[Federal Register Volume 60, Number 213 (Friday, November 3, 1995)]
[Notices]
[Pages 55863-55868]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27296]



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[[Page 55864]]


DEPARTMENT OF LABOR
[Prohibited Transaction Exemption 95-100; Exemption Application No. D-
9500 , et al.]


Grant of Individual Exemptions; Fidelity Management Trust, 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.

Fidelity Management Trust Company (FMTC) and its Affiliates 
(collectively, Fidelity) Located in Boston, Massachusetts

[Prohibited Transaction Exemption 95-100; Application No. D-9500]

Section I--Exemption for Payment of Certain Fees to Fidelity

    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 certain 
performance fees (the Performance Fee) to Fidelity by employee benefit 
plans for which Fidelity provides investment management or 
discretionary trustee services (the Client Plans) pursuant to an 
investment management or trust agreement (the Agreement) entered into 
between Fidelity and the Client Plans either individually, through the 
establishment of a single client separate account (Single Client 
Account), or collectively as participants in a multiple client 
commingled account (Multiple Client Account), provided that the 
conditions set forth below in Section III are satisfied. (Single Client 
Accounts and Multiple Client Accounts are collectively referred to 
herein as Accounts.)

Section II--Exemption for Investments in a Multiple Client Account

    The restrictions of section 406(a)(1) (A) through (D) of the Act 
and the taxes imposed by section 4975 of the Code, by reason of section 
4975(c)(1) (A) through (D) of the Code, shall not apply to any 
investment by a Client Plan in a Multiple Client Account managed by 
Fidelity, provided that the conditions set forth below in Section III 
are satisfied.

Section III--General Conditions

    (a) The investment of plan assets in a Single or Multiple Client 
Account, including the terms and payment of any Performance Fee, shall 
be approved in writing by a fiduciary of a Client Plan which is 
independent of Fidelity (the Independent Fiduciary). Notwithstanding 
the foregoing, Fidelity may authorize the transfer of cash from a 
Single Client Account to a Multiple Client Account provided that: (1) 
The Multiple Client Account has similar investment objectives and the 
identical fee structure as the Single Client Account; (2) the Agreement 
governing the Single Client Account authorizes Fidelity to invest in a 
Multiple Client Account; (3) Fidelity receives no additional fees from 
the Single Client Account for cash invested in the Multiple Client 
Account; (4) a binding commitment to make the transfer to the Multiple 
Client Account occurs within six months of the Independent Fiduciary's 
decision to allocate assets to the Single Client Account or, in the 
event Fidelity's binding commitment to make the transfer occurs more 
than six months after such fiduciary's decision, Fidelity obtains an 
additional authorization from the Independent Fiduciary; and (5) each 
transfer of assets from the Single Client Account to the Multiple 
Client Account occurs within sixty (60) days of the actual transfer of 
such assets to the Single Client Account.
    (b) The terms of any investment in an Account and of any 
Performance Fee shall be at least as favorable to the Client Plans as 
those obtainable in arm's-length transactions between unrelated 
parties.
    (c) At the time any Account is established and at the time of any 
subsequent investment of assets (including the reinvestment of assets) 
in such Account:
    (1) Each Client Plan shall have total net assets with a value in 
excess of $50 million or, alternatively, be represented by an 
Independent Fiduciary that is responsible for the investment of at 
least $50 million in ``plan assets'' subject to the provisions of the 
Act; and
    (2) No Client Plan shall invest, in the aggregate, more than five 
percent (5%) of its total assets in any Account or more than ten 
percent (10%) of its assets in all Accounts established by Fidelity.
    (d) Prior to making an investment in any Account, the Independent 
Fiduciary of each Client Plan investing in an Account shall receive 
offering materials from Fidelity which disclose all material facts 
concerning the purpose, structure, and operation of the Account, 
including any fee arrangements.
    (e) With respect to its ongoing participation in an Account, the 
Independent Fiduciary of each Client Plan shall receive the following 
written information from Fidelity:
    (1) Audited financial statements of the Account prepared by 
independent public accountants selected by Fidelity no later than 
ninety (90) days after the end of the fiscal year of the Account;
    (2) Quarterly and annual reports prepared by Fidelity relating to 
the overall financial position of the Account and, in the case of a 
Multiple Client Account, the value of such Client Plan's interest in 
the Account. Each such report shall include a statement regarding the 
amount of fees paid to Fidelity during the period covered by such 
report;
    (3) Annual reports indicating the fair market value of the 
Account's assets 

