[Federal Register Volume 59, Number 242 (Monday, December 19, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31087]


[[Page Unknown]]

[Federal Register: December 19, 1994]


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DEPARTMENT OF LABOR
[Prohibited Transaction Exemption 94-84; Exemption Application No. D-
9801, et al.]

 

Grant of Individual Exemptions; Alex. Brown & Sons, Incorporated, 
et al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of Individual Exemptions.

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SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(the Act) and/or the Internal Revenue Code of 1986 (the Code).
    Notices were published in the Federal Register of the pendency 
before the Department of proposals to grant such exemptions. The 
notices set forth a summary of facts and representations contained in 
each application for exemption and referred interested persons to the 
respective applications for a complete statement of the facts and 
representations. The applications have been available for public 
inspection at the Department in Washington, D.C. The notices also 
invited interested persons to submit comments on the requested 
exemptions to the Department. In addition the notices stated that any 
interested person might submit a written request that a public hearing 
be held (where appropriate). The applicants have represented that they 
have complied with the requirements of the notification to interested 
persons. No public comments and no requests for a hearing, unless 
otherwise stated, were received by the Department.
    The notices of proposed exemption were issued and the exemptions 
are being granted solely by the Department because, effective December 
31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR 
47713, October 17, 1978) transferred the authority of the Secretary of 
the Treasury to issue exemptions of the type proposed to the Secretary 
of Labor.

Statutory Findings

    In accordance with section 408(a) of the Act and/or section 
4975(c)(2) of the Code and the procedures set forth in 29 CFR Part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon 
the entire record, the Department makes the following findings:
    (a) The exemptions are administratively feasible;

    (b) They are in the interests of the plans and their participants 
and beneficiaries; and

    (c) They are protective of the rights of the participants and 
beneficiaries of the plans.

Alex. Brown & Sons, Incorporated (ABS) Located in Baltimore, 
Maryland

[Prohibited Transaction Exemption 94-84; Exemption Application No. D-
9801]

Exemption

I. Transactions

    A. Effective August 12, 1994, the restrictions of sections 406(a) 
and 407(a) of the Act and the taxes imposed by section 4975(a) and (b) 
of the Code by reason of section 4975(c)(1)(A) through (D) of the Code 
shall not apply to the following transactions involving trusts and 
certificates evidencing interests therein:
    (1) The direct or indirect sale, exchange or transfer of 
certificates in the initial issuance of certificates between the 
sponsor or underwriter and an employee benefit plan when the sponsor, 
servicer, trustee or insurer of a trust, the underwriter of the 
certificates representing an interest in the trust, or an obligor is a 
party in interest with respect to such plan;
    (2) The direct or indirect acquisition or disposition of 
certificates by a plan in the secondary market for such certificates; 
and
    (3) The continued holding of certificates acquired by a plan 
pursuant to subsection I.A.(1) or (2).
    Notwithstanding the foregoing, section I.A. does not provide an 
exemption from the restrictions of sections 406(a)(1)(E), 406(a)(2) and 
407 for the acquisition or holding of a certificate on behalf of an 
Excluded Plan by any person who has discretionary authority or renders 
investment advice with respect to the assets of that Excluded 
Plan.1
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    \1\Section I.A. provides no relief from sections 406(a)(1)(E), 
406(a)(2) and 407 for any person rendering investment advice to an 
Excluded Plan within the meaning of section 3(21)(A)(ii) and 
regulation 29 CFR 2510.3-21(c).
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    B. Effective August 12, 1994, the restrictions of sections 
406(b)(1) and 406(b)(2) of the Act and the taxes imposed by section 
4975 (a) and (b) of the Code by reason of section 4975(c)(1)(E) of the 
Code shall not apply to:
    (1) The direct or indirect sale, exchange or transfer of 
certificates in the initial issuance of certificates between the 
sponsor or underwriter and a plan when the person who has discretionary 
authority or renders investment advice with respect to the investment 
of plan assets in the certificates is (a) an obligor with respect to 5 
percent or less of the fair market value of obligations or receivables 
contained in the trust, or (b) an affiliate of a person described in 
(a); if:
    (i) the plan is not an Excluded Plan;
    (ii) solely in the case of an acquisition of certificates in 
connection with the initial issuance of the certificates, at least 50 
percent of each class of certificates in which plans have invested is 
acquired by persons independent of the members of the Restricted Group 
and at least 50 percent of the aggregate interest in the trust is 
acquired by persons independent of the Restricted Group;
    (iii) a plan's investment in each class of certificates does not 
exceed 25 percent of all of the certificates of that class outstanding 
at the time of the acquisition; and
    (iv) immediately after the acquisition of the certificates, no more 
than 25 percent of the assets of a plan with respect to which the 
person has discretionary authority or renders investment advice are 
invested in certificates representing an interest in a trust containing 
assets sold or serviced by the same entity.2 For purposes of this 
paragraph B.(1)(iv) only, an entity will not be considered to service 
assets contained in a trust if it is merely a subservicer of that 
trust;
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    \2\For purposes of this exemption, each plan participating in a 
commingled fund (such as a bank collective trust fund or insurance 
company pooled separate account) shall be considered to own the same 
proportionate undivided interest in each asset of the commingled 
fund as its proportionate interest in the total assets of the 
commingled fund as calculated on the most recent preceding valuation 
date of the fund.
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    (2) The direct or indirect acquisition or disposition of 
certificates by a plan in the secondary market for such certificates, 
provided that the conditions set forth in paragraphs B.(1) (i), (iii) 
and (iv) are met; and
    (3) The continued holding of certificates acquired by a plan 
pursuant to subsection I.B. (1) or (2).
    C. Effective August 12, 1994, the restrictions of sections 406(a), 
406(b) and 407(a) of the Act, and the taxes imposed by section 4975 (a) 
and (b) of the Code by reason of section 4975(c) of the Code, shall not 
apply to transactions in connection with the servicing, management and 
operation of a trust, provided:
    (1) such transactions are carried out in accordance with the terms 
of a binding pooling and servicing arrangement; and
    (2) the pooling and servicing agreement is provided to, or 
described in all material respects in the prospectus or private 
placement memorandum provided to, investing plans before they purchase 
certificates issued by the trust.3
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    \3\In the case of a private placement memorandum, such 
memorandum must contain substantially the same information that 
would be disclosed in a prospectus if the offering of the 
certificates were made in a registered public offering under the 
Securities Act of 1933. In the Department's view, the private 
placement memorandum must contain sufficient information to permit 
plan fiduciaries to make informed investment decisions.
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    Notwithstanding the foregoing, section I.C. does not provide an 
exemption from the restrictions of section 406(b) of the Act or from 
the taxes imposed by reason of section 4975(c) of the Code for the 
receipt of a fee by a servicer of the trust from a person other than 
the trustee or sponsor, unless such fee constitutes a ``qualified 
administrative fee'' as defined in section III.S.
    D. Effective August 12, 1994, the restrictions of sections 406(a) 
and 407(a) of the Act, and the taxes imposed by sections 4975(a) and 
(b) of the Code by reason of sections 4975(c)(1)(A) through (D) of the 
Code, shall not apply to any transactions to which those restrictions 
or taxes would otherwise apply merely because a person is deemed to be 
a party in interest or disqualified person (including a fiduciary) with 
respect to a plan by virtue of providing services to the plan (or by 
virtue of having a relationship to such service provider described in 
section 3(14)(F), (G), (H) or (I) of the Act or section 4975(e)(2)(F), 
(G), (H) or (I) of the Code), solely because of the plan's ownership of 
certificates.

