[Federal Register Volume 60, Number 122 (Monday, June 26, 1995)]
[Notices]
[Pages 32992-33010]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-15521]



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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 95-46;
Exemption Application No. D-09519, et al.]


Grant of Individual Exemptions; Westinghouse Pension Plan, 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.

Westinghouse Pension Plan (the Plan)

Located in Pittsburgh, Pennsylvania [Prohibited Transaction 
Exemption 95-46; Application No. D-09519]

Exemption

    The restrictions of sections 406(a)(1)(A) through (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)(A) through 
(E) of the Code, shall not apply to the contribution of certain 
securities (the Securities) to the Plan on September 14, 1993 and 
October 29, 1993 by Westinghouse Electric Corporation (WEC), the Plan's 
sponsor and as such a party in interest with respect to the Plan, 
provided the following conditions are met:
    (a) The Securities were valued at an amount which was no greater 
than their fair market value at the time of contribution, as 
established by an independent, qualified appraiser;
    (b) The terms and conditions of the contributions were at least as 
favorable to the Plan as terms and conditions which the Plan could have 
obtained in a purchase of similar securities from an unrelated party; 
[[Page 32993]] 
    (c) The Plan did not pay any commissions or other expenses with 
respect to the contributions;
    (d) The fair market value of the Securities represents at all times 
an amount of the Plan's total assets which is consistent with the 
Plan's investment guidelines and objectives;
    (e) Additional Plan assets are not used to purchase any new 
securities which are considered ``alternative investments'' to the 
extent that such purchases, when added to the outstanding fair market 
value of the Securities owned by the Plan, would cause more than 5.2 
percent of the Plan's total assets to be invested in ``alternative 
investments'' (other than as may be occasioned merely by an increase in 
value);\1\

     1Alternative investments generally are relatively illiquid 
investments in an asset class other than traditional classes of 
cash, stock, fixed income securities and real estate.
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    (f) Mellon Bank N.A. (Mellon), as an independent, qualified 
fiduciary for the Plan, determined that each contribution of the 
Securities to the Plan was in the best interests and protective of the 
Plan and its participants and beneficiaries at the time of the 
transactions;
    (g) Mellon monitored each contribution made to the Plan and took 
all appropriate actions necessary to protect the interests of the Plan 
and its participants and beneficiaries;
    (h) Mellon monitors the performance of the Securities as an 
investment for the Plan and takes whatever action is necessary to 
protect the interests of the Plan and its participants and 
beneficiaries;
    (i) On the date on which the Plan no longer holds any of the 
Securities contributed by WEC on September 14 and October 29, 1993 (the 
Exercise Date), WEC shall contribute to the Plan the difference between 
the following:
    (1) the sum of (i) the sales proceeds received by the Plan on the 
disposition of all of the Securities, plus (ii) interest accrued and 
interest and dividends received on the Securities; and
    (2) the aggregate value of the Securities on the date that they 
were originally contributed to the Plan (i.e. $188,882,694), plus any 
adjustments to such aggregate value requested by Mellon to reflect 
changes in the Consumer Price Index (CPI) during the period that the 
Securities were held by the Plan, upon demand by Mellon as the Plan's 
independent fiduciary under the terms of a ``makewhole agreement'' with 
the Plan (the Makewhole Agreement). Mellon shall have sole authority to 
determine the amount due to the Plan under the Makewhole Agreement (the 
Makewhole Amount) at the time of the transaction;2

     2The Department notes that any decision made by Mellon as the 
Plan's independent fiduciary with respect to the exercise of the 
Plan's rights under the Makewhole Agreement shall be fully subject 
to the fiduciary responsibility provisions of the Act. However, by 
granting this exemption, the Department is not expressing an opinion 
regarding whether any actions taken by Mellon would be consistent 
with its fiduciary obligations under Part 4 of Title I of the Act. 
In this regard, section 404(a) of the Act requires, among other 
things, that a plan fiduciary act prudently, solely in the interest 
of the plan's participants and beneficiaries, and for the exclusive 
purpose of providing benefits to participants and beneficiaries when 
making decisions on behalf of a plan.
    (j) On December 30, 1994, WEC made a cash contribution to the Plan 
in the amount of $25 million to support any amounts that may become due 
under the Makewhole Agreement, provided that this cash contribution is 
held as a separate credit balance in the Plan's funding standard 
account until the termination date of the Makewhole Agreement (as 
amended pursuant to paragraph (i) above) and is not used to offset any 
other funding obligation owed by WEC to the Plan until such date. 
Mellon, as the Plan's independent fiduciary, shall be responsible for 
investing the $25 million and ensuring that the Plan receives all 
interest and other income earned on the $25 million; and
    (l) Mellon monitors the compliance by all parties with the terms 
and conditions of the exemption.

EFFECTIVE DATE: The exemption is effective for each contribution as of 
September 14 and October 29, 1993, respectively.
    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 (the Proposal) published on November 
14, 1994, at 59 FR 56537.

WRITTEN COMMENTS AND MODIFICATIONS: The Department received over 160 
comment letters from interested persons. The matters raised in the 
comment letters concern: (1) Sufficiency of the notice to interested 
persons regarding the Proposal; (2) the decision made by WEC to 
contribute the Securities to the Plan rather than sell the Securities 
on the open market; (3) the effect of the contribution of the 
Securities on the Plan's funding status; (4) the investment performance 
of the Tops Securities since the Plan's acquisition of such Securities 
and the potential for losses by the Plan after the period covered by 
the Makewhole Agreement; and (5) the role of Mellon as the independent 
fiduciary for the Plan, particularly with respect to its obligations to 
enforce the terms and conditions of the Makewhole Agreement.
    The Department notes that in a letter dated December 27, 1994, the 
International Brotherhood of Electrical Workers (IBEW) expressed 
particular concerns regarding: (i) The apparent discretionary nature of 
Mellon's obligations to enforce the terms of the Makewhole Agreement on 
behalf of the Plan; (ii) the need to extend the period covered by the 
Makewhole Agreement beyond September 14, 1996 for the Tops Securities 
owned by the Plan to prevent losses during the 8-10 year period when 
the Plan cannot dispose of all of the Tops Securities as a result of 
the timing and volume restrictions of SEC Rule 144; (iii) the need for 
an overall limitation on total Plan assets that can be committed to 
``alternative investments'', including the Securities, which should not 
exceed 5.2 percent (other than as may be occasioned merely by an 
increase in value); and (iv) the need for the Proposal, if granted, to 
clarify that Mellon's decisions regarding whether to exercise the 
Plan's rights under the Makewhole Agreement will be fully subject to 
the fiduciary responsibility rules of the Act, and that the Department, 
by granting the exemption, would not be expressing an opinion regarding 
whether any actions taken by Mellon are consistent with its fiduciary 
obligations under the Act. Notwithstanding these concerns, the IBEW 
stated that it favored the granting of the exemption if modifications 
were made to address these issues.
    By letter dated February 9, 1995, WEC responded to the issues 
raised by the comment letters.
    With respect to the sufficiency of the notice to interested persons 
regarding the Proposal, WEC states that it provided the broadest 
possible notice to Plan participants. Notice to active employees was 
provided through either posting in workplaces, inter-office mail, or 
both. Notice was sent to retirees and vested separated participants at 
the most current address available to the Plan. WEC states that in the 
case of a benefit program as large as the Plan, it is not unusual for 
some participants to fail to keep current addresses on file with the 
Plan, especially where a plant closing has resulted in the dispersal of 
the local workforce. Although some of the commenters indicated that 
adequate and timely notice was not provided in every instance, WEC 
represents that it acted in good faith by taking all practicable steps 
to provide the required notice, as prescribed by the Department's 
regulations (see 29 CFR [[Page 32994]] 2570.43), and that all 
participants were provided with a copy of the Proposal as published in 
the Federal Register. In this regard, WEC states that the success of 
its notification efforts was demonstrated by the fact that the 
Department received over 160 comment letters, most of which raised 
substantive issues regarding the Proposal.
    With respect to the decision made by WEC to contribute the 
Securities to the Plan rather than sell the Securities on the open 
market, WEC states that the contribution enabled the Plan to satisfy a 
pre-existing, independently developed investment target for 
``alternative investments'' without incurring significant transaction 
costs. As noted in Paragraph 2 of the Summary of Facts and 
Representations in the Proposal (the Summary), the Plan developed 
investment allocation guidelines in conjunction with the Frank Russell 
Company in 1990. These guidelines established an allocation target of 
approximately 5 percent for ``alternative investments''. WEC states 
that such an allocation appropriately reflects the role of such 
investments in a prudently diversified portfolio. In addition, WEC 
represents that there is no intention to increase this allocation of 
Plan assets to ``alternative investments'' above the current 5.2 
percent.
    In order to address the concerns raised by the commenters, WEC has 
agreed to adding a new condition to the Proposal which requires that 
additional Plan assets will not be used to purchase new ``alternative 
investments'' to the extent that such purchases would cause more than 
5.2 percent of the Plan's total assets to be invested in ``alternative 
investments'' (see condition (e) above). Paragraph 2 of the Summary 
states that ``alternative investments'' typically include venture 
capital, buyout funds, distressed companies, mezzanine financing, oil 
and gas programs, timberland or farmland, and economically targeted 
investments addressing certain social policies.
    With respect to the effect of the contribution of the Securities on 
the Plan's funding status, WEC states that five factors indicate that 
this transaction has had a positive effect on the Plan's funding. 
First, WEC did not satisfy any current funding obligation through the 
contribution of the Securities. The Plan has not had to forego any 
legally required cash contribution; rather, the contribution of the 
Securities was above and beyond what WEC was legally required to 
contribute to the Plan at the time of the transactions.
    Second, the Securities issued by Tele-Media Company of Western 
Connecticut (the Tele-Media Securities), representing one-third of the 
original value of the Securities contributed by WEC, have already been 
sold at a profit (see Paragraph 6 of the Summary). The Plan, by 
realizing the proceeds of this sale, has received $4,050,000 in 
additional cash as the result of the contribution of the Tele-Media 
Securities.
    Third, the Securities issued by First Britannia Mezzanine N.V. (the 
First Britannia Securities), while remaining stable in asset value, 
have generated significant income for the Plan. The Plan has thus far 
received approximately $2.4 million in interest on the debt portion and 
approximately $9.3 million in cash dividends on the equity portion of 
the First Britannia Securities. All of this income accrues to the 
benefit of the Plan and improves the Plan's funding situation.
    Fourth, the Plan is protected from diminutions in the value of the 
Securities through the operation of the Makewhole Agreement. Such 
support for the value of the Securities would be non-existent if the 
Plan had purchased the Securities on the open market. Therefore, WEC 
states that the Plan is better protected in accomplishing its 
previously described goals for ``alternative investments'' as the 
result of the contribution of the Securities than had a cash 
contribution been used by the Plan to invest in such securities on the 
open market.
    Finally, in support of the Makewhole Agreement, WEC has contributed 
an additional $25 million in cash to the Plan. This amount is above and 
beyond WEC's other contribution obligations to the Plan. WEC states 
that this $25 million contribution was made along with a $200 million 
cash contribution on December 30, 1994 as part of WEC's program to 
improve Plan funding, even though such amounts were not legally 
required to satisfy any current minimum funding obligations. Under the 
terms of the Makewhole Agreement, the additional $25 million will not 
be used to reduce WEC's future contribution obligations until the end 
of the term of the Makewhole Agreement.
    Thus, WEC represents that the Plan has benefitted from, and the 
Plan's funding has been improved by, the contribution of the 
Securities.
    With respect to the investment performance of the Tops Securities 
and the potential for losses by the Plan after the period covered by 
the Makewhole Agreement, WEC states that the publicly-traded price of 
these Securities has fluctuated widely and is currently trading at a 
price significantly below the price that existed on the date that the 
Securities were contributed to the Plan. Because of the trading 
restrictions on the Tops Securities, the Plan will be able to dispose 
of only a small portion of the shares each year. Many of the commenters 
suggested that WEC extend the period covered by Makewhole Agreement 
regarding the Tops Securities. In addition, the Department expressed 
concerns to WEC regarding the absence of additional guarantees for 
potential losses by the Plan in connection with the continued holding 
of both the First Britannia Securities and the Securities issued by 
Federated Investors (the Federated Securities), as well as for the Tops 
Securities, once the three-year period covered under the Makewhole 
Agreement expires on September 14, 1996.
    Consequently, WEC has agreed to extend the term of the Makewhole 
Agreement until such time as the Plan's holdings of all of the 
Securities are totally liquidated. Thus, the new Exercise Date under 
the Makewhole Agreement, as amended, will be the date on which the 
Plan's holdings of all of the Securities contributed by WEC on 
September 14 and October 29, 1993, are liquidated. WEC states that the 
remaining provisions of the Makewhole Agreement relating to, among 
other things, the calculation of the Makewhole Amount will remain 
unchanged, except that such calculation will no longer need to be based 
on any appraisals of the fair market value of the Securities remaining 
in the Plan because all of the Securities will have been liquidated at 
that time. Further, the duration of the $25 million credit balance 
provision, which is being used to ensure payment of the Makewhole 
Amount to the Plan, will also be extended until the new Exercise Date 
under the Makewhole Agreement.
    Therefore, in response to WEC's additional representations 
regarding the extension of the Makewhole Agreement, the Department has 
modified the language of the previous condition (h) in the Proposal 
(which has been redesignated as condition (i) above) by deleting the 
reference in the opening clause to `` * * * the third anniversary of 
the date of the first contribution made to the Plan * * *'' and 
substituting therefor the phrase ``* * * the date on which the Plan no 
longer holds any of the Securities contributed by WEC on September 14 
and October 29, 1993 (the Exercise Date) * * *'' in order to redefine 
the end of the Makewhole Period and create a new Exercise Date. The 
Department has also deleted the phrase in the previous condition (h)(2) 
of the Proposal and other phrases thereafter in such condition 
referring to the fair market value of the Securities 
[[Page 32995]] remaining in the Plan, and the appointment of one or 
more independent appraisers to determine fair market value, for 
purposes of establishing the Makewhole Amount.
    In addition, the Department has amended the language of the 
previous condition (i) in the Proposal (which has been redesignated as 
condition (j) above) to reflect the fact that the duration of the $25 
million credit balance provision, which is being used to ensure payment 
of the Makewhole Amount to the Plan, will be extended until the new 
Exercise Date under the Makewhole Agreement.
    With respect to the role of Mellon as the independent fiduciary for 
the Plan and its obligations to enforce the terms of the Makewhole 
Agreement, WEC states that it was always WEC's understanding that 
Mellon, whether acting as a Plan trustee, an independent fiduciary or 
an investment manager, would be a Plan fiduciary fully subject to the 
fiduciary responsibility rules of the Act. In this regard, WEC notes 
that some commenters, including the IBEW, have questioned the provision 
in the Makewhole Agreement committing exercise of the Plan's rights 
under the Agreement to Mellon's discretion. WEC states that the sole 
purpose of this provision was to make clear that Mellon, not WEC, would 
be representing the Plan with regard to the operation of the Makewhole 
Agreement, including the calculation of the Makewhole Amount and the 
triggering of the necessary payment to the Plan.
    In a separate letter submitted by Mellon in response to the 
concerns raised by the comment letters, Mellon represents that any 
actions taken by Mellon on behalf of the Plan in its role as 
independent fiduciary will be subject to the provisions of Part 4 of 
Title I of the Act. With respect to Mellon's authority under the 
Makewhole Agreement, as amended by WEC and Mellon in response to 
concerns raised by the IBEW and other commenters, the Agreement 
requires the following:
    (i) that WEC shall contribute the Makewhole Amount to the Plan upon 
demand from Mellon in its role as ``the Independent Investment 
Manager'' for the Plan;
    (ii) that Mellon shall make such a demand in the event that a 
Makewhole Amount is due to the Plan;
    (iii) that the Makewhole Amount must be equal to the amount 
determined by Mellon; and
    (iv) that Mellon, in its role as ``the Independent Investment 
Manager'' for the Plan, shall (rather than ``may'' as stated previously 
in the Agreement prior to the amendment) exercise the rights under this 
Agreement on behalf of the Plan by the delivery of a notice (the 
``Notice of Exercise'') to WEC no later than the sixtieth (60th) day 
after the Exercise Date.
    Mellon states that these provisions are intended to set forth a 
specific procedure for the determination and payment of the Makewhole 
Amount (if any), and to make it clear that Mellon, not WEC, would be 
acting on behalf of the Plan with regard to the Makewhole Agreement. 
Thus, Mellon represents that if a payment is due under the Makewhole 
Agreement, Mellon will, on behalf of the Plan, require WEC to make such 
payment.
    Accordingly, upon consideration of the entire exemption application 
file and record, the Department has determined to grant the proposed 
exemption as modified.