[[Page 55865]]
determined using market sources and valuation methodologies acceptable 
to the Independent Fiduciary of the Client Plan for a Single Client 
Account or the responsible independent fiduciaries of Client Plans and 
other authorized persons acting for investors in a Multiple Client 
Account (the Responsible Independent Fiduciaries, as defined in Section 
IV(c) below), or if market sources are not available, values determined 
by a qualified appraiser independent of Fidelity which has been 
approved by the Independent Fiduciary or Responsible Independent 
Fiduciaries. However, no independent appraisals shall be required 
unless such appraisals are necessary for purposes of determining any 
compensation due to Fidelity based on the value of the assets in the 
Account for that period; and
    (4) In the case of any Multiple Client Account, a list of all other 
investors in the Account.
    (f) The total fees paid to Fidelity shall constitute no more than 
reasonable compensation.
    (g) The Performance Fee shall be payable after the Client Plan has 
received distributions from the Account in excess of an amount equal to 
100% of its invested capital plus a pre-specified annual compounded 
cumulative rate of return (the Threshold Amount), except that in the 
case of Fidelity's removal or resignation, Fidelity shall be entitled 
to receive a Performance Fee payable either at the time of removal, or 
in the event of Fidelity's resignation, on the scheduled termination 
date of the Account, subject to the requirements of paragraph (j) 
below, as determined by a deemed distribution of the assets of the 
Account based on an assumed sale of such assets at their fair market 
value (in accordance with market sources or independent appraisals as 
described in paragraph (k) below), only to the extent that the Client 
Plan would receive distributions from the Account in excess of an 
amount equal to the Threshold Amount at the time of Fidelity's removal 
or resignation. Both the Threshold Amount and the amount of the 
Performance Fee, expressed as a percentage of the amount distributed 
(or deemed distributed) from the Account in excess of the Threshold 
Amount, shall be established by the Agreement and agreed to by the 
Independent Fiduciary of the Client Plan.
    (h) The Threshold Amount for any Performance Fee shall include at 
least a minimum rate of return to the Client Plan, as defined below in 
Section IV(d). The Independent Fiduciary acting for a Client Plan shall 
specifically agree in writing with Fidelity, prior to any investment in 
the Account, that it would be appropriate for the minimum rate of 
return applicable to the Account to be based upon the rate of change in 
the consumer price index (CPI) during the period specified in the 
Agreement, as described in Section IV(d).
    (i) For any sale of an asset in an Account which shall give rise to 
the payment of a Performance Fee to Fidelity prior to the termination 
of the Account, the sale price of the asset shall be at least equal to 
a target amount (the Target Amount), as defined in Section IV(e), in 
order for Fidelity to sell the asset and receive its Performance Fee 
without further approvals. If the proposed sale price of the asset is 
less than the Target Amount, the proposed sale shall be disclosed to 
and approved by the Independent Fiduciary for a Single Client Account 
or the Responsible Independent Fiduciaries for a Multiple Client 
Account, in which event Fidelity will be entitled to sell the asset and 
receive its Performance Fee. If the proposed sale price is less than 
the Target Amount and the Independent Fiduciary's or Responsible 
Independent Fiduciaries' approval is not obtained, Fidelity shall still 
have the authority to sell the asset, if the Agreement provides 
Fidelity with complete investment discretion for the Account, provided 
that the Performance Fee that would have been payable to Fidelity by 
reason of the sale of the asset is paid only at the termination of the 
Account.
    (j) In the event Fidelity resigns as investment manager or trustee 
of an Account, the Performance Fee shall be calculated at the time of 
resignation based upon a deemed distribution of the assets of the 
Account at their fair market value (determined using market sources or 
independent appraisals as described in paragraph (k) below). The amount 
arrived at by this calculation shall be multiplied by a fraction, the 
numerator of which shall be the sum of the disposition proceeds of all 
assets in the Account received prior to the termination date plus the 
fair market value of the assets remaining in the Account on the 
termination date and the denominator of which shall be the aggregate 
value of the assets in the Account used in determining the amount of 
the Performance Fee as of the date of resignation, provided that this 
fraction shall never exceed 1.0. The resulting amount shall be the 
Performance Fee payable to Fidelity on the scheduled termination date 
of the Account.
    (k) With respect to the valuation of the assets in an Account for 
purposes of determining any Performance Fee based on a deemed 
distribution of such assets, Fidelity shall establish the fair market 
value for the assets using market sources and valuation methodologies 
disclosed to, and approved in writing by, the Independent Fiduciary for 
a Single Client Account or the Responsible Independent Fiduciaries for 
a Multiple Client Account. In the event market sources are not 
available for the valuation of assets in the Account, the fair market 
value of such assets shall be determined by an independent qualified 
appraiser approved by either the Independent Fiduciary for a Single 
Client Account or the Responsible Independent Fiduciaries for a 
Multiple Client Account prior to any valuation of the assets. If a new 
appraiser for an asset is chosen by Fidelity, the appraiser shall be 
approved by such Fiduciaries prior to any valuation of the asset. In 
any event, the fair market value of all assets involved in any deemed 
distribution shall be based on the current market value of such assets 
as of the date of the transactions giving rise to the payment of the 
Performance Fee.
    (l) Fidelity shall maintain, for a period of six years, the records 
necessary to enable the persons described in paragraph (m) of this 
Section III 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 Fidelity, the records are lost or destroyed prior to the end of the 
six year period, and (2) no party in interest, other than Fidelity, 
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 (m) below.
    (m)(1) Except as provided in paragraph (m)(2) and notwithstanding 
any provisions of sections 504(a)(2) and (b) of the Act, the records 
referred to in paragraph (l) of this Section III shall be 
unconditionally available at their customary location for examination 
during normal business by:
    (i) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service;
    (ii) Any fiduciary of a Client Plan or any duly authorized employee 
or representative of such fiduciary;
    (iii) Any contributing employer to any Client Plan or any duly 
authorized employee or representative of such employer; and
    (iv) Any participant or beneficiary of any Client Plan, or any duly 
authorized employee or representative of such participant or 
beneficiary. 

