Pursuant to section 3 of the Child Nutrition Act of 1966, as amended (42 U.S.C. 1772), the Department announces the rate of reimbursement for a half-pint of milk served to nonneedy children in a school or institution that participates in the Special Milk Program for Children. This rate is adjusted annually to reflect changes in the Producer Price Index for Fluid Milk Products, published by the Bureau of Labor Statistics of the Department of Labor.

For the period July 1, 2002 to June 30, 2003, the rate of reimbursement for a half-pint of milk served to a nonneedy child in a school or institution which participates in the Special Milk Program is 13.50 cents. This reflects a decrease of 6.83 percent in the Producer Price Index for Fluid Milk Products from May 2001 to May 2002 (from a level of 157.9 in May 2001 to 147.1 in May 2002).

As a reminder, schools or institutions with pricing programs that elect to serve milk free to eligible children continue to receive the average cost of a half-pint of milk (the total cost of all milk purchased during the claim period divided by the total number of purchased half-pints) for each half-pint served to an eligible child.

Pursuant to Sections 11 and 17A of the National School Lunch Act, (42 U.S.C. 1759a and 1766a), and Section 4 of the Child Nutrition Act of 1966, (42 U.S.C. 1773), the Department annually announces the adjustments to the National Average Payment Factors and to the maximum Federal reimbursement rates for lunches and afterschool snacks served to children participating in the National School Lunch Program and breakfasts served to children participating in the School Breakfast Program. Adjustments are prescribed each July 1, based on changes in the Food Away From Home series of the Consumer Price Index for All Urban Consumers, published by the Bureau of Labor Statistics of the Department of Labor. The changes in the national average payment rates for schools and residential child care institutions for the period July 1, 2002 through June 30, 2003 reflect a 2.6 percent increase in the Consumer Price Index for All Urban Consumers during the 12-month period May 2001 to May 2002 (from a level of 173.1 in May 2001 to 177.6 in May 2002). Adjustments to the national average payment rates for all lunches served under the National School Lunch Program, breakfasts served under the School Breakfast Program, and afterschool snacks served under the National School Lunch Program are rounded down to the nearest whole cent.

Section 4 of the National School Lunch Act (42 U.S.C. 1753) provides general cash for food assistance payments to States to assist schools in purchasing food. The National School Lunch Act provides two different Section 4 payment levels for lunches served under the National School Lunch Program. The lower payment level applies to lunches served by school food authorities in which less than 60 percent of the lunches served in the school lunch program during the second preceding school year were served free or at a reduced price. The higher payment level applies to lunches served by school food authorities in which 60 percent or more of the lunches served during the second preceding school year were served free or at a reduced price.

To supplement these Section 4 payments, Section 11 of the National School Lunch Act provides special cash assistance payments to aid schools in providing free and reduced price lunches. The Section 11 National Average Payment Factor for each reduced price lunch served is set at 40 cents less than the factor for each free lunch.

As authorized under Sections 8 and 11 of the National School Lunch Act (42 U.S.C. 1757, 1759a), maximum reimbursement rates for each type of lunch are prescribed by the Department in this Notice. These maximum rates are to ensure equitable disbursement of Federal funds to school food authorities.

Section 17A of the National School Lunch Act (42 U.S.C. 1766a) establishes National Average Payments for free, reduced price and paid afterschool snacks as part of the National School Lunch Program.

Section 4 of the Child Nutrition Act of 1966 (42 U.S.C. 1773) establishes National Average Payment Factors for free, reduced price and paid breakfasts served under the School Breakfast Program and additional payments for free and reduced price breakfasts served in schools determined to be in “severe need” because they serve a high percentage of needy children.

The following specific Section 4, Section 11 and Section 17A National Average Payment Factors and maximum reimbursement rates for lunch, the afterschool snack rates, and the breakfast rates are in effect from July 1, 2002 through June 30, 2003. Due to a higher cost of living, the average payments and maximum reimbursements for Alaska and Hawaii are higher than those for all other States. The District of Columbia, Virgin Islands, Puerto Rico and Guam use the figures specified for the contiguous States.

Section 4 National Average Payment Factors —In school food authorities which served less than 60 percent free and reduced price lunches in School Year 2000-01, the payments for meals served are: Contiguous States —paid rate—20 cents, free and reduced price rate—20 cents, maximum rate—28 cents; Alaska —paid rate—33 cents, free and reduced price rate—33 cents, maximum rate—44 cents; Hawaii —paid rate—24 cents, free and reduced price rate—24 cents, maximum rate—32 cents. In school food authorities which served 60 percent or more free and reduced price lunches in School Year 2000-01, payments are: Contiguous States —paid rate—22 cents, free and reduced price rate—22 cents, maximum rate—28 cents; Alaska —paid rate—35 cents, free and reduced price rate—35 cents, maximum rate—44 cents; Hawaii —paid rate—26 cents, free and reduced price rate—26 cents, maximum rate—32 cents.

Section 11 National Average Payment Factors—Contiguous States —free lunch—194 cents, reduced price lunch—154 cents; Alaska —free lunch—314 cents, reduced price lunch—274 cents; Hawaii —free lunch—226 cents, reduced price lunch—186 cents.

Afterschool Snacks in Afterschool Care Programs —The payments are: Contiguous States —free snack—58 cents, reduced price snack—29 cents, paid snack—5 cents; Alaska —free snack—95 cents, reduced price snack—47 cents, paid snack—8 cents; Hawaii —free snack—68 cents, reduced price snack—34 cents, paid snack—6 cents.

For schools “not in severe need” the payments are: Contiguous States —free breakfast—117 cents, reduced price breakfast—87 cents, paid breakfast—22 cents; Alaska —free breakfast—187 cents, reduced price breakfast—157 cents, paid breakfast—32 cents; Hawaii —free breakfast—137 cents, reduced price breakfast—107 cents, paid breakfast—24 cents.

For schools in “severe need” the payments are: Contiguous States —free breakfast—140 cents, reduced price breakfast—110 cents, paid breakfast—22 cents; Alaska —free breakfast—223 cents, reduced price breakfast—193 cents, paid breakfast—32 cents; Hawaii —free breakfast—163 cents, reduced price breakfast—133 cents, paid breakfast—24 cents.

The following chart illustrates: the lunch National Average Payment Factors with the Sections 4 and 11 already combined to indicate the per lunch amount; the maximum lunch reimbursement rates; the reimbursement rates for afterschool snacks served in afterschool care programs; the breakfast National Average Payment Factors including “severe need” schools; and the milk reimbursement rate. All amounts are expressed in dollars or fractions thereof. The payment factors and reimbursement rates used for the District of Columbia, Virgin Islands, Puerto Rico and Guam are those specified for the contiguous States.

This action is not a rule as defined by the Regulatory Flexibility Act (5 U.S.C. 601-612) and thus is exempt from the provisions of that Act.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507), no new recordkeeping or reporting requirements have been included that are subject to approval from the Office of Management and Budget.

This action is exempted from review by the Office of Management and Budget under Executive Order 12866.

National School Lunch, School Breakfast and Special Milk Programs are listed in the Catalog of Federal Domestic Assistance under No. 10.555, No. 10.553 and No. 10.556, respectively, and are subject to the provisions of Executive Order 12372, which requires intergovernmental consultation with State and local officials. ( See 7 CFR part 3015, subpart V, and the final rule related notice published at 48 FR 29114, June 24, 1983.)

The proposed treatments will implement direction in the National Fire Plan, a USDA/USDI effort to reduce impacts of wildfires on people and resources. In August, 2000 President Clinton directed the Secretaries of Agriculture and Interior to reduce the impacts of wildland fires on rural communities. The Secretaries subsequently developed the National Fire Plan. This direction was followed by congressionally-approved plans that funded “hazardous fuel reduction” near urban interface areas.

The National Fire Plan directs Federal agencies within USDA/USDI to engage states and local communities in reducing forest fuels, using a variety of fuel reduction treatments (Mechanical, prescribed fire and intensive manual treatment). Hazardous fuel reduction is a critical investment necessary to reduce fire risk and fire suppression costs into the future and is focused on areas near communities and interface areas that the States have judged to be in harm's way of a wildfire.

The analysis area of 25,741 acres of National Forest system lands is located thirty miles east of Cedar City, Utah. The analysis area includes six tracts of private lands which are surrounded by National Forest lands. The tracts are subdivided into residential lots and contain an estimated 1,900 homes and 10 businesses. The specific subdivisions are as follows:

The private lands were designated an “urban interface community at risk from wildfires on National Forestlands” by the Chief of the Forest Service (66FR 43383, August 17, 2001). This designation meant that Federal funds from the National Fire Plan could be spent to reduce fuels on National Forestlands adjacent to the private lands.

Historic prevention and suppression of wildfire has resulted in ever-increasing accumulations of forest fuels. These buildups of forest fuels increase the risk of high intensity fires to the National Forest and to large private subdivisions within the forest boundary. The extensive development and high recreation use have also increased the threat of human-caused fires. A high intensity fire occurring within this area would cause significant damage to property and natural resources. Reducing the risk of wildfires in these areas would provide the best opportunity to protect National Forestlands and adjacent private properties. The Forest Service has determined that the fuels treatment objectives will be met without harvesting trees over nine inches in diameter.

The purpose of this project is to modify existing, high fuel loads that influence fire behavior in National Forest lands adjacent to private lands in the Duck Creek Area. There is a need to reduce minute, hour, ten-hour and hundred-hour fuels adjacent to private property and in the defensible fire space zone. There is a need to change the structure and composition of the fuels throughout the project area, especially in aspendominated sites. There is a need to change the characteristics of the residual trees by removing ladder fuels from the ground to eight feet high. Changing these fuels characteristics and reducing the fuel loads would help reduce the risk of property damage and allow sufficient time for firefighters to directly attack and control a wildfire before housing and other developments are threatened or destroyed. The fuel elements that need to be treated are as follows:

Current fuel loads adjacent to private lands range from 20-50 tons per acre. The desired condition of the area immediately surrounding the subdivisions, Defensible Fire Space (DFS), is to have fuel loads reduced to 5-10 tons per acre, a level that would not sustain a high intensity wildfire.

The current fuel loads range from 20-50 tons per acre in the general forest area outside of the DFS. Reducing the fuel loads in the general forest area to 10-15 tons per acre would slow the spread of fire and would reduce the potential for a fire to spread into the crowns of the trees.

Lower branches and small trees currently extend from the ground upward, the ladder a fire would climb to reach higher crowns. Ladder fuels have increased dramatically as ponderosa pine trees with small crowns and few lower branches have been replaced by fir and spruce that have large crowns and branches extending to the ground. Fire suppression has also resulted in a dense understory of young trees that contribute to the fire ladder. The desired condition within the DFS is to effectively prevent a ground fire from climbing into upper tree crowns.

Aspen is naturally regenerated by wildfire, and therefore is considered a fire-tolerant species. Aspen stands within the watershed are being encroached upon by tree species such as spruce and fir, which are fire intolerant species. Stands with high density of aspen act as natural firebreaks or areas where fire activity is slowed. Aspen is a short-lived species that requires disturbance in order to regenerate; without disturbance, these stands will eventually be taken over by conifers, eliminating the aspen from the area. Conifer encroachment increases fire susceptibility and fire behavior within these stands. Maintaining aspen stands would help slow the spread of fires that may occur. The desired condition is to regenerate and maintain aspen stands.

The Forest Service proposes to treat fuels in timber stands located in Kane County, Utah, Salt Lake Base Meridian, T38S R38W, T38S R7W, T39S R8W, T39S R7W and T38S R6W. The specific fuels treatments are as follows:

1. Defensible fire space treatments. Establish a defensible fire space (DFS) in National Forest lands from 500′-2000′ wide immediately surrounding private lands with subdivisions. The area to be treated in the DFS is approximately 2,778 acres. To reduce the risk of a wildfire reaching or spreading through tree crowns within the DFS, intensive fuels removal treatments will be conducted by cutting all conifer trees under nine inches in diameter and pruning limbs under eight feet high on conifer trees to reduce ladder fuels. Limbs, existing ground fuels and slash will be disposed of by piling/burning or chipping.

