l) All dealings between the Plans and

the Funds are on a basis no less

favorable to the Plans than dealings

between the Funds and other

shareholders of the Funds.

(m) The Bank shall maintain, for a

period of six years, the records

necessary to enable the persons

described in paragraph (n) below to

determine whether the conditions of

this exemption have been met, except

that (1) a prohibited transaction will not

be considered to have occurred, if due

to circumstances beyond the control of

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(l) of the Act, or the taxes

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

the code, if the records are not available

for examination as required by section

(n) below;

(n) (1) Except as provided in section

(2) of this paragraph and

notwithstanding any provisions of

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

of the Act, the records referred to in

paragraph (l) above shall be

unconditionally available at their

customary location during normal

business hours by:

(A) Any duly authorized employee or

representative of the Department or the

Internal Revenue Service;

(B) Any fiduciary of a Plan who has

the authority to acquire or dispose of the

interests of the Plan or any duly

authorized representative of such

fiduciary;

(C) Any contributing employer to any

Plan that has an interest in any of the

Funds or any duly authorized employee

or representative of such employer; and

(D) Any participant or beneficiary of

any Plan that has an interest in the

Funds or any duly authorized

representative of such participant or

beneficiary.

(2) None of the persons described in

paragraphs (k)(1)(B) through (D) shall be

authorized to examine the trade secrets

of the Bank’s commercial or financial

information which is privileged or

confidential.

Section IV—Definitions

For purposes of this proposed

exemption:

(a) Supplemental Sweep Service

means the transfer of shares in the

Funds between the Bank and the Plans

by means of the Banks’s internal

accounting procedures at the end of the

Supplemental Sweep Period, in

connection with Plan orders to purchase

shares in the Funds that the Bank is

otherwise unable to settle prior to the

Supplemental Sweep Period, and Plan

orders to purchase or redeem shares in

the Funds that are received by the Bank

during the Supplemental Sweep Period.

A Plan order to purchase or redeem

shares in the Fund(s) pursuant to the

Supplemental Sweep Service occurs

solely as a result of investment

decisions, deposits or withdrawals,

directed by an independent Second

Fiduciary.

(b) Supplemental Sweep Period

means the period of time on each

business day after the Funds stop

accepting orders for the purchase or

redemption of shares in the Funds and

before the Bank’s close of business.

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

the amount for purposes of pricing all

purchase and sale of shares in the Funds

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.

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

(1) Any persons directly or indirectly

through one or more intermediaries,

controlling, controlled by, or under

common control, with the person;

(2) Any officer, director, employee,

relative of, or partner in any such

person; and

(3) Any corporation or partnership of

which such person is an officer,

director, partner or employee.

(e) The term ‘‘control’’ means the

power to exercise a controlling

influence over the management or

policies of a person other than an

individual.

(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 sister.

(g) A fiduciary will not be deemed to

be an independent fiduciary with

respect to the Bank and its affiliates if:

(1) The fiduciary directly or indirectly

controls, is controlled by, or is under

common control with the Bank or any

affiliate:

(2) The fiduciary, or any officer,

director, partner, employee or relative of

such fiduciary, is an officer, director

partner, or employee of the Bank or any

affiliate (or is a relative of such persons);

or

(3) The fiduciary directly or indirectly

receives any compensation or other

consideration for his or her own

personal account in connection with

any transaction described in this

proposed exemption.

If an officer, director, partner, or

employee of the Bank (or a 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 Plan’s investment

manager/adviser, (ii) the approval of any

purchase or sale by the Plan of shares

of the Funds, and (iii) the approval of

any change of fees charged to or paid by

the Plan, in connection with any of the

transactions described in sections I and

II above, then paragraph (g)(2) of section

III above, shall not apply.

The availability of this proposed

exemption would be subject to the

express condition that the material facts

and representations contained in the

application are true and complete, and

that the application accurately describes

all material facts which are the subject

of this exemption.

Summary of Facts and Representations

1. The Bank, which is comprised of

Bank of America Illinois, and its wholly

owned subsidiary, Continental Trust

Company, provides a full range of

fiduciary services to qualified employee

benefit plans, welfare plans, and

governmental retirement plans. Such

services include trustee and custodial

services, discretionary and directed

investment of plan assets, and all

related securities processing activities,

domestic and foreign. As of December

31, 1994, the Bank provided investment

management and custodial services with

respect to total assets of approximately

$179 billion.

The Plans are comprised of retirement

plans qualified under section 401(a) of

the Code, pension plans that meet the

definition of pension plan set forth in

section 3(2) of the Act and section

4975(e)(1) of the Code, with respect to

which the Bank serves as a trustee, or

investment fiduciary. In addition, the

Bank states that it may offer the Funds,

under the arrangement described herein,

to welfare plans.

2. The Bank provides the Plans with

the opportunity to purchase shares in

the Funds, to which the Bank provides

investment advisory and other services,

in connection with existing and

expanded cash management sweep

services. The Bank states that it

currently invests certain assets of the

Plans in a short term collective

investment fund (the Collective Fund)

maintained by the Bank in connection

with the provision of sweep services. In

this regard, the Bank represents that the

addition of the Funds as short term
17812 Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices

1The Bank represents that it invests the assets of

plans covering its employees in the Funds on terms

that are identical to the terms of the proposed

exemption set forth herein. In this regard, the Bank

states that this arrangement meets the terms and

conditions of Prohibited Transaction Exemption

(PTE) 77–3 (42 FR 18734, April 8, 1977). The

Department expresses no opinion as to whether PTE

77–3 provides relief for the purchase or sale of

shares in the Funds by plans covering employees

of the Bank pursuant to the arrangement described

herein.

2The Bank represents that it invests cash

collateral provided to the Plans by borrowers of

securities in connection with securities lending

transactions (the Collateral), in the Funds. The Bank

states that it receives a securities lending fee which

is part of the Plans’ net return from the investment

of the Collateral. In this regard, The Bank represents

that the securities lending service is separate from

the cash management service. According to the

Bank, no Cash Management Fee, or investment

management fee, is paid by the Plans to the Bank

with respect to the management of the Collateral.

The Bank states that it is relying on the relief

provided by PTEs 81–6 (46 FR 7527, January 23,

1981) and 82–63 (47 FR 14804, April 6, 1982) for

the securities lending transactions and its receipt of

fees in connection therewith. In addition, The Bank

represents that it is relying on PTE 77–4 (42 FR

18732, April 8, 1977) for relief for the investment

of the Collateral in the Funds.

The Bank is not requesting, and the Department

is not providing, any relief with regard to the

investment of the Collateral in the Funds. In this

regard, the Department expresses no opinion as to

the availability of the relief provided by PTE’s 81–

6 and 82–63 for the Plan’s securities lending

activities and securities lending fees paid by the

Plan in connection therewith, nor the availability of

PTE 77–4 for the investment of the Collateral in

shares of the Funds.

Nevertheless, the Department notes that the relief

provided by PTE 77–4 is predicated on, among

other things, avoiding the payment of double

investment management, investment advisory or

similar fees by a plan to a fiduciary of the plan, or

any affiliate, which also serves as investment

advisor to the mutual fund company. In this regard,

it is the Department’s view that whether a particular

service constitutes the provision of investment

advisory services or similar services depends on the

particular facts and circumstances of each case. The

Department emphasizes that, regardless of whether

an administrative exemption may be applicable, it

expects the plan fiduciary with investment

management responsibility to consider the totality

of fees to be paid by the plan directly, and/or

indirectly, prior to entering into the arrangement in

order to determine that the fees to be paid by the

plan do not exceed reasonable compensation for the

particular advisory service offered.

3The Bank represents that it invests plan assets

with respect to which it has investment discretion

in the Funds. In this regard, the Bank represents

that such transactions meet the terms and

conditions of PTE 77–4. The Department expresses

no opinion as to the availability of the relief

provided by PTE 77–4 for such transactions.

investment alternatives will result in

greater investment choice, greater

diversification and reduced risk for the

Plans.1

3. The Funds are comprised of the

Prime Fund, the Government Securities

Fund and the Treasury Fund, each of

which is a money market mutual fund

portfolio of the 231 Funds, an open-end

management investment company

organized as a Massachusetts business

trust (the Trust). The Trust is organized

under the Investment Company Act of

1940, as amended. Fund shares offered

by the Trust are registered under the

Securities Act of 1933.

The assets of the Prime Fund are

invested in a diversified portfolio of

U.S. Dollar denominated money market

instruments, including: Obligations

issued or guaranteed by the U.S.

Government, its agencies or

instrumentalities, bank obligations,

including certificates of deposits, time

deposits, bankers’ acceptances and debt

securities issued or supported by

domestic banks or domestic branches of

foreign banks; short-term corporate

obligations including commercial loan

participations, commercial paper,

corporate bonds, privately placed

commercial paper, and participation

interests in trusts or special purpose

vehicles backed by consumer or

commercial credit receivables; and

municipal securities including taxable

and tax-exempt general obligations,

revenue obligations, private activity and

industrial development bonds.

The assets of the Government

Securities Fund are invested exclusively

in obligations issued or guaranteed by

the U.S. Government, its agencies or

instrumentalities; receipts evidencing

separately traded interest and principal

components of U.S. Government

obligations (including TIGRs and

CATS); and repurchase agreements

collateralized by government

obligations.

The Treasury Fund invests its assets

exclusively in obligations issued by the

U.S. Treasury, and repurchase

agreements relating to such Treasury

obligations.

4. The Bank states that the Plans pay

a short term cash management fee (Cash

Management Fee) of .12 percent of

average daily assets to the Bank in

connection with Plan investments in the

short term collective investment fund

maintained by the Bank. In addition,

each Plan pays a trustee fee to the Bank

of between .01 percent and .15 percent

of all Plan assets under the Bank’s

custody. The Bank negotiates its trustee

fees with each Plan individually. The

Bank represents that Plan assets are

invested in the Funds as an alternative

to the short term collective investment

fund.2 In order to avoid charging double

fees with respect to Plan assets invested

in the Funds, the Bank credits all fees

attributable to Plan assets invested

therein, payable to the Bank by the

Funds, to the Plans. In this regard, the

Bank states that its crediting to the Plans

of all fees to be paid by the Funds to the

Bank results in no additional cost to any

of the Plans with respect to Plan assets

invested in shares in the Funds.

The fees payable to the Bank by the

Funds are accrued daily and paid to the

Bank on the first day of the following

month, in arrears. On the same day, the

Bank credits to the Plans their

proportionate shares of all fees to be

paid by the Funds to the Bank with

respect to Plan assets invested therein.