[[Page 55866]]

    (2) None of the persons described above in paragraph (m)(1) (ii)-
(iv) shall be authorized to examine the trade secrets of Fidelity or 
any commercial or financial information which is privileged or 
confidential.

Section IV--Definitions

    (a) 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 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 ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (c) The term ``Responsible Independent Fiduciaries'' means with 
respect to a Multiple Client Account the Independent Fiduciary of 
Client Plans invested in the Account and other authorized persons 
acting for investors in the Account which are not employee benefit 
plans as defined under section 3(3) of the Act (such as governmental 
plans, university endowment funds, etc.) that are independent of 
Fidelity and that collectively hold at least 50% of the interests in 
the Account.
    (d) The term ``Threshold Amount'' means with respect to any 
Performance Fee an amount which equals all of a Client Plan's capital 
invested in an Account plus a pre-specified annual compounded 
cumulative rate of return that is at least a minimum rate of return 
determined as follows:
    (1) A non-fixed rate which is at least equal to the rate of change 
in the CPI during the period from the deposit of the Client Plan's 
assets in the Account until distributions of the Client Plan's assets 
from the Account equal or exceed the Threshold Amount; or
    (2) A fixed rate which is at least equal to the average annual rate 
of change in the CPI over some period of time specified in the 
Agreement, which shall not exceed 10 years.
    (e) The term ``Target Amount'' means a value assigned to each asset 
in the Account established by Fidelity either (1) at the time the asset 
is acquired, by mutual agreement between Fidelity and the Independent 
Fiduciary for a Single Client Account or the Responsible Independent 
Fiduciaries for a Multiple Client Account, or (2) pursuant to an 
objective formula approved by such fiduciaries at the time the Account 
is established. However, in no event will such value be less than the 
acquisition price of the asset.
    (f) The term ``Account'' means any Single Client Account or 
Multiple Client Account established with Fidelity, under a written 
investment management or trust agreement, that is invested primarily 
(i.e. more than 50%) in securities or other assets which are not 
publicly-traded equity securities or publicly-traded, investment grade 
debt securities, pursuant to written instructions and guidelines 
established and approved by an Independent Fiduciary for the Client 
Plan prior to any investment by the Client Plan in the Account. For 
purposes of an ``Account'' meeting the 50% test for assets which are 
not ``publicly-traded equity securities'' or ``publicly-traded, 
investment grade debt securities'', any private market securities held 
by the Account that become publicly-traded securities shall not be 
considered as such for a period of thirty (30) months following the 
date such securities become publicly-traded so as to allow Fidelity 
sufficient time to dispose of such securities in order for the Account 
to remain primarily invested in assets which are not publicly-traded 
securities, including for such purposes any publicly-traded debt 
securities which are not investment grade.
    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 June 15, 
1995, at 60 FR 31501.
Written Comments and Modifications
    The Department received one comment letter from interested persons 
regarding the Proposal. The comment letter was from Russell L. Olson, 
Director, Pension Investment, Worldwide, Eastman Kodak Company in 
Rochester, New York (the Commenter).
    The Commenter made two recommendations regarding the conditions 
contained in the Proposal.
    First, the Commenter notes that Section III(c)(1) of the Proposal 
requires that each Client Plan must have total net assets with a value 
in excess of $50 million. The Commenter states that the Proposal's 
language would foreclose the use of such a Fidelity performance-fee 
based Account to a small pension fund whose named fiduciary is the same 
as that which is named fiduciary of a multi-billion dollar pension 
fund, but with which the smaller pension fund is not commingled. The 
Commenter believes that such an Account may be equally as appropriate 
for the small pension fund as for the large, provided that the smaller 
pension fund is represented by a sophisticated fiduciary. Thus, the 
Commenter recommends that Section III(c)(1) be revised to require only 
that each Client Plan be represented by an Independent Fiduciary that 
is responsible for the investment of more than $50 million of ``plan 
assets'' subject to the provisions of the Act.1