2. Mixed conifer treatments. Reduce fuel loads and favor the establishment of ponderosa pine on approximately 7,002 acres of mixed conifer stands in National Forest lands south and west of the private subdivisions. Mixed conifer stands have major components of ponderosa pine, white fir and Douglas-fir with minor components of subalpine fir, Engelmann spruce and Colorado blue spruce. Fuel loads will be reduced by cutting white fir, Douglas-fir, subalpine fir, Engelmann spruce and Colorado blue spruce trees under nine inches in diameter. Limbs, existing ground fuels and slash will be disposed of by piling/burning or chipping.

3. Spruce/fir treatments. Reduce fuel loads on approximately 952 acres of spruce/fir conifer stands in National Forest lands south and west of the private subdivisions. Spruce/fir stands have major components of Engelmann spruce and subalpine fir with minor components of ponderosa pine, Colorado blue spruce, Douglas-fir and white fir. Fuel loads will be reduced by cutting subalpine fir, white fur and Douglas-fir under nine inches in diameter. Engelmann spruce, Colorado blue spruce and ponderosa pine trees under nine inches in diameter will be retained in this area in order to maintain a spruce component into the future. Limbs, existing ground fuels and slash will be disposed of by piling/burning or chipping.

4. Aspen treatments. Regenerate and maintain stands dominated by aspen in approximately 2,906 acres of National Forest lands south and west of the private subdivisions by cutting Engelmann spruce, Colorado blue spruce, subalpine fir and white fir trees under nine inches in diameter and underburning fuels. Slash will be pulled away from mature (over 18″ diameter) ponderosa pine and Douglas-fir trees to provide partial protection from prescribed fire. Aspen, a short-lived species that acts to slow the spread of wildfire, requires periodic disturbance to induce new growth. Underburning will result in stimulating and regeneration the aspen. A prescribed fire plan will be developed prior to underburning. The plan will outline appropriate burning conditions and fire control methods to be implemented to insure the prescribed fire is confined to the area to be treated.

Fuels and slash piling may be done by machine, except where Forest Plan standards for soils or slope dictate otherwise. Piles will be burned. The transportation system required to treat or remove fuels is in place. No new roads would be constructed with this project. Riparian areas along perennial streams would be protected with a 300-foot no-treatment buffer along the edges. Riparian areas along ephemeral streams would be thinned, but piling and burning would occur at least 50 feet away from the channel. No treatment would occur within 100 feet of springs occur in order to protect water sources, soils that are wet and sensitive to compaction, and riparian habitat.

The project will be implemented in accordance with direction in the Dixie National Forest Land and Resource Management Plan.

Three or more alternatives will be considered in the analysis.

No action. Under this alternative, the proposed fuels treatments will not be completed. The current forest fuels conditions would not be substantially changed and natural processes would continue. This alternative will be fully evaluated and described.

Proposed Action (as described above).

Additional Alternatives—Additional alternatives may be developed in response to issues and resource conditions evaluated through the analysis.

The responsible official for this EIS and the Record of Decision is: Mary Wagner, Forest Supervisor, Dixie National Forest, 1789 Wedgewood, P.O. Box 627, Cedar City, Utah 84720-0627; FAX: (435) 865-3791.

The Responsible Official will decide whether forest fuels treatment would be conducted to reduce risks from wildfires to the National Forest and to private lands held within the National Forest; and, if so, what extent and types of treatments should be done.

Public participation was initiated through scoping in October, 2001. A scoping notice was sent to 2,796 individuals and organizations who are potentially affected parties and those currently on the Dixie National Forest mailing list that have expressed interest in natural resource projects. Two public meetings were held (October 27, November 1). Comments and issues were received in response to these public contacts.

Public participation is especially important during scoping and review of the draft EIS. Individuals, organizations, federal, state, and local agencies who are interested in or affected by the decision are invited to participate in the scoping process. This information will be used in the preparation of the draft EIS.

The following issues were identified through public scoping and internal resource analyses:

1. The proposed fuels treatments would reduce travel corridors for big game (e.g. elk and deer) and birds and small mammals ( e.g. turkey, grouse, red squirrels and flying squirrels) by substantially fragmenting habitat throughout the project area.

2. The proposed fuels treatments would remove understory trees and limbs, which are used by juvenile goshawks within nest areas and flammulated owls as roosting habitat.

3. The proposed fuels treatments would create openings in the forest and increase sight distance from the homes within the subdivision into the forest. This would change the visuals/aesthetics of the area by reducing or eliminating the “vegetative screening” that many residents value.

4. Older stands of aspens would be regenerated and replaced by younger stands of aspen, reducing and/or changing the aesthetic value of these stands. Older trees with large, white boles would be replaced by thickets of seedlings and saplings in the short term. Fall color viewing would also be impacted.

5. The proposed fuels treatments would remove young trees and seedlings from the spruce/fir stands, resulting in the eventual loss of the timber stand due to lack of regeneration.

6. The proposed fuels treatments are too costly to implement.

7. The proposed fuels treatment would reduce or eliminate understory vegetation that serves as a barrier to off-road motorized vehicles, especially by ATV's (All Terrain Vehicles).

Comments will continue to be received and considered througout the analysis process. Comments received in response to this notice and through scoping, including names and addresses of those who comment, will be considered part of the public record of this proposed action and will be available for public inspection. Comments submitted anonymously will be accepted and considered; however, those who submit anonymous comments will not have standing to appeal the subsequent decision under 36 CFR Parts 215 or 217. Additionally, pursuant to 7 CFR 1.27(d), any person may request the agency to withhold a submission from the public record by showing how the Freedom of Information Act (FOIA) permits such confidentiality. Persons requesting such confidentiality should be aware that,under the FOIA, confidentiality may be grated in only very limited circumstances, such as to protect trade secrets. The Forest Service will inform the requester of the agency's decision regarding the request for confidentiality, and where the request is denied, the agency will return the submission and notify the requester that the comments may be resubmitted with or without name and address within a specified number of days.

A draft environmental impact statement will be prepared for comment. The draft EIS is expected to be filed with the EPA (Environmental Protection Agency) and to be available for public review. At that time the EPA will publish a notice of availability of the draft EIS in the Federal Register . The comment period for the draft environmental impact statement will be forty-five days from the date the EPA's notice of availability appears in the Federal Register . Comments on the draft EIS should be as specific as possible and may address the adequacy of the statement or the merits of the alternatives discussed (Reviewers may wish to refer to the Council on Environmental Quality Regulations for implementing the procedural provisions of the National Environmental Policy Act at 40 CFR 1503.3 in addressing these points).

The Forest Service believes, at this early stage, it is important to give reviewers notice of several court rulings related to public participation in the environmental review process. First, reviewers of draft environmental impact statements must structure their participation in the environmental review of the proposal so that it is meaningful and alerts an agency to the reviewers' position and contentions. Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 553 (1978).

Also, environmental objections that could have been raised at the draft environmental impact statement stage but that are not raised until after completion of the final environmental impact statement may be waived or dismissed by the courts. City of Angoon v. Hodel, (9th Circuit, 1986) and Wisconsin Heritages, Inc. v. Harris, 490 F. Supp. 1334. 1338 (E.D. Wis. 1980). Because of these court rulings, it is very important that those interested in this proposed action participate by the close of the 45-day comment period so that substantive comments and objections are made available to the Forest Service at the time it can meaningfully consider that and respond to them in the final environmental impact statement.

To assist the Forest Service in identifying and considering issues and concerns about the proposed action, comments on the draft environmental impact statement should be as specific as possible. It is also helpful if comments refer to specific pages or chapters of the draft statement. Comments may also address the adequacy of the statement or the merits of the alternatives formulated and discussed in the statement. Reviewers may wish to refer to the Council on Environmental Quality Regulations for implementing the procedural provisions of the National Environmental Policy Act at 40 CFR 1503.3 in addressing these points.

In the final EIS, the Forest Service is required to respond to substantive comments and responses received during the comment period that pertain to the environmental consequences discussed in the draft EIS and applicable laws, regulations, and policies considered in making a decision regarding the proposal.

The Responsible Official will document the decision and rationale for the decision in a Record of Decision. The final EIS is scheduled for completion in January, 2003. The decision will be subject to review under Forest Service Appeal Regulations.

The purpose of these proposals is to initiate actions that would improve the motorized transportation system, improve habitat for wildlife, and reduce sedimentation and erosion. The project area is located approximately 24 miles east of Cedar City, Utah. The project would be implemented in accordance with direction in the Land and Resource Management Plan (Forest Plan) for the Dixie National Forest, 1986.

The proposed action includes:

1. Maintain approximately 222 miles of road open to motorized vehicle travel. Approximately 32 miles of this mileage consists of State Highways 14 and 89, plus the Mammoth Creek Road. These three roads are open but restricted to street legal vehicles only. (This does not include approximately 61 miles on private land that would remain open in the Duck/Swains area.)

2. Provide approximately 35 miles of motorized vehicle trail by restricting travel to motorized trail use on approximately 33 miles of road, and constructing approximately 2 miles of new trail. This does not include the Duck Creek ATV Trail system, which is 8.5 miles.

3. Remove (decommission) approximately 123 miles of unneeded road from the Forest Transportation System close to motorized use, and restore to a more natural state.

4. Close approximately 178 miles of road to motorized use, retaining them on the Forest Transportation System for forest management or emergency use.

5. Implement a Code of Federal Regulations Special Order in the Dixie National Forest Travel Map superceding the existing order that would change the wording from: “roads not shown on the map are open to motorized use unless posted as closed on the ground”, to: “all roads are close unless designated open” in the Duck Creek—Swains Area.

6. Relocate approximately one-half mile of the Bower's Flat road out of a wet meadow.

7. Any new roads (regardless of origin) inventoried after this proposal and corresponding decision will be decommissioned using existing authority.

These activities would occur over five years, with the Strawberry Creek and Swains Creek watersheds implemented last.

Four tentative alternatives excluding the Proposed Action and the No Action Alternative have been developed to address the issues listed in this notice. These are:

• Alternative C Responds to Issue #1—All closed roads would be decommissioned—301 miles

• Alternative D responds to issue #2 with 265 miles of road open and 35 miles of motorized trail open.

• Alternative E Responds to Issue #3 with 303 miles of road and 35 miles of motorized trail open.

• Alternative F Responds to Issues #4 and #5. 193 miles of road and 29 miles of motorized trail open).

Mary Wagner, Forest Supervisor, Dixie National Forest, 1789 N Wedgewood Lane, Cedar City, Utah, 84720-7769.

Based on the environmental analysis in this Draft EIS, the Dixie National Forest Supervisor will decide whether or not to retain, close, relocate, or decommission roads and motorized trails within the Duck/Swains Area in accordance with Forest Plan goals, objectives and desired future conditions. The Forest Supervisory will decide whether to implement an action alternative, a modified action alternative, or the no action alternative. If an action alternative is selected, it may include:

• The miles and location of roads to retain open;

• The miles and location of roads to close;

• The miles and location of roads to decommission;

• The miles and location of new motorized trails to construct;

• The miles and location of roads to restrict for motorized trail use;

• The location of a new motorized bridge across Swains Creek;

• Changing the Code of Federal Regulations Order to implement closed unless designated open; and/or

• Mitigation measures and monitoring requirements.

This decision does not include a forest plan amendment.