The Bank states that it discloses

annually in writing to the Plans: The

total rate of return earned on their

shares in the Fund(s) which includes

the amounts received by the Plan from

the Bank as a credit of the fees paid by

the Fund(s) to the Bank in connection

with Plan assets invested therein; and

the portion of the rate of return which

is attributable to the amounts credited

by the Bank to the Plans. In addition,

the Bank represents that it discloses to

the Second Fiduciary annually in

writing the rate of return earned on

shares in the Fund(s) held by investors

other than the Plans.

5. The Bank states that it does not

have investment discretion with respect

to Plan assets involved in the purchase

or sale of shares in the Funds for which

relief is requested.3 Purchases and

redemptions of shares in the Funds are

solely the result of investment

directions from a Second Fiduciary. The

Bank represents that only liquid Plan

assets awaiting distribution, or

investment, are used to purchase shares

in the Funds. The Bank states that it has

no discretion with respect to the amount

of liquid assets available for investment

in the funds. The liquid assets of the

Plans are always the proceeds of other

assets which have been liquidated, or

new assets transferred to the Bank, at

the direction of a Second Fiduciary.

The Bank states that it has no

discretion with respect to how liquid

assets of the Plans are invested. The

Bank represents that the investment of

the liquid assets of a Plan in the Funds

is either specifically directed by a

Second Fiduciary, or pursuant to

standing orders by a Second Fiduciary

to invest any daily cash balances in the

Fund absent the Bank’s receipt of any

other investment directions.

6. The Bank states that share

purchases and redemption requests

communicated by the Bank to the Funds

are transmitted each business day prior

to the time established by the Fund

(currently expected to be 2:00 P.M.

Central Standard Time) (the Cutoff

Time) for same-day processing and

payment of transaction requests. If a

transaction triggering a purchase or

redemption of Fund shares is processed

by the Bank prior to the Cutoff Time, the
Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices 17813

4The Bank represents that it intends to rely on

section 408(b)(4) of the Act with regard to the

investment of Plan assets in deposits of the Bank.

The Department expresses no opinion as to whether

the relief provided by section 408(b)(4) of the Act

is available for the investment of Plan assets in

deposits of the Bank pursuant to the arrangement

described herein.

Bank, in turn, transmits the purchase or

redemption request to the Fund, which

executes the request that same day.

The Bank states that additions to

customer accounts (including additions

made to cover Fund purchase requests

placed prior to the Cutoff Time) and

withdrawals from customer accounts

may occur subsequent to the Cutoff

Time but prior to the close of business

for the Bank (the Posting Time). The

Bank represents that in order to provide

additional opportunities for same-day

processing of Plan purchase and

redemption requests with respect to

shares in the Funds, it offers a

Supplemental Sweep Service. The

Supplemental Sweep Service provides

for the settlement of deposits and

withdrawals late each business day

subsequent to the Cutoff Time but prior

to the Posting Time (the Supplemental

Sweep Period).

The Bank represents that the

Supplemental Sweep Service assures

the overnight investment of any Plan

assets to which it applies in order to

maximize the return to the Plans by

providing an additional period during

which the Plan’s otherwise idle assets

would be invested. In addition, the

Bank represents that the Supplemental

Sweep Service helps to meet the

liquidity needs of the Plans by

providing an opportunity for the Plans

to, in effect, redeem shares in the Funds

and withdraw assets during the

Supplemental Sweep Period.

The Bank states that the

Supplemental Sweep Service is for

selected institutional customers,

primarily Plans, and is effective for

purchase orders which cannot be settled

prior to the Supplemental Sweep Period

and for purchase and withdrawal orders

received during the Supplemental

Sweep Period each business day.

7. The Bank represents that shares

acquired by the Plans through the

Supplemental Sweep Service are, in

some cases, first acquired by the Bank

and subsequently allocated to customers

which have assets available to be swept

as of the Posting Time on that same day.

In addition, in order to facilitate prompt

redemption of customer shares on the

same day that the customer wishes to

redeem them, the Bank processes the

customer redemption requests received

during the Supplemental Sweep Period

internally by providing immediate

credit to the customer for the Fund

Shares.

The Bank represents that the price

paid, or received by, a Plan for shares

in a Fund purchased, or redeemed,

pursuant to the Supplemental Sweep

Service is the net asset value per share

for all other purchases and redemptions

of shares in the Fund on that date.

8. The Bank represents that its

acquisition of shares from the Funds

through the Supplemental Sweep

Service is based on estimates of the

prospective purchase and sale of shares

in the Funds by the Plans during the

Supplemental Sweep Period.

Immediately prior to the

Supplemental Sweep Period on each

business day, the Bank estimates the

approximate number of shares of each

fund which its customers will require as

of the Posting Time later that same day

(in addition to the number of shares

needed to cover net customer purchase

and sale orders placed prior to the

Cutoff Time). The Bank then purchases

that number of shares of each Fund

prior to the Cutoff time as trustee,

nominee or in some other capacity for

its customers. The books of the Fund’s

transfer agent carry only one account for

all purchases and redemptions of Fund

shares by the Bank, and reflect the Bank

as the owner of all Fund shares

purchased. The Bank’s books, however,

reflect its purchase of shares in the

Funds as trustee, nominee, or other

capacity for its customer accounts, or as

principal, on a provisional basis.

Later in the day, at the end of the

Supplemental Sweep Period, the Bank

determines the precise number of each

Fund’s shares needed by its customers.

Based on its determination, the Bank

adjusts the provisional purchase entries

previously made on its books to reflect

the net purchase or redemption of Fund

shares by each customer account (or by

the Bank in its own name) in the

amount necessary to satisfy the net

purchase needs of its customers at the

end of the Supplemental Sweep Period.

Appropriate final entries are made in

the Bank’s trust and corporate

accounting systems to reflect the

previous day’s transaction activity and

the respective ownership positions of

the Bank and its customers as of the

previous day’s Cutoff Time. The books

of the transfer agent of the respective

Fund, however reflect no net change

(i.e., change in number of shares

outstanding) in the record ownership

position of the Bank as a result of the

Bank’s adjustments; all adjustments of

Fund shares among the Bank and its

various customers would be internal

bookkeeping adjustments made by the

Bank.

In the event that the Bank, on a given

business day, underestimated the

number of any Fund’s shares which

were required by its customers, the

Bank allocates any shares the Bank had

previously purchased to customer

accounts which purchased Fund shares

between the Posting Time and the

Cutoff Time on a pro rata basis by

reflecting on the Bank’s books the

redemption of Fund shares owned or

purchased by the Bank and the

simultaneous purchase by its customers,

from the Fund, of the corresponding

number of fund shares. The balance of

each customer’s funds that was

intended to be invested in the Funds

during the Supplemental Sweep Period

which remain uninvested after this

adjustment process are temporarily

invested in the Bank’s deposits paying

a rate of interest equivalent to the net

return on Fund shares for that day

(subject to certain regulatory

requirements) and subsequently are

invested in Fund shares the next

business day. 4 The Bank represents that

each customer including the Plans

realizes an equivalent return on its

invested funds for the day.

However, if the Bank overestimated

the number of Fund shares required by

its customers on a given business day,

any excess Fund shares are placed in

the Bank’s investment portfolio or

trading account.

The Bank represents that, in any

event, customers who redeem Fund

Shares during the Supplemental Sweep

Period pursuant to the Supplemental

Sweep Service are provided with

immediate provisional credit for the

value of Fund shares. Such redemptions

ultimately are reflected on the Bank’s

books as having occurred as of the

Cutoff Time in the manner described

above. Accordingly, such shares are

allocated to other customer accounts or

to the Bank’s own investment or trading

account, through the netting procedures.

The Bank states that all such entries are

made on its own internal accounting

systems effective as of the previous

day’s Cutoff Time, and result in no net

change in the transfer agent’s records

reflecting the Bank’s record ownership

of Fund shares. The Bank represents

that in effect, the Bank is acting

functionally as a sub-transfer agent to

effect post-Cutoff redemptions by the

Fund.

9. In summary, the Bank represents

that the proposed transactions satisfy

the statutory criteria of section 408(a) of

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

because: (a) The Funds provide the

Plans with a more effective investment

vehicle than the Collective Fund
17814 Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices

currently maintained by the Banks

without any increase in fees paid to the

Bank; (b) a Second Fiduciary must

authorize in writing the investment of

Plan assets in the Funds and the

payment of any fees to the Bank by the

Plans and the Funds, after receiving full

written disclosure, including a

prospectus for the Funds and a

statement describing the fee structure;

(c) no sales fees or redemption fees are

paid by the Plans in connection with the

acquisition or sale of shares of the

Funds; and (d) all dealings between the

Plans and the Funds, the Bank, or any

affiliated person, are on a basis no less

favorable to the Plans than such

dealings are with the other

shareholders.

FOR FURTHER INFORMATION CONTACT: Eric

Berger of the Department, telephone

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

number.)

Mellon Bank, N.A. (Mellon) and Its

Affiliates Located in Pittsburgh,

Pennsylvania

[Application No. D–9724]

Proposed Exemption

Section I—Exemption for Cross-Trading

Between Certain Accounts

The restrictions of sections

406(a)(1)(A) and 406(b)(2) of the Act,

and the sanctions resulting from the

application of section 4975 of the Code,

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

Code, shall not apply to (1) the purchase

and sale of securities (including the

stock of Mellon Bank Corporation

(MBC)) between Indexed Accounts, as

defined in Section IV(a); and (2) the

purchase and sale of securities,

including the common stock of MBC,

between Indexed Accounts and various

large accounts (the Large Accounts)

pursuant to portfolio restructuring

programs of the Large Accounts;

provided that the following conditions

and the General Conditions of Section

III are met:

(a) The Indexed Account is based on

an index which represents the

investment performance of a specific

segment of the public market for equity

or debt securities in the United States

and/or foreign countries. The

organization creating and maintaining

the index must be (1) engaged in the

business of providing financial

information, evaluation, advice or

securities brokerage services to

institutional clients, (2) a publisher of

financial news or information, or (3) a

public stock exchange or association of

securities dealers. The index must be

created and maintained by an

organization independent of Mellon and

its affiliates. The index must be a

generally accepted standardized index

of securities which is not specifically

tailored for the use of Mellon or its

affiliates.

(b) The price for the securities is set

at the current market value for the

securities on the date of the

transactions. For equity securities, the

price shall be the closing price for the

security on the day of trading; unless

the security was added to or deleted

from an index underlying an Indexed

Account after the close of trading, in

which case the price shall be the

opening price for that security on the

next business day after the

announcement of the addition or

deletion. For debt securities, the price

shall be the fair market value

determined as of the close of the day of

trading pursuant to Rule 17a–7(b) issued

by the Securities and Exchange

Commission under the Investment

Company Act of 1940.