    \1\See 29 CFR 2510.3-101 for the Department's regulations 
defining ``plan assets'' that are subject to Title I of the Act.
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    Second, the Commenter notes that Section III(i) of the Proposal 
requires, in pertinent part, that

    ``* * * If the proposed sale price of an asset is less than the 
Target Amount, the proposed sale shall be disclosed to and approved 
by the Independent Fiduciary * * * or [if the] Independent 
Fiduciary's * * * approval is not obtained, Fidelity shall still 
have the authority to sell the asset, if the Agreement provides 
Fidelity with complete investment discretion for the Account, 
provided that the Performance Fee that would have been payable to 
Fidelity by reason of the sale of the asset is paid only at the 
termination of the Account.''

    The Commenter recommends that this provision be eliminated. In this 
regard, the Commenter states that this condition would make it more 
cumbersome for Fidelity to sell a less successful investment. The 
Commenter represents that, as an investor, it would view any such 
impediment as counter to the best interest of plan participants.
    By letter dated August 16, 1995, Fidelity responded to the comments 
made by the Commenter. Fidelity expressed support for the Commenter's 
suggested revisions to the Proposal to the extent the Department would 
be willing to adopt such changes. However, Fidelity noted that it would 
also be willing to accept an exemption as proposed on these issues to 
avoid any material delay in the processing of a final exemption.
    With respect to the first recommendation made by the Commenter, and 
Fidelity's response thereto, the Department believes that a Client 
Plan's interests in connection with the proposed payment of Performance 
Fees to Fidelity should be represented by an Independent Fiduciary 
which has sufficient knowledge, experience and expertise to enable such 
fiduciary to adequately protect the interests of the Client Plan.2 


[[Page 55867]]
Thus, the Department believes that the Commenter's recommendations have 
merit as long as the Client Plan's interests are protected by a 
sophisticated fiduciary that is thoroughly familiar with the 
Performance Fee arrangement and monitors such arrangement for the 
Client Plan. In this regard, the Department expects that a particular 
sophisticated fiduciary which initially acts for a Client Plan as an 
Independent Fiduciary for the Plan's approval of a Performance Fee for 
Fidelity should continue to serve in that role throughout the duration 
of such Plan's participation in the Account.