On May 21, 2001, we published a notice in the Federal Register (Vol. 66, No. 98, pgs 27934-27936) soliciting public involvement in the development of issues necessary to complete an analysis of the environmental impacts of reducing roads in the Duck Creek-Swains area of the Cedar City Ranger District on the Dixie National Forest. We solicited comments on that notice for 45 days and received 184 comments. We will consider all the comments that we received in response to our May 21, 2001 notice during the preparation of the EIS that is the subject of this notice. Therefore, if you submitted comments in response to the March 2001 notice, you do not need to resubmit those comments in order for the information provided in them to be considered during the development of the EIS.

Issues identified to date include the following:

1. Open and closed roads cause resource impacts such as fragmentation and sedimentation.

2. Some of the roads proposed for closure or decommissioning provide access to scenic vistas, woodcutting, picnicking, hunting, and camping. Closing or decommissioning roads would eliminate access to these areas.

3. Increasing ATV and OHV use on the fewer roads left open would not meet current and anticipated demand increase would cause the potential for user conflicts, congestion and displacement.

4. Use on some roads left open could cause impacts to goshawk and peregrine falcon nesting areas, rims, meadows, and other sensitive areas for wildlife.

5. Existing roads cause changes in natural drainage patterns by intercepting subsurface flow, preventing infiltration and redirecting flow.

This notice of intent continues the scoping process which guides the development of the environmental impact statement. On May 21, 2001, we published a notice in the Federal Register (Vol. 66, No. 98, pgs 27934-27936) soliciting public involvement in the development of issues necessary to complete an analysis of the environmental impacts of reducing roads in the Duck Creek-Swains area of the Cedar City Ranger District on the Dixie National Forest. We solicited comments on that notice for 45 days and received 184 comments. We will consider all the comments that we received in response to our May 21, 2001 notice during the preparation of the EIS that is the subject of this notice. Therefore, if you submitted comments in response to the March 2001 notice, you do not need to resubmit those comments in order for the information provided in them to be considered during the development of the EIS.

A draft environmental impact statement will be prepared for comment. The comment period on the draft environmental impact statement will be 45 days from the date the Environmental Protection Agency publishes the notice of availability in the Federal Register .

The Forest Service believes, at this early stage, it is important to give reviewers notice of several court rulings related to public participation in the environmental review process. First, reviewers of draft environmental impact statements must structure their participation in the environmental review of the proposal so that it is meaningful and alerts an agency to the reviewer's position and contentions. Vermont Yankee Nuclear Power Corp. v. NRDC , 435 U.S. 519, 553 (1978). Also, environmental objections that could be raised at the draft environmental impact statement stage but that are not raised until after completion of the final environmental impact statement may be waived or dismissed by the courts. City of Angoon v. Hodel , 803 F.2d 1016, 1022 (9th Cir. 1986) and Wisconsin Heritages, Inc. v. Harris , 490 F. Supp. 1334, 1338 (E.D. Wis. 1980). Because of these court rulings, it is very important that those interested in this proposed action participate by the close of the 45-day comment period so that substantive comments and objections are made available to the Forest Service at a time when it can meaningfully consider them and respond to them in the final environmental impact statement.

To assist the Forest Service in identifying and considering issues and concerns on the proposed action, comments on the draft environmental impact statement should be as specific as possible. It is also helpful if comments refer to specific pages or chapters of the draft statement. Comments may also address the adequacy of the draft environmental impact statement or the merits of the alternatives formulated and discussed in the statement. Reviewers may wish to refer to the Council on Environmental Quality Regulations for implementing the procedural provisions of the National Environmental Policy Act at 40 CFR 1503.3 in addressing these points.

Agenda items to be covered include: (1) Presentation on Salmon Recovery Plan; (2) Regional Ecosystem Office (REO) update; (3) Bureau of Land Management presentation on Draft Environmental Impact Statement for the Headwaters Forest Reserve; (4) Update on planning for a Province fire ecology fuels treatment workshop; (5) Aquatic Conservation Subcommittee report; (6) Presentation on working with county Fire Safe Counsels; (7) Northwest Forest Plan Implementation Monitoring scheduling; (8) Options for vegetation management; and (9) Public comment. The meeting is open to the public. Public input opportunity will be provided and individuals will have the opportunity to address the Committee at that time.

Agenda items to be covered include: (1) Old business; (2) Project Criteria Discussion; (3) Camping in Alphine County; (4) Project Proposals; (5) New business & Public comment.

The meeting is open to the public. Public input opportunity will be provided and individuals will have the opportunity to address the Committee at that time.

Pursuant to Title 13 of the United States Code, Section 141, the U.S. Census Bureau has conducted the 2000 Census. The amendment updates administrative information concerning the locations of the system files, the categories of individuals covered by the system, the categories of records in the system, the purpose of the system of records, retrievability , safeguards, and the disposal of the records in the system in addition to other minor administrative updates. Accordingly, the Population and Housing Census Records of the 1960 and Subsequent Censuses system notice originally published at 45 FR 82105, December 12, 1980, is amended by the addition of the following information updates.

The Department of Commerce finds no probable or potential effect of the proposed change to the system of records on the privacy of individuals. Respondent data including personally identifying data are captured as images suitable for computer processing. Images are scheduled for permanent retention. Original data sources are destroyed, according to the disposal procedures for Title 13 (“census confidential”) records, after confirmation of successful data capture and data transmission to headquarters. The Individual Census Record File (ICRF) represents a unified record of individual responses, including all names and other written entries provided by the respondent, and all associated address and geographic information for each housing unit or person living in group quarters. The ICRF is scheduled for permanent retention.

Accordingly, the Population and Housing Census Records of the 1960 and Subsequent Censuses is amended by the following updates:

Unless otherwise indicated, all citations to the statute are references to the provisions effective January 1, 1995, the effective date of the amendments made to the Tariff Act of 1930 (the Act) by the Uruguay Round Agreements Act. In addition, unless otherwise indicated, all citations to the Department of Commerce's (the Department's) regulations are to 19 CFR Part 351 (2001).

On November 29, 2001, Shandong Heze International Trade and Developing Company requested a new shipper review, in accordance with section 751(a)(2)(B) of the Act and section 351.214(b) of the Department's regulations, of exports of its merchandise to the United States. Jinan Yipin Corporation, Ltd., also requested such a review of its exports to the United States on November 30, 2001. On January 7, 2002, the Department initiated new shipper reviews for these companies. See Fresh Garlic From the People's Republic of China: Initiation of New Shipper Antidumping Duty Reviews , 67 FR 715 (Jan. 7, 2002). The Department also initiated a new shipper review of exports of Huaiyang Hongda Dehydrated Vegetable Company (Hongda) to the United States. However, we have since determined that it is appropriate to rescind the review of Hongda. See Fresh Garlic From the People's Republic of China: Rescission of New Shipper Review and Initiation of New Shipper Review , published concurrently with this notice. The deadline for completing the preliminary results of these new shipper reviews currently is June 26, 2002.

A number of complex factual and legal questions related to the calculation of dumping margins have arisen in the new shipper reviews. Because a margin has not been calculated during an earlier segment of this proceeding, numerous issues have been raised and commented upon by the petitioner and a respondent concerning the factors of production and the valuation of those factors. In addition, in the case of both Jinan Yipin and Shandong Heze, we are still evaluating their responses to the original questionnaire and two supplemental questionnaires. Therefore, we find that the new shipper reviews are extraordinarily complicated and it is not practicable to complete these reviews within the time limits mandated by section 751(a)(2)(B)(iv) of the Act. As a result, we are extending the time limit for the preliminary results of these reviews to July 24, 2002.

Unless otherwise indicated, all citations to the Tariff Act of 1930, as amended (the Act), are references to the provisions effective January 1, 1995, the effective date of the amendments made to the Act by the Uruguay Round Agreements Act. In addition, for purposes of the rescission, all references are made to the Department of Commerce's (the Department) regulations at 19 CFR Part 351 (2001), and, for purposes of the initiation, all references are made to the Department's regulations at 19 CFR Part 351 (2002).

On November 30, 2001, we received a request for a new shipper review from Huaiyang Hongda Dehydrated Vegetable Company (Hongda). We reviewed this request, in addition to two other requests, and found that the requests complied with the content requirements for requests for new shipper reviews set forth under 19 CFR 351.214(b)(2). We therefore initiated three new shipper reviews on December 28, 2001. See Fresh Garlic from the People's Republic of China: Initiation of New Shipper Antidumping Duty Reviews , 67 FR 715 (Jan. 7, 2002) ( Initiation Notice ). On January 22, 2002, we issued Hongda a questionnaire. On March 7, 2002, we received a response from Hongda to the questionnaire. The company submitted a response to our May 15, 2002, supplemental questionnaire on June 5, 2002, and supplemented this response with additional information on June 17, 2002.

In its request for a new shipper review, Hongda stated that its only sale of subject merchandise had occurred on October 29, 2001, and that it considered this date to be both the sales invoice date and the date of sale. It also stated that the merchandise was entered for consumption into the United States on November 28, 2001. In support of its statements, it submitted an invoice, dated October 29, 2001, and a U.S. Customs entry summary form showing an entry date of November 28, 2001. Based on this request and documentation, we concluded that a sale had taken place during the period of review as defined under 19 CFR 351.214(g) and that the request complied with the content requirements for requests set forth under 19 CFR 351.214(b)(2).

In its March 7, 2002, questionnaire response, Hongda confirmed that the invoice date for its U.S. sale was October 29, 2001. However, it claimed that the merchandise was shipped from the factory on November 7, 2001, and that, upon its arrival in the United States, the U.S. Customs Service refused entry of the merchandise unless the importer entered the merchandise at a higher price. In support of its claim, Hongda submitted an entry summary reject form from the U.S. Customs Service that showed that entry of the merchandise was rejected on the basis of value claimed. Hongda stated that, as a result, the price was increased and it issued a supplemental invoice to the customer on November 29, 2001, to reflect this price increase. It stated that, since the increased price was not the result of a negotiation between the buyer and the seller, the price increase did not affect the date of sale and should be treated as a billing adjustment.

The petitioner, the Fresh Garlic Producers Association, submitted comments on Hongda's response on April 5, 2002. It argued that the new shipper review should be rescinded on the basis that no sale or entry had occurred during the period of review (POR). The petitioner asserted that a key term of sale the price changed on November 29, 2001, and that, accordingly, the sale of the merchandise did not occur during the POR.

In its June 5, 2002, response to our supplemental questionnaire, Hongda claimed that the U.S. Customs Service had demanded that the U.S. customer import the merchandise at a specified higher price and that this was the price reflected in the price increase between Hongda and the customer. Hongda could not provide an explanation as to why the U.S. Customs Service demanded the higher price.

As set forth under 19 CFR 351.401(i), the Department will normally use the date of invoice, as recorded in the exporter's or producer's records kept in the ordinary course of business, in identifying the date of sale of the subject merchandise. However, the Department may use a date other than the date of invoice if it is satisfied that a different date better reflects the date on which the exporter or producer establishes the material terms of sale. See 19 CFR 351.401(i). The Department cited and explained this regulatory provision in Appendix I of the January 22, 2002, questionnaire sent to Hongda. See Request for Information Regarding Exports of Fresh Garlic from the PRC, p. I-2 (Jan. 22, 2002). In addition, the Department stated that “if basic terms of sale have changed up to, or even subsequent to, the date of shipment, then the date of shipment is the date of sale.” Id .

We find, based on a review of the record, that the U.S. Customs Service did not reject entry of the fresh garlic on the basis of the negotiated price between Hongda and the U.S. customer but on the basis of the value of the merchandise. Thus, we find that Hongda's decision to increase the price of its merchandise on November 29, 2001, was a decision it voluntarily made to have the merchandise enter the United States. Therefore, the price increase was not a mere billing adjustment, but a change in the price a material adjustment in the transaction of the goods. Consequently, a material term of sale changed on November 29, 2001, and, because this date is subsequent to the date of shipment, we find that the date of sale is November 7, 2001.