II. General Conditions

    A. The relief provided under Part I is available only if the 
following conditions are met:
    (1) The acquisition of certificates by a plan is on terms 
(including the certificate price) that are at least as favorable to the 
plan as they would be in an arm's-length transaction with an unrelated 
party;
    (2) The rights and interests evidenced by the certificates are not 
subordinated to the rights and interests evidenced by other 
certificates of the same trust;
    (3) The certificates acquired by the plan have received a rating at 
the time of such acquisition that is in one of the three highest 
generic rating categories from either Standard & Poor's Corporation 
(S&P's), Moody's Investors Service, Inc. (Moody's), Duff & Phelps Inc. 
(D & P) or Fitch Investors Service, Inc. (Fitch);
    (4) The trustee is not an affiliate of any member of the Restricted 
Group. However, the trustee shall not be considered to be an affiliate 
of a servicer solely because the trustee has succeeded to the rights 
and responsibilities of the servicer pursuant to the terms of a pooling 
and servicing agreement providing for such succession upon the 
occurrence of one or more events of default by the servicer;
    (5) The sum of all payments made to and retained by the 
underwriters in connection with the distribution or placement of 
certificates represents not more than reasonable compensation for 
underwriting or placing the certificates; the sum of all payments made 
to and retained by the sponsor pursuant to the assignment of 
obligations (or interests therein) to the trust represents not more 
than the fair market value of such obligations (or interests); and the 
sum of all payments made to and retained by the servicer represents not 
more than reasonable compensation for the servicer's services under the 
pooling and servicing agreement and reimbursement of the servicer's 
reasonable expenses in connection therewith; and
    (6) The plan investing in such certificates is an ``accredited 
investor'' as defined in Rule 501(a)(1) of Regulation D of the 
Securities and Exchange Commission under the Securities Act of 1933.
    B. Neither any underwriter, sponsor, trustee, servicer, insurer, or 
any obligor, unless it or any of its affiliates has discretionary 
authority or renders investment advice with respect to the plan assets 
used by a plan to acquire certificates, shall be denied the relief 
provided under Part I, if the provision of subsection II.A.(6) above is 
not satisfied with respect to acquisition or holding by a plan of such 
certificates, provided that (1) such condition is disclosed in the 
prospectus or private placement memorandum; and (2) in the case of a 
private placement of certificates, the trustee obtains a representation 
from each initial purchaser which is a plan that it is in compliance 
with such condition, and obtains a covenant from each initial purchaser 
to the effect that, so long as such initial purchaser (or any 
transferee of such initial purchaser's certificates) is required to 
obtain from its transferee a representation regarding compliance with 
the Securities Act of 1933, any such transferees will be required to 
make a written representation regarding compliance with the condition 
set forth in subsection II.A.(6) above.

III. Definitions

    For purposes of this exemption:
    A. ``Certificate'' means:
    (1) a certificate--
    (a) that represents a beneficial ownership interest in the assets 
of a trust; and
    (b) that entitles the holder to pass-through payments of principal, 
interest, and/or other payments made with respect to the assets of such 
trust; or
    (2) a certificate denominated as a debt instrument--
    (a) that represents an interest in a Real Estate Mortgage 
Investment Conduit (REMIC) within the meaning of section 860D(a) of the 
Internal Revenue Code of 1986; and
    (b) that is issued by and is an obligation of a trust;