FOR FURTHER INFORMATION CONTACT: Mr. E.F. Williams of the Department, 
telephone (202) 219-8194. (This is not a toll-free number.)

Mellon Bank, N.A. Located in Pittsburgh, Pennsylvania

[Prohibited Transaction Exemption 95-47; Application No. D-9523]

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

    The restrictions of sections 406(a) and 406(b) of the Act and the 
sanctions resulting from the application of section 4975 of the Code, 
by reason of section 4975(c)(1)(A) through (F) of the Code, shall not 
apply, as of November 5, 1993, to the in-kind transfer of assets of 
plans for which Mellon Bank, N.A. or any of its affiliates (Mellon) 
acts as a fiduciary (the Client Plans), other than plans established or 
maintained by Mellon for its own employees, that are held in certain 
collective investment funds maintained by Mellon (CIFs), in exchange 
for shares of the Laurel Funds [a/k/a Dreyfus or Premier Funds] (the 
Funds),\3\ open-end investment companies registered under the 
Investment Company Act of 1940 (the 1940 Act), in situations where 
Mellon acts as investment advisor for the Fund as well as custodian, 
dividend disbursing agent, shareholder servicing agent, transfer agent, 
and/or Fund accountant, or provides some other ``secondary service'' to 
the Funds as defined in Section V(h), in connection with the 
termination or partial termination of such CIFs, provided that the 
following conditions and the general conditions of Section IV are met:

    \3\The applicant represents that effective October 1994, the 
Laurel Funds changed their name to either ``Dreyfus'' or ``Premier'' 
as a result of Mellon's acquisition of the Dreyfus Corporation, the 
sponsor of the Dreyfus Funds.
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    (a) No sales commissions or other fees are paid by the Client Plans 
in connection with the purchase of Fund shares through the in-kind 
transfer of CIF assets and no redemption fees are paid in connection 
with the sale of such shares by the Client Plans to the Funds.
    (b) Each Client Plan receives shares of a Fund which have a total 
net asset value that is equal to the value of the Client Plan's pro 
rata share of the assets of the CIF on the date of the in-kind 
transfer, based on the current market value of the CIF's assets as 
determined in a single valuation performed in the same manner at the 
close of the same business day using independent sources in accordance 
with Rule 17a-7 of the Securities and Exchange Commission under the 
1940 Act (see 17 CFR 270.17a-7) 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 CIF transfers (or, in the case of 
any weekday CIF transfers, the day of the transfer), determined on the 
basis of reasonable inquiry from at least three sources that are 
broker-dealers or pricing services independent of Mellon.
    (c) All or a pro rata portion of the assets of a Client Plan held 
in a CIF are transferred in-kind to the Funds in exchange for shares of 
such Funds.
    (d) A second fiduciary which is independent of and unrelated to 
Mellon (the Second Fiduciary) receives advance written notice of the 
in-kind transfer of assets of the CIFs and full written disclosure of 
information concerning the Funds (including a current prospectus for 
each of the Funds and a statement describing the fee structure) and, on 
the basis of such information, authorizes in writing the in-kind 
transfer of the Client Plan's assets to a corresponding Fund in 
exchange for shares of the Fund.
    (e) For all transfers of CIF assets to a Fund following the 
publication of the proposed exemption in the Federal Register (i.e. 
January 30, 1995), Mellon sends by regular mail to each affected Client 
Plan the following information:
    (1) Within 30 days after completion of the transaction, a written 
confirmation containing: [[Page 32996]] 
    (i) The identity of each security that was valued for purposes of 
the transaction in accordance with Rule 17a-7(b)(4);
    (ii) The price of each such security involved in the transaction;
    (iii) The identity of each pricing service or market maker 
consulted in determining the value of such securities; and
    (2) Within 90 days after completion of each transfer, a written 
confirmation that contains:
    (i) The number of CIF units held by the Client Plan immediately 
before the transfer, the related per unit value, and the total dollar 
amount of such CIF units; and
    (ii) The number of shares in the Funds that are held by the Client 
Plan immediately following the transfer, the related per share net 
asset value, and the total dollar amount of such shares.
    (f) The conditions set forth in paragraphs (e), (f), and (n) of 
Section II below are satisfied.

Section I--Exemption for Receipt of Fees

    The restrictions of section 406(a) and 406(b) of the Act and the 
sanctions resulting from the application of section 4975 of the Code, 
by reason of section 4975(c)(1) (A) through (F) of the Code, shall not 
apply, as of November 5, 1993, to the receipt of fees by Mellon from 
the Funds for acting as an investment advisor for the Funds as well as 
for providing other services to the Funds which are ``secondary 
services'' as defined in Section V(h), in connection with the 
investment by the Client Plans in shares of the Funds, provided that 
the following conditions and the general conditions of Section IV are 
met:
    (a) Each Client Plan receives a cash credit of such Plan's 
proportionate share of all fees charged to the Funds by Mellon for 
investment advisory services and ``secondary services'', including any 
investment advisory fees paid by Mellon to third party sub-advisers, no 
later than the same day as the receipt of such fees by Mellon. The 
crediting of all such fees to the Client Plans by Mellon is audited by 
an independent accounting firm on at least an annual basis to verify 
the proper crediting of the fees to each Client Plan.
    (b) The price paid or received by a Client Plan for shares in a 
Fund is the net asset value per share at the time of the transaction, 
as defined in Section V(e), and is the same price which would have been 
paid or received for the shares by any other investor at that time.
    (c) Mellon, including any officer or director of Mellon, does not 
purchase or sell shares of the Funds from or to any Client Plan.
    (d) No sales commissions are paid by the Client Plans in connection 
with the purchase or sale of shares of the Funds and no redemption fees 
are paid in connection with the sale of shares by the Client Plans to 
the Funds.
    (e) The combined total of all fees received by Mellon for the 
provision of services to a Client Plan, and in connection with the 
provision of services to the Funds in which the Client Plan may invest, 
are not in excess of ``reasonable compensation'' within the meaning of 
section 408(b)(2) of the Act.
    (f) Mellon does not receive any fees payable pursuant to Rule 12b-1 
under the 1940 Act in connection with the transactions.
    (g) The Client Plans are not employee benefit plans sponsored or 
maintained by Mellon (other than master or prototype plans sponsored by 
Mellon that are adopted by employers other than Mellon).
    (h) The Second Fiduciary receives full and detailed written 
disclosure of information concerning the Funds (including a current 
prospectus for each of the Funds and a statement describing the fee 
structure) in advance of any investment by the Client Plan in a Fund.
    (i) On the basis of the information described above in paragraph 
(h), the Second Fiduciary authorizes in writing the investment of 
assets of the Client Plan in each particular Fund and the fees to be 
paid by such Funds to Mellon.
    (j) All authorizations made by a Second Fiduciary regarding 
investments in a Fund and the fees paid to Mellon are subject to an 
annual reauthorization wherein any such prior authorization referred to 
in paragraph (i) shall be terminable at will by the Client Plan, 
without penalty to the Client Plan, upon receipt by Mellon of written 
notice of termination. A form expressly providing an election to 
terminate the authorization described in paragraph (i) above (the 
Termination Form) with instructions on the use of the form must be 
supplied to the Second Fiduciary no less than annually. The 
instructions for the Termination Form must include the following 
information:
    (1) The authorization is terminable at will by the Client Plan, 
without penalty to the Client Plan, upon receipt by Mellon of written 
notice from the Second Fiduciary; and
    (2) Failure to return the Termination Form will result in continued 
authorization of Mellon to engage in the transactions described in 
paragraph (i) on behalf of the Client Plan.
    (k) The Second Fiduciary of each Client Plan invested in a 
particular Fund receives full written disclosure in a Fund prospectus 
or otherwise of any increases in the rates of fees charged by Mellon to 
the Funds for investment advisory services or other services (i.e. 
``secondary services'') even though such fees will be credited to the 
Client Plan as required by paragraph (a) above.
    (l) On an annual basis, Mellon provides the Second Fiduciary of a 
Client Plan investing in the Funds with:
    (1) A copy of the current prospectus for the Funds and, upon such 
fiduciary's request, a copy of the Statement of Additional Information 
for such Funds which contains a description of all fees paid by the 
Funds to Mellon;
    (2) A copy of the annual financial disclosure report prepared by 
Mellon which includes information about the Fund portfolios as well as 
audit findings of an independent auditor within 60 days of the 
preparation of the report; and
    (3) Oral or written responses to inquiries of the Second Fiduciary 
as they arise.
    (m) With respect to each of the Funds in which a Client Plan 
invests, in the event such Fund places brokerage transactions with 
Mellon or an affiliate, Mellon will provide the Second Fiduciary of 
such Client Plan at least annually with a statement specifying:
    (1) The total, expressed in dollars, brokerage commissions of each 
Fund's portfolio that are paid to Mellon by such Fund;
    (2) The total, expressed in dollars, of brokerage commissions of 
each Fund's portfolio that are paid by such Fund to brokerage firms 
unrelated to Mellon;
    (3) The average brokerage commissions per share, expressed as cents 
per share, paid to Mellon by each Fund portfolio; and
    (4) The average brokerage commissions per share, expressed as cents 
per share, paid by each Fund portfolio to brokerage firms unrelated to 
Mellon.
    (n) All dealings between the Client Plans and the Funds are on a 
basis no less favorable to the Client Plans than dealings with other 
shareholders of the Funds.
Section III--Exemption for Transfers of Client Plan Securities From 
Individual Portfolios