This date is outside of the POR for the new shipper review. Under 19 CFR 351.214(g), a new shipper review will normally cover entries, exports, or sales during the twelve-month period preceding the anniversary month of the order if the new shipper review was initiated in the month immediately following the anniversary month. The anniversary month in this proceeding is November, since the antidumping duty order was published on November 16, 1994. We initiated the new shipper review on December 28, 2001. Consequently, the POR covers entries, exports, or sales of merchandise by Hongda from November 1, 2000, until October 31, 2001. Because no sales or entries of merchandise occurred during this period, we are rescinding this review in accordance with 19 CFR 351.214(f)(2), which permits the Department to rescind a new shipper review when we conclude that no entry and sale of subject merchandise to an unaffiliated customer in the United States took place during the period of review.

This notice serves as a reminder to parties subject to administrative protective order (APO) of their responsibility concerning the disposition of proprietary information disclosed under the APO in accordance with 19 CFR 351.305(a)(3). Timely written notification of the return or destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and terms of an APO is a sanctionable violation.

As indicated in the “background” section above, we found in our Initiation Notice that Hongda's November 30, 2001, request for a new shipper review complied with the content requirements set forth under 19 CFR 351.214(b)(2). Therefore, we are initiating a new shipper review for shipments of fresh garlic from the People's Republic of China produced and exported by Hongda. This review will cover entries, exports, and sales during the period of November 1, 2001, through April 30, 2002, as defined under 19 CFR 351.214(g). We intend to issue final results of this review no later than 270 days after the date on which the new shipper review was initiated. See 19 CFR 351.214(i).

We previously instructed the Customs Service to allow, at the option of the importer, the posting of a bond or security in lieu of a cash deposit for each entry of the merchandise exported by Hongda in accordance with 19 CFR 351.214(e). These instructions will remain in effect until the completion of the new shipper review.

The interested parties should submit applications for disclosure under APO in accordance with 19 CFR 351.305 and 351.306 of the Department's regulations.

This rescission, initiation, and notice are in accordance with section 751(a)(2)(B)(ii) of the Act and 19 CFR 351.214 and 351.221(c)(1)(i) of the Department's regulations.

The Standards in Trade Workshops are a major activity of the Global Standards and Information Group (GSIG) in the NIST Standards Services Division (SSD). The workshops are designed to provide timely information to foreign standards officials on U.S. practices in standards and conformity assessment. Participants are introduced to U.S. technology and principles in metrology, standards development and application, and conformity assessment systems.

Each workshop is a one or two week program offering a comprehensive overview of the roles of the U.S. Government, private sector, and regional and international organizations engaged in standards development and conformity assessment practices. Specific workshop objectives are to: (1) Familiarize participants with U.S. technology and practices in metrology, standardization, and conformity assessment; (2) describe and understand the roles of the U.S. Government and the private sector in developing and implementing standards; and (3) develop professional contacts as a basis for strengthening technical ties and enhancing trade. Workshop recommendations (maximum 4 pages) will address at a minimum the following points:

All recommendations must be submitted no later than July 31, 2002.

Pursuant to its statutory authority found at 15 U.S.C. 3704(c), the Technology Administration is authorized, among other things, to conduct technology policy analyses to improve United States industrial productivity, technology, and innovation, cooperate with United States industry in the improvement of its productivity, technology, and ability to compete successfully in world markets, and identify technological needs, problems, and opportunities within and across industrial sectors, that, if addressed, could make a significant contribution to the economy of the United States.

With these responsibilities in mind, the Technology Administration is planning on holding a moderated series of informal discussions with relevant stakeholders to gather information on the availability of digital entertainment and status of copyright protection and rights management tools. The discussions will help gather data on such issues as the strength, weaknesses and availability of technological solutions, as well as network capability, and the proper role for the Government in facilitating solutions that are best for innovation and best for consumers.

Topics to be addressed at the workshop include:

The workshop will focus on these and other related issues. Anyone wishing to comment on these or raise related issues is free to do so, either in writing before the meeting, or in person at the meeting. Prior comments will be collected via the Technology Administration Web site— www.ta.doc.gov/<http://www.ta.doc.gov/.> and are requested by July 11, 2002.

Section 3506 of the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35) requires that the Office of Management and Budget (OMB) provide interested Federal agencies and the public an early opportunity to comment on information collection requests. OMB may amend or waive the requirement for public consultation to the extent that public participation in the approval process would defeat the purpose of the information collection, violate State or Federal law, or substantially interfere with any agency's ability to perform its statutory obligations. The Leader, Regulatory Information Management Group, Office of the Chief Information Officer, publishes that notice containing proposed information collection requests prior to submission of these requests to OMB. Each proposed information collection, grouped by office, contains the following: (1) Type of review requested, e.g. new, revision, extension, existing or reinstatement; (2) title; (3) summary of the collection; (4) description of the need for, and proposed use of, the information; (5) respondents and frequency of collection; and (6) reporting and/or recordkeeping burden. OMB invites public comment.

Type of Review: Reinstatement.

Title: Application for Grants under Upward Bound (UB) & Upward Bound Math/Science (UBMS) Programs.

Frequency: Once every four years.

Affected Public: Not-for-profit institutions; Businesses or other for-profit; State, Local, or Tribal Gov't, SEAs or LEAs.

Reporting and Recordkeeping Hour Burden:

 Responses: 1,450.

 Burden Hours: 49,300.

Abstract: The application form is needed to conduct a national competition for the Upward Bound and Upward Bound Math and Science Centers Programs for program year 2003-04. These programs provide federal financial assistance in the form of grants to institutions of higher education, public and private agencies and organizations, combinations of institutions and agencies and, in exceptional cases, secondary schools to establish and operate projects designed to generate skills and motivations necessary for success in education beyond secondary school. The Math and Science Program provides an intensive six-week summer math-science curriculum program.

This information collection is being submitted under the Streamlined Clearance Process for Discretionary Grant Information Collections (1890-0001). Therefore, the 30-day public comment period notice will be the only public comment notice published for this information collection.

Requests for copies of the submission for OMB review; comment request may be accessed from http://edicsweb.ed.gov, by selecting the “Browse Pending Collections” link and by clicking on link number 2064. When you access the information collection, click on “Download Attachments” to view. Written requests for information should be addressed to Vivian Reese, Department of Education, 400 Maryland Avenue, SW., Room 4050, Regional Office Building 3, Washington, DC 20202-4651 or to the e-mail address vivan.reese@ed.gov. Requests may also be electronically mailed to the Internet address OCIO_RIMG@ed.gov or faxed to 202-708-9346. Please specify the complete title of the information collection when making your request.

Comments regarding burden and/or the collection activity requirements should be directed to Joseph Schubart at his Internet address Joe.Schubart@ed.gov. Individuals who use a telecommunications device for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at 1-800-877-8339.

Purpose of the Board: The purpose of the Board is to make recommendations to DOE and its regulators in the areas of environmental restoration, waste management, and related activities.

Tentative Board Meeting and Retreat Agenda:

This agenda is subject to change at least one day in advance of the meeting.

Public Participation: The meeting is open to the public. Written statements may be filed with the Committee either before or after the meeting. Individuals who wish to make oral statements pertaining to agenda items should contact Menice Manzanares at the address or telephone number listed above. Requests must be received five days prior to the meeting and reasonable provision will be made to include the presentation in the agenda. The Deputy Designated Federal Officer is empowered to conduct the meeting in a fashion that will facilitate the orderly conduct of business. Each individual wishing to make public comment will be provided a maximum of five minutes to present their comments at the beginning of the meeting.

Minutes: Minutes of this meeting will be available for public review and copying at the Freedom of Information Public Reading Room, 1E-190, Forrestal Building, 1000 Independence Avenue, SW, Washington, DC 20585 between 9 a.m. and 4 p.m., Monday-Friday, except Federal holidays. Minutes will also be available at the Public Reading Room located at the Board's office at 1660 Old Pecos Trail, Suite B, Santa Fe, NM. Hours of operation for the Public Reading Room are 9 a.m.-4 p.m. on Monday through Friday. Minutes will also be made available by writing or calling Menice Manzanares at the Board's office address or telephone number listed above. Minutes and other Board documents are on the Internet at: http:www.nnmcab.org.

OMB Control Number: 3060-0532.

Title: Scanning Receiver Compliance Exhibit, Sections 2.1033(b)(11) and 15.121.

Form Number: N/A.

Type of Review: Extension of a currently approved collection.

Respondents: Individuals or households; not-for-profit institutions; business or other for-profit entities; and State, Local or Tribal Government.

Number of Respondents: 40.

Estimated Time per Response: 1 hour.

Frequency of Response: On occasion reporting requirement; Third party disclosure.

Total Annual Burden: 40 hours.

Total Estimated Cost: $2,000.

Needs and Uses: The FCC rules under 47 CFR 2.1033(b)(11) require manufacturers of scanning receivers to design their equipment so that: it has 38 dB of image rejection for Cellular Service frequencies, tuning, control, and filtering circuitry are inaccessible, and any attempt to modify the scanning receiver to receive Cellular Service transmissions will likely render the scanning receiver inoperable. The Commission also requires manufacturers to submit information with any application for certification that describes: the testing method used to determine compliance with the 38 dB image rejection ratio, the design features that prevent modification of the scanning receiver to receive Cellular Service transmissions, and the design steps taken to make tuning, control, and filtering circuitry inaccessible. Furthermore, the FCC requires equipment to carry a statement assessing the vulnerability of the scanning receiver to modification and to have a label affixed to the scanning receiver, similar to the following:

OMB Control Number: 3060-0329.

Title: Equipment Authorization—Verification, 47 CFR 2.955.

Form Number: N/A.

Type of Review: Extension of a currently approved collection.

Respondents: Not-for-profit institutions; business or other for-profit entities; and State, Local or Tribal Government.

Number of Respondents: 5,655.

Estimated Time per Response: 18 hours (avg.).

Frequency of Response: On occasion reporting requirement; Third party disclosure.

Total Annual Burden: 101,790 hours.

Total Estimated Cost: $1,131,000.

Needs and Uses: Under certain sections of Part 15 and Part 18 of the Commission rules, manufacturers are required to gather and retain technical data to verify that the equipment being marketed complies with established technical standards and FCC regulations and that the operation of the equipment is consistent with the initially documented test results. The information is essential to controlling potential interference to radio communications.

This is a summary of the Commission's Memorandum Opinion and Order (MO&O) in WC Docket No. 02-67, FCC 02-189, adopted June 24, 2002 and released June 24, 2002. This full text may be purchased from the Commission's duplicating contractor, Qualex International, Portals II, 445 12th Street, SW, Room CY-B402, Washington, DC 20554, telephone 202-863-2893, facsimile 202-863-2898, or via e-mail qualexint@aol.com. It is also available on the Commission's website at http://www.fcc.gov/Bureaus/Wireline_Competition/in-region_applications.

1. History of the Application. On March 26, 2002, Verizon New Jersey Inc., et al., filed its second application with the Commission to provide in-region, interLATA service in New Jersey (NJ II). Although Verizon initially filed a section 271 application for New Jersey with this Commission on December 20, 2001 (NJ I), that application was withdrawn on March 19, 2002 , as a result of “process concerns” that were raised with respect to certain pricing matters.

2. The New Jersey Board of Public Utilities' (New Jersey Board) Evaluation. The New Jersey Board conducted an extensive proceeding to facilitate competition in local exchange markets in which it approved and finalized a new Incentive Plan and conducted a lengthy pricing proceeding. Consequently, it recommended that the Commission grant Verizon's section 271 application for New Jersey.

3. The Department of Justice's Evaluation. The Department of Justice filed its evaluation of Verizon's New Jersey Application on April 15, 2002. It recommended approval of the application subject to the Commission's review of Verizon's checklist compliance for certain pricing and operation support systems (OSS) issues.