(c) The transaction takes place within

three business days of the ‘‘triggering

event’’ giving rise to the cross-trade

opportunity. A triggering event is

defined as:

(1) A change in the composition or

weighting of the index underlying an

Indexed Account by the organization

creating and maintaining the index;

(2) A change in the overall level of

investment in an Indexed Account as a

result of investments and withdrawals

made on the Account’s regularly

scheduled opening date; provided,

however, that Mellon does not change

the level of investment in the Indexed

Account through investments or

withdrawals of assets of any employee

benefit plan maintained by Mellon or its

affiliates (the Mellon Plans) for which

Mellon has investment discretion; or

(3) A declaration by Mellon (recorded

on Mellon’s records) that a ‘‘triggering

event’’ has occurred, which will be

made upon an accumulation of cash in

an Indexed Account attributable to

interest or dividends on, and/or tender

offers for, portfolio securities equal to

not more than .5 percent of the Indexed

Account’s total value.

(d) With respect to any Indexed

Account that is model-driven, no crosstrades are engaged in by the Account for

10 business days subsequent to any

change made by Mellon to the model

underlying the Account.

(e) In the event that the amount of a

particular security which all of the

Indexed Accounts or Large Accounts

propose to sell on a given day is less

than the amount of such security which

all of the Indexed Accounts or Large

Accounts propose to buy, or vice versa,

the direct cross-trade opportunity must

be allocated by Mellon among potential

buyers or sellers of the security on a pro

rata basis.

(f) An Indexed Account does not

participate in a cross-trade if more than

10 percent of the assets of the Indexed

Account at the time of the proposed

cross-trade are comprised of assets of

Mellon Plans for which Mellon

exercises investment discretion.

(g) Prior to any proposed cross-trading

by an Indexed Account or a Large

Account, Mellon provides to each

employee benefit plan invested in the

Account information which describes

the existence of the cross-trading

program, the ‘‘triggering events’’ which

will create cross-trade opportunities, the

pricing mechanism that will be utilized

for securities purchased or sold by the

Accounts, and the allocation methods

and other procedures which will be

implemented by Mellon for its crosstrading practices. Any employee benefit

plan which subsequently invests in the

Indexed Account or Large Account shall

be provided the same information prior

to or immediately after the plan’s initial

investment in the Account.

(h) With respect to cross-trade

transactions involving a Large Account:

(1) Total assets of the Large Account

are in excess of $50 million.

(2) Fiduciaries or other appropriate

decisionmakers of the Large Account

who are independent of Mellon are,

prior to any cross-trade transactions,

fully informed of the cross-trade

technique and provide advance written

approval of the cross-trade transactions.

Such authorization shall be

terminable at will by the Large Account

upon receipt by Mellon of written notice

of termination. A form expressly

providing an election to terminate the

authorization, with instructions on the

use of the form, must be supplied to the

authorizing Large Account fiduciary

concurrent with the receipt of the

written information describing the

cross-trading program. The instructions

for such form must include the

following information:

(i) The authorization is terminable at

will by the Large Account, without

penalty to the Large Account, upon

receipt by Mellon of written notice from

the authorizing Large Account fiduciary;

and

(ii) Failure to return the termination

form will result in the continued

authorization of Mellon to engage in

cross-trade transactions on behalf of the

Large Account.

(3) Within 45 days of the completion

of the Large Account’s portfolio

restructuring program, the Large

Account’s fiduciaries shall be fully

appraised in writing of the transaction
Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices 17815

results. However, if the program takes

longer than three months to complete,

interim reports of the transaction results

will be made within 30 days of the end

of each three month period.

(4) The Large Account transactions

occur only in situations where Mellon

has been authorized to restructure all or

a portion of the Large Account’s

portfolio into an Indexed Account

(including a separate account based on

an index or computer model) or to act

as a ‘‘trading adviser’’ in carrying out a

Large Account-initiated liquidation or

restructuring of its portfolio.

(i) Mellon receives no additional

direct or indirect compensation as a

result of any cross-trade transactions.

(j) Mellon does not purchase or sell

any debt securities issued by Mellon or

an affiliate for the Indexed Accounts.

Section II—Exemption for the

Acquisition, Holding and Disposition of

MBC Stock

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

the acquisition, holding or disposition

of the common stock of MBC (the MBC

Stock) by Indexed Accounts, if the

following conditions and the General

Conditions of Section III are met:

(a) The acquisition or disposition of

the MBC stock is for the sole purpose of

maintaining strict quantitative

conformity with the relevant index

upon which the Indexed Account is

based.

(b) In the event that MBC Stock is

added to an index on which an Indexed

Account is based or is added to the

portfolio of the Indexed Account which

tracks an index that includes MBC

Stock, all acquisitions necessary to bring

the Indexed Account’s holdings of MBC

Stock to its capitalization weighting in

the index, other than cross-trade

transactions meeting the conditions of

Section I, shall comply with Rule 10b–

18 of the Securities and Exchange

Commission (SEC) under the Securities

Exchange Act of 1934, including the

limitations regarding the price paid for

such stock.

(c) Subsequent to acquisitions

necessary to bring the Indexed

Account’s holdings of MBC Stock to its

capitalization weighting in the index

pursuant to the restrictions of SEC Rule

10b–18, all aggregate daily purchases of

MBC stock, other than cross-trade

purchases meeting the conditions of

Section I, shall not constitute more than

the greater of: (1) 15 percent of the

stock’s average daily trading volume for

the previous five days; or (2) 15 percent

of the stock’s trading volume on the date

of the transaction.

(d) If the necessary number of shares

of MBC stock cannot be acquired within

10 business days from the date of the

event which causes the particular

Indexed Account to require MBC stock,

Mellon shall appoint a fiduciary which

is independent of Mellon and its

affiliates to design acquisition

procedures and monitor Mellon’s

compliance with such procedures.

(e) All purchases and sales of MBC

stock, other than cross-trades meeting

the conditions of Section I, shall be

executed on the national exchange on

which MBC stock is primarily traded.

(f) No transactions shall involve

purchases from, or sales to, Mellon or

any affiliate, officer, director or

employee of Mellon or any party in

interest with respect to a plan which has

invested in an Indexed Account. This

requirement does not preclude

purchases and sales of MBC stock in

cross-trade transactions meeting the

conditions of Section I, provided that

the Indexed Accounts are not

maintained by Mellon primarily for the

investment of assets of Mellon or any

affiliate, including officers, directors or

employees of Mellon other than in

connection with a Mellon Plan.

(g) No more than five (5) percent of

the total amount of MBC stock issued

and outstanding at any time shall be

held in the aggregate by the Indexed

Accounts which hold plan assets.

(h) MBC stock shall constitute no

more than two (2) percent of the value

of any independent third-party index on

which the investments of an Indexed

Account are based.

(i) A plan fiduciary independent of

Mellon authorizes the investment of

such plan’s assets in an Indexed

Account which purchases and/or holds

MBC stock.

(j) A fiduciary independent of Mellon

and its affiliates shall direct the voting

of the MBC stock held by an Indexed

Account on any matter in which

shareholders of MBC stock are required

or permitted to vote.

Section III—General Conditions

(a) Mellon maintains or causes to be

maintained for a period of six years

from the date of the transaction the

records necessary to enable the persons

described in paragraph (b) of this

Section to determine whether the

conditions of the exemption have been

met, except that (1) a prohibited

transaction will not be considered to

have occurred if, due to circumstances

beyond the control of Mellon, the

records are lost or destroyed prior to the

end of the six-year period, and (2) no

party in interest other than Mellon 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 this Section are

available at their customary location for

examination during normal business

hours by—

(A) Any duly authorized employee or

representative of the Department of

Labor or the Internal Revenue Service,

(B) Any fiduciary of a plan

participating in an Indexed Account

who has authority to acquire or dispose

of the interests of the plan, or any duly

authorized employee or representative

of such fiduciary,

(C) Any contributing employer with

respect to any plan participating in an

Indexed Account or any duly authorized

employee or representative of such

employer, and

(D) Any participant or beneficiary of

any plan participating in an Indexed

Account, or any duly authorized

employee or representative of such

participant or beneficiary.

(2) None of the persons described in

paragraph (b)(1)(B) through (D) shall be

authorized to examine trade secrets of

Mellon, any of its affiliates, or

commercial or financial information

which is privileged or confidential.

Section IV—Definitions

(a) Indexed Account—Any Index

Fund or Model-Driven Fund.

(b) Index Fund—Any investment

fund, account or portfolio sponsored,

maintained, trusteed, or managed by

Mellon or an affiliate in which one or

more investors invest that is designed to

replicate the capitalization-weighted

composition of an independently

maintained securities index which

satisfies the conditions of Section I(a)

and Section II(h).

(c) Model-Driven Fund—Any

investment fund, account or portfolio

sponsored, maintained, trusteed, or

managed by Mellon or an affiliate, in

which one or more investors invest

which is based on computer models

using prescribed objective criteria to

transform an independently maintained

securities index which satisfies the

conditions of Section I(a) and Section

II(h).

(d) Opening date—The regularlyscheduled date on which investments in
17816 Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices

5The Russell 2000 Index was established and is

maintained by the Frank Russell Company, which

is not an affiliate of Mellon. The Russell 2000 Index

is a subset of the larger Russell 3000 Index. The

Russell 3000 Index consists of the largest 3,000

publicly traded stocks of U.S. domiciled

corporations, as identified by the Frank Russell

Company, and includes large, medium and small

stocks. The Russell 3000 Index represents

approximately 98% of the total market

capitalization of all U.S. stocks that trade on the

New York and American Stock Exchanges and in

the NASDAQ over-the-counter market. The Russell

2000 Index consists of approximately 2,000 of the

smallest stocks within the Russell 3000 Index, and

is therefore a broadly diversified index of small

capitalization stocks, representing less than 10

percent of the U.S. equity market in total

capitalization.

6The S&P 500 Index is composed of 500 stocks

that are traded on the New York Stock Exchange,

American Stock Exchange, and the NASDAQ

National Market System. The S&P 500 is a market

value-weighted index (i.e. shares outstanding times

stock price) in which each company’s influence on

the Index’s performance is directly proportional to

its market value.

or withdrawals from an Indexed

Account may be made.

(e) Large Account—An account of an

investor that is either: (1) An employee

benefit plan within the meaning of

section 3(3) of the Act that has $50

million or more in total assets; or (2) an

institutional investor, other than an

investment company registered under

the Investment Company Act of 1940

(i.e. a mutual fund), such as an

insurance company separate account or

general account, a governmental plan, a

university endowment fund, a

charitable foundation fund, or a trust or

other fund which is exempt from

taxation under section 501(a) of the

Code, that has total assets in excess of

$50 million. As noted in Section I(g)(4),

a ‘‘Large Account’’ shall only be an

account to which Mellon has been

authorized to restructure all or a portion

of the portfolio for such account into an

Indexed Account or to which Mellon

has been authorized to act as a ‘‘trading

adviser’’ (as defined below) in

connection with a specific liquidation

or restructuring program for the

account.