    The restrictions of sections 406(a) and 406(b) of the Act and the 
sanctions resulting from the application of section 4975 of the Code, 
by reason of section 4975(c)(1) (A) through (F) of the Code, shall not 
apply to an exchange (the [[Page 32997]] Exchange) by a Client Plan of 
securities for shares of the Funds (other than an exchange covered by 
Section I above), and to the receipt of fees by Mellon from the Funds 
for acting as investment adviser for the Funds as well as providing 
other services to the Funds which are ``secondary services'' as defined 
in Section V(h), in connection with such an investment by a Client Plan 
in the Funds, provided that the following conditions and the general 
conditions in Section IV are met:
    (a) The terms of the transaction are at least as favorable to the 
Client Plan as those obtainable in an arm's-length transaction between 
unrelated parties.
    (b) Each Exchange is a one-time transaction between a Client Plan 
and the Fund.
    (c) All or a pro rata portion of the assets of a Client Plan held 
by Mellon in an investment account or portfolio that is selected by the 
Second Fiduciary of such Client Plan for an Exchange are transferred 
in-kind to the Funds in exchange for shares of such Funds.
    (d) No sales commission or dealer mark-up is paid by the Client 
Plan in connection with the transaction.
    (e) The Exchange meets the requirements of the particular Fund for 
an in-kind purchase of shares of the Fund.
    (f) One of the following conditions is met:
    (1) The Client Plan receives a cash credit of such Plan's 
proportionate share of all fees (including all investment advisory fees 
and all secondary service fees) charged to the Funds by Mellon, less 
any fees paid by Mellon to parties unrelated to Mellon for services 
other than investment advisory services provided to the Funds, no later 
than the same day as the receipt of such fees by Mellon;
    (2) The assets of the Client Plan invested in the Funds are 
excluded from the assets on which the investment management fees paid 
by the Client Plan to Mellon are determined; or
    (3) The Client Plan pays an investment management fee to Mellon 
based on total Plan assets from which a credit is subtracted 
representing only the Client Plan's pro rata share of the investment 
advisory fees paid by the Funds to Mellon.
    (g) For purposes of the Exchange, the price of securities is 
established as of the close of business on the date for the Exchange 
specified in the written authorization by the Second Fiduciary, as 
follows:
    (1) If the security is described in subparagraphs (b) (1) through 
(3) of Rule 17a-7 under the 1940 Act (see 17 CFR 270.17a-7(b) (1)-(3)), 
in accordance with the valuation procedures described in those 
paragraphs; or
    (2) If the security is not described in paragraph (g)(1) above, by 
the recognized, independent pricing service or services disclosed to 
the Second Fiduciary described in paragraph (j) below prior to its 
written authorization of the Exchange. If no price is available from a 
recognized, independent pricing service for such date, or from a 
sufficient number of pricing services if more than one is to be used, 
Mellon will determine the price by averaging the mean of the closing 
bid and asked quotations from each of two or more recognized, 
independent market markers and/or pricing services for such securities 
on that date.
    (h) For purposes of the Exchange, the price paid or received by a 
Client Plan for Fund shares is the net asset value per share at the 
time of the transaction, as defined in Section V(e), and Mellon 
determines the value of the securities exchanged and the net asset 
value of the Funds as of the close of business on the same day.
    (i) Within 30 days after the authorization of the Exchange, the 
Second Fiduciary receives a written confirmation that reflects the 
price of each of the securities involved in the Exchange. For those 
securities described in paragraph (g)(2) above, the confirmation will 
include a written disclosure of the identity of the pricing service or 
market markers consulted in determining the value of the securities.
    (j) The Second Fiduciary acting for the Client Plan--
    (1) receives advance written disclosure of information concerning 
the Funds (including current prospectuses for the Funds and a statement 
describing the fee structure to be used to comply with paragraph (f) 
above) and, prior to the Exchange, receives in writing (A) the reasons 
why Mellon may consider such Exchanges to be appropriate for the Client 
Plan and a list of the securities held by the Client Plan that would be 
accepted by one or more Funds with respect to the Exchange, (B) the 
date the Exchange is to occur, and (C) an explanation of the procedures 
that would be followed for valuing the securities for purposes of the 
Exchange, including the identity of the recognized, independent pricing 
service or services that will value any of the securities described in 
paragraph (g)(2) above; and
    (2) on the basis of such information, authorizes in writing the 
investment of assets of the Client Plan in the Funds through the 
Exchange and the fees to be paid by the Funds to Mellon.
    (k) The authorization referred to in paragraph (j) is terminable at 
will by the Client Plan, without penalty to the Client Plan, upon 
receipt by Mellon of written notice of termination. A Termination Form 
expressly providing an election to terminate the authorization 
described in paragraph (j) with instructions on the use of the form 
must be supplied to the Second Fiduciary no less than annually. The 
instructions for the Termination Form must include the following 
information:
    (1) The authorization is terminable at will by the Client Plan, 
without penalty to the Client Plan, upon receipt by Mellon of written 
notice from the Second Fiduciary; and
    (2) Failure to return the form will result in continued 
authorization of the investment by the Client Plan in the Funds and the 
payment of fees by the Funds to Mellon.
    (l) If the fee structure described in paragraph (f)(2) or (f)(3) 
above is followed, the Second Fiduciary is notified of any change in 
any of the rates of the fees payable to Mellon for investment advisory 
services or secondary services, that had been disclosed to the Second 
Fiduciary as described in paragraph (j) above, at least 30 days prior 
to the effective date of such change, and approves in writing the 
continued holding of any Fund shares acquired by the Client Plan prior 
to such change which are still held by the Plan. Such approval may be 
limited solely to the investment advisory and other fees paid by the 
Funds in relation to the fees paid by the Client Plan and need not 
relate to any other aspect of such investment.
    (m) The conditions set forth in paragraphs (c), (e), (f), (g), (l), 
(m) and (n) of Section II above are satisfied.

Section IV--General Conditions

    (a) Mellon maintains for a period of six years the records 
necessary to enable the persons described below in paragraph (b) 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 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 below in paragraph (b)(2) and 
notwithstanding [[Page 32998]] any provisions of section 504(a)(2) of 
the Act, the records referred to in paragraph (a) are unconditionally 
available at their customary location for examination during normal 
business hours by--
    (i) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service,
    (ii) Any fiduciary of the Client Plans who has authority to acquire 
or dispose of shares of the Funds owned by the Client Plans, or any 
duly authorized employee or representative of such fiduciary, and
    (iii) Any participant or beneficiary of the Client Plans or duly 
authorized employee or representative of such participant or 
beneficiary;
    (2) None of the persons described in paragraph (b)(1) (ii) and 
(iii) shall be authorized to examine trade secrets of Mellon, or 
commercial or financial information which is privileged or 
confidential.

Section V--Definitions

    For purposes of this exemption:
    (a) The term ``Mellon'' means the Mellon Bank, N.A. and any 
affiliate thereof as defined below in paragraph (b) of this section.
    (b) An ``affiliate'' of a person includes:
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person;
    (2) Any officer, director, employee, relative, or partner in any 
such person; and
    (3) Any corporation or partnership of which such person is an 
officer, director, partner, or employee.
    (c) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (d) The term ``Fund'' or ``Funds'' shall include the Laurel Funds, 
Inc. [a/k/a the Dreyfus Funds or the Premier Funds], or any other 
diversified open-end investment company or companies registered under 
the 1940 Act for which Mellon serves as an investment adviser and may 
also serve as a custodian, dividend disbursing agent, shareholder 
servicing agent, transfer agent, Fund accountant, or provide some other 
``secondary service'' (as defined below in paragraph (h) of this 
Section) which has been approved by such Funds.
    (e) The term ``net asset value'' means the amount for purposes of 
pricing all purchases and sales calculated by dividing the value of all 
securities, determined by a method as set forth in the Fund's 
prospectus and statement of additional information, and other assets 
belonging to the Fund or portfolio of the Fund, less the liabilities 
charged to each such portfolio or Fund, by the number of outstanding 
shares.
    (f) The term ``relative'' means a ``relative'' as that term is 
defined in section 3(15) of the Act (or a ``member of the family'' as 
that term is defined in section 4975(e)(6) of the Code), or a brother, 
a sister, or a spouse of a brother or a sister.
    (g) The term ``Second Fiduciary'' means a fiduciary of a Client 
Plan who is independent of and unrelated to Mellon. For purposes of 
this exemption, the Second Fiduciary will not be deemed to be 
independent of and unrelated to Mellon if:
    (1) Such fiduciary directly or indirectly controls, is controlled 
by, or is under common control with Mellon;
    (2) Such fiduciary, or any officer, director, partner, employee, or 
relative of the fiduciary is an officer, director, partner or employee 
of Mellon (or is a relative of such persons);
    (3) Such fiduciary directly or indirectly receives any compensation 
or other consideration for his or her own personal account in 
connection with any transaction described in this exemption.
    If an officer, director, partner or employee of Mellon (or relative 
of such persons), is a director of such Second Fiduciary, and if he or 
she abstains from participation in (i) the choice of the Client Plan's 
investment adviser, (ii) the approval of any such purchase or sale 
between the Client Plan and the Funds, and (iii) the approval of any 
change in fees charged to or paid by the Client Plan in connection with 
any of the transactions described in Sections I, II and III above, then 
paragraph (g)(2) of this section 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 Mellon to the Funds. However, for purposes of Sections 
II(a) and III(f)(1) this exemption, the term ``secondary service'' will 
not include any brokerage services provided to the Funds by Mellon for 
the execution of securities transactions engaged in by the Funds.
    (i) The term ``Termination Form'' means the form supplied to the 
Second Fiduciary which expressly provides an election to the Second 
Fiduciary to terminate on behalf of a Client Plan the authorization 
described in paragraph (j) of Section II and paragraph (k) of Section 
III. Such Termination Form may be used at will by the Second Fiduciary 
to terminate an authorization without penalty to the Client Plan and to 
notify Mellon in writing to effect a termination by selling the shares 
of the Funds held by the Client Plan requesting such termination within 
one business day following receipt by Mellon of the form; provided that 
if, due to circumstances beyond the control of Mellon, the sale cannot 
be executed within one business day, Mellon shall have one additional 
business day to complete such sale.

EFFECTIVE DATE: The exemption is effective November 5, 1993, for those 
transactions described in Sections I and II above.
    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 January 30, 1995, at 60 
FR 5704.

NOTICE TO INTERESTED PERSONS: The applicant represents that it was 
unable to notify interested persons within the time period specified in 
the Federal Register notice published on January 30, 1995. The 
applicant states that interested persons were notified, in the manner 
agreed upon between the applicant and the Department, by March 22, 
1995. Interested persons were advised that they had until April 21, 
1995 to comment on the proposed exemption.

WRITTEN COMMENTS AND MODIFICATIONS: The applicant submitted the 
following comments and requests for modifications regarding the notice 
of proposed exemption (the Proposal).
    With respect to the use of the term ``affiliate'', the applicant 
states that both the beginning of Sections I and V(a) define the term 
``Mellon'' to include its affiliates. Therefore, the applicant notes 
that references in the body of the Proposal to affiliates of Mellon 
would appear to be unnecessary, and their presence would raise the 
question of whether particular conditions are intended to apply to 
affiliates of Mellon's affiliates. In this regard, the applicant 
requests that Section II(c) of the Proposal be revised to read as 
follows:

    ``* * * Mellon, including any officer or director of Mellon, 
does not purchase or sell shares of the Funds from or to any Client 
Plan.''