4. Compliance with Section 271(c)(1)(A). Section 271(c)(1)(A) (Track A) requires the presence of facilities-based competitors serving both residential and business customers. The Commission concludes that Verizon satisfies the requirements of Track A in New Jersey. Verizon relies on interconnection agreements with MetTel, eLEC, and Broadview in support of its Track A showing, and the Commission finds that each of these carriers serves more than a de minimis number of end users predominantly over its own facilities and represents an “actual commercial alternative” to Verizon in New Jersey. Verizon notes that each of these carriers has increased the number of residential lines it serves since the time Verizon filed its NJ I application. Also, the New Jersey Board has stated its intention to take additional measures to further encourage local entry by competitors of Verizon New Jersey, if necessary.

5. Checklist Item 2—Unbundled Network Elements: Pricing and OSS. Based on the evidence in the record before us for this application, the Commission finds that Verizon's UNE rates in New Jersey are just, reasonable, and nondiscriminatory, and are based on cost plus a reasonable profit as required by section 252(d)(1). Thus, Verizon's UNE rates in New Jersey satisfy checklist item two.

6. Pricing. Verizon filed its first application to provide interLATA service in New Jersey before the New Jersey Board had issued its final order on rates for unbundled network elements (UNEs). On day 76 of the NJ I proceeding, the New Jersey Board released its Final UNE Rate Order. On day 89 of the NJ I proceeding, Verizon notified the Commission that it was withdrawing its application as a result of “process concerns” that were raised with respect to the non-recurring charge for performing a hot cut. The next day, Verizon informed the New Jersey Board that, effective immediately, it would reduce the effective hot cut rate in New Jersey to the same level —$35— that was recently made effective in New York. On March 26, 2002, Verizon filed its second application to provide interLATA service in New Jersey. Both the Department of Justice and the New Jersey Board recommended approval of the NJ II application, although commenters reiterated pricing concerns from the NJ I application and also raised new pricing issues.

7. WorldCom contends that the New Jersey Board incorrectly approved Verizon's fiber/copper feeder and fill factor percentages. WorldCom disagrees with Verizon's assumption that 60 percent of feeder will be served on fiber cable with integrated digital loop carrier (IDLC) and that the remaining 40 percent served on copper feeder. The New Jersey Board considered this very issue and approved Verizon's 60/40 split between fiber and copper feeder. WorldCom presents no arguments or evidence that would cause us to find that these assumptions are inconsistent with TELRIC principles as applied to Verizon in New Jersey. WorldCom also claims that the New Jersey Board approved unreasonably low fill factors for fiber and copper cable, which allegedly results in overstated loop costs. The Board-approved fill factors are not inconsistent with those that the Commission has approved in prior section 271 orders, and the Commission finds no TELRIC errors in the New Jersey Board's analysis of Verizon's fill factors.

8. The NJDRA and WorldCom allege that Verizon improperly “double charges” for calls that both originate and terminate on the same switch. The commenters claim that Verizon should be allowed to charge only once for such intra-switch calls. Verizon's methodology is not inconsistent with our handling of this issue in prior applications. No commenter argues that the manner in which Verizon developed its switching rates is inconsistent with the manner in which Verizon imposes these rates. The Commission therefore rejects commenters' claims that charging both an originating and a terminating rate for every call, regardless of the number of switches involved, is by itself inappropriate or a violation of TELRIC.

9. WorldCom and AT&T also challenge Verizon's inclusion of vertical features in the switching rate. They argue that non-usage-sensitive elements, such as vertical features, should be included with the port charge and not charged on a per-minute basis. no commenter has stated that vertical features are provided over wholly dedicated facilities, nor have they provided evidence that the per-minute charge is inconsistent with the manner in which costs are incurred. Under our rules, the New Jersey Board could have properly directed Verizon to recover the costs of vertical features as part of flat-rated port charges, split the costs between the flat and per-minute switch elements, or recover the costs through the per-minute charge. The New Jersey Board's decision to allow the recovery of such costs in the per-minute switching rate fully complies with our rate structure rules. The Commission finds no TELRIC error in the New Jersey Board's handling of the vertical features costs issue.

10. WorldCom also claims that Verizon has overstated its switching costs by using an inappropriate switch vendor discount. The New Jersey Board directed Verizon to compute its switching costs as if 79.4 percent of the switches would receive the discount for purchases of new switches and 20.6 percent would receive the discount for purchases of growth switches. The Commission concludes that this issue is a fact-specific inquiry amenable in the first instance to determination by the state commissions; it is not a bright-line rule. The Commission has been presented with no evidence or rationale, beyond bare assertions, that would persuade us that the split chosen by the New Jersey Board amounts to a TELRIC error. It is satisfied that the New Jersey Board carefully evaluated this issue, properly rejected Verizon's proposed use of 100 percent growth switches, and validly established what it considered to be more appropriate and state-specific switching discounts.

11. WorldCom contends that Verizon improperly calculates its switching cost by dividing by minutes associated with only 251 business days in a calendar year. In our view, provided that an incumbent LEC's methodology is reasonable and consistent, TELRIC does not by itself dictate the use of a particular number of days, whether 308, 251, or some other number. Even if the New Jersey Board erred in approving Verizon's use of 251 days together with other inputs, Verizon's non-loop rates in New Jersey pass a benchmark comparison to Verizon's non-loop rates in New York and therefore fall within the range that reasonable application of TELRIC principles would produce.

12. In this application, Verizon chooses to rely on a benchmark comparison of its rates in New Jersey to those in New York. The Commission agrees that New York is similar to New Jersey in terms of both geography and rate structure. Having found that New York is an appropriate benchmark state, the Commission finds that New Jersey's non-loop rates are roughly six percent lower than New York non-loop rates. The Commission also finds that New Jersey non-loop costs are roughly one percent higher than New York non-loop costs, after taking a weighted average of New Jersey and New York costs derived from the Commission's Synthesis Model. Therefore, it concludes that New Jersey's non-loop rates pass a benchmark comparison to New York's non-loop rates and that they therefore satisfy our benchmark analysis and the requirements of checklist item two.

13. AT&T argues that Verizon's DUF rates are inflated and do not comply with TELRIC. AT&T did not raise these issues before the New Jersey Board, and it has only recently challenged Verizon's DUF rates in a motion for reconsideration of the Final UNE Rate Order. AT&T's motion is presently pending before the New Jersey Board. The New Jersey Board should have the opportunity to evaluate AT&T's evidence and make any adjustments it finds appropriate. The Commission commends the New Jersey Board's commitment to TELRIC principles, defers to the New Jersey Board's forthcoming resolution of the DUF rate, and finds no TELRIC error on the record before us on this issue.

14. AT&T, ASCENT, the NJDRA, and XO challenge Verizon's “hot cut” charges. A hot cut is the process of converting a customer from one network, usually a UNE-platform served by an incumbent LEC's switch, to a UNE-loop served by another carrier's switch. Commenters argue that the $35 hot cut rate is not TELRIC-compliant. They contend generally that the hot cut rate is merely a temporary credit that does not comport with TELRIC principles. During the NJ I proceeding, Verizon's $159.76 hot cut rate generated considerable controversy. Although Verizon continues to argue in NJ II that this rate is Board-approved and TELRIC-complaint, it voluntarily agreed to reduce the effective rates for six hot cut charges to $35.00. The $35.00 hot cut rate is a rate selected by Verizon and that has gone into effect in New Jersey. The $35.00 hot cut rate, which mirrors the effective rate in New York, bears the imprimatur of the New York PSC as well as the numerous competitive LECs who joined that settlement. The New Jersey Board is presently considering AT&T's motion for reconsideration of the hot cut rate and will have an opportunity to weigh AT&T's evidence of the appropriate rate level. We note that the $35 hot cut charge reflects a reduction of over 75 percent from the charge adopted by the New Jersey Board. The Commission also takes comfort that the $35 hot cut rate will remain in effect until at least March 1, 2004. Accordingly, it defers to the New Jersey Board's anticipated resolution of this matter and find no TELRIC error on the record before it in Verizon's $35 hot cut rate.

15. AT&T asserts that the $7.71 service order charge Verizon assesses on a competitive LEC whenever it adds or deletes a telephone feature service, such as caller identification, does not comply with TELRIC. A feature change service order charge is imposed only if a customer is already taking service from a competitive LEC. Even then, not all such customers request changes to their feature services. There is no evidence in the record that a feature change service order charge constitutes a barrier to market entry in the same way that a non-TELRIC hot cut charge could. The Commission notes that AT&T has filed a motion for reconsideration of this issue with the New Jersey Board. It believes that the New Jersey Board should have the opportunity to evaluate the evidence itself and make adjustments it regards as appropriate.

16. OSS. The Commission finds, as did the New Jersey Board, that Verizon provides non-discriminatory access to its OSS. In addition to New Jersey performance data, Verizon certifies that it provides competitive LECs in New Jersey with interfaces and gateways to the OSS common to those serving the rest of the former Bell Atlantic service area. Verizon engaged KPMG Consulting (KPMG) to test the interfaces and OSS serving New Jersey. In addition, Verizon engaged PricewaterhouseCoopers (PwC) to conduct two attestation reviews of Verizon's BOS BDT formatted bills in New Jersey in September 2001.

17. KPMG's testing included end-to-end testing and evaluation of integrated operations, including examination at a projected “normal” volume equivalent to the submission of 1.3 million orders per month into the New Jersey SOP. With regard to performance data, KPMG undertook a comprehensive review of Verizon's systems and procedures to measure and report its performance under the Carrier-to-Carrier Guidelines, and KMPG found that Verizon satisfied all 164 test points. The Commission finds, as did the New Jersey Board, that we can rely on the KPMG test results as significant evidence that Verizon provides nondiscriminatory access to its OSS. The Commission's reliance on the KPMG test results is warranted because of the thoroughness and rigorousness with which KMPG conducted its military-style test, which covered 536 transactions and included volume testing. Thus, it sees no need to question the reliability of the data Verizon submitted in its application and, in fact, we are encouraged by Verizon's efforts in coordination with the New Jersey Board, to ensure that its data are accurate, reliable, and widely disclosed.

18. Competitors in New Jersey raise several issues regarding notifier timeliness and accuracy, and the Department of Justice comments that the Commission should satisfy itself that Verizon returns BCNs on an accurate and timely basis. For example, MetTel raises a threshold accusation that Verizon issues “false” order completion notifiers. In contrast to more anecdotal-based challenges made by competitors in previous section 271 proceedings, MetTel has extensively documented and inventoried its submissions of orders and receipt of notifiers. We commend MetTel on its efforts to compile and submit independent evidence and construct an affirmative case for its position. Nevertheless, we continue to place primary reliance on the notifier data that Verizon has submitted with its application. At the same time, the Commission recognizes that, although the issues raised by MetTel do not generally demonstrate checklist noncompliance, Verizon has an affirmative obligation to continue to engage MetTel and attempt to reconcile its disagreements with MetTel through a carrier-to-carrier dispute resolution process. In this regard, it is noted that Verizon has begun a data reconciliation process with MetTel during the course of this proceeding that, although incomplete, has focused the number of issues in dispute and led to a more precise identification of the underlying data in dispute. As a result, it appears that much of the remaining gap between the performance results reported by Verizon and the performance results generated by MetTel arise from an apparent disagreement over the application of various aspects of the Carrier-to-Carrier Guidelines. Although the record reveals that this reconciliation process has been contentious and adversarial, at this time we do not believe that Verizon is not engaged in a good-faith effort to resolve these issues. The Commission fully expects Verizon to continue these efforts at reconciliation as part of its nondiscrimination obligations and to continue to make efforts to improve its OSS performance. It also expects the New Jersey Board will make every effort to facilitate this reconciliation effort either formally through its dispute resolution process or through other administrative measures.