(f) Trading adviser—A person whose

role is limited to arranging a Large

Account-initiated liquidation or

restructuring of an equity or debt

portfolio within a stated period of time

so as to minimize transaction costs. The

person must not be a fiduciary with

investment discretion for any

underlying asset allocation,

restructuring or liquidation decisions

for the account in connection with such

transactions.

(g) Affiliate—Any person, directly or

indirectly through one or more

intermediaries, controlling, controlled

by, or is under common control with

Mellon (except Mellon/McMahon Real

Estate Advisors, Inc.).

Summary of Facts and Representations

1. Mellon is a national bank and a

subsidiary of MBC, which is the twentythird largest bank holding company in

the U.S. with assets of approximately

$37 billion. Mellon is licensed to

operate a trust department, which is

regulated by the Office of the

Comptroller of the Currency. Within the

trust department, Mellon provides a

variety of fiduciary services, including

acting as trustee of employee benefit

plans subject to the Act. Currently,

Mellon acts as fiduciary of institutional

accounts, including employee benefit

plans, with assets totaling

approximately $481 billion.

Additionally, certain affiliates of Mellon

provide trust or investment management

services to various employee benefit

plans. Mellon and its affiliates are, to

the extent of the provision of such

services, fiduciaries of these plans. For

purposes of this proposed exemption,

Mellon does not include Mellon/

McMahon Real Estate Advisors, Inc., as

an ‘‘affiliate’’ because that entity is

being sold.

2. In its capacity as fiduciary of an

employee benefit plan, Mellon may be

either directed by an independent plan

fiduciary or a plan participant that has

the ability to direct investments for his/

her plan account under the plan

document. Alternatively, in those cases

in which Mellon manages the

investments, Mellon represents that it

does not exercise any discretionary

authority over whether an employee

benefit plan invests in particular Funds,

such as the Mellon S&P 500 Index

Funds, except for a relatively small

number of plans which subscribe to

Mellon’s Portfolio Management in

Funds (PMF) services (as discussed

below in Paragraph 13).

Mellon manages the different

collective investment funds in various

ways to enable plan assets to be

diversified to reduce risk and to be

invested in the types of investments that

a particular manager for a plan may

determine is appropriate at a particular

time. Index Funds and Model-Driven

Funds (the Funds) are two examples of

the Bank’s collective investment funds

which include plan investors.

Index and Model-Driven Funds

3. An Index Fund may be an

individual or collective investment

fund, the objective of which is the

replication of the performance of an

independently-maintained stock or

bond index representing the

performance of a specific segment of the

public market for equity or debt

securities. The Index Funds are

passively managed, in that the choice of

stocks or bonds purchased and sold, and

the volume purchased and sold, are

made according to predetermined third

party indices rather than according to

active evaluation of the investments.

4. A Model-Driven Fund may be an

individual or collective investment

fund, the performance of which is based

on computer models using prescribed

objective criteria to transform an

independently-maintained stock or

bond index representing the

performance of a specific segment of the

public market for equity or debt

securities. The portfolio of a ModelDriven Fund is determined by the

details of the computer model, which

examines structural aspects of the stock

or bond market rather than the

underlying values of such securities. An

example of a Model-Driven Fund would

include a fund which ‘‘transforms’’ an

index, making investments according to

a computer model which uses such data

as the following: (a) Earnings, dividends

and price-earning ratios for common

stocks included in the index; (b) current

yields on corporate bonds and money

market instruments; (c) the duration,

maturity structure, yield and sector/

quality weights for bonds included in

the index; and (d) historical standard

deviations and correlations between

asset classes.

Mellon represents that the process for

the establishment and operation of all

Indexed Accounts which are modeldriven is very disciplined. Clear-cut

rules are established for each model.

Since the Model-Driven Funds operate

pursuant to pre-specified computer

programs, the rules and programs are

changed only infrequently. However, to

the extent that there is any change made

by Mellon to a model underlying an

Indexed Account, no cross-trades will

be engaged in by the Account for 10

business days subsequent to such

change. Thereafter, an Indexed Account

that is model-driven will engage in

cross-trade transactions if the crosstrade opportunity results from any

‘‘triggering event’’ described herein (see

Paragraph 5 below).

Mellon currently offers more than 60

collective investment funds that are

invested according to the criteria of

various third-party indexes or are

model-driven based on such indexes.

For example, some Funds track the

Russell 2000 Index,5 while other Funds

track the Standard & Poors 500

Composite Stock Price Index (the S&P

500 Index).6 Most of the Funds track

stock indexes, although some Funds
Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices 17817

7The indexes of debt securities used by Mellon

for the Funds, such as the Lehman Brothers Bond

Indices, consist primarily of high-quality fixedincome securities representing the U.S. government,

corporate, and mortgage-backed securities sectors of

the bond market in the U.S. Mellon currently has

approximately 14 debt Index Funds.

track indexes of debt securities, such as

the Lehman Brothers Bond Indices.7

In addition to Funds that are

collective investment funds, Mellon has

investment responsibility for individual

investment funds which are separate

portfolios for various client accounts,

including employee benefit plans,

where the portfolio is invested in

accordance with a third-party index.

Such individual investment funds and

collective investment funds are referred

to herein as Indexed Accounts (see

Paragraph 6 below). Mellon states that

the ability of all Indexed Accounts to

cross-trade securities with each other, or

to invest in MBC Stock when the stock

is included in an index, would improve

Mellon’s tracking of such indexes.

Cross Trades

5. Mellon represents that cross-trades

will be made within three business days

of the ‘‘triggering event’’ giving rise to

the cross-trade opportunity. A

‘‘triggering event’’ is limited to: (i) A

change in the composition or weighting

of the index underlying an Indexed

Account by the organization creating

and maintaining the index; (ii) a change

in the overall investments in an Indexed

Account as a result of a net investment

or withdrawal on the Account’s

regularly-scheduled opening date

(provided that Mellon does not change

the level of investment in the Indexed

Account through investments or

withdrawals of assets of any Mellon

Plans for which Mellon has investment

discretion); and (iii) a declaration by

Mellon that a ‘‘triggering event’’ has

occurred upon an accumulation in the

Indexed Account of cash attributable to

interest or dividends on, and/or tender

offers for, portfolio securities equal to

not more than .5 percent of the value of

the Indexed Account.

Mellon states that frequent purchases

and sales of securities by the Indexed

Accounts are required to accomplish

portfolio balances that conform with the

particular indexes. In addition, some

securities transactions may be prompted

by a client plan’s request to add funds

to, or withdraw funds from, an Indexed

Account. Under any of these

circumstances, Mellon’s disposition of a

particular security for one Indexed

Account may involve a security which

may be needed by another Account,

thus presenting an opportunity to save

substantial commissions for both the

liquidating Account and the acquiring

Account. This saving is enabled by a

cross-trade transaction, which involves

matching Mellon’s sell orders for a

particular day with its buy orders for the

same day, and the execution of trades

between the Accounts in off-market

transactions. Under current procedures,

all securities transactions, including

cross-trades between Indexed Accounts

maintained by Mellon, are executed by

a broker on behalf of a purchasing or

selling Account at the direction of

Mellon, dealing with a second broker

acting on behalf of the other purchasing

or selling party.

6. Mellon proposes to take advantage

of opportunities to direct the crosstrading of securities directly between

various Indexed Accounts. Such

Indexed Accounts will include: (i)

Collective investment funds for

employee benefit plans, (ii) separate

employee benefit plan trust accounts

that are not commingled in a collective

fund, (iii) other large fiduciary accounts

such as governmental plans, university

endowment funds, charitable

foundation funds and personal trusts,

(iv) common or collective trust funds

containing assets of governmental plans,

university endowments, charitable

foundations or personal trusts, and (v)

mutual funds and other institutional

accounts for which Mellon or an

affiliate serves as an investment

manager or investment advisor.

Mellon represents that by

participating in its cross-trading

program, the Accounts will benefit by

not incurring the transaction costs

involved in dealing with a broker-dealer

or ‘‘market maker’’ for the particular

securities to effect the transactions.

Such transaction costs include

brokerage commissions and/or the

market-maker’s bid/offer spread on

prices for such securities. Mellon

maintains that transactions involving

equity securities on the open market

between unrelated parties require

brokerage commissions equal to at least

two cents per share for each sale or

purchase transaction. However, the

brokerage commissions that would be

paid for each proposed cross trade of

equity securities would be equal to

approximately .05 cents per share,

reflecting only the necessary recordkeeping costs for the brokers. For debt

securities, Mellon states that crosstrades would produce transactions cost

savings by eliminating the bid/offer

spread that normally would be paid to

a broker-dealer to acquire or sell such

securities. Mellon also represents that

participation in the cross-trading

program may enable the Accounts to

obtain earlier opportunities to acquire or

sell certain securities. The applicant

represents that all brokers used in cross

trade transactions would be unrelated to

and independent of Mellon and its

affiliates.

Mellon states that the price for the

securities involved in any cross-trade

will be set at the current market value

for the securities on the date of the

transactions.

For equity securities, the price will be

the closing price for the security on the

day of trading; unless the security was

added to or deleted from an index

underlying an Indexed Account after the

close of trading, in which case the price

shall be the opening price for that

security on the next business day after

the announcement of the addition or

deletion.

Mellon will use independent pricing

services to value all equity securities

which are cross-traded by the Indexed

Accounts. The primary service currently

used by Mellon for pricing domestic

equity securities is Interactive Data

Corporation, a subsidiary of Dunn &

Bradstreet Corporation. For pricing

foreign equity securities, Mellon uses

Morgan Stanley & Co. or Vestek

Systems. The applicable independent

pricing service provides the price in

local currency rates and, if that currency

is other than U.S. dollars, also provides

the U.S. Dollar exchange rate. The

equity securities are valued at the close

of the day, and thus equity security

cross-trades would in all cases be

executed at the closing price received by

Mellon from the relevant independent

pricing service. In addition, the same

independent pricing service will be

employed to value any given equity

security for both the buy and sell sides

of all cross-trades involving that equity

security. The identity of the applicable

independent pricing service for each

equity security will be recorded on

Mellon’s records and will be made

available to any participant in the crosstrading program upon request. If the

independent pricing service for any

particular equity security is changed, a

single new independent pricing service

will be selected for future pricings of

that equity security.

For debt securities, the price will be

the fair market value determined as of

the close of the day of trading pursuant

to SEC Rule 17a–7(b) under the

Investment Company Act of 1940. SEC

Rule 17a–7(b) contains four possible

means of determining ‘‘current market’’

value for either debt or equity securities

depending on such factors as whether

the security is a reported security and

whether its principal market is an

exchange. Mellon states that all debt

securities that are not a reported
17818 Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices

8While certain of the debt indexes used by

Mellon for the Indexed Accounts may include debt

securities issued by Mellon or an affiliate (Mellon

Debt), Mellon states that it does not acquire Mellon

Debt for any of its Indexed Accounts. Therefore,

Mellon is not requesting relief for any transactions

involving Mellon Debt.