with respect to certificates defined in (1) and (2) above for which ABS 
or any of its affiliates is either (i) the sole underwriter or the 
manager or co-manager of the underwriting syndicate, or (ii) a selling 
or placement agent.
    For purposes of this exemption, references to ``certificates 
representing an interest in a trust'' include certificates denominated 
as debt which are issued by a trust.
    B. ``Trust'' means an investment pool, the corpus of which is held 
in trust and consists solely of:
    (1) either
    (a) secured consumer receivables that bear interest or are 
purchased at a discount (including, but not limited to, home equity 
loans and obligations secured by shares issued by a cooperative housing 
association);
    (b) secured credit instruments that bear interest or are purchased 
at a discount in transactions by or between business entities 
(including, but not limited to, qualified equipment notes secured by 
leases, as defined in section III.T);
    (c) obligations that bear interest or are purchased at a discount 
and which are secured by single-family residential, multi-family 
residential and commercial real property (including obligations secured 
by leasehold interests on commercial real property);
    (d) obligations that bear interest or are purchased at a discount 
and which are secured by motor vehicles or equipment, or qualified 
motor vehicle leases (as defined in section III.U);
    (e) ``guaranteed governmental mortgage pool certificates,'' as 
defined in 29 CFR 2510.3-101(i)(2);
    (f) fractional undivided interests in any of the obligations 
described in clauses (a)-(e) of this section B.(1);
    (2) property which had secured any of the obligations described in 
subsection B.(1);
    (3) undistributed cash or temporary investments made therewith 
maturing no later than the next date on which distributions are to be 
made to certificateholders; and
    (4) rights of the trustee under the pooling and servicing 
agreement, and rights under any insurance policies, third-party 
guarantees, contracts of suretyship and other credit support 
arrangements with respect to any obligations described in subsection 
B.(1).
    Notwithstanding the foregoing, the term ``trust'' does not include 
any investment pool unless: (i) the investment pool consists only of 
assets of the type which have been included in other investment pools, 
(ii) certificates evidencing interests in such other investment pools 
have been rated in one of the three highest generic rating categories 
by S&P's, Moody's, D & P, or Fitch for at least one year prior to the 
plan's acquisition of certificates pursuant to this exemption, and 
(iii) certificates evidencing interests in such other investment pools 
have been purchased by investors other than plans for at least one year 
prior to the plan's acquisition of certificates pursuant to this 
exemption.
    C. ``Underwriter'' means:
    (1) ABS;
    (2) any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by or under common control with 
ABS; or
    (3) any member of an underwriting syndicate or selling group of 
which ABS or a person described in (2) is a manager or co-manager with 
respect to the certificates.
    D. ``Sponsor'' means the entity that organizes a trust by 
depositing obligations therein in exchange for certificates.
    E. ``Master Servicer'' means the entity that is a party to the 
pooling and servicing agreement relating to trust assets and is fully 
responsible for servicing, directly or through subservicers, the assets 
of the trust.
    F. ``Subservicer'' means an entity which, under the supervision of 
and on behalf of the master servicer, services loans contained in the 
trust, but is not a party to the pooling and servicing agreement.
    G. ``Servicer'' means any entity which services loans contained in 
the trust, including the master servicer and any subservicer.
    H. ``Trustee'' means the trustee of the trust, and in the case of 
certificates which are denominated as debt instruments, also means the 
trustee of the indenture trust.
    I. ``Insurer'' means the insurer or guarantor of, or provider of 
other credit support for, a trust. Notwithstanding the foregoing, a 
person is not an insurer solely because it holds securities 
representing an interest in a trust which are of a class subordinated 
to certificates representing an interest in the same trust.
    J. ``Obligor'' means any person, other than the insurer, that is 
obligated to make payments with respect to any obligation or receivable 
included in the trust. Where a trust contains qualified motor vehicle 
leases or qualified equipment notes secured by leases, ``obligor'' 
shall also include any owner of property subject to any lease included 
in the trust, or subject to any lease securing an obligation included 
in the trust.
    K. ``Excluded Plan'' means any plan with respect to which any 
member of the Restricted Group is a ``plan sponsor'' within the meaning 
of section 3(16)(B) of the Act.
    L. ``Restricted Group'' with respect to a class of certificates 
means:
    (1) each underwriter;
    (2) each insurer;
    (3) the sponsor;
    (4) the trustee;
    (5) each servicer;
    (6) any obligor with respect to obligations or receivables included 
in the trust constituting more than 5 percent of the aggregate 
unamortized principal balance of the assets in the trust, determined on 
the date of the initial issuance of certificates by the trust; or
    (7) any affiliate of a person described in (1)-(6) above.
    M. ``Affiliate'' of another person includes:
    (1) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with such other person;
    (2) Any officer, director, partner, employee, relative (as defined 
in section 3(15) of the Act), a brother, a sister, or a spouse of a 
brother or sister of such other person; and
    (3) Any corporation or partnership of which such other person is an 
officer, director or partner.
    N. ``Control'' means the power to exercise a controlling influence 
over the management or policies of a person other than an individual.
    O. A person will be ``independent'' of another person only if:
    (1) such person is not an affiliate of that other person; and
    (2) the other person, or an affiliate thereof, is not a fiduciary 
who has investment management authority or renders investment advice 
with respect to any assets of such person.
    P. ``Sale'' includes the entrance into a forward delivery 
commitment (as defined in section Q below), provided:
    (1) The terms of the forward delivery commitment (including any fee 
paid to the investing plan) are no less favorable to the plan than they 
would be in an arm's length transaction with an unrelated party;
    (2) The prospectus or private placement memorandum is provided to 
an investing plan prior to the time the plan enters into the forward 
delivery commitment; and
    (3) At the time of the delivery, all conditions of this exemption 
applicable to sales are met.
    Q. ``Forward delivery commitment'' means a contract for the 
purchase or sale of one or more certificates to be delivered at an 
agreed future settlement date. The term includes both mandatory 
contracts (which contemplate obligatory delivery and acceptance of the 
certificates) and optional contracts (which give one party the right 
but not the obligation to deliver certificates to, or demand delivery 
of certificates from, the other party).
    R. ``Reasonable compensation'' has the same meaning as that term is 
defined in 29 CFR 2550.408c-2.
    S. ``Qualified Administrative Fee'' means a fee which meets the 
following criteria:
    (1) the fee is triggered by an act or failure to act by the obligor 
other than the normal timely payment of amounts owing in respect of the 
obligations;
    (2) the servicer may not charge the fee absent the act or failure 
to act referred to in (1);
    (3) the ability to charge the fee, the circumstances in which the 
fee may be charged, and an explanation of how the fee is calculated are 
set forth in the pooling and servicing agreement; and
    (4) the amount paid to investors in the trust will not be reduced 
by the amount of any such fee waived by the servicer.
    T. ``Qualified Equipment Note Secured By A Lease'' means an 
equipment note:
    (1) which is secured by equipment which is leased;
    (2) which is secured by the obligation of the lessee to pay rent 
under the equipment lease; and
    (3) with respect to which the trust's security interest in the 
equipment is at least as protective of the rights of the trust as the 
trust would have if the equipment note were secured only by the 
equipment and not the lease.
    U. ``Qualified Motor Vehicle Lease'' means a lease of a motor 
vehicle where:
    (1) the trust holds a security interest in the lease;
    (2) the trust holds a security interest in the leased motor 
vehicle; and
    (3) the trust's security interest in the leased motor vehicle is at 
least as protective of the trust's rights as the trust would receive 
under a motor vehicle installment loan contract.
    V. ``Pooling and Servicing Agreement'' means the agreement or 
agreements among a sponsor, a servicer and the trustee establishing a 
trust. In the case of certificates which are denominated as debt 
instruments, ``Pooling and Servicing Agreement'' also includes the 
indenture entered into by the trustee of the trust issuing such 
certificates and the indenture trustee.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on October 25, 1994 at 59 FR 
53674.

EFFECTIVE DATE: This exemption is effective for transactions occurring 
on or after August 12, 1994.