    This revision would clarify that the condition does not extend to 
all affiliates of Mellon's affiliates, but does extend to Mellon and 
its ``affiliates'' as that term is defined in Section V(a) of the 
Proposal. In addition, the applicant requests that the statement ``* * 
* or an affiliate'', which appears after the first mention of Mellon in 
subparagraphs (1) and (3) of Section II(m), relating to the provision 
of brokerage services, is [[Page 32999]] unnecessary and should be 
deleted. The Department concurs with the applicant's requested 
clarifications and has so modified the language of the Proposal.
    With respect to the use of the term ``Client Plans'' in Section 
II(g) of the Proposal, the applicant states that this section, which 
also is incorporated by reference into Section III, excludes from the 
term ``Client Plans'' any employee benefit plans sponsored or 
maintained by Mellon. Mellon's understanding of this condition is that 
it is meant to exclude ``in-house plans'' of Mellon (i.e. plans 
maintained by Mellon for its own employees) from relief under the 
requested exemption. However, the applicant notes that Mellon is also 
the sponsor of master and prototype plans that are adopted by third 
parties. The applicant wishes to clarify that such plans were not meant 
to be excluded from relief under the exemption. Therefore, the 
applicant proposes the following change to Section II(g):

    ``* * * The Client Plans are not employee benefit plans 
sponsored or maintained by Mellon (other than master or prototype 
plans sponsored by Mellon that are adopted by employers other than 
Mellon). [emphasis added]

    The applicant requests that the same parenthetical language 
referred to above be added to the opening paragraph of Section I, 
following the phrase ``* * * other than plans established or maintained 
by Mellon''. In this regard, the Department concurs with the 
applicant's requested clarifications, but for the opening paragraph of 
Section I has added the phrase ``* * * for its own employees'' instead 
of the parenthetical language used in Section II(g).
    With respect to the definition of the term ``Second Fiduciary'' in 
Section V(g) of the Proposal, the applicant notes that the language 
following subparagraph (3) describes an exception for when a fiduciary 
is considered ``independent'' for purposes of the exemption. Part (iii) 
of this exception refers to approvals by a ``Second Fiduciary'' as 
described in Sections I and II. The applicant states that this sentence 
in Part (iii) should also refer to Section III because that section 
contains an approval requirement for a ``Second Fiduciary'' as well. 
The Department concurs with this clarification and has so modified the 
language of the Proposal.
    With respect to the definition of the term ``secondary service'' in 
Section V(h) of the Proposal, the current definition excludes from the 
scope of that term any brokerage services provided to the Funds by 
Mellon for the execution of securities transactions engaged in by the 
Funds. In this regard, the applicant notes that this exclusion should 
not prohibit Mellon from providing brokerage services to the Funds 
because, to the contrary, Section II(m) of the Proposal requires 
certain disclosures to be made based on the fact that such services may 
be provided. However, the applicant states that Sections II(a) and 
III(f)(1) require Mellon to credit to the Client Plans all fees for the 
``secondary services'' it provides to the Funds. Thus, the applicant 
wishes to clarify that brokerage services should be specifically 
excluded from treatment as a ``secondary service'' under these 
sections, so that, consistent with the purpose behind the disclosures 
required in Section II(m), Mellon is not required to credit its fees 
for brokerage services in the same manner that it is required to credit 
its fees for other secondary services. Therefore, the applicant 
requests that the second sentence in Section V(h) of the Proposal 
should read as follows:

    ``* * * However, for purposes of Sections II(a) and III(f)(1) of 
this exemption, the term ``secondary service'' will not include any 
brokerage services provided to the Funds by Mellon for the execution 
of securities transactions engaged in by the Funds.'' [emphasis 
added]

    The Department concurs with this clarification and has so modified 
the language of the Proposal.
    With respect to the definition of the term ``Termination Form'' in 
Section V(i) of the Proposal, the current definition refers to the 
condition describing that form in Section II(j). However, the applicant 
notes that the ``Termination Form'' is also described in Section III(k) 
of the Proposal, so that Section V(i) should refer specifically to 
``paragraph (k) of Section III'' following the reference to Section 
II(j). The Department concurs with the applicant's requested 
clarification and has so modified the language of the Proposal.
    Finally, the applicant states that Section III of the Proposal, 
dealing with transfers of Client Plan securities from individual 
portfolios, provides relief for both the ``credit'' fee structure 
described in Section II (which provides a full cash credit of all Fund-
level fees) and the two fee structures described in Prohibited 
Transaction Exemption (PTE) 77-4 (42 FR 18732, April 8, 1977).\4\ With 
regard to the fee structures described in PTE 77-4 (the PTE 77-4 Fee 
Structures), any change in fees received by Mellon from a Fund must be 
disclosed at least 30 days prior to the effective date of the change 
and be approved in writing. Mellon represents that the use of an 
``affirmative'' approval requirement for the PTE 77-4 Fee Structures 
creates a number of problems. Mellon states that the Department has 
previously recognized the administrative difficulties caused by an 
affirmative approval requirement for increases in Fund-level fees. 
Mellon notes that the Department has allowed, through recent individual 
exemptions, the use of a ``passive'' approval condition under which the 
independent fiduciaries of Client Plans receive notice of any increase 
in Fund fees at least 30 days in advance of the effective date of such 
increase and a ``Termination Form'' which allows a Client Plan to 
withdraw from the Fund.\5\ If the bank does not receive a ``Termination 
Form'' from a Client Plan prior to the effective date of the fee 
increase, the independent fiduciary of the Client Plan is deemed to 
have approved the fee increase.\6\

    \4\PTE 77-4, in pertinent part, permits the purchase and sale by 
an employee benefit plan of shares of a registered, open-end 
investment company when a fiduciary with respect to the plan is also 
the investment adviser for the investment company, provided that, 
among other things, the plan does not pay an investment management, 
investment advisory or similar fee with respect to the plan assets 
invested in such shares for the entire period of such investment. 
Section II(c) of PTE 77-4 states that this condition does not 
preclude the payment of investment advisory fees by the investment 
company under the terms of an investment advisory agreement adopted 
in accordance with section 15 of the Investment Company Act of 1940. 
Section II(c) states further that this condition does not preclude 
payment of an investment advisory fee by the plan based on total 
plan assets from which a credit has been subtracted representing the 
plan's pro rata share of investment advisory fees paid by the 
investment company.
    \5\The Department notes that this approval process for increases 
in Fund-level fees with the use of a ``Termination Form'' by Client 
Plans would be similar to the arrangement previously described by 
Mellon, and included in Section II of the Proposal, for annual 
reauthorizations of Fund investments by Client Plans where credits 
of all Fund-level fees are made. The Department notes further that 
the latter arrangement involving a full credit of Fund-level fees 
was the particular fee structure which Mellon designed at the time 
of the initial in-kind transfers of CIF assets to the Funds in order 
to be able to represent to the affected Client Plans that no 
increases in fees paid by such Plans would result from the transfer 
of such assets to the Funds.
    \6\See PTE 94-86 (Bank of California, N.A.), 59 FR 65403, 
December 19, 1994; PTE 95-33 (BankSouth, N.A.), 60 FR 20773, April 
27, 1995.
---------------------------------------------------------------------------

    Therefore, Mellon requests that the final exemption contain a 
``passive'' approval condition that would apply to both in-kind and 
cash investments in a Fund where any PTE 77-4 Fee Structure is used.
    In this regard, the Department is not prepared, at this time, to 
include such a material change to the conditions of the Proposal as 
part of the final exemption for the transactions described herein. Upon 
the receipt of a [[Page 33000]] new exemption request pertaining to 
this issue, the Department is willing to consider the merits of such a 
change in the conditions pertaining to the PTE 77-4 Fee Structures used 
by Mellon. Such request, when received, would be processed as an 
amendment to the final exemption for the subject transactions involving 
the Funds.
    No other comments, and no requests for a hearing, were received by 
the Department during the comment period, as extended pursuant to the 
applicant's notification of interested persons as discussed herein.
    Accordingly, the Department has determined to grant the proposed 
exemption as modified.

FOR FURTHER INFORMATION CONTACT: Mr. E. F. Williams of the Department, 
telephone (202) 219-8194. (This is not a toll-free number.)
Norwest Bank Minnesota, N.A., Located in Minneapolis, MN

[Prohibited Transaction Exemption 95-48; Exemption Application No. 
D-09595]

Exemption

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

    The restrictions of sections 406(a) and 406(b) of the Act and the 
sanctions resulting from the application of section 4975 of the Code, 
by reason of section 4975(c) of the Code, shall not apply, as of 
September 30, 1994, to the in-kind transfer of assets of plans for 
which Norwest Bank Minnesota, N.A. or any of its affiliates 
(collectively, the Bank) serves as a fiduciary (the Client Plans), 
including plans established or maintained by the Bank (the Bank Plans; 
collectively, the Plans), that are held in certain collective 
investment funds (the CIFs) maintained by the Bank, in exchange for 
shares of the Norwest Funds (the Funds), an open-end investment company 
registered under the Investment Company Act of 1940 (the '40 Act), as 
amended, for which the Bank acts as investment adviser, custodian, and 
shareholder servicing agent, in connection with the termination of such 
CIFs provided that the following conditions are met:
    (a) No sales commissions or other fees are paid by a Bank Plan or a 
Client Plan in connection with the purchase of shares of the Funds 
through the in-kind transfer of CIF assets and no redemption fees are 
paid in connection with the sale of such shares of the Funds.
    (b) All of the assets of a Bank Plan or a Client Plan that are held 
in the CIFs are transferred in-kind to the Funds in exchange for shares 
of such Funds. A Plan not electing to participate in the Funds receives 
a cash payment representing a pro rata portion of the assets of the 
terminating CIF before the final liquidation takes place.
    (c) Each Bank Plan and each Client Plan receives shares of the 
Funds which have a total net asset value that is equal to the value of 
such Plan's pro rata share of the assets of the CIF on the date of the 
transfer, based on the current market value of the CIF's assets, as 
determined in a single valuation performed in the same manner at the 
close of the same business day, using independent sources in accordance 
with the procedures set forth in Rule 17a-7(b) (Rule 17a-7) under the 
'40 Act 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 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.
    (d) A second fiduciary who is independent of and unrelated to the 
Bank (the Second Fiduciary) receives advance written notice of the in-
kind transfer of assets of the CIFs and full written disclosure, which 
includes but is not limited to, the following information concerning 
the Funds:
    (1) A current prospectus for each portfolio of the Funds in which a 
Bank Plan or a Client Plan is considering investing;
    (2) A statement describing (i) the fees for investment advisory or 
similar services that are to be credited back to a Client Plan, (ii) 
the fees retained by the Bank for Secondary Services, as defined in 
paragraph (g) of Section III below, and (iii) all other fees to be 
charged to or paid by the Bank Plan or the Client Plan and by such 
Funds to the Bank or to unrelated third parties. Such statement also 
includes the nature and extent of any differential between the rates of 
the fees.
    (3) The reasons why the Bank considers such investment to be 
appropriate for the Bank Plan or the Client Plan;
    (4) A statement describing whether there are any limitations 
applicable to the Bank with respect to which assets of a Bank Plan or a 
Client Plan may be invested in the relevant 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.
    (e) On the basis of the foregoing information, the Second Fiduciary 
authorizes in writing the in-kind transfer of the Bank Plan's or the 
Client Plan's CIF assets to a Fund in exchange for shares of the Funds, 
the investment of such assets in corresponding portfolios of the Funds, 
the fees received by the Bank in connection with its services to the 
Funds and, in the case of a Client Plan only, the purchase by such 
Client Plan of additional shares of the corresponding Funds with the 
fees credited back to the Client Plan by the Bank. Such authorization 
by the Second Fiduciary will be consistent with the responsibilities, 
obligations and duties imposed on fiduciaries under Part 4 of Title I 
of the Act.
    (f) For all subsequent transfers of CIF assets to a Fund following 
the publication of the proposed exemption in the Federal Register, the 
Bank sends by regular mail to each affected Bank Plan and Client Plan a 
written confirmation, not later than 30 days after the completion of 
the transaction, containing the following information:
    (1) The identity of each security that was valued for purposes of 
the transaction in accordance with Rule 17a-7(b)(4) of the '40 Act;
    (2) The price of each such security involved in the transaction; 
and
    (3) The identity of each pricing service or market maker consulted 
in determining the value of such securities.
    (g) For all subsequent transfers of CIF assets to a Fund following 
the publication of the proposed exemption in the Federal Register, the 
Bank sends by regular mail, no later than 90 days after completion of 
each transfer, a written confirmation that contains the following 
information:
    (1) The number of CIF units held by the Plan immediately before the 
transfer, the related per unit value and the total dollar amount of 
such CIF units;
    (2) The number of shares in the Funds that are held by the Plan 
following the conversion, the related per share net asset value and the 
total dollar amount of such shares.
    (h) The conditions set forth in paragraphs (c), (d), (e), (o) and 
(p) of Section II below as they would relate to all Plans are 
satisfied. [[Page 33001]] 