9 In this regard, Mellon is not requesting any relief

from section 407(a) of the Act in connection with

the acquisition and holding of MBC Stock by the

Mellon Plans which invest in the Mellon S&P 500

Index Funds.

security or traded on an exchange

would be valued based on an average of

the highest current independent bid and

lowest current independent offer, as of

the close of business on the day of the

cross-trade. Such prices would be

determined in accordance with Rule

17a–7(b)(4) on the basis of reasonable

inquiry from at least three sources that

are broker-dealers or market-makers

independent of Mellon, except in those

circumstances where fewer than three

independent sources exist to price a

certain debt security (in which event

closing price quotations will be

obtained from all available sources).

Mellon intends that the requested

exemption for cross-trade transactions

would apply, in addition to existing

Indexed Accounts currently maintained,

to all Indexed Accounts which it may

create in the future which satisfy the

conditions of the exemption, if granted.

7. Mellon proposes to engage in crosstrade transactions between the Indexed

Accounts and various Large Accounts

that have total assets in excess of $50

million. Mellon states that a Large

Account could be either: (i) An

employee benefit plan within the

meaning of section 3(3) of the Act; or (ii)

a portfolio of an institutional investor,

other than an investment company

registered under the Investment

Company Act of 1940 (i.e. a mutual

fund), such as an insurance company

separate account or general account, a

governmental plan, a university

endowment fund, a charitable

foundation fund, or a trust or other fund

which is exempt from taxation under

section 501(a) of the Code.

Cross-trades between an Indexed

Account and a Large Account would

occur only when the fiduciary or other

appropriate decision-maker for the

Large Account, which is independent of

Mellon and its affiliates, is fully

informed of the cross-trade technique,

provides advance written approval of

such transactions, and is fully apprised

of the transaction results. Further, cross

trades involving a Large Account will be

limited to those situations where Mellon

has been authorized to restructure all or

a portion of the Large Account’s assets

into an Indexed Account, or where

Mellon is otherwise acting as a trading

adviser for a Large Account portfolio

restructuring. Such restructurings

generally occur in connection with a

Large Account decision to invest in one

of Mellon’s Index or Model-Driven

Funds, but they may also involve

requests for Mellon to carry out a

restructuring program independent of

future investments in any of the Funds.

In the latter instance, Mellon’s only role

is that of a trading adviser, carrying out

a Large Account-initiated liquidation or

restructuring. When a Large Account

engages Mellon to invest in a collective

investment fund that is index or modeldriven or to arrange its own passivelymanaged individual portfolio, the Large

Account’s assets must be transformed

into a portfolio that tracks a third-party

index. In implementing the

transformation, Mellon is limited to

recreating the required portfolio and is

not involved in any active investment

management decisions. The impetus for

the investment comes from the

independent fiduciaries or other

independent decision-makers for these

Large Accounts. By performing crosstrades with existing Index Accounts

where possible, Mellon would reduce

the overall transactions costs by both

parties to the cross-trade. Mellon would

have a similar lack of discretion in the

case of Large Accounts which request

Mellon or an affiliate to restructure a

specific portfolio by liquidation. Mellon

would act as the trading advisor to the

Large Account, arranging for the

securities transactions within a stated

time so as to minimize transaction costs.

The opportunity to engage in crosstrades with Index Accounts occurs only

when those Accounts are required to

purchase the same securities which the

Large Account is selling.

8. Mellon represents that its crosstrading program will be effected

pursuant to a proportional allocation

system which will ensure that no

Indexed Account or Large Account will

be favored over any other such Account.

In the event that the amount of a

particular security which all of the

Indexed Accounts or Large Accounts

propose to sell on a given day is less

than the amount of such security which

all such Accounts propose to buy, or

vice versa, the direct cross-trade

opportunity would be allocated among

all potential buyers or sellers of the

security on a pro rata basis. Thus, all of

the Indexed Accounts or Large Accounts

participating in its cross-trade program

will have opportunities to participate on

a proportional basis in any cross-trade

transactions during the operation of the

program. This aspect of the proposed

cross-trading program would be part of

the information disclosed in writing to

the fiduciaries or other decisionmakers

of the Large Accounts and to all

employee benefit plans which invest in

the Index or Model-Driven Funds that

are collective investment funds

maintained by Mellon or to all such

plans that invest in any other Indexed

Account. In this regard, Mellon states

that prior to any cross-trading by an

Indexed Account or a Large Account,

each employee benefit plan invested in

the Account will be provided

information which describes the

existence of the cross-trading program,

the ‘‘triggering events’’ which will

create cross-trade opportunities, the

pricing mechanism that will be utilized

for securities purchased or sold by the

Accounts, and the allocation methods

and other procedures which will be

implemented by Mellon for its crosstrading practices. Any employee benefit

plan which subsequently invests in the

Indexed Account or Large Account will

also be provided the same information

prior to or immediately after the plan’s

initial investment in the Account.

Acquisition, Holding and Disposition of

MBC Stock

9. Mellon is also proposing that each

Indexed Account be permitted to invest

in the MBC Stock if such stock is

included among the securities listed in

the index utilized by the Indexed

Account.8 For example, MBC Stock is

one of the stocks included in the S&P

500. Because of the prohibitions of

section 406 and 407 of the Act, the

Mellon S&P 500 Index Funds and other

Indexed Accounts holding plan assets

which track the S&P 500 Index currently

are not permitted to invest in MBC

stock. Mellon states that the exclusion

of MBC Stock from such Index Funds or

other Indexed Accounts creates tracking

error. To correct the tracking error,

Mellon proposes to purchase on the

open market, and hold, on behalf of all

Indexed Accounts which hold plan

assets, the number of shares of MBC

Stock necessary to replicate correctly

the weighting of MBC Stock in the

portfolio relative to the S&P 500 Index.9

Mellon represents that when MBC

Stock is added to an index on which an

Indexed Account is based or is added to

the portfolio of an Indexed Account

which tracks an index that includes

MBC Stock, all acquisitions necessary to

bring the Indexed Account’s holdings of

MBC Stock to its capitalization

weighting in the index, other than

through cross-trade transactions meeting

the conditions of Section I, will comply

with the SEC Rule 10b–18, including

the limitations regarding the price paid

for such stock. Such acquisitions of
Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices 17819

MBC Stock would occur when an

Indexed Account is first able to hold

MBC Stock, such as purchases that will

occur for all Indexed Accounts that

track the S&P 500 Index, or when MBC

Stock is added to an Indexed Account’s

portfolio as a result of the stock being

added to another underlying index used

by the Account. SEC Rule 10b–18

provides a ‘‘safe harbor’’ for issuers of

securities from section 9(a)(2) of the

Securities Exchange Act of 1934 and

SEC Rule 10b-5 (which generally

prohibits persons from manipulating the

price of a security and engaging in fraud

in connection with the purchase or sale

of a security).

Mellon states that the conditions

imposed by SEC Rule 10b–18 for

purchases of MBC Stock would be as

follows: (a) All purchases would be

made from or through only one broker

on any single day; (b) no purchases

would constitute the opening

transaction in MBC Stock; (c) purchases

would not occur within one-half hour

before the scheduled close of trading on

the NYSE; (d) the price would not be

higher than the current independent bid

quotation or the last independent sale

price on the exchange, whichever is

higher; and (e) if the purchases of MBC

Stock are not block purchases as defined

by SEC Rule 10b–18(b)(4), the total

amount of purchases on any one day

would not exceed the higher of one

round lot or the number of round lots

closest to 25 percent of the trading

volume for MBC Stock on that day.

In addition, subsequent to the initial

acquisitions necessary to bring an

Indexed Account’s holdings of MBC

Stock to its capitalization weighting in

the index pursuant to the restrictions of

SEC Rule 10b–18, Mellon states that all

aggregate daily purchases of MBC Stock

will not constitute more than the greater

of either: (i) 15 percent of the stock’s

average daily trading volume for the

previous five days, or (ii) 15 percent of

the stock’s trading volume on the date

of the transaction.

All additional purchases or

subsequent sales of MBC Stock by the

Indexed Accounts that are made on a

daily basis merely to track the S&P 500

Index or other appropriate index would

be accomplished either through crosstrade transactions, subject to the

conditions of Section I of the proposed

exemption, or on the open market,

subject to the conditions of Section II

the proposed exemption. However,

daily purchases of MBC Stock, which

occur after all acquisitions of such stock

have been made in order to bring the

Indexed Account’s holdings to the

capitalization weighting of MBC Stock

in the index, would not be subject to the

restrictions of Rule 10b–18, but would

be subject to the other conditions of

Section II of this proposed exemption.

In this regard, Mellon believes that the

restrictions of Rule 10b–18 are not

necessary for the volume of transactions

which will be required by the Indexed

Accounts for daily tracking of an index

in order to respond to changes in the

composition or weighting of MBC Stock

in the index.

Mellon represents that no more than

5 percent of the total outstanding shares

of MBC Stock will be held in the

aggregate by the Indexed Accounts

which hold plan assets. In addition,

Mellon states that the MBC Stock will

not constitute more than 2 percent of

the value of any independent thirdparty index on which investments of an

Indexed Account are based.

10. Mellon will appoint an

independent fiduciary for the purposes

of developing trading procedures for the

initial acquisition of MBC Stock on the

open market by the Indexed Accounts

that track the S&P 500 Index. The

independent fiduciary will allow the

Indexed Accounts to acquire MBC Stock

in the amounts necessary to track the

S&P 500 Index while minimizing the

impact of the acquisitions on the market

for MBC Stock during the acquisition

period. The independent fiduciary will

also monitor Mellon’s compliance with

the trading procedures for

accomplishing this goal.

The independent fiduciary and its

principals will be completely

independent from Mellon and its

affiliates. The independent fiduciary

will also be experienced in developing

and operating investment strategies for

individual and collective investment

funds that track third-party indexes,

such as the S&P 500 Index. In addition,

Mellon will require the independent

fiduciary to represent that neither it nor

its principals, employees, or affiliates

holds or controls any shares of MBC

Stock. During the exercise of the trading

program by Mellon, no principal

employee of the independent fiduciary

nor the fiduciary itself will engage in

any trading of any kind in MBC Stock.

Furthermore, the independent fiduciary

will not act as the broker for any

purchases or sales of MBC Stock and

will not receive any commissions as a

result of the trading program.