FOR FURTHER INFORMATION CONTACT: Gary Lefkowitz of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

The Masters, Mates and Pilots Pension Plan (The Pension Plan) and 
Individual Retirement Account Plan (the IRAP; together, the Plans) 
Located in Linthicum Heights, Maryland

[Prohibited Transaction Exemption 94-85; Exemption Application Nos. D-
9618 and D-9619]

Exemption

    The restrictions of sections 406(a), 406(b)(1) and (b)(2) and 
407(a) of the Act and the sanctions resulting from the application of 
section 4975 of the Code, by reason of section 4975(c)(1)(A) through 
(E) of the Code, shall not apply to the continued holding by the Plans 
of their shares of stock (the Stock) in American Heavy Lift Shipping 
Company, provided that: (a) the Plans' independent fiduciary has 
determined that the Plans' holding of the Stock is appropriate for the 
Plans and in the best interests of the Plans' participants and 
beneficiaries; and (b) the Plans' independent fiduciary continues to 
monitor the Plans' holding of the Stock and determines at all times 
that such transaction remains in the best interests of the Plans.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on October 25, 1994 at 59 FR 
53682.

TEMPORARY NATURE OF EXEMPTION: This exemption is effective until the 
later of: (1) December 31, 1995, or (2) December 31, 1996 provided 
another application for exemption is filed with the Department prior to 
December 31, 1995.

FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

The Bank of California, N.A.; Located in San Francisco, California

[Prohibited Transaction Exemption 94-86; Exemption Application No. D-
9240]

Exemption

Section I--Exemption for In-Kind Transfer of Assets

    The restrictions of section 406(a) 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) shall not apply, 
effective November 12, 1993, to the in-kind transfer to any diversified 
open-end investment company (the Fund or Funds) registered under the 
Investment Company Act of 1940 to which the Bank of California, N.A. or 
any of its affiliates (collectively, the Bank) serves as investment 
adviser and may provide other services of the assets of various 
employee benefit plans (the Plan or Plans) that are either held in 
certain collective investment funds (the CIF or CIFs) maintained by the 
Bank or otherwise held by the Bank as trustee, investment manager, or 
in any other capacity as fiduciary on behalf of the Plans, in exchange 
for shares of such Funds; provided that the following conditions are 
met:
    (a) A fiduciary (the Second Fiduciary) who is acting on behalf of 
each affected Plan and who is independent of and unrelated to the Bank, 
as defined in paragraph (g) of section III below, receives advance 
written notice of the in-kind transfer of assets of the Plans or the 
CIFs in exchange for shares of the Fund and the disclosures described 
in paragraph (g) of section II below;
    (b) On the basis of the information described in paragraph (g) of 
section II below, the Second Fiduciary authorizes in writing the in-
kind transfer of assets of the Plans in exchange for shares of the 
Funds, the investment of such assets in corresponding portfolios of the 
Funds, and the fees received by the Bank in connection with its 
services to the Fund. Such authorization by the Second Fiduciary to be 
consistent with the responsibilities, obligations, and duties imposed 
on fiduciaries by Part 4 of Title I of the Act;
    (c) No sales commissions are paid by the Plans in connection with 
the in-kind transfers of asset of the Plans or the CIFs in exchange for 
shares of the Funds;
    (d) All or a pro rata portion of the assets of the Plans held in 
the CIFs or all or a pro rata portion of the assets of the Plans held 
by the Bank in any capacities as fiduciary on behalf of such Plans are 
transferred in-kind to the Funds in exchange for shares of such Funds,
    (e) The Plans or the CIFs receive shares of the Funds that have a 
total net asset value equal in value to the assets of the Plans or the 
CIFs exchanged for such shares on the date of transfer;
    (f) The current market value of the assets of the Plans or the CIFs 
to be transferred in-kind in exchange for shares is determined in a 
single valuation performed in the same manner and at the close of 
business on the same day, using independent sources in accordance with 
the procedures set forth in Rule 17a-7(b) (Rule 17a-7) under the 
Investment Company Act of 1940, as amended from time to time or any 
successor rule, regulation, or similar pronouncement, and the 
procedures established by the Funds pursuant to Rule 17a-7 for the 
valuation of such assets. Such procedures must require that all 
securities for which a current market price cannot be obtained by 
reference to the last sale price for transactions reported on a 
recognized securities exchange or NASDAQ 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 Friday preceding the weekend 
of the Plan or CIF transfers determined on the basis of reasonable 
inquiry from at least three sources that are broker-dealers or pricing 
services independent of the Bank;
    (g) Not later than thirty (30) days after completion of each in-
kind transfer of assets of the Plans or the CIFs in exchange for shares 
of the Funds, the Bank sends by regular mail to the Second Fiduciary, 
who is acting on behalf of each affected Plan and who is independent of 
and unrelated to the Bank, as defined in paragraph (g) of section III 
below, a written confirmation that contains the following information:
    (1) the identity of each of the assets that was valued for purposes 
of the transaction in accordance with Rule 17a-7(b)(4) under the 
Investment Company Act of 1940;
    (2) the price of each of the assets involved in the transaction; 
and
    (3) the identity of each pricing service or market maker consulted 
in determining the value of such assets; and
    (h) For all conversion transactions that occur after the date of 
this exemption, the Bank, no later than ninety (90) days after 
completion of each in-kind transfer of assets of the Plans or the CIFs 
in exchange for shares of the Funds, will send by regular mail to the 
Second Fiduciary, who is acting on behalf of each affected Plan and who 
is independent of and unrelated to the Bank, as defined in paragraph 
(g) of section III below, a written confirmation that contains the 
following information:
    (1) the number of CIF units held by each affected Plan immediately 
before the conversion (and the related per unit value or the aggregate 
dollar value of the units transferred); and
    (2) the number of shares in the Funds that are held by each 
affected Plan following the conversion (and the related per share net 
asset value or the aggregate dollar value of the shares received).
    (i) The conditions set forth in paragraphs (d), (e), (f), (o), (p), 
(q) and (r) of section II below are satisfied;