Section II. Exemption for the Receipt of Fees

    The restrictions of sections 406(a) and 406(b) of the Act and the 
sanctions resulting from the application of section 4975 of the Code, 
by reason of section 4975(c) of the Code, shall not apply, as of 
November 11, 1994, to: (1) The receipt of fees by the Bank from the 
Funds for acting as an investment adviser to the Funds; and (2) the 
receipt and proposed retention of fees by the Bank from the Funds for 
acting as custodian or shareholder servicing agent to the Funds, as 
well as for any other services provided to the Funds which are not 
investment advisory services (i.e., the Secondary Services), in 
connection with the investment in shares of the Funds by the Client 
Plans, other than the Bank Plans, for which the Bank serves as 
fiduciary.
    The aforementioned transactions are subject to the following 
conditions:
    (a) No sales commissions are paid by the Client Plans in connection 
with the purchase or sale of shares of the Funds and no redemption fees 
are paid in connection with the sale of shares by the Client Plans to 
the Funds.
    (b) The price paid or received by the Client Plans for shares in 
the Funds is the net asset value per share, as defined in paragraph (d) 
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) Neither the Bank nor an affiliate, including any officer or 
director, purchases from or sells to any of the Client 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 Client Plans, and in connection with the 
provision of services to any of the Funds in which the Client Plans 
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 of the 1940 Act in connection with the transactions involving the 
Funds.
    (f) Each Client Plan receives a credit, either through cash or, if 
applicable, the purchase of additional shares of the Funds, pursuant to 
an annual election, which may be revoked at any time, made by the 
Client Plan, of such Plan's proportionate share of all investment 
advisory fees charged to the Funds by the Bank, including any 
investment advisory fees paid by the Bank to third party sub-advisers, 
within not more than one business day after the receipt of such fees by 
the Bank.
    (g) The Second Fiduciary receives, in advance of investment by a 
Client Plan in the Funds, full and detailed written disclosure of 
information concerning the relevant Funds as set forth above in Section 
I(d).
    (h) On the basis of the information described in paragraph (d) of 
Section I, the Second Fiduciary authorizes in writing:
    (1) The ongoing investment of assets of the Client Plans in shares 
of the Funds, in connection with the transactions set forth in Section 
II;
    (2) The investment portfolios of the Funds in which the assets of 
the Client Plans may be invested; and
    (3) The fees to be paid by the Funds in which Client Plans invest 
to the Bank and the purchase of additional shares of the Funds by the 
Client Plan with the fees credited to the Client Plan by the Bank.
    (i) The authorization referred to in paragraph (h) is terminable at 
will by the Client Plan, without penalty to the Client Plan. Such 
termination will be effected by the Bank selling the shares of the 
Funds held by the affected Client Plan within the period of time 
specified by the Client Plan but not more than one business day 
following receipt by the Bank from the Second Fiduciary, of the 
termination form (the Termination Form), as defined in paragraph (h) 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) In the event of an increase in the contractual rate of any fees 
paid by the Funds to the Bank regarding investment advisory services or 
fees for similar services that had been authorized by the Second 
Fiduciary in accordance with paragraph (h) of this Section II, the Bank 
provides written notice to the Second Fiduciary in a prospectus for the 
Funds or otherwise, of any increases in the contractual rate of fees 
charged by the Bank to the Funds for investment advisory services even 
though such fees will be credited to the Client Plans as required by 
paragraph (f) of Section II.
    (k) In the event of an additional Secondary Service, as defined in 
paragraph (g) of Section III below, provided by the Bank to the Funds 
for which a fee is charged or an increase in the contractual rate of 
any fee due from the Funds to the Bank for any Secondary Service, as 
defined in paragraph (g) of Section III below, that results 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 Client Plan in accordance with paragraph (h) of this 
Section II, the Bank will, at least 30 days in advance of the 
implementation of such additional service for which a fee is charged or 
fee increased, provide written notice to the Second Fiduciary 
explaining the nature and amount of the additional service for which a 
fee is charged or the nature and amount of the increase in fees of the 
affected Fund. Such notice will be accompanied by the Termination Form, 
as defined in paragraph (h) of Section III below.
    (l) The Second Fiduciary is supplied with a Termination Form at the 
times specified in paragraphs (k) and (m) 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 Client 
Plans, without penalty to such Plans. The termination will be effected 
by the Bank selling the shares of the Funds held by the Client Plans 
requesting termination within the period of time specified by the 
Client Plan, but not later than one business day following receipt by 
the Bank from the Second Fiduciary of the Termination Form or any 
written notice of termination; provided that if, due to circumstances 
beyond the control of the Bank, the sale of shares of such Client 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 form on behalf of 
the 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 
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 the Client Plan.
    (m) The Second Fiduciary is supplied with a Termination Form, at 
least once in each calendar year, beginning with the calendar year that 
begins after the date of the grant of this proposed 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 (m) of this Section II, 
sooner than six months after such Termination Form is supplied pursuant 
to paragraph (k) of this Section [[Page 33002]] II, except to the 
extent required by said paragraph (k) of this Section II to disclose an 
increase in fees.
    (n) On an annual basis, the Bank will provide the Second Fiduciary 
of a Client Plan investing in the Funds with:
    (1) A copy of the current prospectus for the Funds and upon such 
fiduciary's request, a copy of the Statement of Additional Information 
which contains a description of all fees paid by the Funds to the Bank.
    (2) A copy of the annual financial disclosure report prepared by 
the Bank which contains information about the portfolios of the Funds 
and includes audit findings of an independent auditor within 60 days of 
the preparation of the report.
    In addition, the Bank will respond to oral or written responses to 
inquiries of the Second Fiduciary as they arise.
    (o) All dealings between the Client Plans and the Funds are on a 
basis no less favorable to the Client Plans than dealings between the 
Funds and other shareholders holding the same class of shares as the 
Client Plans.
    (p) The Bank maintains for a period of six years the records 
necessary to enable the persons described below in paragraph (q) 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 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 (q) of Section II below; and
    (q)(1) Except as provided in paragraph (p)(2) and notwithstanding 
any provisions of section 504(a)(2) and (b) of the Act, the records 
referred to in paragraph (p) are unconditionally available at their 
customary location for examination during normal business hours by--
    (i) Any duly authorized employee or representative of the 
Department, the Internal Revenue Service or the Securities and Exchange 
Commission;
    (ii) Any fiduciary of a Client Plan who has authority to acquire or 
dispose of shares of the Funds owned by the Client Plan, or any duly 
authorized employee or representative of such fiduciary, and
    (iii) Any participant or beneficiary of a Client Plan or duly 
authorized employee or representative of such participant or 
beneficiary;
    (2) None of the persons described in paragraphs (q)(1)(ii) and 
(iii) shall be authorized to examine trade secrets of the Bank, or 
commercial or financial information which is privileged or 
confidential.

Section III. Definitions

    For purposes of this exemption:
    (a) The term ``Bank'' means Norwest Bank Minnesota, N.A. and any 
affiliate of the Bank, as defined in paragraph (b) of this Section III.
    (b) An ``affiliate'' of the Bank includes--
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the Bank. (For purposes of this paragraph, the term ``control'' 
means the power to exercise a controlling influence over the management 
or policies of a person other than an individual.)
    (2) Any officer, director, employee, relative or partner in such 
person, and
    (3) Any corporation or partnership of which such person is an 
officer, director, partner or employee.
    (c) The term ``Fund'' or ``Funds'' refers to the Norwest Funds or 
to any diversified open-end investment company or companies registered 
under the '40 Act for which the Bank serves as an investment adviser 
and may also serve as a custodian, shareholder servicing agent, 
transfer agent or provide some other ``Secondary Service'' (as defined 
below in paragraph (g) of this Section IV) which has been approved by 
such Funds.
    (d) 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 chargeable to 
each portfolio, by the number of outstanding shares.
    (e) The term ``relative'' means a ``relative'' as that term is 
defined in section 3(15) of the Act (or 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.
    (f) 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, 
affiliate, 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 proposed 
exemption; provided, however that with respect to Bank Plans, the 
Second Fiduciary may receive compensation from the Bank in connection 
with the transactions contemplated herein, but the amount or payment of 
such compensation may not be contingent upon or be in any way affected 
by the Second Fiduciary's ultimate decision regarding whether the Bank 
Plans participate in such transactions.
    With the exception of the Bank Plans, if an officer, director, 
partner, affiliate or employee of the Bank (or relative of such 
persons), is a director of such Second Fiduciary, and if he or she 
abstains from participation in: (i) The choice of the Plan's investment 
adviser, (ii) the approval of any such purchase or sale between the 
Client Plan and the Funds, and (iii) the approval of any change of fees 
charged to or paid by the Client Plan, any of the transactions 
described in Sections I and II above, then paragraph (f)(2) of this 
Section IV, shall not apply.
    (g) The term ``Secondary Service'' means a service, other than 
investment advisory or similar services which is provided by the Bank 
to the Funds, including, but not limited to, custodial or shareholder 
services. However, the term ``Secondary Service'' does not include any 
brokerage services provided by the Bank to the Funds.
    (h) The term ``Termination Form'' means the form supplied to the 
Second Fiduciary at the times specified in paragraphs (i), (k), (l) and 
(m) of Section II which expressly provides an election to the Second 
Fiduciary to terminate on behalf of a Plan the authorization described 
in paragraph (h) of Section II. Such Termination Form is to be used at 
will by the Second Fiduciary to terminate such authorization without 
penalty to the Plan and to notify the Bank in writing to effect such 
termination by selling the shares of the Fund held by the Plan 
requesting termination not later than one business day following 
receipt by the Bank of written notice of such request for termination; 
provided that if, due to circumstances beyond the control of the Bank, 
the shares of such Client Plans cannot be executed within one business 
[[Page 33003]] day, the Bank shall have one additional business day to 
complete such sale.

EFFECTIVE DATE: This exemption is effective as of September 30, 1994 
with respect to the transactions described in Section I and as of 
November 11, 1994 with respect to the transactions described in Section 
II.
Written Comments
    The Department received two written comments with respect to the 
notice of proposed exemption and no requests for a public hearing. Both 
comments were submitted by the Bank. The first comment clarifies 
Section II(f) of the exemption and the parallel language contained in 
the Summary of Facts and Representations (the Summary). In pertinent 
part, Section II(f) states the following:

    Each Client Plan receives a credit, either through cash or, if 
applicable, the purchase of additional shares of the Funds, pursuant 
to an annual election, which may be revoked at any time, made by the 
Client Plan, of such Plan's proportionate share of all investment 
advisory fees charged to the Funds by the Bank, including any 
investment advisory fees paid by the Bank to a third party sub-
adviser, within not more than one business day after the receipt of 
such fee by the Bank.

    The Bank represents that in the future, some of the Funds may hire 
a third party sub-adviser directly. In this event, the Bank states that 
it will comply with the fee rebate mechanism described in the notice of 
proposed exemption with respect to any fees paid by the Funds to the 
third party sub-adviser. The Department does not have any objection to 
the proposed hiring arrangement, given that the same fee rebate 
mechanism will be in place. Accordingly, the Department concurs with 
the applicant's clarification of Section II(f) and the corresponding 
language in the Summary.
    The second comment pertains to notification of interested persons. 
In this comment, the Bank represents that it did not comply with the 
notice to interested persons requirement for participants in the Bank 
Plans within the time frame stated in the exemption application. By 
letter dated May 23, 1995, the Bank explains that it reposted the 
notice of proposed exemption for an additional 16 days ending June 5, 
1995 in each of the major work sites where the notice had been 
originally posted. No comments were received by the Department from 
Bank Plan participants.
    After giving full consideration to the entire record, including the 
written comments that were submitted by the Bank, the Department has 
decided to grant the exemption as described and revised above. Comment 
letters have been included as part of the public record of the 
exemption application. The complete application file, including all 
supplemental submissions received by the Department, is made available 
for public inspection in the Public Documents Room of the Pension and 
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 March 13, 1995 at 60 FR 
13457.