19. For purposes of checklist compliance, the Commission is convinced by the thoroughness and rigorousness of KPMG's independent audit that Verizon's performance data, including its data related to notifiers specifically, is sufficiently accurate. The fact that no other company questions whether Verizon's performance data related to the timeliness and accuracy of Verizon's notifier data gives us additional assurance that such data are reliable. Further, MetTel's attempts to introduce certain usage proxies as indicators of system events and reliance on measures not adopted by the New Jersey Board do not persuade us to abandon the more objective and industry standard performance measures approved by the Board. The Commission concludes that Verizon has demonstrated that it provides notifiers in a nondiscriminatory manner that allows efficient competitors a meaningful opportunity to compete. In reaching this determination, it recognizes that the processes for notifying competitors of the status of their orders, the set of metrics to measure notification, and the corresponding process to record notifier performance, are all evolving and will continue to do so. Accordingly, the Commission expects Verizon to continue to work with MetTel and other competitors in enabling them to understand the business rules and address carrier-specific problems.

20. Billing. The Commission finds that Verizon complies with its obligation to provide nondiscriminatory access to its billing functions on the basis of its provision of: (1) Timely and accurate service usage data to competitive LECs; and (2) wholesale billing in a manner that provides competing carriers with a meaningful opportunity to compete. No party raises any issues with Verizon's provision of service usage data to competitive LECs; and based on the evidence in the record, we find that Verizon's provision of the DUF meets its obligations in this regard. Several parties, however, raise issues with Verizon's provision of wholesale billing. Specifically, a number of parties dispute the accuracy of the wholesale bill, based on both the BOS BDT format and the retail format.

21. Verizon employs the same billing systems in New Jersey as it does in Pennsylvania, where our evidentiary finding that Verizon's wholesale bills were checklist compliant was a “close call,” and many of the issues commenters raise in New Jersey are similar to the issues raised in Pennsylvania. Accordingly, the Commission agrees with the Department of Justice that the competitive experience in New Jersey is informed by that of Pennsylvania. It recognizes, however, that while the billing systems in New Jersey and Pennsylvania are identical, the overall billing processes differ. The Commission cannot, therefore, merely rely on our previous review of Verizon's billing system in Pennsylvania to make our finding here. It finds that Verizon has made a sufficient showing that both its retail-formatted and BOS BDT bills are accurate, and we reject assertions by AT&T that KPMG's failure to test the BOS BDT bill format fatally undermines Verizon's showing.

22. The Commission finds that Verizon demonstrates the accuracy of the BOS BDT bill format based on the limited commercial performance data available from its use in New Jersey, and consistent with our findings in the Verizon Pennsylvania Order, the PwC attestation that Verizon's BOS BDT bills are consistent with the retail format. Our concerns are satisfied by the recent performance data, by the low and decreasing number of discrepancies between the electronic and paper bills, and by PwC's attestation that the BOS BDT bills in September contained a de minimis amount of erroneous charges. Further, we find that Verizon has adequately demonstrated the accuracy of the BOS BDT bill by having PwC attest that it is reconcilable against the retail-formatted bill, which KPMG had previously found reconcilable with the DUF. Since the retail-formatted bill has been tested for accuracy by KPMG, and PwC has reconciled the BOS BDT bill against the retail-formatted bill, it is reasonable to assume that the BOS BDT bill is also reconcilable with the DUF. As with all OSS functions, although we must judge Verizon's wholesale billing at the time of its application, we recognize that access to OSS is an evolutionary process and we expect that Verizon continue its efforts to improve its wholesale billing as industry standards evolve.

23. Several competitive LECs assert that their commercial experience shows that Verizon's systems produce recurring or “systemic” inaccuracies in its wholesale bills. We note that no commenter has put forth the type of detailed analysis of its wholesale billing dispute with Verizon that was present in our review of Verizon's application for section 271 authority in Pennsylvania As we stated in the Verizon Pennsylvania Order, “we recognize, as a practical matter, that high-volume, carrier-to-carrier commercial billing cannot always be perfectly accurate.” The Commission cannot, without further evidence, find that the parties have demonstrated systemic inaccuracies in Verizon's wholesale bills that would require a finding of checklist noncompliance.

24. Finally, the Commission addresses AT&T's allegations that Verizon's BOS BDT bill does not comply with industry standards. Verizon explains that the issues raised by AT&T are in fact deviations that are allowed under the industry standard and for which Verizon has provided clear documentation. AT&T also acknowledges that Verizon has made attempts to comply with AT&T's specific requests regarding the BOS BDT bill. It finds that Verizon complies with its obligation to provide clear documentation and assistance to AT&T regarding the BOS BDT bill, and that AT&T provides insufficient evidence to support its claim that Verizon does not offer a “readable and auditable” electronic bill format or that Verizon's BOS BDT bill impermissibly deviates from accepted industry standards. Moreover, AT&T's assertions regarding Verizon's implementation of the BOS BDT bill format are a fact-specific, carrier-to-carrier dispute concerning AT&T's use of Verizon's BOS BDT bill. As the Commission has stated in prior proceedings, given the statutory period for our review, the section 271 process simply could not function if we were required to resolve every individual factual dispute between a BOC and each competitive LEC regarding the precise content of the BOC's obligations to each competitor. The Commission takes added comfort in the special measures that the New Jersey Board announced to ensure nondiscriminatory access to electronic billing.

25. Flow Through. The Commission concludes, as did the New Jersey Board, that Verizon's electronic processing of orders is sufficient to provide carriers with a meaningful opportunity to compete. Flow-through measures the number of orders that are electronically processed by an incumbent LEC's OSS without the need for manual intervention. In New Jersey, while Verizon's achieved flow-through rate for UNEs has been below the 95 percent standard set by the New Jersey Board, there nevertheless, has been a consistent, upward trend in the rate, reaching 85.34 percent in January, 89.82 percent in February and 90.50 percent in March 2002. Even if the Commission looks beyond achieved flow-through to total flow-through rates and order reject rates, it notes that Verizon's performance appears to show an improving trend. Moreover, it notes that KPMG's OSS test included an examination of Verizon's ability to electronically process service orders in varying mixes of order types at reasonably foreseeable commercial volumes and that KPMG and the New Jersey Board found Verizon's performance satisfactory. The Commission finds that the positive trends in both Verizon's flow-through and order reject rates, along with Verizon's overall performance in providing service order information in a timely and accurate manner and KPMG's findings regarding the scalability of Verizon's OSS are sufficient to demonstrate checklist compliance.

26. Checklist Item 4—Unbundled Local Loops. Verizon has adequately demonstrated that it provides unbundled local loops as required by section 271 and the Commission's rules. Specifically, the Commission's conclusion is based on its review of Verizon's performance for all loop types, which include, as in past section 271 orders, voice grade loops, hot cut provisioning, xDSL-capable loops, digital loops, and high capacity loops, and its review of Verizon's processes for line sharing and line splitting. As of February 2002, competitors in New Jersey have acquired from Verizon and placed into use approximately 59,000 stand-alone loops (including DSL loops), and about 51,000 loops provided as part of network element platforms that include switching and transport elements.

27. Voice Grade Loops. The Commission finds that Verizon provisions voice grade loops in a nondiscriminatory manner. It notes that voice grade loops comprise the overwhelming majority of loops ordered by competitive LECs in New Jersey. Verizon's performance in provisioning voice grade loops has met the relevant parity standard throughout the November-March period with respect to timeliness and quality. Furthermore, Verizon's performance for repair and maintenance timeliness under the mean time to repair metric also demonstrates parity during the November-March period.

28. Hot Cut Activity. Verizon is providing voice grade loops through hot cuts in New Jersey in a nondiscriminatory manner. Verizon has satisfied its benchmark for on time performance for hot cuts for each month of the relevant November-March period. Although Verizon's installation quality performance for hot cuts is not reported in the New Jersey Carrier-to-Carrier Performance Reports, Verizon does provide a calculation of its performance under the New York guidelines. Verizon states that its installation quality performance has consistently been better than the two percent New York benchmark for trouble reports received within seven days of installation.

29. xDSL-Capable Loops. Verizon demonstrates that it provides stand-alone xDSL-capable loops in a nondiscriminatory manner. Verizon makes xDSL-capable loops available in New Jersey under approved interconnection agreements, and provides timely order confirmation notices to competitors. Verizon's performance for all relevant months under the missed appointment metric indicates that Verizon provisions xDSL loops in a timely manner. With respect to installation quality, Verizon also maintained parity during the relevant months under the installation quality measure. For almost every month during the relevant period, Verizon also maintained parity for measures of repair and maintenance timeliness and quality.

30. Digital Loops. Verizon provisions digital loops to competitors in a nondiscriminatory fashion in New Jersey. As an initial matter, we note that digital loops only represent a small number of the total loops provided by Verizon in New Jersey. Verizon provided digital loops to competitors in a timely manner throughout the relevant period. Verizon also achieves parity from November through March with respect to the measure of installation quality we have traditionally relied on, which measures the percent of installation troubles reported within 30 days. In addition, Verizon achieved parity performance throughout the relevant period with respect to maintenance and repair timeliness under the mean time to repair metric. Verizon also maintained parity performance during the relevant period for every month except February with respect to a measure of maintenance and repair quality “ the percentage of repeat trouble reports within 30 days. Verizon's performance under this measure indicates a large disparity in February with respect to the percentage of repeat reports observed for competitive LECs and Verizon retail. Verizon explains, however, that the small sample size of competitive LEC trouble reports observed in February contributed to the wide fluctuation in performance under this measure. Moreover, this one month disparity is not competitively significant and does not warrant a finding of checklist noncompliance, given that Verizon returns to parity performance under this measure in March.

31. High Capacity Loops. Given the totality of the evidence, the Commission finds that Verizon's performance with respect to high capacity loops does not result in a finding of noncompliance for checklist item 4. Verizon states that, as of February 2002, competitive LECs have in service in New Jersey approximately 400 high capacity DS-1 loops, and no high capacity DS-3 loops, provided by Verizon. According to Verizon, high capacity loops represent only about 0.4 percent of all unbundled loops provisioned to competitors in New Jersey. Verizon's performance under the missed installation appointment metric suggests that Verizon has generally been timely in the provisioning of high capacity loops. Verizon achieved parity for repair and maintenance timeliness under the mean time to repair metric for three of the five relevant months. Verizon's performance with respect to repair and maintenance quality also indicates parity for four of the five months during the relevant period. The Commission recognizes, however, that Verizon does not achieve parity during the relevant period other than in February with respect to the installation quality metric, the percentage of installation troubles reported within 30 days. Verizon contends that this measure may not be an accurate indicator of its performance because the retail group for this metric (Verizon retail) does not provide a meaningful comparison. Verizon also argues that the small number of installation trouble reports received during the relevant period for high capacity loops, interoffice facilities, and loop/transport combinations are too few to provide meaningful performance results, and are “not as reliable an indicator of checklist compliance.” The Commission does not find that Verizon's performance with respect to troubles reported within thirty days warrants a finding of checklist noncompliance, given that high capacity loops represent less than one percent of the unbundled loops that Verizon provides to competitors in New Jersey, and in light of Verizon's generally good performance under the other measures of high capacity loop provisioning, maintenance, and repair discussed above.

32. Line Sharing and Line Splitting. Verizon demonstrates that it provides nondiscriminatory access to the high frequency portion of the loop, and access to network elements necessary for competing carriers to provide line splitting. Verizon generally has met the relevant performance standards for provisioning, maintaining and repairing line-shared loops for competitors in New Jersey. Commenters in this proceeding do not criticize Verizon's performance with regard to the provisioning, maintenance and repair of line shared loops. Verizon also provides nondiscriminatory access to line-splitting in accordance with our rules. Verizon provides carriers that purchase line splitting with access to the same pre-ordering capabilities as carriers that purchase unbundled DSL loops or line sharing. In addition, working with competitive LECs through the New York DSL Collaborative, Verizon implemented a permanent OSS process for line splitting on October 20, 2001, throughout the Verizon East territory, including New Jersey. We note that AT&T raises challenges to Verizon's ordering process for line splitting, but we find that this process allows competitors a meaningful opportunity to compete. Accordingly, the Commission finds that Verizon complies with the requirements of this checklist item with respect to its line sharing and line splitting processes.