    \2\As noted in Footnote 3 of Paragraph 3 in the Summary of Facts 
and Representations in the Proposal, the Department expects a plan 
fiduciary, prior to entering into any performance-based compensation 
arrangement with an investment manager, to fully understand the 
risks and benefits associated with the compensation formula 
following disclosure by the investment manager of all relevant 
information pertaining to the proposed arrangement. In addition, a 
plan fiduciary must be capable of periodically monitoring the 
actions taken by the investment manager in the performance of its 
duties and must consider, prior to entering into the arrangement, 
whether such plan fiduciary is able to provide oversight of the 
investment manager during the course of the arrangement.
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    Therefore, the Department has determined to modify the language of 
Section III(c)(1) as follows:

    ``* * * Each Client Plan shall have total net assets with a 
value in excess of $50 million or, alternatively, be represented by 
an Independent Fiduciary that is responsible for the investment of 
at least $50 million in ``plan assets'' subject to the provisions of 
the Act. [emphasis added]

    With respect to the second recommendation made by the Commenter, 
and Fidelity's response thereto, the Department does not believe that 
elimination of requirements in Section III(i) of the Proposal is 
warranted. In general, the Department views the payment of a 
Performance Fee as a reward for superior investment performance for 
assets acquired by an Account. The ``Target Amount'' concept (as 
defined in Section IV(e) of the Proposal) ensures that Fidelity will 
only receive a Performance Fee if each particular asset has at least 
reached its intended or ``targeted'' value at the time of sale. Thus, 
the Department believes that after the Threshold Amount (as defined in 
Section IV(d) of the Proposal) has been reached, the sale of any asset 
by an Account at a price which is less than the Target Amount 
established for such asset should not entitle Fidelity to the receipt 
of a Performance Fee at the time of sale unless an Independent 
Fiduciary is made aware of, and specifically approves, the sale at that 
time. Accordingly, the Department has determined not to adopt the 
Commenter's recommendations with respect to the provisions of Section 
III(i) of the Proposal.
    In addition to the issues raised by the Commenter, the applicant 
(i.e. Fidelity) submitted the following comments and/or requests for 
modifications regarding the Proposal.
    First, Fidelity states that Section III(e)(3) of the Proposal 
requires, in pertinent part, that no independent appraisals will be 
required for assets acquired for an Account within the twelve (12) 
months preceding the end of the period covered by the report, unless 
such appraisals are necessary for purposes of determining any 
compensation due to Fidelity based on the value of the assets in the 
Account for that period. Fidelity notes that this condition seems to 
suggest that independent appraisals will be required for assets after 
the twelve (12) month period mentioned therein, even where Fidelity's 
fees are not based on the value of the assets in the Account. In this 
regard, Fidelity states that in certain instances it's Base Fee for an 
Account may be based on the amount of capital invested in the Account, 
rather than on the value of the assets in the Account [see Footnote 7 
in Paragraph 5 of the Summary of Facts and Representations (the 
Summary) in the Proposal]. Thus, Fidelity requests that the words ``* * 
* for assets acquired for the Account within the twelve (12) months 
preceding the end of the period covered by the report * * *'' in 
Section III(e)(3) of the Proposal be deleted in order to clarify that 
no appraisals will be required for assets held in an Account at any 
time unless compensation payable to Fidelity is based on the ``value'' 
of the assets in the Account.
    The Department concurs with Fidelity's requested clarification and 
has so modified the language of the Proposal.
    Second, with respect to the condition set forth in Section III(j) 
dealing with the calculation and payment of any Performance Fee in the 
event Fidelity resigns as investment manager or trustee of an Account, 
Fidelity states that there is a fraction which is used to reduce the 
amount of the Performance Fee calculated at the time of resignation to 
reflect the ultimate value realized by the Account for the assets held 
in the Account at the time of resignation. The numerator of this 
fraction equals the sum of the disposition proceeds of all assets in 
the Account received prior to the termination date of the Account plus 
the fair market value of the assets remaining in the Account on the 
termination date. In this regard, Fidelity wishes to clarify for the 
record that the disposition proceeds which would be included in the 
numerator of this fraction are disposition proceeds which are received 
on and after the date of resignation and which arise from the 
disposition of assets which were included in the Account on the 
resignation date. However, Fidelity does not believe that any change is 
required to the language of Section III(j) of the Proposal.
    The Department notes the applicant's clarification.
    Third, Fidelity states that the first sentence in Footnote 6 in 
Paragraph 4 of the Summary requires a minor clarification. Footnote 6 
states that an Account will not invest in or use any swap transactions 
(including caps, floors, collars, or options relating thereto), forward 
contracts, exchanged-traded futures transactions, or options (other 
than covered call options). Fidelity's comment letter reaffirms its 
previous representation regarding the exclusion of swap transactions, 
forward contracts, and exchanged-traded futures transactions. However, 
Fidelity states that the exclusion with respect to the use of all 
``options'' (which do not relate to swap transactions), as stated in 
Footnote 6, is too broad. In this regard, Fidelity represents that an 
Account may need to either: (i) Purchase an option to permit the 
Account to acquire an asset from, or sell an asset to, a third party at 
a later date, or (ii) sell an option which permits a third party to 
acquire an asset owned by the Account at a later date (i.e. so-called 
``covered'' call options). In addition, Fidelity represents that an 
Account may need to enter into certain contracts which require the 
Account to acquire or sell, and a third party to sell or acquire, an 
asset owned or to be acquired by the Account at a later date. 
Specifically, Fidelity states that an Account may use such options, or 
enter into such contracts, to acquire or sell the following: (i) Real 
estate; (ii) mortgages; (iii) interests in real estate; (iv) 
partnership interests; (v) joint venture interests; (vi) securities 
which are not publicly-traded at the time of purchase; or (vii) loans 
or other debt instruments (whether or not considered ``securities'') 
which are not rated as investment grade. Fidelity states further that 
an Account will not use any ``exchange-traded'' options or options 
which relate to either publicly-traded equity securities or publicly-
traded investment grade debt securities. Finally, Fidelity states that 
in no event will an Account engage in the sale of any ``naked'' 
options.
    The Department notes the applicant's clarification.
    No other comments on the Proposal, and no requests for a hearing, 
were received by the Department during the comment period. 