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

Paloma Securities L.P. (Paloma) and Boston Global Advisors, Inc. (BGA) 
Located in Boston, Massachusetts

[Prohibited Transaction Exemption 95-49;
Application No. D-09660]

Exemption

    The restrictions of sections 406(a)(1)(A) through (D) and 406(b)(1) 
and (2) of the Act and the sanctions resulting from the application of 
section 4975 of the Code, by reason of section 4975(c)(1)(A) through 
(E) of the Code, shall not apply to the lending of securities to Paloma 
by employee benefit plans (including commingled investment funds 
holding plan assets) for which BGA, an affiliate of Paloma, acts as 
securities lending agent (or sub-agent) and to the receipt of 
compensation by BGA in connection with these transactions, provided 
that the following conditions are met:
    1. Neither BGA, Paloma nor an affiliate of either has discretionary 
authority or control with respect to the investment of the plan assets 
involved in the transaction, or renders investment advice (within the 
meaning of 29 CFR 2510.3-21(c) with respect to those assets;
    2. Any arrangement for BGA to lend plan securities to Paloma in 
either an agency or sub-agency capacity will be approved in advance by 
a plan fiduciary who is independent of Paloma and BGA;
    3. A plan may terminate the agency or sub-agency arrangement at any 
time without penalty on five business days notice;
    4. The plan will receive from Paloma (either by physical delivery 
or by book entry in a securities depository, wire transfer or similar 
means) by the close of business on or before the day the loaned 
securities are delivered to Paloma, collateral consisting of cash, 
securities issued or guaranteed by the U.S. Government or its agencies 
or instrumentalities, or irrevocable bank letters of credit issued by a 
person other than Paloma or an affiliate thereof, or any combination 
thereof, or other collateral permitted under PTE 81-6, having, as of 
the close of business on the preceding business day, a market value 
initially equal to at least 102 percent of the market value of the 
loaned securities and, if the market value of the collateral falls 
below 100 percent, Paloma will deliver additional collateral on the 
following day such that the market value of the collateral will again 
equal 102 percent;
    5. All procedures regarding the securities lending activities will 
at a minimum conform to the applicable provisions of Prohibited 
Transaction Exemptions (PTEs) 81-6 and 82-63;
    6. Paloma will indemnify the plan against any losses due to its use 
of the borrowed securities;
    7. The plan will receive the equivalent of all distributions made 
to holders of the borrowed securities during the term of the loan, 
including, but not limited to, cash dividends, interest payments, 
shares of stock as a result of stock splits and rights to purchase 
additional securities, or other distributions;
    8. Prior to any plan's approval of the lending of its securities to 
Paloma, a copy of this exemption, (and the notice of pendency) will be 
provided to the plan; and
    9. Only plans with total assets having an aggregate market value of 
at least $50 million will be permitted to lend securities to Paloma.
Written Comments
    The applicant submitted the following comments regarding the notice 
of pendency.
    The applicant suggests that the last sentence of paragraph 18 of 
the notice of pendency which stated that, ``BGA will lend securities to 
requesting borrowers on a first come, first served basis, as a means of 
assuring uniformity of treatment among borrowers,'' needs further 
clarification. The applicant suggests that this sentence should have 
been deleted and the following paragraph should have been inserted in 
its place, ``[w]hile BGA will normally lend securities to requesting 
borrowers on a first come, first served basis, as a means of assuring 
uniformity of treatment among borrowers, it should be recognized that 
in some cases it may not be possible to adhere to a first come, first 
served allocation. This can occur, [[Page 33004]] for instance, where: 
(a) The credit limit established for such borrower by BGA and/or the 
client-plan has already been satisfied; (b) the ``first in line'' 
borrower is not approved as a borrower by the particular client- plan 
whose securities are sought to be borrowed; or (c) the ``first in 
line'' borrower cannot be ascertained, as an operational matter, 
because several borrowers spoke to different BGA representatives at or 
about the same time with respect to the same security. In situations 
(a) and (b), loans would normally be effected with the ``second in 
line.'' In situation (c), securities would be allocated equitably among 
all eligible borrowers.'' The Department concurs with this comment.
    The applicant further represents that, pursuant to discussions with 
the Department subsequent to the publication of the Proposal, it will 
make the following commitments with respect to the exempted 
transactions. BGA shall make and retain, for six (6) months, tape 
recordings evidencing all securities loan transactions with Paloma. 
Also, if requested by the lending customer, BGA shall provide daily 
confirmations of securities lending transactions; and BGA shall provide 
to lending customers monthly account reports, or if requested by the 
customer, weekly or daily reports, setting forth for each transaction 
made or outstanding during the relevant reporting period, the loaned 
securities, the related collateral, rebates and loan premiums and such 
other information in such format as shall be agreed to by the parties.
    Accordingly, after giving full consideration to the entire record, 
including the written comment from the applicant, the Department has 
decided to grant the exemption, as described and concurred in above. In 
this regard, the comment letter submitted by the applicant 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 and 
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 April 14, 1995, at 60 FR 
19086.

For Further Information Contact: Louis Campagna of the Department, 
telephone (202) 219-8883. (This is not a toll-free number.)
The First National Bank of Boston and Its Affiliates (Collectively, the 
Bank) Located in Boston, Massachusetts

[Prohibited Transaction Exemption 95-50; Application No. D-09682]

Section I--Exemption for Receipt of Fees

    The restrictions of sections 406(a) and 406(b) of the Act and the 
sanctions resulting from the application of section 4975 of the Code, 
by reason of section 4975(c)(1) (A) through (F) of the Code, shall not 
apply as of April 1, 1994 to: (1) The receipt by the Bank of fees from 
the 1784 Funds (the Funds), investment companies registered under the 
Investment Company Act of 1940 (the 1940 Act), for acting as an 
investment adviser to the Funds in connection with the investment by 
plans for which the Bank serves as a fiduciary (the Client Plans) in 
shares of the Funds; and (2) the receipt and retention of fees by the 
Bank from the Funds for acting as custodian and accountant to the Funds 
as well as for any other services to the Funds which are not investment 
advisory services (i.e. ``secondary services'' as defined in Section 
III(h) below) in connection with the investment by the Client Plans in 
shares of the Funds, provided that the following conditions and the 
General Conditions of Section II below are met:
    (a) No sales commissions are paid by the Client Plans in connection 
with the purchase or sale of shares of the Funds and no redemption fees 
are paid in connection with the sale of shares by the Client Plans to 
the Funds.
    (b) The price paid or received by a Client Plan for shares in a 
Fund is the net asset value per share at the time of the transaction, 
as defined in Section III(e), and is the same price which would have 
been paid or received for the shares by any other investor at that 
time.
    (c) Neither the Bank nor an affiliate, including any officer or 
director of the Bank, purchases or sells shares of the Funds to any 
Client Plan.
    (d) Each Client Plan receives a credit, through a cash rebate, of 
such Plan's proportionate share of all fees charged to the Funds by the 
Bank for investment advisory services, including any investment 
advisory fees paid by the Bank to third party sub-advisors, no later 
than one business day after the receipt of such fees by the Bank. The 
crediting of all investment advisory fees to the Client Plans by the 
Bank is audited by an independent accounting firm on at least an annual 
basis to verify the proper crediting of the fees to each Client Plan.
    (e) The combined total of all fees received by the Bank for the 
provision of services to a Client Plan, and in connection with the 
provision of services to the Funds in which the Client Plan may invest, 
are not in excess of ``reasonable compensation'' within the meaning of 
section 408(b)(2) of the Act.\7\

    \7\In addition, the Department notes that Section 404(a) of the 
Act requires, among other things, that a fiduciary of a plan act 
prudently, solely in the interest of the plan's participants and 
beneficiaries, and for the exclusive purpose of providing benefits 
to participants and beneficiaries when making investment decisions 
on behalf of a plan. Thus, the Department believes that the Bank 
should ensure, prior to any investments made by a Client Plan for 
which it acts as a trustee or investment manager, that all fees paid 
by the Funds, including fees paid to parties unrelated to the Bank 
and its affiliates, are reasonable. In this regard, the Department 
is providing no opinion as to whether the total fees to be paid by a 
Client Plan to the Bank, its affiliates, and third parties under the 
arrangements described herein would be either reasonable or in the 
best interests of the participants and beneficiaries of the Client 
Plans.
---------------------------------------------------------------------------

    (f) The Bank does not receive any fees payable pursuant to Rule 
12b-1 under the 1940 Act in connection with the transactions.
    (g) The Client Plans are not employee benefit plans sponsored or 
maintained by the Bank.
    (h) A second fiduciary acting for the Client Plan which is 
independent of and unrelated to the Bank (the Second Fiduciary) 
receives, in advance of any initial investment by the Client Plan in a 
Fund, full and detailed written disclosure of information concerning 
the Funds, including but not limited to:
    (1) A current prospectus for each Fund in which a Client Plan is 
considering investing;
    (2) A statement describing the fees for investment advisory or 
similar services, any secondary services as defined in Section III(h), 
and all other fees to be charged to or paid by the Client Plan and by 
the Funds, including the nature and extent of any differential between 
the rates of such fees;
    (3) The reasons why the Bank may consider such investment to be 
appropriate for the Client Plan;
    (4) A statement describing whether there are any limitations 
applicable to the Bank with respect to which assets of a Client Plan 
may be invested in the Funds, and if so, the nature of such 
limitations; and
    (5) Upon request of the Second Fiduciary, a copy of the proposed 
exemption and/or a copy of the final exemption, once such documents are 
published in the Federal Register.
    (i) After consideration of the information described above in 
[[Page 33005]] paragraph (h) of Section I, the Second Fiduciary 
authorizes in writing the investment of assets of the Client Plan in 
each particular Fund, the fees to be paid by such Fund to the Bank, and 
the cash rebate to the Client Plan of fees received by the Bank from 
the Funds for investment advisory services.
    (j) All authorizations made by a Second Fiduciary regarding 
investments in a Fund and the fees paid to the Bank are subject to an 
annual reauthorization wherein any such prior authorization referred to 
in paragraph (i) of Section I shall be terminable at will by the Client 
Plan, without penalty to the Client Plan, upon receipt by the Bank of 
written notice of termination. A form expressly providing an election 
to terminate the authorization described in paragraph (i) above (the 
Termination Form) with instructions on the use of the form must be 
supplied to the Second Fiduciary no less than annually. The 
instructions for the Termination Form must include the following 
information:
    (1) The authorization is terminable at will by the Client Plan, 
without penalty to the Client Plan, upon receipt by the Bank of written 
notice from the Second Fiduciary; and
    (2) Failure to return the Termination Form will result in continued 
authorization of the Bank to engage in the transactions described in 
paragraph (i) of Section I on behalf of the Client Plan.
    (k) The Second Fiduciary of each Client Plan invested in a 
particular Fund receives full written disclosure, in a statement 
separate from the Fund prospectus, of any proposed increases in the 
rates of fees charged by the Bank to the Funds for secondary services 
at least 30 days prior to the effective date of such increase, 
accompanied by a copy of the Termination Form, and receives full 
written disclosure in a Fund prospectus or otherwise of any increases 
in the rates of fees charged by the Bank to the Funds for investment 
advisory services even though such fees will be rebated as required by 
paragraph (d) of Section I above.
    (l) In the event that the Bank provides an additional secondary 
service to a Fund for which a fee is charged or there is an increase in 
the amount of fees paid by the Funds to the Bank for any secondary 
services resulting from a decrease in the number or kind of services 
performed by the Bank for such fees in connection with a previously 
authorized secondary service, the Bank will, at least thirty days in 
advance of the implementation of such additional service or fee 
increase, provide written notice to the Second Fiduciary explaining the 
nature and the amount of the additional service for which a fee will be 
charged or the nature and amount of the increase in fees of the 
affected Fund. Such notice shall be accompanied by the Termination 
Form, as defined in Section III(i) below. However, if the Termination 
Form has been provided to the Second Fiduciary pursuant to this 
paragraph or paragraph (k) above, then the Termination Form need not be 
provided again for an annual reauthorization pursuant to paragraph (j) 
above unless at least six months has elapsed since the form was 
provided in connection with the fee increase.
    (m) On an annual basis, the Bank provides the Second Fiduciary of a 
Client Plan investing in the Funds with:
    (1) A copy of the current prospectus for the Funds and, upon such 
fiduciary's request, a copy of the Statement of Additional Information 
for such Funds which contains a description of all fees paid by the 
Funds to the Bank;
    (2) A copy of the annual financial disclosure report of the Funds 
in which such Client Plan is invested, which includes information about 
the Fund portfolios as well as audit findings of an independent 
auditor, within 60 days of the preparation of the report; and
    (3) Oral or written responses to inquiries of the Second Fiduciary 
as they arise.
    (n) All dealings between the Client Plans and the Funds are on a 
basis no less favorable to the Client Plans than dealings with other 
shareholders of the Funds.

Section II--General Conditions

    (a) The Bank maintains for a period of six years the records 
necessary to enable the persons described below in paragraph (b) of 
Section II to determine whether the conditions of this exemption have 
been met, except that: (1) A prohibited transaction will not be 
considered to have occurred if, due to circumstances beyond the control 
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(i) of the Act or to the taxes imposed by section 4975(a) and (b) of 
the Code if the records are not maintained or are not available for 
examination as required by paragraph (b) below.
    (b)(1) Except as provided in paragraph (b)(2) and notwithstanding 
any provisions of section 504(a)(2) and (b) of the Act, the records 
referred to in paragraph (a) of Section II are unconditionally 
available at their customary location for examination during normal 
business hours by--
    (i) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service,
    (ii) Any fiduciary of the Client Plans who has authority to acquire 
or dispose of shares of the Funds owned by the Client Plans, or any 
duly authorized employee or representative of such fiduciary, and
    (iii) Any participant or beneficiary of the Client Plans or duly 
authorized employee or representative of such participant or 
beneficiary;
    (2) None of the persons described in paragraph (b)(1)(ii) and (iii) 
shall be authorized to examine trade secrets of the Bank, or commercial 
or financial information which is privileged or confidential.