11. The independent fiduciary will

have as its primary goal the

development of a trading program that

minimizes the market impact of

purchases made pursuant to the initial

acquisition program by the Indexed

Accounts. Thus, price increases that

would be detrimental to the interests of

any employee benefit plan investors

will be minimized. The trading

activities will be conducted in a lowprofile, mechanical, non-discretionary

manner. In this regard, the independent

fiduciary will be required to utilize a

computerized trading program that will

engage in a number of small purchases

over the course of each day, randomly

timed. Such a program will allow

Mellon to acquire the necessary shares

of MBC Stock for the Indexed Accounts

that track the S&P 500 Index with

minimum impact on the market and in

a manner that will be in the best

interests of any employee benefit plans

that maintain or participate in such

Accounts.

12. The independent fiduciary will

also be required to monitor Mellon’s

compliance with the trading program

and procedures developed for the initial

acquisition of MBC Stock. The

independent fiduciary will receive

duplicate confirmation slips of all trades

as well as the ‘‘time and tape’’ of all

NYSE transactions in MBC Stock

completed immediately before and after

each transaction and a time/price/

quantity record of all completed or

attempted trades. The independent

fiduciary will be required to review the

activities weekly to determine

compliance with the trading procedures

and notify Mellon and the Department

should any non-compliance be detected.

Should the trading strategy need

modifications due to unforeseen events

or consequences, the independent

fiduciary will be required to consult

with Mellon and must approve in

advance any alteration of the trading

procedures. All purchases of MBC Stock

by the Indexed Accounts pursuant to

the independent fiduciary’s trading

program will comply with SEC Rule

10b–18 and the conditions of the

proposed exemption.

13. If Mellon provides Portfolio

Management in Funds (i.e. PMF)

services to a plan, Mellon exercises

some discretion in allocating and

reallocating the plan’s assets among

various collective investment funds,

including Mellon’s S&P 500 Index

Funds and other Index or Model-Driven

Funds. These allocations are based on a

plan’s investment objectives, risk profile

and market conditions. However,

Mellon makes the following

representations with respect to the

purchase, directly or indirectly, of MBC

Stock by plans utilizing PMF (PMF

Plans):

(a) Mellon represents that any prohibited

transactions (other than cross-trade

transactions described herein) which might

occur as a result of the discretionary

allocation and reallocation of plan assets

among collective investment funds will be
17820 Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices

10 In the absence of regulations, the Department

is not prepared at this time to indicate whether

section 408(b)(8) applies to transactions described

in section 406(b) of the Act. Accordingly, the

Department expresses no opinion as to whether

Mellon’s discretionary allocation and reallocation

services for any collective investment funds

maintained by Mellon satisfy the requirements of

section 408(b)(8) of the Act and is not proposing

any exemptive relief beyond that offered by section

408(b)(8).

exempt from the prohibitions of section 406

of the Act by reason of section 408(b)(8).10

(b) Before MBC Stock is purchased by an

Index or Model-Driven Fund, the appropriate

independent fiduciary for each PMF Plan

which is currently invested or could be

invested in such Funds will be furnished an

explanation and a simple form to return on

which approval or disapproval of

investments in the Fund including MBC

Stock could be indicated, together with a

postage-paid return envelope. If the form is

not received by Mellon within 30 days,

Mellon may obtain a verbal response by

telephone. If a verbal response is obtained by

telephone, Mellon will confirm the

fiduciary’s decision in writing within five

business days. In the event no response is

obtained from a PMF Plan fiduciary, the

assets of the plan will not be invested in any

Index or Model-Driven Fund which invests

in MBC Stock and any plan assets currently

invested in such Funds at that time would be

withdrawn.

(c) Each new management agreement with

a PMF Plan will contain language specifically

approving or disapproving the investment in

any Index or Model-Driven Fund which

might hold MBC Stock. The fiduciary for

each current PMF Plan will be informed that

the existing management agreement could be

modified in the same way. However, if the

PMF Plan fiduciary does not specifically

approve language in the agreement allowing

the investment of plan assets in Funds which

might hold MBC Stock, then no such

investment will be made by Mellon.

(d) Each PMF Plan will be informed on a

quarterly basis of any investment in or

withdrawal from any Index or Model-Driven

Fund holding MBC Stock. The PMF Plan

would be granted the election to override

Mellon’s discretionary decision to invest in

or withdraw from such Funds. If the PMF

Plan overrides Mellon’s decision to invest in

or withdraw from the Funds, then Mellon

will carry out the plan’s election as soon as

possible after being notified of such election.

14. In the event a third-party index

utilized by Mellon for any Indexed

Account (in addition to the S&P 500

Index) adds MBC Stock or if Mellon is

otherwise unable to satisfy an Indexed

Accounts’ needs for MBC Stock through

cross-trades with other Indexed

Accounts, Mellon will acquire the

necessary shares of MBC Stock on the

open market. If Mellon is required to

purchase MBC Stock in the open market

on behalf of any Indexed Account in

those circumstances, Mellon will

determine whether the stock can be

acquired within 10 business days. If the

MBC Stock cannot be acquired within

10 business days, Mellon will appoint

an independent fiduciary to establish

the procedures to be used to acquire the

MBC Stock and monitor Mellon’s

compliance with those procedures. The

fiduciary will be unrelated to and

independent of Mellon and will have

expertise in the operation of index

funds.

15. Mellon will appoint an

independent fiduciary which will direct

the voting of the MBC Stock held by the

Mellon S&P 500 Index Funds or other

Indexed Accounts. The independent

fiduciary will be a consulting firm

specializing in corporate governance

issues and proxy voting on behalf of

public and private pension funds,

banks, trust companies, money

managers, insurance companies and

other institutional investors with large

equity portfolios. The fiduciary will be

required to develop, and supply to

Mellon, a corporate ownership manual

which will act as a guideline to the

voting of proxies by institutional

fiduciaries, and their current voting

guidelines. Mellon will provide the

independent fiduciary with all

necessary information regarding the

Indexed Accounts that hold MBC Stock,

the amount of MBC Stock held by the

Indexed Accounts on the record date for

shareholder meetings of MBC, and all

proxy and consent materials with

respect to MBC Stock. The independent

fiduciary will maintain records with

respect to its activities as an

independent fiduciary on behalf of the

Indexed Accounts, including the

number of MBC Stock shares voted, the

manner in which they were voted, and

the rationale for the vote if the vote was

not consistent with the independent

fiduciary’s corporate ownership manual

and the current voting guidelines in

effect at the time of the vote. The

independent fiduciary will supply

Mellon with the information after each

shareholder meeting. The independent

fiduciary will be required to

acknowledge that it will be acting as a

fiduciary with respect to the plans

which invest in the Mellon S&P 500

Index Funds or other Indexed Accounts

which own MBC Stock, when voting

such stock.

16. In summary, the applicant

represents that the proposed crosstrading transactions will satisfy the

criteria of section 408(a) of the Act for

the following reasons: (a) An Indexed

Account will buy or sell securities only

in response to various ‘‘triggering

events’’ which are not within Mellon’s

control or discretion; (b) a Large

Account will engage in cross trades only

in situations where the investment

decisions relating to a particular

portfolio restructuring program for the

Large Account are made by a fiduciary

or other appropriate decision-maker

which is independent of Mellon; (c) all

cross trade transactions, including

cross-trades involving MBC Stock, will

occur within three business days of the

‘‘triggering event’’ necessitating the

purchase or sale; (d) no cross-trades will

be engaged in by an Indexed Account

that is model-driven for 10 business

days subsequent to any change made by

Mellon to the model underlying the

Account; (e) the price for all securities

will be the current market value for the

securities on the date of the transaction,

which for equity securities will be set at

the closing (or opening, where

appropriate) price for the securities on

the day of trading as determined by

independent pricing services, and for

debt securities will be determined based

on quotations received from

independent broker-dealers or marketmakers as of the close of the day

pursuant to the procedures described in

SEC Rule 17a–7(b); (f) the Indexed

Accounts and the Large Accounts will

save significant amounts of money on

brokerage commissions; and (g) Mellon

will receive no additional compensation

as a result of the proposed cross trades

nor with respect to the acquisition,

holding and disposition of MBC Stock.

The applicant further represents that

the proposed MBC Stock transactions

will satisfy the criteria of section 408(a)

of the Act for the following reasons: (a)

The acquisition, holding and

disposition of MBC Stock by an Indexed

Account will occur solely to maintain

strict quantitative conformity with the

underlying index; (b) all purchases of

MBC Stock by the Mellon S&P 500

Index Funds or other Indexed Accounts

which occur as a result of such stock

being added to an index on which an

Indexed Account is based or being

added to the portfolio of the Indexed

Account which tracks an index that

includes MBC Stock, will be made on

the open market and will comply with

the restrictions of SEC Rule 10b–18; (c)

subsequent to the initial acquisitions

necessary to bring an Indexed Account’s

holdings of MBC Stock to its

capitalization weighting in the index

pursuant to the restrictions of SEC Rule

10b–18, all aggregate daily purchases of

MBC Stock will not constitute more

than the greater of either (i) 15 percent

of the stock’s average daily trading

volume for the previous five days, or (ii)

15 percent of the stock’s trading volume

on the date of the transaction; (d) no

more than 5 percent of the total

outstanding shares of MBC Stock will be
Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices 17821

held in the aggregate by the Indexed

Accounts which hold plan assets; (e) the

MBC Stock will not constitute more

than 2 percent of the value of any

independent third-party index on which

investments of an Indexed Account are

based; (f) the initial acquisitions of MBC

Stock by the Mellon S&P 500 Index

Funds will be monitored by a fiduciary

independent of Mellon in an attempt to

minimize market disturbances; and (g) a

fiduciary independent of Mellon will

direct the voting of any MBC Stock held

by the Indexed Accounts.

FOR FURTHER INFORMATION CONTACT: Mr.

E.F. Williams of the Department,

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

a toll-free number.)

Analex Corporation (Analex), Analex

Corporation Retirement Plan (the Plan)

Located in Brook Park, OH

[Application No. D–9786]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 408(a) of the Act

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

in accordance with the procedures set

forth in 29 CFR part 2570, subpart B (55

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

the exemption is granted, the

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

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

resulting from the application of section

4975 of the Code, by reason of section

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

shall not apply retroactively to the past

loan (the Past Loan) made by the Plan

to Analex (the Employer) in accordance

with the following conditions:

(1) The terms and conditions of the Past

Loan were at least as favorable to the Plan as

those obtainable by the Plan under similar

circumstances in arm’s-length transactions

with unrelated parties;

(2) The amount of the Plan’s assets

involved in the Past Loan did not exceed

15% of the Plan’s total assets at any time

during the transaction;

(3) The Past Loan was at all times secured

by collateral which was valued at not less

than 200% of the value of the Past Loan;

(4) Prior to the disbursement under the

Loan agreement, an independent, qualified

fiduciary determined on behalf of the Plan

that the Past Loan was in the best interests

of the Plan as an investment for the Plan’s

portfolio, and protective of the Plan and its

participants and beneficiaries;

(5) The independent, qualified fiduciary

reviewed the terms and conditions of the

exemption and the Past Loan, including the

applicable interest rate, the sufficiency of the

collateral, the financial condition of the

Employer and compliance with the 15% of

Plan assets maximum loan amount, prior to

approving the disbursement under the Loan

agreement;

(6) The fiduciary is monitoring the Past

Loan to ensure compliance with the terms

and conditions of the exemption and the

Loan agreement;

(7) The Plan suffers no loss as a result of

the Past Loan; and

(8) The Past Loan will be fully repaid by

May 31, 1995.