33. Checklist Item 1—Interconnection. Based on the evidence in the record, the Commission concludes that Verizon demonstrates that it provides interconnection in accordance with the requirements of section 251(c)(2) and as specified in section 271 and applied in the Commission's prior orders. Pursuant to this checklist item, Verizon must provide equal-in-quality interconnection on terms and conditions that are just, reasonable, and nondiscriminatory. Based on the Commission's review of the record, it concludes, as did the New Jersey Board, that Verizon complies with the requirements of this checklist item. In reaching this conclusion, the Commission examined Verizon's performance in providing collocation and interconnection trunks to competing carriers, as it has done in prior section 271 proceedings. It notes that no commenter faults Verizon's interconnection quality or timeliness, and that the New Jersey Board found that Verizon provides equal-in-quality interconnection on terms and conditions that are just and reasonable and in accordance with the section 271.

34. Checklist Item 8—White Pages Directory Listings. Based on the record, the Commission finds that Verizon provides white page directory listings for customers of the other carrier's telephone exchange service and permits competitive providers of telephone exchange service and toll service to have access to directory listings in compliance with checklist item 8.

35. Checklist Item 13—Reciprocal Compensation. The Commission finds that Verizon demonstrates that it provides reciprocal compensation as required by checklist item 13.

36. Checklist Item 14—Resale. Based on the evidence in the record, the Commission concludes that Verizon satisfies the requirements of this checklist item in New Jersey in that it makes telecommunications services available for resale in accordance with the requirements of sections 251(c)(4) and 252(d)(3).

37. Checklist Items 3, 5, 6, 7, 9, 10, 11 and 12. An applicant under section 271 must demonstrate that it complies with checklist item 3 (poles, ducts, conduits, and rights of way), item 5 (transport), item 6 (switching), item 7 (911/E911, directory assistance, and operator services), item 9 (numbering administration), item 10 (databases and associated signaling), item 11 (number portability), and item 12 (local dialing parity). Based on the evidence in the record, the Commission concludes that Verizon demonstrates that it is in compliance with checklist items 3, 5, 6, 7, 9, 10, 11, and 12 in New Jersey. The New Jersey Board also concludes that Verizon complies with the requirements of each of these checklist items.

38. Section 272 Compliance. Verizon provides evidence that it maintains the same structural separation and nondiscrimination safeguards in accordance with the requirements of section 272.

39. Public Interest Analysis. The Commission concludes that approval of this application is consistent with the public interest. From the Commission's extensive review of the competitive checklist, which embodies the critical elements of market entry under the Act, it finds that barriers to competitive entry in New Jersey's local exchange market have been removed, and that the local exchange market is open to competition. It further finds that the record confirms the Commission's view that BOC entry into the long distance market will benefit consumers and competition if the relevant local exchange market is open to competition consistent with the competitive checklist.

40. Price Squeeze Analysis. Commenters allege the existence of a price squeeze in New Jersey that, they assert, compels a finding that the grant of Verizon's NJ II application is not in the public interest. While no commenter argues that the $35 hot cut rate in New Jersey effects a price squeeze on competitors, XO contends that the Commission must determine whether Verizon's previous hot cut rates of $159.76 and $233.13 constitute a price squeeze. XO specifically alleges that the $35 rate in New Jersey, unlike that in New York, is merely a temporary credit. There is no evidence that the specific hot cut terms in New York differ significantly from those in New Jersey. We therefore reject commenters' argument that that there are material differences between the New Jersey and New York hot cut rates that would warrant disapproval of the NJ II application, and we also decline to conduct a price squeeze analysis using Verizon's previous hot cut rates of $159.76 and $233.13.

41. The Commission also rejects the UNE price squeeze arguments of AT&T and WorldCom from NJ I, which they incorporate by reference in NJ II. Both commenters make related arguments concerning the allegedly insufficient profit margin available to them in the residential telephone market in New Jersey. Significantly, neither commenter claims that it cannot earn a positive gross margin in New Jersey. As it has noted previously, conducting a price squeeze analysis requires a determination of what a “sufficient” profit margin is. Resolving that issue requires more than simply determining what is sufficient for a particular carrier. The evidence before us demonstrates that competitive LECs in New Jersey can realize positive margins in 100 percent of the state and that the statewide average gross margin is $5.62. There is no record evidence before us that these profit margins are inadequate for an efficient competitor. The Commission also notes that the New Jersey Board itself considered allegations of a price squeeze in the New Jersey residential market. During a November 20, 2001 state hearing, staff of the New Jersey Board presented evidence that the average residential customer generates approximately $30.00 in monthly revenue. New Jersey Board staff noted that local competitors such as AT&T who are also long distance carriers would receive net access savings or revenues. After subtracting UNE-platform costs from estimated monthly residential rates, staff of the New Jersey Board determined that competitors could expect to earn a monthly gross profit of approximately $6.50. The Commission commends the New Jersey Board's independent analysis of the price squeeze issue and finds that it provides additional support for our conclusion that commenters have not established the existence of a price squeeze in New Jersey. It rejects commenters' allegations of a price squeeze and conclude that there is no evidence in the record that warrants disapproval of this application based on such contentions, whether couched as a violation of the public interest standard or as discrimination in violation of checklist item two.

42. Section 271(d)(6) Enforcement Authority. Working with the New Jersey Board, the Commission intends to monitor closely post-entry compliance and to enforce the provisions of section 271 using the various enforcement tools Congress provided us in the Communications Act.

In light of the heightened concerns regarding security of federal government personnel and buildings, the Board is implementing a procedure to screen visitors to the Board's premises before admission to those premises. To conduct this screening, the Board will request, in advance, that each visitor provide his or her name, date of birth, and social security number or passport number. Persons who refuse to provide the requested information may be denied admittance to the premises. This information will be used to facilitate searches of law enforcement databases to determine whether the visitor may present a risk to the security of the Board. As required by the General Records Schedule 18, published by the National Archives, the records will be retained for two years from date of admittance to the Board.

In accordance with 5 U.S.C. 552a(r), a report of this new system of records is being filed with the Chair of the House Committee on Government Reform and Oversight, the Chair of the Senate Committee on Governmental Affairs, and the Office of Management and Budget. This new system of records will become effective on August 12, 2002, without further notice, unless the Board publishes a notice to the contrary in the Federal Register.

Pursuant to Section 6(f) of the Federal Trade Commission Act, 28 Stat. 721, 15 U.S.C. 46(f), and Section 2.34 of the Commission's Rules of Practice, 16 CFR 2.34, notice is hereby given that the above-captioned consent agreement containing a consent order to cease and desist, having been filed with and accepted, subject to final approval, by the Commission, has been placed on the public record for a period of thirty (30) days. The following Analysis to Aid Public Comment describes the terms of the consent agreement, and the allegations in the complaint. An electronic copy of the full text of the consent agreement package can be obtained from the FTC Home Page (for June 27, 2002), on the World Wide Web, at http://www.ftc.gov/os/2002/06/index.htm . A paper copy can be obtained from the FTC Public Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington, DC 20580, either in person or by calling (202) 326-2222.

Public comments are invited, and may be filed with the Commission in either paper or electronic form. Comments filed in paper form should be directed to: FTC/Office of the Secretary, Room 159-H, 600 Pennsylvania Avenue, NW., Washington, DC 20580. If a comment contains nonpublic information, it must be filed in paper form, and the first page of the document must be clearly labeled “confidential.” Comments that do not contain any nonpublic information may instead be filed in electronic form (in ASCII format, WordPerfect, or Microsoft Word) as part of or as an attachment to email messages directed to the following email box: consentagreement@ftc.gov . Such comments will be considered by the Commission and will be available for inspection and copying at its principal office in accordance with Section 4.9(b)(6)(ii) of the Commission's Rules of Practice, 16 CFR 4.9(b)(6)(ii)).

The Federal Trade Commission has accepted for public comment an agreement and proposed consent order with Biovail Corporation (“Biovail”) and Elan Corporation, plc (“Elan”), settling charges that the two companies illegally agreed to restrain competition in the market for generic Adalat CC. The Commission has placed the proposed consent order on the public record for thirty days to receive comments by interested persons. The proposed consent order has been entered into for settlement purposes only and does not constitute an admission by either Biovail or Elan that it violated the law or that the facts alleged in the complaint, other than the jurisdictional facts, are true.

Biovail is a Canadian manufacturer of branded and generic pharmaceutical products. Elan is an Irish manufacturer of branded and generic pharmaceutical products. Biovail and Elan are the only two sellers of generic forms of Adalat CC (“generic Adalat”), a once-a-day antihypertension medication. No other company has even sought Food and Drug Administration (“FDA”) approval to sell a 30 mg or a 60 mg dosage form of generic Adalat. Bayer AG (“Bayer”) manufactures branded Adalat CC. In 1999, before the entry of generic equivalents to Adalat CC, Bayer's United States sales of the 30 mg and 60 mg doses of Adalat CC were in excess of $270 million.

Biovail was the first to file an Abbreviated New Drug Application (“ANDA”) for FDA approval on the 60 mg dosage, and Elan was the first to file an ANDA for FDA approval on the 30 mg dosage. Thus, Elan had 180 days of exclusivity for the 30 mg product upon receiving final FDA approval, and Biovail had the 180-day exclusivity on the 60 mg product upon receiving final FDA approval. Each was the second to file on the other dosage.

In October 1999, after both Biovail and Elan (hereinafter sometimes referred to as “Respondents”) had filed for FDA approval of their 30 mg and 60 mg generic Adalat products, they entered into an agreement involving all four of their generic Adalat products. That agreement (the “Agreement”), and the Respondents' conduct arising out of that Agreement, are the subject of the Commission's complaint. The complaint alleges that, by entering the Agreement, Respondents illegally created market power in the United States market for sales of 30 mg and 60 mg dosages of generic Adalat. There is little prospect of new entry in the near future, because no other companies have applied for FDA approval of a 30 mg or a 60 mg generic Adalat product.

Under the Respondents' Agreement, Elan appointed Biovail as the exclusive distributor of Elan's 30 mg and 60 mg generic Adalat products. At the time of the Agreement, neither Elan nor Biovail distributed its own generic drugs in the United States. Teva Pharmaceuticals, Inc. (“Teva”), a distributor of some of Biovail's products, participated in the negotiations leading up to the Agreement. The Agreement provided that Biovail appoint Teva to sub-distribute Elan's 30 mg generic Adalat product in the United States. With respect to Elan's 60 mg product, the Agreement provided that, upon notice from Elan that Elan's 60 mg product was ready for commercial launch, Biovail would appoint either Teva or another company as a sub-distributor of that product. The Agreement has a minimum term of 15 years.

The FDA approval Elan's mg generic Adalat product in March 2000 and its 60 mg product in October 2001. It approved Biovail's 30 mg and 60 mg generic Adalat products in December 2000. Biovail began selling Elan's 30 mg product immediately after receiving final FDA approval. Biovail began selling its own 60 mg product through Teva immediately after the FDA gave final approval to that product. Neither Elan's 60 mg product nor Biovail's 30 mg product, however, has ever been launched commercially. Thus, although two 30 mg generic Adalat products and two 60 mg generic Adalat products have had FDA approval for many months, consumers can purchase only one product at each strength.

The complaint alleges that, in exchange for the right to distribute Elan's products and share in the profits of those products, Biovail agreed to make specified payments to Elan. To date, Biovail has paid Elan approximately $33 million in connection with its distribution of Elan's 30 mg generic Adalat product, and $12.75 million in connection with the right to distribute Elan's 60 mg generic Adalat product.