Section II--Exemption for Receipt of Fees From Funds

    If the exemption is granted, effective November 12, 1993, the 
restrictions of section 406(a) 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 acting as 
the investment adviser, custodian, sub-administrator, and other service 
provider for the Funds in connection with the investment in the Funds 
by the Plans for which the Bank acts as a fiduciary provided that:
    (a) No sales commissions are paid by the Plans in connection with 
purchases or sales of shares of the Funds and no redemption fees are 
paid in connection with the sale of such shares by the Plans to the 
Funds;
    (b) The price paid or received by the Plans for shares in the Funds 
is the net asset value per share, as defined in paragraph (e) of 
section III, at the time of the transaction and is the same price which 
would have been paid or received for the shares by any other investor 
at that time;
    (c) The Bank, its affiliates, and officers or directors have not 
and will not purchase from or sell to any of the Plans shares of any of 
the Funds;
    (d) 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 of ``reasonable compensation'' within the 
meaning of section 408(b)(2) of the Act;
    (e) 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;
    (f) The Plans are not sponsored by the Bank;
    (g) A Second Fiduciary who is acting on behalf of a Plan and who is 
independent of and unrelated to the Bank, as defined in paragraph (g) 
of section III below, receives in advance of the investment by a Plan 
in any of the Funds a full and detailed written disclosure of 
information concerning such Fund including, but not limited to:
    (1) a current prospectus for each portfolio of each of the Funds in 
which such Plan is considering investing,
    (2) a statement describing the fees for investment management, 
investment advisory, or other similar services, any fees for secondary 
services (Secondary Services), as defined in paragraph (h) of section 
III below, and all other fees to be charged to or paid by the Plan and 
by such Funds to the Bank, including the nature and extent of any 
differential between the rates of such fees,
    (3) the reasons why the Bank may consider such investment to be 
appropriate for the Plan,
    (4) a statement describing whether there are any limitations 
applicable to the Bank with respect to which assets of a Plan may be 
invested in the Funds, and, if so, the nature of such limitations; and
    (5) upon request of the Second Fiduciary, a copy of the proposed 
exemption and/or a copy of the final exemption.
    (h) On the basis of the information described in paragraph (g) of 
this section II, the Second Fiduciary authorizes in writing: (1) The 
investment of assets of the Plans in shares of the Fund, in connection 
with the transaction set forth in section II; (2) the investment 
portfolios of the Funds in which the assets of the Plans may be 
invested; and (3) the fees received by the Bank in connection with its 
services to the Funds; such authorization by the Second Fiduciary to be 
consistent with the responsibilities, obligations, and duties imposed 
on fiduciaries by Part 4 of Title I of the Act;
    (i) The authorization, described in paragraph (h) of this section 
II, is terminable at will by the Second Fiduciary of a Plan, without 
penalty to such Plan. Such termination will be effected by the Bank 
selling the shares of the Fund held by the affected Plan within one 
business day following receipt by the Bank, either by mail, hand 
delivery, facsimile, or other available means at the option of the 
Second Fiduciary, of the termination form (the Termination Form), as 
defined in paragraph (i) of section III below, or any other written 
notice of termination; provided that if, due to circumstances beyond 
the control of the Bank, the sale cannot be executed within one 
business day, the Bank shall have one additional business day to 
complete such sale;
    (j) Plans do not pay any plan-level investment management fees, 
investment advisory fees, or similar fees to the Bank with respect to 
any of the assets of such Plans which are invested in shares of any of 
the Funds. This condition does not preclude the payment of investment 
advisory fees or similar fees by the Funds to the Bank under the terms 
of an investment advisory agreement adopted in accordance with section 
15 of the Investment Company Act of 1940 or other agreement between the 
Bank and the Funds;
    (k) In the event of an increase in the rate of any fees paid by the 
Funds to the Bank regarding any investment management services, 
investment advisory services, or fees for similar services that the 
Bank provides to the Funds over an existing rate for such services that 
had been authorized by a Second Fiduciary, in accordance with paragraph 
(h) of this section II, the Bank will, at least thirty (30) days in 
advance of the implementation of such increase, provide a written 
notice (which may take the form of a proxy statement, letter, or 
similar communication that is separate from the prospectus of the Fund 
and which explains the nature and amount of the increase in fees) to 
the Second Fiduciary of each of the Plans invested in a Fund which is 
increasing such fees. Such notice shall be accompanied by the 
Termination Form, as defined in paragraph (i) of section III below;
    (l) In the event of an addition of a Secondary Service, as defined 
in paragraph (h) of section III below, provided by the Bank to the Fund 
for which a fee is charged or an increase in the rate of any fee paid 
by the Funds to the Bank for any Secondary Service, as defined in 
paragraph (h) of section III below, that results either from an 
increase in the rate of such fee or from the decrease in the number or 
kind of services performed by the Bank for such fee over an existing 
rate for such Secondary Service which had been authorized by the Second 
Fiduciary of a Plan, in accordance with paragraph (h) of this section 
II, the Bank will at least thirty (30) days in advance of the 
implementation of such additional service for which a fee is charged or 
fee increase, provide a written notice (which may take the form of a 
proxy statement, letter, or similar communication that is separate from 
the prospectus of the Fund and which explains the nature and amount of 
the additional service for which a fee is charged or the nature and 
amount of the increase in fees) to the Second Fiduciary of each of the 
Plans invested in a Fund which is adding a service or increasing fees. 
Such notice shall be accompanied by the Termination Form, as defined in 
paragraph (i) of section III below.
    (m) The Second Fiduciary is supplied with a Termination Form at the 
times specified in paragraphs (k), (l), and (n) of this section II, 
which expressly provides an election to terminate the authorization, 
described above in paragraph (h) of this section II, with instructions 
regarding the use of such Termination Form including statements that:
    (1) the authorization is terminable at will by any of the Plans, 
without penalty to such Plans. Such termination will be effected by the 
Bank selling the shares of the Fund held by the Plans requesting 
termination within one business day following receipt by the Bank, 
either by mail, hand delivery, facsimile, or other available means at 
the option of the Second Fiduciary, of the Termination Form or any 
other written notice of termination; provided that if, due to 
circumstances beyond the control of the Bank, the sale of shares of 
such Plans cannot be executed within one business day, the Bank shall 
have one additional business day to complete such sale; and
    (2) failure by the Second Fiduciary to return the Termination Form 
on behalf of a Plan will be deemed to be an approval of the additional 
Secondary Service for which a fee is charged or increase in the rate of 
any fees, if such Termination Form is supplied pursuant to paragraphs 
(k) and (l) of this section II, and will result in the continuation of 
the authorization, as described in paragraph (h) of this section II, of 
the Bank to engage in the transactions on behalf of such Plan;
    (n) The Second Fiduciary is supplied with a Termination Form, 
annually during the first quarter of each calendar year, beginning with 
the first quarter of the calendar year that begins after the date the 
grant of this exemption is published in the Federal Register and 
continuing for each calendar year thereafter; provided that the 
Termination Form need not be supplied to the Second Fiduciary, pursuant 
to paragraph (n) of this section II, sooner than six months after such 
Termination Form is supplied pursuant to paragraphs (k) and (l) of this 
section II, except to the extent required by said paragraphs (k) and 
(l) of this section II to disclose an additional Secondary Service for 
which a fee is charged or an increase in fees;
    (o)(1) With respect to each of the Funds in which a Plan invests, 
the Bank will provide the Second Fiduciary of such Plan:
    (A) at least annually with a copy of an updated prospectus of such 
Fund;
    (B) upon the request of such Second Fiduciary, with a report or 
statement (which may take the form of the most recent financial report, 
the current statement of additional information, or some other written 
statement) which contains a description of all fees paid by the Fund to 
the Bank; and
    (2) With respect to each of the Funds in which a Plan invests, in 
the event such Fund places brokerage transactions with the Bank, the 
Bank will provide the Second Fiduciary of such Plan at least annually 
with a statement specifying:
    (A) the total, expressed in dollars, brokerage commissions of each 
Fund's investment portfolio that are paid to the Bank by such Fund;
    (B) the total, expressed in dollars, of brokerage commissions of 
each Fund's investment portfolio that are paid by such Fund to 
brokerage firms unrelated to the Bank;
    (C) the average brokerage commissions per share, expressed as cents 
per share, paid to the Bank by each portfolio of a Fund; and
    (D) the average brokerage commissions per share, expressed as cents 
per share, paid by each portfolio of a Fund to brokerage firms 
unrelated to the Bank;
    (p) All dealings between the Plans and any of the Funds are on a 
basis no less favorable to such Plans than dealings between the Funds 
and other shareholders holding the same class of shares as the Plans;
    (q) The Bank maintains for a period of six (6) years the records 
necessary to enable the persons, as described in paragraph (r) of 
section II 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 (6) year 
period, and
    (2) no party in interest, other than the Bank, shall be subject to 
the civil penalty that may be assessed under section 502(i) of the Act, 
or to the taxes imposed by section 4975(a) and (b) of the Code, if the 
records are not maintained, or are not available for examination as 
required by paragraph (r) of section II below;
    (r)(1) Except as provided in paragraph (r)(2) of this section II 
and notwithstanding any provisions of subsection (a)(2) and (b) of 
section 504 of the Act, the records referred to in paragraph (q) of 
section II above are unconditionally available at their customary 
location for examination during normal business hours by--
    (i) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service;
    (ii) Any fiduciary of each of the Plans who has authority to 
acquire or dispose of shares of any of the Funds owned by such a Plan, 
or any duly authorized employee or representative of such fiduciary; 
and
    (iii) Any participant or beneficiary of the Plans or duly 
authorized employee or representative of such participant or 
beneficiary;
    (2) None of the persons described in paragraph (r)(1)(ii) and 
(r)(1)(iii) of section II shall be authorized to examine trade secrets 
of the Bank, or commercial or financial information which is privileged 
or confidential.