Temporary Nature of Exemption

If granted, this proposed exemption

would be effective for the period from

July 12, 1994 through May 31, 1995, the

date by which the Past Loan will be

repaid.

Summary of Facts and Representations

1. The Plan is a profit sharing plan

with a salary reduction feature. There

were 394 Plan participants and total

assets of $9,222,172 as of December 31,

1993. The Plan provides for participant

direction with respect to employee

contributions to the Plan, and provides

that an Administrative Committee will

direct the investment of Employer

contributions. Donald M. Zucker of

Sorin, Zucker & Warfield, Inc., the

independent, qualified fiduciary (the

Independent Fiduciary), acted on behalf

of the Plan with respect to the Past

Loan.

2. The Employer is a Nevada

corporation maintaining its principle

place of business in Brook Park, Ohio

and operating in Florida, Colorado,

Texas, California, Virginia and New

Mexico. The Employer provides

engineering services to commercial and

government entities.

3. On July 20, 1993, the Department

published a notice of proposed

exemption for prospective exemptive

relief for a series of loans to the

Employer by the Plan (58 FR 38792).

The final exemption (PTE 93–65) was

published in the Federal Register on

September 22, 1993 at 58 FR 49325. The

exemption was expressly conditioned

on compliance with the limitations set

forth therein. Among other conditions,

PTE 93–65 was subject to the condition

that the Independent Fiduciary would

monitor the Loans to ensure compliance

with the terms and conditions of the

exemption and the Loans. Under the

terms of PTE 93–65, the Independent

Fiduciary was also responsible for

reviewing, among other things, the

financial condition of the Employer

prior to approving each disbursement

under the Loan agreement.

Section 6.4 of the written Loan

agreement between the Plan and the

Employer provides that the Employer

must maintain at all times certain net

worth requirements. In addition, section

6.5 of the Loan agreement requires that

the Employer maintain at all times a

certain ratio of current assets to current

liabilities. (The net worth test and the

current ratio test are hereinafter referred

to as the Covenants.)

The Employer represents that only

one loan was made to the Employer

pursuant to PTE 93–65. It is represented

that a $1.3 million loan was made on

September 29, 1993 and that the

outstanding balance on that loan as of

December 13, 1994 was $991,525.41. On

July 12, 1994, the Employer entered into

a settlement agreement regarding certain

claims with respect to activities of

Xanalex Corporation, a predecessor

corporation to the Employer, which

resulted in the Employer’s failure to

satisfy the Covenants.

4. The Employer now seeks a

retroactive exemption for the Past Loan

by the Plan to the Employer from the

point in time when the Employer failed

to satisfy the Covenants. In support of

its request for retroactive relief, the

Employer and the Independent

Fiduciary maintain that the interests of

the Plan and its participants and

beneficiaries were fully protected

throughout the duration of the Past

Loan. In this regard, the Independent

Fiduciary was engaged to act on behalf

of the Plan with respect to the Past

Loan. Any disbursement under the Loan

agreement required prior approval by

the Independent Fiduciary and could

not be made unless the Independent

Fiduciary found that such disbursement

was appropriate and in the interests of

the Plan and its participants and

beneficiaries.

As further protection for the Plan and

its participants and beneficiaries, the

Past Loan was collateralized by

recorded perfected security interests in

accounts receivable (the Accounts

Receivable) of the Employer. Upon

entering into the Past Loan, the

Independent Fiduciary received from

the Employer any and all

documentation needed to evidence the

Plan’s security interest in the collateral

securing the Past Loan and the

Independent Fiduciary ensured that

appropriate documentation was

recorded to perfect the Plan’s security

interest. The Independent Fiduciary was

also responsible for ensuring that, at no

time while the Past Loan was

outstanding, was the fair market value

of the Accounts Receivable securing

such Loan less than 200% of the

outstanding face amount of such Past

Loan.

5. The Independent Fiduciary

maintains that, once apprised of the

pending breach of the Covenants, it took

appropriate steps to protect the interests

of the Plan and its participants and

beneficiaries. In this regard, the

Independent Fiduciary represents that,
17822 Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices

11The interest rate applicable upon breach of the

Covenants is the greater of 9% or the Advance Rate

plus 2%. The Advance Rate is defined as the greater

of 7% or the prime rate as published in the Wall

Street Journal.

pursuant to its request, the default

interest rate was applied to calculate

interest payments due after the

Covenants were breached.11 In addition,

the Independent Fiduciary retained

independent counsel in June, 1994 to

represent the interests of the Plan in

connection with the anticipated breach

of the Covenants.

6. The Independent Fiduciary

represents that the Plan suffered no loss

as a result of the loan program and no

term or condition of the Past Loan was

inconsistent with the terms and

conditions described in PTE 93–65,

except for the failure to satisfy the

Covenants. In addition, the Independent

Fiduciary represents that payments

under the Past Loan have remained

current. Finally, the Employer will pay

off the remaining balance under the Past

Loan no later than May 31, 1995.

7. In summary, the applicant

represents that the past transaction

meets the statutory criteria for an

exemption under section 408(a) of the

Act because: (a) The terms and

conditions of the Past Loan were at least

as favorable to the Plan as those

obtainable by the Plan under similar

circumstances in arm’s length

transactions with unrelated third

parties; (b) the Plan’s independent

fiduciary reviewed the terms and

conditions of the proposed exemption

and the Past Loan and determined that

the Loan was in the best interest of the

Plan’s participants and beneficiaries; (c)

the independent fiduciary reviewed and

approved the Past Loan prior to making

the disbursement; (d) the Past Loan was

at all times secured by collateral which

was valued at not less that 200% of the

balance of the Loan; (e) the amount of

the Past Loan did not exceed 15% of the

fair market value of the Plan’s assets; (f)

the Employer will pay off the balance on

the Past Loan by May 31, 1995; and (g)

except for the failure to satisfy the

Covenants, the Past Loan satisfied all

other conditions of PTE 93–65.

FOR FURTHER INFORMATION CONTACT:

Virginia J. Miller of the Department,

telephone (202) 219–8971. (This is not

a toll-free number.)

Washington Mortgage Corporation, Inc.

(WMC) Located in Seattle, Washington

[Application No. D–9814]

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) as

follows:

I. If the exemption is granted, the

restrictions of section 406(a) of the Act

and the sanctions resulting from the

application of section 4975 of the Code,

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

through (D) of the Code, shall not apply

to: 1) the sale, exchange or transfer

between WMC and its affiliates and

certain employee benefit plans (the

Plans) of certain construction loans or

participation interests therein to nonparty in interest entities; and 2) the sale,

exchange or transfer between WMC and

its affiliates and the Plans of any

construction or permanent loan made by

a Plan to a party in interest, and the

resulting extension of credit therefrom,

provided that:

(a) The terms of the transactions are

not less favorable to the Plans than the

terms generally available in arm’s-length

transactions between unrelated parties;

(b) Such sales, exchanges or transfers

are expressly approved by a Plan

fiduciary independent of WMC and its

affiliates who has authority to manage

or control those Plan assets being

invested in mortgages or participation

interests therein;

(c) No investment management,

advisory, underwriting fee or sales

commission or similar compensation is

paid to WMC or any of its affiliates with

regard to such sale, exchange or transfer;

(d) The decision to invest in a loan or

a participation interest therein is not

part of an arrangement under which a

fiduciary of a Plan, acting with the

knowledge of WMC or its affiliate,

causes a transaction to be made with or

for the benefit of a party in interest (as

defined in section 3(14) of the Act) with

respect to the Plan;

(e) At the time of its acquisition of a

loan or participation interest therein, no

Plan will have more than 25% of its

assets invested in construction and

permanent mortgages;

(f) WMC and its affiliates do not and

will not act as fiduciaries with regard to

any Plan investing in permanent and

construction loans and interests therein

as described in this proposed

exemption; and

(g) WMC shall maintain or will cause

to be maintained, for the duration of any

loan or participation interest therein

sold to a Plan pursuant to this

exemption, such records as are

necessary to determine whether the

conditions of this exemption have been

met. The records mentioned above must

be unconditionally available at their

customary location for examination for

purposes reasonably related to

protecting rights under the Plans, during

normal business hours, by: Any trustee,

investment manager, employer of Plan

participants, employee organization

whose members are covered by a Plan,

participant or beneficiary of a Plan.

II. If the exemption is granted, the

restrictions of section 406(a) of the Act

and the sanctions resulting from the

application of section 4975 of the Code

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

through (D) of the Code shall not apply

to any transactions to which such

restrictions would otherwise apply

merely because WMC or any of its

affiliates is deemed to be a party in

interest with respect to a Plan by virtue

of providing services to the Plan in

connection with the subject loan

transactions (or because it has a

relationship to such service provider

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

(I) of the Act), solely because of the

ownership of a loan or participation

interest therein as described in this

exemption by such Plan.

III. Definitions. For purposes of this

exemption,

(a) An ‘‘affiliate’’ of WMC includes—

(1) Any person directly or indirectly

through one or more intermediaries,

controlling, controlled by, or under

common control with WMC,

(2) Any officer, director, employee,

relative of, or partner in any such

person, and

(3) Any corporation or partnership of

which such person is an officer,

director, partner or employee.

(b) The term ‘‘control’’ means the

power to exercise a controlling

influence over the management or

policies of a person other than an

individual.

Temporary Nature of Exemption: If

the proposed exemption is granted, it

will be effective only for those

transactions entered into within eight

years of the date on which the Final

Grant of this proposed exemption is

published in the Federal Register.

Summary of Facts and Representations

1. WMC has originated income

property (commercial and multifamily)

loans since 1949 for major institutional

buyers, including pension funds, life

insurance companies and thrift

institutions. In 1988, WMC was

acquired by Puget Sound Bancorp as a

wholly owned subsidiary.

2. Through the decade of the 1980’s

and until 1993, WMC and its affiliates

engaged in permanent and construction

loan origination and servicing activities

involving Plans as lenders. These

activities were conducted pursuant to

the descriptions contained in proposed
Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices 17823

12PTE 85–1 exempted transactions involving

permanent loans made to non-party in interest

entities. PTE 89–78 provided relief for transactions

involving construction loans made to non-party in

interest entities, and construction and permanent

loans made to parties in interest.