Section III--Definitions

    For purposes of this exemption:
    (a) The term ``Bank'' means The First National Bank of Boston and 
any affiliate thereof as defined below in paragraph (b) of Section III.
    (b) An ``affiliate'' of a person includes:
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person;
    (2) Any officer, director, employee, relative, or partner in any 
such person; and
    (3) Any corporation or partnership of which such person is an 
officer, director, partner, or employee.
    (c) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (d) The term ``Fund'' or ``Funds'' shall include the 1784 Funds, 
each series thereof, or any other diversified open-end investment 
company registered under the 1940 Act for which the Bank serves as an 
investment adviser and may also serve as a custodian, Fund accountant, 
transfer agent or provide some other ``secondary service'' (as defined 
below in paragraph (h) of this Section) which has been approved by such 
Funds.
    (e) The term ``net asset value'' means the amount for purposes of 
pricing all purchases and sales calculated by dividing the value of all 
securities, determined by a method as set forth in the Fund's 
prospectus and statement of additional information, and other assets 
belonging to the Fund or portfolio of the Fund, less the liabilities 
charged to each such portfolio or Fund, by the number of outstanding 
shares.
    (f) The term ``relative'' means a ``relative'' as that term is 
defined in [[Page 33006]] section 3(15) of the Act (or a ``member of 
the family'' as that term is defined in section 4975(e)(6) of the 
Code), or a brother, a sister, or a spouse of a brother or a sister.
    (g) The term ``Second Fiduciary'' means a fiduciary of a Client 
Plan who is independent of and unrelated to the Bank. For purposes of 
this exemption, the Second Fiduciary will not be deemed to be 
independent of and unrelated to the Bank if:
    (1) Such fiduciary directly or indirectly controls, is controlled 
by, or is under common control with the Bank;
    (2) Such fiduciary, or any officer, director, partner, employee, or 
relative of the fiduciary is an officer, director, partner, employee or 
affiliate of the Bank (or is a relative of such persons);
    (3) Such fiduciary directly or indirectly receives any compensation 
or other consideration for his or her own personal account in 
connection with any transaction described in this exemption.
    If an officer, director, partner, affiliate or employee of the Bank 
(or relative of such persons), is a director of such Second Fiduciary, 
and if he or she abstains from participation in (i) the choice of the 
Client Plan's investment adviser, (ii) the approval of any such 
purchase or sale between the Client Plan and the Funds, and (iii) the 
approval of any change in fees charged to or paid by the Client Plan in 
connection with any of the transactions described in Sections I and II 
above, then paragraph (g)(2) of Section III shall not apply.
    (h) The term ``secondary service'' means a service other than an 
investment management, investment advisory, or similar service, which 
is provided by the Bank to the Funds. However, for purposes of this 
exemption, the term ``secondary service'' will not include any 
brokerage services provided to the Funds by the Bank for the execution 
of securities transactions engaged in by the Funds.
    (i) The term ``Termination Form'' means the form supplied to the 
Second Fiduciary which expressly provides an election to the Second 
Fiduciary to terminate on behalf of a Client Plan the authorization 
described in paragraph (j) of Section II. The Termination Form shall be 
used at will by the Second Fiduciary to terminate an authorization 
without penalty to the Client Plan and to notify the Bank in writing to 
effect a termination by selling the shares of the Funds held by the 
Client Plan requesting such termination within one business day 
following receipt by the Bank of the form; provided that if, due to 
circumstances beyond the control of the Bank, the sale cannot be 
executed within one business day, the Bank shall have one additional 
business day to complete such sale.

EFFECTIVE DATE: This exemption is effective as of April 1, 1994.
    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 March 20, 1995 at 60 FR 
14786.

WRITTEN COMMENTS AND MODIFICATIONS: The applicant submitted the 
following comments and requests for modifications regarding the notice 
of proposed exemption (the Proposal).
    With respect to Section I(h) of the Proposal, the condition 
requires that a Second Fiduciary receive, in advance of any investment 
by the Client Plan in a Fund, full and detailed written disclosure of 
information concerning the Funds. However, the applicant states that 
the condition as written might be construed as requiring the disclosure 
of such information before every investment thereafter in the same Fund 
(i.e., if one reads ``any investment'' to mean ``each and every 
investment''). The applicant requests that, in order to avoid confusion 
on this point, the phrase ``* * * in advance of any investment'' be 
changed to read ``* * * in advance of any initial investment'' 
(emphasis added). The Department concurs with the applicant's requested 
clarification and has so modified the language of Section I(h) of the 
Proposal.
    With respect to Section I(i) of the Proposal, the applicant states 
that this condition, which in general requires the Second Fiduciary for 
each Client Plan to have authorized in writing the investment of assets 
of the Client Plan in a particular Fund, begins with the clause ``[o]n 
the basis of the information described above in paragraph (h) of 
Section I.'' The applicant represents that while the Bank will be 
providing the information required by Section I(h), and anticipates 
that the Second Fiduciary will take such information into consideration 
in determining whether to approve any investment in a Fund, the Bank 
will not in every case be able to determine the precise basis on which 
a Second Fiduciary has approved use of a Fund as an investment vehicle. 
Thus, the applicant requests that this clause be either deleted or 
otherwise clarified. In this regard, the Department concurs with the 
applicant's requested clarification and has deleted the words ``[o]n 
the basis of * * *'' in the opening clause of Section I(i) and has 
substituted therefor the words ``[a]fter consideration of * * *''.
    With respect to Section I(m)(2) of the Proposal, the condition 
requires that the Bank provide the Second Fiduciary of a Client Plan 
investing in the Fund with a copy of the ``* * * annual financial 
disclosure report prepared by the Bank'' which includes information 
about the Fund portfolios. The applicant requests that the information 
referred to here should be clarified to mean the annual financial 
reports of the Funds which are prepared by the Funds, not by the Bank. 
In addition, the applicant requests that the condition be clarified to 
require that only the annual reports of the Funds in which a Client 
Plan is invested need to be sent to the Second Fiduciary for that 
Client Plan. The Department concurs with the applicant's requested 
clarification and has modified the language of Section I(m)(2) by 
deleting the words ``* * * prepared by the Bank'' and substituting 
therefor the words ``* * * of the Funds in which such Client Plan is 
invested''.
    With respect to Section III(d) of the Proposal, the applicant 
states that the 1784 Funds is a Massachusetts business trust with 
separate series recognized for tax purposes as a separate corporation, 
but which collectively is not recognized as a corporation. Thus, the 
applicant requests that the Department delete the word ``Inc.'' after 
the reference to the 1784 Funds in the definition contained in Section 
III(d). In addition, the applicant notes that references throughout the 
Proposal to the ``Fund'' are in fact generally meant as references to 
one or more of the separate series of the 1784 Funds. In this regard, 
the applicant requests that the definition in Section III(d) indicate 
that the term ``Fund'' or ``Funds'' ``* * * shall include the 1784 
Fund, each series thereof, or any other * * *'' (emphasis added). The 
Department concurs with the applicant's requested clarification and has 
so modified the language of Section III(d) of the Proposal.
    Finally, pursuant to telephone conversations with representatives 
of the Department, the applicant has confirmed in writing that when the 
Bank is engaged to provide investment advisory services for a Fund 
under the requested exemption, such services will be performed by the 
Bank or a third party sub-advisor retained by the Bank. The applicant 
represents that no ``sub-advisor'' to the Bank will be retained 
directly by a Fund. In this regard, the Bank states that the fees 
payable by a Fund ultimately for the account of a sub-advisor to the 
Bank will be rebated by the Bank to the Client Plans, as discussed in 
the Proposal and required by Section I(d) above. [[Page 33007]] 
    Accordingly, based on the current exemption application file and 
record, the Department has determined to grant the proposed exemption 
as modified.

FOR FURTHER INFORMATION CONTACT: Mr. E. F. Williams of the Department, 
telephone (202) 219-8194. (This is not a toll-free number.)
AT&T Corporation (AT&T), and AT&T Investment Corporation (ATTIMCO) 
Located in New York, New York

[Prohibited Transaction Exemption 95-51; Exemption Application Nos. 
D-09716 & D-09717]