Section III--Definitions

    For purposes of this exemption,
    (a) The term ``Bank'' means The Bank of California, N.A. and any 
affiliate of the Bank, as defined in paragraph (b) of this section III.
    (b) An ``affiliate'' of a person includes:
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person;
    (2) any officer, director, employee, relative, or partner in any 
such person; and
    (3) Any corporation or partnership of which such person is an 
officer, director, partner, or employee.
    (c) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual;
    (d) The term ``Fund or Funds'' means any diversified open-end 
investment company or companies registered under the Investment Company 
Act of 1940 for which the Bank serves as investment adviser, and may 
also provide custodial or other services as approved by such Funds;
    (e) The term, ``net asset value'' means the amount for purposes of 
pricing all purchases and sales calculated by dividing the value of all 
securities, determined by a method as set forth in a Fund's prospectus 
and statement of additional information, and other assets belonging to 
each of the portfolios in such Fund, less the liabilities charged to 
each portfolio, by the number of outstanding shares.
    (f) The term, ``relative,'' means a ``relative'' as that term is 
defined in section 3(15) of the Act (or a ``member of the family'' as 
that term is defined in section 4975(e)(6) of the Code), or a brother, 
a sister, or a spouse of a brother or a sister.
    (g) The term, ``Second Fiduciary,'' means a fiduciary of a plan who 
is independent of and unrelated to the Bank. For purposes of this 
exemption, the Second Fiduciary will not be deemed to be independent of 
and unrelated to the Bank if:
    (1) Such Second Fiduciary directly or indirectly controls, is 
controlled by, or is under common control with the Bank;
    (2) Such Second Fiduciary, or any officer, director, partner, 
employee, or relative of such Second Fiduciary is an officer, director, 
partner, or employee of the Bank (or is a relative of such persons);
    (3) Such Second Fiduciary directly or indirectly receives any 
compensation or other consideration for his or her own personal account 
in connection with any transaction described in this exemption.
    If an officer, director, partner, 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/advisor, (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.
    (h) The term, ``Secondary Service,'' means a service, other than an 
investment management, investment advisory, or similar service, which 
is provided by the Bank to the Funds, including but not limited to 
custodial, accounting, brokerage, administrative, or any other service.
    (i) The term, ``Termination Form,'' means the form supplied to the 
Second Fiduciary, at the times specified in paragraphs (k), (l), and 
(n) of section II above, which expressly provides an election to the 
Second Fiduciary to terminate on behalf of the Plans the authorization, 
described in paragraph (h) of section II. Such Termination Form may be 
used at will by the Second Fiduciary to terminate such authorization 
without penalty to the Plans and to notify the Bank in writing to 
effect such termination by selling the shares of the Fund held by the 
Plans requesting termination within one business day following receipt 
by the Bank, either by mail, hand delivery, facsimile, or other 
available means at the option of the Second Fiduciary, of written 
notice of such request for termination; provided that if, due to 
circumstances beyond the control of the Bank, the sale cannot be 
executed within one business day, the Bank shall have one additional 
business day to complete such sale.

EFFECTIVE DATE: The exemption is effective retroactively, as of 
November 12, 1993.

Written Comments

    In the Notice of Proposed Exemption (the Notice), the Department 
invited all interested persons to submit written comments and requests 
for a hearing on the proposed exemption within sixty (60) days of the 
date of the publication of the Notice in the Federal Register on August 
17, 1994. All comments and requests for hearing were due by October 17, 
1994.
    During the comment period, the Department received no requests for 
a hearing. However, the Department did receive a comment letter from 
the applicant, dated October 17, 1994. The comment from the applicant 
requested certain modifications and clarifications of the conditions of 
the exemption and certain corrections of the language of the Summary of 
Facts and Representation in the Notice. The applicant's comments are as 
follows:
    First, the Bank requests modification of the language in Section 
I(f). This section provides in relevant part that,
    The value of the assets of the Plans or the CIFs to be transferred 
in-kind and the net asset value of the Funds receiving those assets in 
exchange for shares is determined in a single valuation performed in 
the same manner and at the close of business on the same day, in 
accordance with the procedures set forth in Rule 17a-7(b) (Rule 17a-7) 
under the Investment Company Act of 1940, as amended from time to time 
or any successor rule, regulation, or similar pronouncement.