[[Page 55868]]

    Accordingly, the Department has determined to grant the proposed 
exemption as modified herein.

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

Michael Elkin Individual Retirement Account (the IRA) Located in New 
York, New York

[Prohibited Transaction Exemption 95-101; Application No. D-10022]

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 purchase for cash of a certain limited 
partnership interest in the Medallion Fund (the Interest) by the IRA 
from Michael Elkin, a disqualified person with respect to the 
IRA,3 provided the following conditions are met:

     3 Pursuant to 29 CFR 2510.3-2(d), there is no jurisdiction 
with respect to the IRA under Title I of the Act. However, there is 
jurisdiction under Title II of the Act pursuant to section 4975 of 
the Code.
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    (a) The purchase is a one-time transaction for cash;
    (b) The terms and conditions of the purchase are at least as 
favorable to the IRA as those obtainable in an arm's-length transaction 
with an unrelated party;
    (c) The IRA pays no more than the fair market value of the 
Interest, as established by an independent qualified appraiser at the 
time of the transaction;
    (d) The IRA is not required to pay any commissions, costs or other 
expenses in connection with the transaction; and
    (e) The fair market value of the Interest is based on an 
independent valuation of the total net asset value of the Fund and does 
not represent more than 25% of the total assets of the IRA at the time 
of the transaction.
    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 Notice published on September 21, 
1995, 60 FR 49022.

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

The Age-Based Profit Sharing Plan and Trust of Carolina OB-GYN Care, 
P.A. (the Plan) Located in Spartanburg, South Carolina

[Prohibited Transaction Exemption 95-102; [Application No. D-10061]

Exemption

    The restrictions of section 406(a), 406 (b)(1) and (b)(2) of the 
Act and the sanctions resulting from the application of section 4975 of 
the Code, by reason of section 4975(c)(1) (A) through (E) of the Code, 
shall not apply to the proposed sale by the individual account (the 
Account) in the Plan of James C. Montgomery, M.D., of a parcel of real 
property (the Property) to Dr. Montgomery, a party in interest with 
respect to the Plan, and the assumption by Dr. Montgomery of the 
Account's current indebtedness with respect to the Property, provided 
that the following conditions are satisfied: (a) The purchase price is 
the greater of $120,000 or the fair market value of the Property as of 
the date of the sale; (b) the fair market value of the Property is 
determined by a qualified, independent appraiser as of the date of the 
sale; and (c) the Account pays no commissions or other expenses 
relating to 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 September 25, 1995 at 60 
FR 49425.

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

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest 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 31st day of October, 1995.
Ivan Strasfeld,
Director of Exemption Determinations Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 95-27296 Filed 11-2-95; 8:45 am]
BILLING CODE 4510-29-P