13The Department is not proposing any relief

herein for the receipt of fees beyond that which is

provided by the statutory exemption contained in

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

14The applicant represents that no loan acquired

by a Plan which is made to a party in interest will

be a loan to a fiduciary or an affiliate thereof. In

this regard, the Department notes that any such loan

would involve violations of section 406(b) of the

Act for which no relief is being proposed herein.

The applicant represents that, with respect to the

subject loans, construction and other services

related to the project may, or may not, be performed

by a party in interest. The Department notes, as it

did in the proposal to both PTE 85–1 and 89–78,

that where the construction on the property which

secures the loan is by a contributing employer to

the Plan and a principal of such employer exercises

fiduciary authority in approving the Plan’s

investment in the loan, a separate prohibited

transaction under section 406(b) of the Act may

occur, which transaction would not be covered by

this proposed exemption. See also condition (d) of

Part I of this proposed exemption which has the

effect of precluding relief under section 408(a) of

the Act for certain transactions undertaken for the

benefit of parties in interest.

15The Department is not proposing exemptive

relief herein for any violation of section 406(b) of

the Act resulting from the provision of such

construction services. See footnote above.

and final prohibited transaction

exemptions granted by the Department.

These exemptions were PTE 85–1 (50

FR 1004, January 8, 1985), and PTE 89–

78 (54 FR 35951, August 30, 1989).

These exemptions were obtained to

allow WMC and its bank and non-bank

affiliates to engage in loan origination,

sale and service activity and other

(unrelated) banking and non-banking

commercial activity with Plans, which

would otherwise be prohibited under

section 406(a) of the Act and section

4975 of the Code.12 PTE 85–1 does not

provide for any expiration date, and

PTE 89–78 expired on August 30, 1994.

3. In 1993, through a series of

acquisitions involving national financial

institutions, WMC became a subsidiary

of KeyCorp, one of the largest bank

holding companies in the U.S. KeyCorp

owns 21 banks and trust companies and

several related financial services

companies, with more than 1,300

branch and affiliate offices in 23 states.

As of December 31, 1994, KeyCorp had

assets of $64.6 billion.

4. At present, WMC maintains offices

in Seattle and Tacoma, Washington, but

does not do any loan originations.

Following the expiration of PTE 89–78

on August 30, 1994, WMC did not

originate any new loans to Plans. Prior

loans are now serviced elsewhere except

for a loan made by the Carpenters

Retirement Trust of Western

Washington, which is being serviced by

KeyCorp Mortgage, Inc., an affiliate of

WMC. The applicant represents that

seven other loans were placed with

Plans by WMC or its affiliates pursuant

to PTE 89–78. The applicant represents

that no Plan has suffered any loss or

default with respect to any of these

loans. To allow WMC and its affiliates

to resume loan origination and servicing

activities with Plans, as a subsidiary of

KeyCorp or on its own following

possible acquisition by outsiders,

KeyCorp has applied for renewal of PTE

89–78 to augment the relief afforded

under PTE 85–1.

5. The proposed activities of WMC

and its affiliates may be summarized as

follows:

(1) WMC works on behalf of the

borrower/developer in putting together

construction and permanent financing

for commercial and multifamily

residential real estate projects. The role

of WMC is to provide or arrange for all

of the construction financing and to

arrange a negotiated permanent

commitment, so that construction

financing is paid off when the building

is completed. In some cases, WMC or its

affiliates also participate in funding the

construction or permanent loans. WMC

works on behalf of the borrower/

developer to secure permanent

financing alternatively by: (a)

Committing directly to the borrower for

permanent financing, with the intention

of later securing a permanent lender; (b)

committing to the borrower based on a

commitment for permanent financing

provided by another lending institution

to WMC; or (c) securing for the

borrower, directly, a commitment from

another lending institution for the

permanent financing, with such a

commitment going directly from the

lender to the borrower, but assigned to

WMC during the construction phase as

additional collateral and security for the

construction loan.

(2) Loan servicing might be done by

WMC or an affiliate. Fees paid to the

servicer would run 1/8% to 1% per

annum on the outstanding principal

balance of permanent loans. Servicing

fees for construction loans are

determined as a percentage of the

outstanding balance of the loans. The

applicant represents that all fees and

charges are set in advance in accordance

with prevailing market conditions.13

(3) In conducting these permanent

and construction loan origination, sales

and servicing activities, WMC and its

affiliates would not act as a fiduciary to

any lending Plan. Rather, all decisions

to invest in a loan would be made by

Plan fiduciaries independent of WMC

and its affiliates. In the case of loans

made to parties in interest, these

fiduciaries will also be independent of

the party receiving the loan proceeds.14

If construction is to be performed by a

contributing employer or other party in

interest, WMC would require a written

statement executed by the independent

fiduciary that its decision to invest was

not influenced or controlled by the

borrower or any other party in

interest.15

(4) WMC’s responsibilities in the

administration or servicing of loans sold

to Plans will vary depending on the loan

type. For example, construction loans

will involve: (a) Releasing construction

loan draws and hold backs as various

conditions of the construction loan are

satisfied; (b) adjustment of hard-line

cost items in the construction loan

budget to reflect actual costs; (c) making

certain the borrower corrects any nonmonetary defaults; (d) implementing

borrower-requested change orders

approved by WMC staff or independent

inspectors; (e) clearing mechanics’ liens

placed on the property during the

course of construction; and (f) insuring

general compliance by all parties with a

construction loan agreement and related

agreements.

(5) Any loan in default will involve

decisions by the independent Plan

fiduciary, or by WMC in accordance

with pre- approved guidelines set forth

in the loan documents. The loan

documents, including default

guidelines, would be approved by the

independent fiduciary. A Plan, acting

through its independent fiduciary,

would also retain the ability (with

WMC’s consent) to transfer, assign or

otherwise dispose of its interest in any

construction loan, without payment of

any fee or penalty.

(6) As to purchase of either permanent

or construction loans, or interests

therein, Plans would not pay WMC an

investment management, investment

advisory, sales commission or similar

fee. In addition, Plans would not pay

more for any loan interest than would

be paid by an unrelated party in an

arm’s-length transaction.

6. WMC represents that as a result of

being a party in interest with respect to

Plans by virtue of servicing by it or

affiliates of the subject loans or

participations purchased thereby, WMC

and its affiliates would be prohibited

from engaging in other commercial

transactions with these Plans, such as

the making of loans, which transactions

have nothing to do with the mortgages

or participation interests held by the

Plans. The Department has considered

WMC’s request for relief for such

transactions and has decided that
17824 Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices

because the servicing relationship is

established as a necessary result of the

purchase of a mortgage or participation

interest by a Plan, subsequent

transactions between the parties

otherwise prohibited by section 406(a)

are not likely to present an inherent

abuse potential. Accordingly, the

Department has determined that it

would be appropriate to propose the

relief from section 406(a) contained in

Part II of the proposed exemption.

7. In summary, the applicant

represents that the proposed

transactions satisfy the criteria

contained in section 408(a) of the Act

because: (a) The Plans will pay no more

for the mortgages and participation

interests therein than would be paid by

an unrelated party in an arm’s-length

transaction; (b) all Plan decisions to

invest in mortgages and participation

interests will be made by a Plan

fiduciary independent of WMC and its

affiliates; (c) at the time of its

acquisition of a loan or a participation

therein, no Plan will have more than

25% of its assets invested in

construction or permanent mortgages;

(d) the terms of the construction or

permanent loans will not be less

favorable to the Plans than the terms

generally available in arm’s-length

transactions with unrelated parties; and

(e) no investment management,

advisory, underwriting fee or sales

commission will be paid to WMC or any

of its affiliates with regard to such sale,

exchange or transfer.

Notice to Interested Persons: The

applicant represents that notice will be

provided to all trustees of Plans

currently holding loan investments

originated and/or serviced by WMC

and/or its affiliates. In addition, WMC

agrees to provide a copy of the notice of

proposed exemption and any

subsequent grant of such exemption to

all employee benefit plans with whom

WMC may contract in the future to

provide services as described herein.

Such notification will be provided prior

to WMC entering into a contract to

provide such services.

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 31st day of

March, 1995.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

U.S. Department of Labor.

[FR Doc. 95–8395 Filed 4–6–95; 8:45 am]

BILLING CODE 4510–29–P

NATIONAL ARCHIVES AND RECORDS

ADMINISTRATION

Meeting of the Advisory Committee on

Presidential Libraries

Notice is hereby given that the

National Archives and Records

Administration (NARA) Advisory

Committee on Presidential Libraries will

meet on Sunday, April 23 1995 from 3

p.m. until 6 p.m. in Room 100 of the

National Archives Building, 7th Street

and Pennsylvania Avenue, NW.,

Washington, DC, and on Monday, April

24, 1995 from 9 a.m. until 2 p.m. in

Room 105 of the National Archives

Building.

The agenda for the meeting will

address budget and resource issues, and

NARA and Presidential library programs

in light of Federal government

reductions.

The meeting will be open to the

public. For additional information, call

Richard Jacobs, Acting Assistant

Archivist, Office of Presidential

Libraries at (202) 501–5700.

Dated: March 29, 1995.

Trudy Huskamp Peterson,

Acting Archivist of the United States.

[FR Doc. 95–8598 Filed 4–6–95; 8:45 am]

BILLING CODE 7515–01–M

NATIONAL FOUNDATION ON THE

ARTS AND HUMANITIES

Notice of Meeting

Pursuant to Section 10(a)(2) of the

Federal Advisory Committee Act (Pub.

L. 92–463), as amended, notice is hereby

given that a meeting of the International

Advisory Panel (International

Fellowships and Residencies

Prescreening Section) to the National

Council on the Arts will be held on

April 25–27, 1995 from 9:00 a.m. to 7:00

p.m. on April 25–26 and from 9:00 a.m.

to 5:00 p.m. on April 27. This meeting

will be held in Room 716, at the Nancy

Hanks Center, 1100 Pennsylvania

Avenue, N.W., Washington, D.C. 20506.

Portions of this meeting will be open

to the public from 9:00 a.m to 9:30 a.m.

on April 25 and from 3:30 p.m. to 5:00

p.m. on April 27, for a policy

discussion.

The remaining portions of this

meeting from 9:30 a.m. to 7:00 p.m. on

April 25; from 9:00 a.m. to 7:00 p.m. on

April 26; and from 9:00 a.m. to 3:30

p.m. on April 27 are for the purpose of

Panel review, discussion, evaluation,

and recommendation on applications

for financial assistance under the

National Foundation on the Arts and the

Humanities Act of 1965, as amended,

including information given in

confidence to the agency by grant

applicants. In accordance with the

determination of the Chairman of

February 8, 1994 these sessions will be

closed to the public pursuant to

subsection (c)(4), (6) and (9)(B) of

section 552b of Title 5, United States

Code.

Any person may observe meetings, or

portions thereof, of advisory panels

which are open to the public, and may

be permitted to participate in the