(Emphasis added). In this regard, the Bank indicated that the valuation 
procedures described in Rule 17a-7 were used to value the CIF 
securities transferred to the Funds in the ``conversion'' transaction 
that occurred on November 12, 1993, for which retroactive relief has 
been requested. Further, in connection with the determination of the 
net asset value of the Funds' shares to be transferred to the CIFs in 
that transaction, the trustees of the HighMark Group (HighMark) decided 
to use Rule 17a-7 procedures to value certain securities held in the 
portfolios of the Funds in cases where those securities were the same 
as the securities being transferred to the Funds by the CIFs. However, 
it is represented that Rule 17a-7 procedures were not used to determine 
the value of other securities held in the Fund portfolios where those 
securities were not the same as those held by the CIFs. The values of 
such other Fund securities were instead determined pursuant to 
procedures permitted under the Investment Company Act and normally 
followed by HighMark in determining net asset value. The Bank maintains 
that it did not intend as a condition of the exemption that Rule 17a-7 
valuation procedures be used to determine the value of all of the 
Fund's assets for purposes of ascertaining the number of shares to be 
issued in connection with a conversion. The Bank believes that the best 
approach is to require both parties to a conversion (e.g., a CIF and a 
Fund) to use the same procedures to value any securities that are held 
by both parties, but that compliance with the valuation requirements of 
Rule 17a-7 should be required only with respect to securities held by a 
party (such as a CIF) that is not a registered investment company. In 
the opinion of the Bank, this would provide assurance that assets 
transferred in a conversion transaction are priced appropriately 
without interfering with the procedures normally employed by a 
registered investment company in determining its net asset value.
    In this regard, the Department believes that the most important 
consideration is that the value of the securities transferred by the 
Plan or the CIF into the Fund equal the value of the units of the Fund 
received in exchange for such securities by the Plan. Accordingly, we 
believe that the securities transferred must be valued under the same 
procedures by both the transferee and transferor entity (e.g. a CIF and 
a Fund). In response to the comment, the Department has reviewed its 
policies concerning valuation in these types of transactions and has 
decided to implement the following changes. The word, ``are,'' before 
the word, ``value,'' should be deleted and the language of Section I(e) 
amended to read as follows: ``The Plans or the CIFs receive shares of 
the Funds that have a total net asset value equal in value to the 
assets of the Plans or the CIFs exchanged for such shares on the date 
of transfer.'' (The New language is italicized).
    The Department concurs with the applicant's request that Section 
I(f) be amended by deleting the phrase, ``and the net asset value of 
the Funds receiving those assets,'' from the language quoted above to 
provide that Rule 17a-7 procedures are required to value only assets 
being transferred to a Fund, and not the assets of the Fund itself. In 
this connection, the Department has amended the language of Section 
I(f) to read as follows: ``The current market value of the assets of 
the Plans or the CIFs to be transferred in-kind in exchange for shares 
is determined in a single valuation performed in the same manner and at 
the close of business on the same day, using independent sources in 
accordance with the procedures set forth in Rule 17a-7(b) (Rule 17a-7) 
under the Investment Company Act of 1940, as amended from time to time 
or any successor rule, regulation, or similar pronouncement, and the 
procedures established by the Funds pursuant to Rule 17a-7 for the 
valuation of such assets. Such procedures must require that all 
securities for which a current market price cannot be obtained by 
reference to the last sale price for transactions reported on a 
recognized securities exchange or NASDAQ 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 Friday preceding the weekend 
of the Plan or CIF transfers determined on the basis of reasonable 
inquiry from at least three sources that are broker-dealers or pricing 
services independent of the Bank. (The new language is italicized).
    The Bank in another comment requests a modification of the language 
of Section II(i) and the parallel language in Section II(m)(1) and 
Section III(i). The language in these sections requires the Bank to 
sell Fund shares within one business day after receipt by the Bank, 
either by mail, hand delivery, facsimile, or other available means of 
the Termination Form or any other written notice from the Second 
Fiduciary terminating its authorization of investments in the Fund. The 
language of these sections provides that if due to circumstances beyond 
the control of the Bank, the sale cannot be executed within one 
business day, the Bank shall have one additional business day to 
complete such sale. The Bank believes that the circumstances that may 
prevent the Bank from completing a sale within one business day (e.g., 
natural disaster) may, as a practical matter, also prevent completion 
of such sale by the second day. Accordingly, the Bank suggests that the 
language be amended to make clear that a prohibited transaction will 
not be considered to have occurred in such circumstances, if the Bank, 
due to circumstances that could not be reasonably foreseen by the Bank, 
is further prevented from completing the sale by the end of the 
additional business day.
    The Department believes that the two business day requirement 
provides ample opportunity for the Bank to execute sales of shares in 
the Funds, even in the event circumstances arise which could not 
reasonably have been foreseen by the Bank. Accordingly, the Department 
does not believe that the modification proposed by the Bank would be in 
the interest of the Plans, and has determined not to revise the 
exemption in this manner.
    The Bank also requested a clarification of the scope of relief 
provided by Section II of the proposed exemption. In this regard, the 
language of Section II, as published in the Notice, provides relief 
from ``the sanctions resulting from the application of section 4975 of 
the Code by reason of section 4975(c)(1) (D) through (F) of the Code.'' 
The Bank believes that the reference to section 4975(c)(1)(D) is a 
typographical error and requests that the exemption be corrected to 
include relief from section 4975(c)(1) (A) through (F) of the Code in 
order to conform with the scope of relief provided to other applicants 
for substantially similar transactions. The Department concurs and has 
amended the exemption accordingly.
    The Bank also commented on section I wherein it is stated that the 
Plans involved in the transaction are Plans for which the Bank serves 
as trustee, investment manager, or in any other capacity as fiduciary 
on behalf of the Plan, and on section II wherein it is stated that the 
Plans involved in the transaction are Plans for which the Bank serves 
as fiduciary. The Bank states that although its original application 
referred to Plans for which it exercised investment discretion, it 
wishes to note for the record that it also serves Plans in other 
fiduciary capacities that do not involve the exercise of investment 
responsibility. In this regard, in addition to the representations 
contained in paragraph 2 of the Notice, as of the time of the 
application, the Bank had custody of approximately $2.5 billion in 
assets from approximately 1,500 plans for which the Bank does not 
exercise investment responsibility.