Exemption

Part I--Exemption for Payment of Certain Fees to Asset Managers
    The restrictions of section 406(b)(1) and (b)(2) of the Act and the 
taxes imposed by section 4975 of the Code, by reason of section 
4975(c)(1)(E) of the Code, shall not apply to the payment of 
Performance Fees by an AT&T Investment Fund to an Asset Manager in 
exchange for real estate management or advisory services rendered 
pursuant to an Agreement, provided that the conditions set forth in 
Parts II and III are satisfied.
Part II--General Conditions
    (a) The Asset Manager is not an affiliate of AT&T and the terms of 
any Performance Fee are approved in writing by AT&T.
    (b) The terms of any Performance Fee shall be at least as favorable 
to the AT&T Investment Fund as those obtainable in arm's-length 
transactions between unrelated parties.
    (c) No AT&T Trust shall allocate, in the aggregate, more than 
twenty percent of its total assets to Arrangements which are the 
subject of this exemption, determined at the time any such Arrangement 
is established and at the time of any subsequent allocation of 
additional assets (including the reinvestment of assets) to such an 
Arrangement. The foregoing limitation shall not apply to an AT&T Plan 
Assets Entity. However, that percentage of the Assets of an AT&T Plan 
Assets Entity which is deemed to be ``plan assets'' of an AT&T Trust 
invested therein shall be treated as assets of such AT&T Trust for the 
purpose of applying the foregoing limitation to the AT&T Trust.
    (d) AT&T shall receive the following written information with 
respect to assets subject to this exemption (Assets):
    (1) annual audited financial statements prepared by independent 
certified public accountants approved by AT&T
    (2) quarterly and annual reports prepared by the Asset Manager 
relating to the overall financial position of the Assets (Each such 
report shall include a statement regarding the amount of fees paid to 
the Asset Manager during the period covered by such report); and
    (3) annual reports indicating the fair market value of the Assets 
determined on the basis of the most recently available Independent 
Valuations.
    (e) The total fees paid to an Asset Manager shall constitute no 
more than reasonable compensation.
    (f) The Performance Fee shall be payable after Net Proceeds with 
respect to the Assets exceed the Threshold Amount. The Threshold Amount 
and the amount of the Performance Fee, expressed as a percentage (or 
percentages) of the Net Proceeds in excess of the Threshold Amount (or 
Threshold Amounts), shall be established by the Agreement. The 
Threshold Amount for any Performance Fee shall include at least a 
minimum rate of return to the AT&T Investment Fund, as described in 
Part III, Section (q).
    (g) The provisions of this paragraph (g) shall apply only where an 
Asset Manager has discretion to sell Assets without prior approval of 
AT&T. For any sale of an Asset which gives rise to the payment of a 
Performance Fee to an Asset Manager prior to the Termination Date, the 
sales price of the Asset shall be at least equal to a Target Amount in 
order for the Asset Manager to sell the Asset and receive its 
Performance Fee without further approval. If the proposed sales price 
of the Asset is less than the applicable Target Amount, the proposed 
sale shall be disclosed to and subject to the approval of AT&T, in 
which event the Asset Manager shall be entitled to sell the Asset and 
receive its Performance Fee. If the proposed sales price is less than 
the applicable Target Amount and AT&T's approval is not obtained, the 
Asset Manager shall retain the authority to sell the Asset, provided 
that the Performance Fee that would have been payable to the Asset 
Manager by reason of the sale of the Asset shall be paid only at the 
termination of the Arrangement.
    (h) In the event of termination of the Arrangement upon its 
Termination Date, the Asset Manager shall be entitled to receive a 
Performance Fee payable on the Termination Date. The amount of the 
Performance Fee upon termination shall be determined by assuming a sale 
for cash of the remaining Assets at their fair market value (determined 
on the basis of Independent Valuations) and no reinvestment of such 
cash in Assets subject to the Arrangement.
    (i) In the event of the removal or resignation of an Asset Manager 
prior to the Termination Date, the Asset Manager shall be entitled to 
receive a Performance Fee payable on the Termination Date pursuant to 
this paragraph (i). The Performance Fee shall be calculated on a 
preliminary basis at the time of such removal or resignation by 
assuming a sale for cash of the remaining Assets at their fair market 
value (determined on the basis of Independent Valuations) and no 
reinvestment of such cash in Assets subject to the Arrangements. As of 
the Termination Date, the amount so determined on a preliminary basis 
shall be multiplied by a fraction, the numerator of which is the sum 
of: (1) The actual sales prices received by the AT&T Investment Fund on 
disposition of all Assets sold after the date of the Asset Manager's 
removal or resignation and prior to the Termination Date, and (2) in 
the case of Assets which have not been sold prior to the Termination 
Date, the value of the Assets as of the Termination Date (determined on 
the basis of Independent Valuations), and the denominator of which is 
the aggregate value of the Assets which was used in connection with the 
preliminary determination of the Performance Fee at the time of removal 
or resignation, provided that this fraction shall never exceed 1.0. The 
resulting amount shall be the Performance Fee payable to the Asset 
Manager upon the Termination Date.
    (j) AT&T shall maintain or cause to be maintained with respect to 
the Assets, for a period of six years, the records necessary to enable 
the persons described in paragraph (k) of this Part II to determine 
whether the conditions of this exemption have been met, except that (1) 
a prohibited transaction will not be considered to have occurred if, 
due to circumstances beyond the control of AT&T, the records are lost 
or destroyed prior to the end of the six-year period, and (2) no party 
in interest, other than AT&T, 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 Part 
III, Section (k) below.
    (k) Notwithstanding any provisions of Section 504(a)(2) and 504(b) 
of the Act, the records referred to in Section (j) of this Part II 
shall be unconditionally available at their customary location for 
examination during normal business hours by:
    (1) any duly authorized employee or representative of the 
Department or the Internal Revenue Service; [[Page 33008]] 
    (2) any contributing employer to any employee benefit plan the 
assets of which are held in the AT&T Investment Fund which has entered 
into the Arrangement or any duly authorized employee or representative 
of such employer;
    (3) any participant or beneficiary of any employee benefit plan the 
assets of which are held in the AT&T Investment Fund or any duly 
authorized representative of such participant or beneficiary; and
    (4) nothing in this paragraph (k) shall authorize any of the 
persons described in subsections (2) and (3) to examine any trade 
secrets of AT&T or information which is privileged or confidential.
Part III--Definitions
    (a) An ``affiliate'' of a person means:
    (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 of, or partner of any 
such person; and
    (3) Any corporation or partnership of which such person is an 
officer, director, partner or employee.
    (b) The term ``Agreement'' means the investment management, trust 
or other agreement entered into between an Asset Manager and AT&T for 
the provision of real estate management or advisory services.
    (c) The term ``Arrangement'' means a fee arrangement entered into 
between AT&T and an Asset Manager pursuant to an Agreement providing 
for the payment of Performance Fees to the Asset Manager by an AT&T 
Investment Fund in exchange for real estate management or advisory 
services.
    (d) The term ``Asset Manager'' means any person or entity providing 
real estate management or advisory services to an AT&T Investment Fund.
    (e) The term ``Assets'' means assets of an AT&T Investment Fund 
which are the subject of an Arrangement with an Asset Manager.
    (f) The term ``AT&T'' means AT&T Corporation, AT&T Investment 
Management Corporation and/or any Subsidiary.
    (g) The term ``AT&T Investment Fund'' means an AT&T Trust or an 
AT&T Plan Assets Entity.
    (h) The term ``AT&T Plan Assets Entity'' means any group trust, 
partnership or other entity (including without limitation the Telephone 
Real Estate Equity Trust), the assets of which are deemed to be ``plan 
assets'' by reason of the application of 29 C.F.R. 2510.3-101, but only 
if (1) fifty percent or more of the interests in such entity are held 
by one or more AT&T Trusts, and (2) AT&T is the named fiduciary or 
manager of the assets of such entity.
    (i) The term ``AT&T Trust'' means the AT&T Master Pension Trust or 
any other trust (other than an AT&T Plan Assets Entity), one hundred 
percent of the assets of which are assets of employee benefit plans 
maintained by AT&T.
    (j) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (k) The term ``Independent Valuations'' means valuations based on 
independent and objective third party sources acceptable to AT&T 
(including without limitation NASDAQ, newspapers, or other general 
publications, or brokers which are independent of the Asset Manager and 
its affiliates), or, if such sources are not available with respect to 
a particular asset or at the option of AT&T, valuations conducted by an 
appraiser independent of the Asset Manager and its affiliates which has 
been approved by AT&T provided, however, that, solely for purposes of 
the reports described in Part II, Section (d)(3) above, no such 
appraisal will be required with respect to any Asset if AT&T 
determines, in its sole discretion, that such an appraisal is 
unnecessary.
    (l) The term ``Net Proceeds'' means, with respect to an 
Arrangement, the aggregate amount of cash and other assets (valued at 
fair market value as determined on the basis of Independent Valuations) 
which cease to be Assets which are subject to such Arrangement, in 
accordance with the terms of the Agreement establishing such 
Arrangement.
    (m) The term ``Performance Fee'' means a fee which equals a pre-
specified percentage (or several pre-specified percentages) of all Net 
Proceeds in excess of the Threshold Amount (or several Threshold 
Amounts), subject to such limitations, if any, as AT&T may approve or 
impose.
    (n) The term ``Subsidiary'' means a corporation, partnership, or 
other entity of which (or in which) fifty percent or more of:
    (1) The combined voting power of all classes of stock entitled to 
vote or the total value of shares of all classes of such corporation, 
(2) the capital interest or profits interest of such partnership, or 
(3) the beneficial interest of such other entity, is owned directly or 
indirectly by AT&T Corporation or AT&T Investment Management 
Corporation.
    (o) The term ``Target Amount'' means a value assigned to each Asset 
either (1) at the time the Asset becomes subject to the Arrangement, by 
mutual agreement between the Asset Manager and AT&T, or (2) pursuant to 
an objective formula approved by the Asset Manager and AT&T at the time 
the Arrangement is established. However, in no event will the value be 
less than the value of the Asset at the time the Asset becomes subject 
to the Arrangement.
    (p) The term ``Termination Date'' means the date, established in 
the Agreement, on which the Arrangement will terminate by reason of the 
passage of time, as the same may be amended from time to time with the 
approval of AT&T.
    (q) The term ``Threshold Amount'' means with respect to any 
Arrangement an amount which equals one hundred percent of the AT&T 
Investment Fund's capital invested in the Assets plus a pre- specified 
annual compounded cumulative rate or rates of return, each of which is 
at least a minimum rate of return determined as follows:
    (1) A non-fixed rate which is a least equal to the rate of change 
in the consumer price index (CPI) during the period from the time the 
Assets become subject to the Arrangement until Net Proceeds equal or 
exceed the applicable Threshold Amount; or
    (2) a fixed rate which is at least equal to the average rate of 
change in the CPI over some period of time specified in the Agreement, 
which shall not exceed ten years.

EFFECTIVE DATE: This exemption is effective as of September 19, 1994, 
the date on which the notice of proposed exemption was published in the 
Federal Register.
    For a more complete statement of the facts and representations 
supporting this exemption, refer to the notice of proposed exemption 
published on September 19, 1994 at 59 FR 47952.

FOR FURTHER INFORMATION CONTACT: Ronald Willett of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)
Toyota Motor Sales, U.S.A., Inc. Money Purchase Pension Plan for 
Bargaining Unit Employees (the Plan) Located in Torrance, California

Exemption Application No. D-09875 Prohibited Transaction Exemption 
95-52;

Exemption

    The restrictions of sections 406(a) and 406 (b)(1) and (b)(2) of 
the Act and the sanctions resulting from the application of section 
4975 of the Code, by reason of section 4975(c)(1) (A) through (E) of 
the Code, shall not apply to the cash sale by the Plan (the Sale) of 
group annuity contract No. GA-4564 (the [[Page 33009]] GAC) issued by 
Mutual Benefit Life Insurance Company (Mutual Benefit), located in 
Newark, New Jersey, to Toyota Motor Sales, U.S.A., Inc., a California 
corporation, (the Employer), a party in interest with respect to the 
Plan; provided that: (1) The Sale is a one-time transaction for cash; 
(2) the Plan experiences no loss nor incurs any expense from the Sale; 
and (3) the Plan receives as consideration from the Sale the greater of 
either the fair market value of the GAC as determined by the trustee of 
the Plan on the date of the Sale, or an amount that is equal to the 
total funds expended by the Plan in acquiring and holding the GAC, plus 
the amount of interest earned and accrued by the Plan on the GAC to the 
date of the Sale, less all withdrawals from the Plan to the date of the 
Sale, and less all advances made to the Plan by the Employer to the 
date of the Sale.
    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 April 27, 1995, at 60 FR 
20766.

WRITTEN COMMENTS: With respect to the Notice of Proposed Exemption, the 
applicant noted that the last sentence in the penultimate paragraph of 
Section 4 under the Summary of Facts and Representations represents 
that the fair market value of the GAC is $2,349,840, as of September 
30, 1994. The applicant believes that the fair market value of the GAC, 
if ascertainable, is considerably lower because of the rehabilitation 
proceedings affecting Mutual Benefit, which significantly restrict the 
withdrawal and payment provisions of the GAC.
    The applicant also noted that had the Sale taken place on September 
30, 1994, the Plan would have been paid approximately $2,349,840, which 
is the amount that would have been determined in accordance with the 
terms and provisions of the Proposed Exemption as of that date. Since 
the Sale did not take place on September 30, 1994, the Plan will 
receive as consideration an amount determined on the date of the Sale 
in accordance with the terms and provisions of the Proposed Exemption.

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

Bob Murphy, Inc. Proft Sharing Plan (the Plan) Located in Boynton 
Beach, FL

[Prohibited Transaction Exemption 95-53; Exemption Application No. 
D-09949]

Exemption

    The sanctions resulting from the application of section 4975 of the 
Code, by reason of section 4975(c)(1) (A) through (E) of the Code, 
shall not apply to the proposed sale of certain works of art (the Art 
Work) by the Plan to Robert J. Murphy, Jr., a disqualified person with 
respect to the Plan.8

     8Because Mr. Murphy and his spouse, Gail F. Murphy, are the 
only participants in the Plan, there is no jurisdiction under Title 
I of the Act pursuant to 29 CFR 2510.3-3(b). However, there is 
jurisdiction under Title II of the Act pursuant to section 4975 of 
the Code.
---------------------------------------------------------------------------

    This exemption is conditioned upon the following requirements: (1) 
All terms and conditions of the sale are at least as favorable to the 
Plan as those obtainable in an arm's length transaction between 
unrelated parties; (2) the sale is a one-time cash transaction; (3) the 
Plan is not required to pay any commissions, costs or other expenses in 
connection with the sale; and (4) the Plan receives a sales price equal 
to the fair market value of the Art Work on the date of the sale as 
determined by a qualified, independent appraiser.
    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 May 10, 1995 at 60 FR 
24902.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)
Employees' Thrift Plan of Columbia Gas System (the Plan) Located in 
Wilmington, Delaware

[Exemption Application No. D-09959 Prohibited Transaction Exemption 
95-54]

Exemption

    The restrictions of sections 406(a) and 406 (b)(1) and (b)(2) of 
the Act and the sanctions resulting from the application of section 
4975 of the Code, by reason of section 4975(c)(1) (A) through (E) of 
the Code, shall not apply to: (1) The loan of funds (the Loan) to the 
Plan by the Columbia Gas System, Inc., the sponsor of the Plan, and its 
wholly-owned subsidiary, Columbia Gas Transmission Corporation, with 
respect to the Guaranteed Investment Contract No. 61969 (the GIC) 
issued by Confederation Life Insurance Company of Canada 
(Confederation); and (2) the potential repayment by the Plan of the 
Loan upon the receipt by the Plan of payments under the GIC; provided 
the following conditions are satisfied: (a) No interest and/or expenses 
are paid by the Plan in connection with the Loan; (b) all the terms and 
conditions of the proposed Loan are no less favorable to the Plan than 
those which the Plan could obtain in an arm's-length transaction with 
an unrelated party; (c) the Loan will be the accumulated book value of 
the GIC as of August 12, 1994, less any amounts received by the Plan 
from Confederation since August 12, 1994; (d) the repayment of the Loan 
will not exceed the total amount of the Loan; (e) the repayment of the 
Loan by the Plan will be restricted to funds paid to the Plan under the 
GIC by Confederation, or State Guaranty Funds, or other third-party 
sources; (f) the repayment of the Loan is waived to the extent the Loan 
exceeds the proceeds the Plan receives from the GIC; and (g) any 
proceeds or future interest credited under the GIC after August 12, 
1994, in accordance with the Rehabilitation Plan by the State of 
Michigan, will be allocated and disbursed to the affected participants 
of the Plan.
    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 April 27, 1995, at 60 FR 
20771.

WRITTEN COMMENTS: With respect to the Notice of Proposed Exemption, the 
applicant noted that item 2(c) of the first paragraph of the Proposed 
Exemption did not take into account amounts received by the Plan since 
August 12, 1994, from Confederation prior to the date the Loan is made. 
The applicant states that Confederation has paid some limited amounts 
on its GICs for certain withdrawal events and may pay some more funds 
before the date of the Loan.
    The applicant also noted that amounts received by the Plan from 
Confederation since August 12, 1994, were not considered in determining 
the amount of the Loan as described in the fourth sentence of Section 5 
and item 6(c) in Section 6 of the Summary of Facts and Representations.
    In consideration of the comments, item 2(c) of the Exemption is 
changed to reflect that the Loan will be the accumulated book value of 
the GIC as of August 12, 1994, less any amounts received by the Plan 
from Confederation since August 12, 1994.

FOR FURTHER INFORMATION CONTACT: Mr. C.E. Beaver 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 [[Page 33010]] 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 are true and complete and accurately describe all material 
terms of the transaction which is the subject of the exemption. In the 
case of continuing exemption transactions, if any of the material facts 
or representations described in the application change after the 
exemption is granted, the exemption will cease to apply as of the date 
of such change. In the event of any such change, application for a new 
exemption may be made to the Department.

    Signed at Washington, D.C., this 21st day of June, 1995.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 95-15521 Filed 6-23-95; 8:45 am]
BILLING CODE 4510-29-P