    In response to this comment, the Department acknowledges this 
additional information. However, the Department wishes to reiterate 
that it is not granting relief for transactions afforded relief by 
Section 404(c) of the Act nor relief for transactions involving any 
plan sponsored by the Bank or its affiliates.
    The Bank in its comment letter also requests further modifications 
and updates to the language of the Summary of Facts and 
Representations, as published in the Federal Register. Specifically, 
the Bank requests that representations at pages 42293 through 42294 in 
Notice be changed to reflect the fact that HighMark now has eleven (11) 
portfolios, having established in November 1993, four (4) new non-money 
market portfolios, namely the Growth Fund, the Income & Growth Fund, 
the Balanced Fund, and the Government Bond Fund, and having merged the 
Special Growth Equity and Growth Funds in May 1994. It is further 
represented that the Bank continues to serve as investment adviser, 
sub-administrator, sub-transfer agent and custodian, but does not serve 
as sub-accountant to HighMark. The Department notes that this 
additional information will be included in the record of the exemption.
    The Bank also requests clarification of the language of the fourth 
sentence of paragraph 3 of the Summary of Facts and Representation, as 
published in the Federal Register. In this regard, the Bank wishes to 
confirm that the exemption does not preclude the Bank from relying on 
any other available exemption (e.g., Prohibited Transaction Class 
Exemption 84-24 or Prohibited Transaction Class Exemption 77-4), if the 
terms and conditions of such exemptions are satisfied and if the Bank 
deems it appropriate to do so in a given situation. The Department 
concurs in this comment, but expresses no opinion regarding the 
availability of those exemptions.
    The Bank also comments that the first sentence of paragraph 5 of 
the Summary of Facts and Representations in the Notice could be read to 
suggest that the Bank believes that in-kind transfers of the type 
covered by Section I of the exemption are not covered by Prohibited 
Transaction Class Exemption 77-4. While the Bank represents that it 
intends to follow the requirements of Section I of the exemption in 
connection with such in-kind transfers, the Bank reiterates that its 
position was and is that such transfers also are within the scope of 
Prohibited Transaction Class Exemption 77-4. The Department notes that 
it has formally expressed its view on this issue. Specifically, the 
Department has concluded that the relief provided by Prohibited 
Transaction Class Exemption 77-4 is unavailable for the purchase of 
shares in mutual funds other than for cash. (See footnote 3 in Advisory 
Opinion 94-35A, dated November 3, 1994).
    Finally, the Bank wishes to update in three particulars the 
description of the Bank's automated ``sweep'' service described in the 
Summary of Facts and Representations, as published in the Federal 
Register. In this regard, language in the first paragraph in paragraph 
14 of the Notice indicates that purchases and sales of shares in any of 
the Funds by the Plans may also occur in connection with daily 
automated cash ``sweep'' arrangements, but that agreement to such an 
arrangement is not a condition for the Plan otherwise choosing to 
invest in shares of the Fund, nor will the reverse be required. The 
Bank maintains that the meaning of the phrase, ``nor will the reverse 
be required'' is unclear. It is the Bank's position that, in the 
exercise of its business judgment regarding the structure and 
characteristics of any sweep services it may wish to offer, it may 
choose to limit investment vehicles made available under any sweep 
program to shares of a designated Fund. The Department notes that the 
sentence in which the phrase, ``nor will the reverse be required,'' 
appeared was intended to mean that Plans may participate in automated 
cash ``sweep'' arrangements involving the Funds without being required 
to invest other plan assets in shares of the Funds and that Plans may 
invest in the Funds without being required also to participate in 
automated cash ``sweep'' arrangements offered by the Bank.
    Second, the Bank wishes to correct a representation in the second 
paragraph of paragraph 14 of the Notice which states, in part, that 
``all of the Plans served by the Bank had elected to participate in 
automated cash ``sweep'' arrangements with HighMark.'' According to the 
Bank, this representation should read that ``substantially all'' of the 
Plans served by the Bank had elected to participate in automated cash 
``sweep'' arrangements with HighMark. The Department concurs and 
incorporates this information into the exemption.
    Third, the Bank seeks clarification of the second sentence of the 
third paragraph of paragraph 14 of the Notice. In the opinion of the 
Bank, the sentence could be read to suggest that the ``sweep'' program 
for a given Plan may involve investments in more than one of the 
HighMark money market portfolios at the same time. The Bank represents 
that while a Plan may choose from among several such portfolios of 
HighMark, the ``sweep'' arrangement for a given Plan involves automatic 
investments in shares of only one such portfolio at a time. The 
Department concurs and incorporates the information on the ``sweep'' 
program into the exemption.
    After giving full consideration to the entire record, including the 
written comment from the Bank, the Department has decided to grant the 
exemption, as described and concurred in above. In this regard, the 
comment letter submitted by the Bank to the Department has been 
included as part of the public record of the exemption application. The 
complete application file, including all supplemental submissions 
received by the Department, is made available for public inspection in 
the Public Documents Room of the Pension Welfare Benefits 
Administration, Room N-5638, U.S. Department of Labor, 200 Constitution 
Avenue N.W., Washington, D.C. 20210.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the notice of proposed exemption published on Wednesday, August 17, 
1994, at 59 FR 42289.

FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the 
Department, telephone (202) 219-8883 (this is not a toll-free number.)

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions to which the exemptions does not 
apply and the general fiduciary responsibility provisions of section 
404 of the Act, which among other things require a fiduciary to 
discharge his duties respecting the plan solely in the interest of the 
participants and beneficiaries of the plan and in a prudent fashion in 
accordance with section 404(a)(1)(B) of the Act; nor does it affect the 
requirement of section 401(a) of the Code that the plan must operate 
for the exclusive benefit of the employees of the employer maintaining 
the plan and their beneficiaries;
    (2) These exemptions are supplemental to and not in derogation of, 
any other provisions of the Act and/or the Code, including statutory or 
administrative exemptions and transactional rules. Furthermore, the 
fact that a transaction is subject to an administrative or statutory 
exemption is not dispositive of whether the transaction is in fact a 
prohibited transaction; and
    (3) The availability of these exemptions is subject to the express 
condition that the material facts and representations contained in each 
application accurately describes all material terms of the transaction 
which is the subject of the exemption.

    Signed at Washington, D.C., this 14th day of December, 1994.
Ivan Strasfeld,
Director of Exemption Determinations Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 94-31087 Filed 12-16-94; 8:45 am]
BILLING CODE 4510-29-P