As the complaint alleges, the Agreement gave Biovail substantial incentives not to launch its own 30 mg product. Although Biovail has had final FDA approval to market its 30 mg product for over one year, and the Agreement purports to require Biovail to use “reasonable commercial endeavors” to launch that product “with reasonable dispatch,” Biovail has not yet launched that product. Biovail's launch of its own 30 mg product could be expected to cause a significant reduction in the price of Elan's incumbent 30 mg product, and generate for Elan's product lower total profits, which Biovail shares with Elan. For the same reasons, the Agreement diminished Biovail's incentives to exercise maximum efforts at eliminating the technological obstacles, if any, that Biovail asserts have impeded its ability to launch a self-manufactured 30 mg product. Elan also does not have any incentive to enforce the Agreement's provision requiring that Biovail use reasonable efforts to launch its 30 mg product in competition with Elan's product.

Similarly, the complaint alleges that the Agreement gave Elan substantial incentives not to launch its 60 mg product. Under the Agreement, in exchange for receiving a large up-front payment, Elan, in effect, stood to receive no royalties upon launch of its 60 mg product, until that product generated certain profits for Biovail. It would take several years of sales before Elan's 60 mg product would generate such profits, and once that triggering event happened, Elan's royalty was to be only 6% of profits. Accordingly, the complain alleges that the Agreement compensated Elan for its 60 mg product up-front and pre-entry, while substantially diminishing that product's value to Elan thereafter. The Agreement also diminished Elan's incentives to exercise maximum efforts at eliminating any technological obstacles to launching its 60 mg product, if any, that Elan has asserted to exist. Moreover, neither Elan nor Biovail had any financial incentives to enforce the provision requiring launch of Elan's 60 mg product. As with the launch of Biovail's 30 mg product, Respondents knew that Elan's launch of its own 60 mg product could be expected to cause a reduction in the price of Biovail's incumbent 60 mg product by a significant amount and generate lower total profits for Biovail's product. It was in Bilvail's strategic interest, therefore, for Elan not to launch its 60 mg products.

The complaint further alleges that even its Bilvail had launched its 30 mg product and Elan had launched its 60 mg product, the Agreement allows Biovail to control or influence pricing and other competitive features of both its and Elan's 30 mg and 60 mg generic Adalat products. Biovail was thus in a position to profit by suppressing competition between its and Elan's products.

For the above reasons, the complaint alleges that Respondents' Agreement is an agreement not to compete between the only two producers of the 30 mg and 60 mg generic Adalat products. As a result, Teva, Biovail's distributor, is the only firm selling generic Adalat to consumers in the United States, and consumers have had access to only one of two approved generic Adalat products at each strength. Moreover, the Agreement is not justified by an countervailing efficiency.

The proposed order remedies the Respondents' anticompetitive conduct by requiring them to end their anticompetitive Agreement and barring them from engaging in similar conduct in the future. It maintains supply of the incumbent generic Adalat products while Respondents unwind their anticompetitive Agreement and eliminates the anticompetitive obstacles to entry of a second 30 mg and a second 60 mg generic Adalat product.

Paragraph I of the proposed order contains definitions, one of which defines the “Adalat CC Agreement” as the “License, Distribution & Supply Agreement” covering generic Adalat that Biovail and Elan executed on October 4, 1999, and all modifications and amendments thereto. We discuss other definitions below, as needed to explain the substantive provisions of the proposed order.

Paragraph II of the proposed order is a core provision, prohibiting Biovail or Elan from repeating the instant conduct by entering anticompetitive price, output, or distribution agreements with other generic drug companies. This provision targets agreements between either Respondent and other persons concerning a generic drug for which both parties to the agreement have filed for FDA approval of an ANDA referencing the same pioneer drug product. It aims to prohibit agreements between competing generic drug manufacturers that restrict the marketing of competing generic drugs.

Paragraph III of the proposed order requires Biovail and Elan to terminate their agreement on generic Adalat no later than the date on which the order becomes final. Paragraph 13 of the Agreement Containing Consent Order required them to start the termination process upon their execution of that document. The proviso to Paragraph III allows Biovail and Elan to resolve financial issues connected to the termination of their agreement on generic Adalat on mutually agreeable terms; however, they cannot resolve those financial issues by using sales, revenues, or profits generated by generic Adalat or any other drug product, or by transferring rights connected to any drug product. This limitation is intended to ensure that, in resolving the financial issues, Respondents do not perpetuate the anticompetitive effects of the Agreement by continuing the entanglements between them on generic Adalat or on other drug products.

Paragraph IV of the proposed order prohibits Elan from distributing its generic Adalat product through Teva. This prohibition is necessary because Biovail and Teva have a longstanding commercial relationship, whereby Teva distributes some of Biovail's product. Forbidding Elan from distributing this generic Adalat products through Teva will minimize the risk of inappropriate information exchange among Biovail, Elan, and Teva regarding generic Adalat, by eliminating any legitimate reason for all three companies to discuss their marketing of the products. Thus, it will help ensure that the termination of the Agreement fully restores the proper competitive incentives for each company.

The proviso to Paragraph IV requires Elan to supply Teva, through Biovail, with Elan's 30 mg product, until the earlier of Biovail's launch of its own 30 mg product or May 31, 2003 (the “Interim Supply Agreement”). This provision eliminates any disruption of supply of the 30 mg product to consumers while Elan makes alternate arrangements for the distribution of its products. Once Elan begins to distribute its own product through an independent distributor, the Interim Supply Agreement will assure that consumers have access to two generic 30 mg Adalat products. The Interim supply Agreement may continue for up to a year, to give consumers the continued benefit of two 30 mg generic Adalat products while Biovail solves its purported manufacturing difficulty. Biovail has assured the Commission that it expects to overcome any manufacturing problems it has and launch its 30 mg generic Adalat product within a year. (Paragraph V further addresses Biovail's launch of its own 30 mg product, as we discuss below.)

Paragraph IV prohibits Elan from charging Biovail more than Elan's “Cost” for the product. Paragraph I of the proposed order defines “Cost” to mean Elan's actual manufacturing cost. The cost definition is narrow, to minimize Elan's ability to profit from the Interim Supply Agreement through manipulation of the definition. Preventing Elan from profiting by supplying Biovail with the Elan 30 mg generic Adalat product gives Elan a strong incentive to launch its own 30 mg product through an indecent distributor as quickly as possible. Only through that launch will Elan begin to earn a profit on its 30 mg product. Because, under the Interim Supply Agreement, Biovail will receive Elan's 30 mg product at Elan's 30 mg product at Elan's manufacturing cost, Biovail will be in the same competitive position with respect to the cost of the 30 mg product as will Elan. In addition, Biovail will have to compete with Elan's new distributor to gain and maintain market share. Thus, the narrow cost definition will also give consumers the benefit of immediate price competition between the 30 mg product marketed by Teva and the 30 mg product marketed by Elan's independent distributor.

Paragraph V of the proposed order require Elan to use best efforts to launch its 30 mg and 60 mg generic Adalat products as promptly as possible through a distributor other than Teva. It also requires Biovail to use best efforts to manufacture and distribute its 30 mg Adalat product, and to use best efforts to continue to manufacture and distribute its 60 mg generic Adalat product through a distributor other than Elan's generic Adalat distributor. Paragraph V.C states that the purpose of these requirements is to restore competitive incentives in the market for generic Adalat, and to remedy the lessening of competition resulting from the anticompetitive practices alleged in the Commission's complaint. This provision covers all four generic Adalat products, to ensure that Biovail and generic market their 30 mg and 60 mg products through separate distributors. The proposed order defines “Launch” to require Biovail and Elan to deliver commercial quantities of their generic Adalat products to a viable pharmaceutical distributor pursuant to a commercially reasonable, multi-year contract. This definition will ensure that the launch of Elan's 60 mg product and of Biovail's 30 mg product is on a competitive scale.

The Commission will closely monitor Respondents' efforts to market their products. To facilitate this, the proposed order includes reporting requirements. Paragraph VIII requires Biovail and Elan to submit to the Commission verified written reports detailing each of their efforts to comply with the proposed order. Biovail and Elan must submit these reports every thirty days until they have complied with the proposed order.

Paragraph VI of the proposed order requires Biovail and Elan to give the Commission notice of two types of agreements with other pharmaceutical manufacturers. First, Paragraph VI.A requires Biovail and Elan to give notice of agreements where, at the time of the agreement, the parties to the agreement each own, control, or license another product that is in the same “Therapeutic Class” as the product covered by the agreement. (The proposed order defines “Therapeutic Class” as a class of drugs categorized by the Unified System of Classification contained in the most recent version of the IMS Health Incorporated publication Market Research Database: Product Directory.) Aa proviso excepts from the reporting requirement agreements that only transfer “Drug Delivery Technology” in exchange for a commercially reasonable cash royalty not to exceed drive per cent of revenue. The proposed order defines “Drug Delivery Technology” to mean technology that controls the release rate, or enhances the absorption or utilization of a pharmaceutical compound.)

Second, Paragraph VI.B requires Biovail and Elan to give notice of agreements involving a product for which one party to the agreement has an ANDA that references a New Drug Application (“DNA”) that the other party owns, controls, or licenses. The notification provisions contained in Paragraph VI are necessary, because the core prohibition in Paragraph II only reaches agreements involving ANDAs that reference the same branded drug. Paragraph VI ensures that the Commission will receive notice of potentially anticompetitive agreements not covered by Paragraph II ( i.e. , agreements involving potentially competitive branded products, and agreements regarding a brand product and its generic equivalent.)

Paragraphs VII, VIII, IX, and X of the proposed order contain reporting and other standard Commission order provisions designed to assist the Commission in monitoring compliance with the order. Paragraph XI provides that the order will expire in ten years.

The proposed order has been placed on the public record for thirty days in order to receive comments from interested persons. Comments received during this period will become part of the public record. After thirty days, the Commission will again review the proposed order and the comments received and will decide whether it should withdraw from the agreement containing the proposed order or make the proposed order final.

By accepting the proposed order subject to final approval, the Commission anticipates that the competitive issues alleged in the complaint will be resolved. The purpose of this analysis is to facilitate public comment on the agreement. It is not intended to constitute an official interpretation of the agreement, the complaint, or the proposed consent order, or to modify their terms in any way.

FDA is requesting nominations of voting members with appropriate expertise for vacancies listed as follows:

1. Allergenic Products Advisory Committee: Three vacancies occurring August 31, 2003; immunology, pediatrics, internal medicine, biochemistry, statistics, consumer interest, and related scientific fields.

2. Blood Products Advisory Committee: One vacancy occurring September 30, 2002; and six vacancies occurring September 30, 2003; clinical and administrative medicine, hematology, immunology, blood banking, surgery, internal medicine, biochemistry, engineering, statistics, biological and physical sciences, and other related scientific fields.

3. Transmissible Spongiform Encephalopathies Advisory Committee: Five vacancies occurring January 31, 2003; clinical administrative medicine, hematology, virology, neurology, infectious diseases, immunology, blood banking, surgery, internal medicine, biochemistry, biostatistics, epidemiology, biological and physical sciences, sociology/ethics, and other related professions.

4. Vaccines and Related Biological Products Advisory Committee: Five vacancies occurring January 31, 2003; immunology, molecular biology, recombinant deoxyribonucleic acid (rDNA), virology, bacteriology, epidemiology, biostatistics, allergy, preventive medicine, infectious diseases, pediatrics, microbiology, biochemistry, and consumer interest.

Reviews and evaluates available data concerning the safety, effectiveness, and adequacy of labeling of marketed and investigational allergenic biological products or materials that are administered to humans for the diagnosis, prevention, or treatment of allergies and allergic diseases.

Reviews and evaluates available data concerning the safety, effectiveness, and appropriate use of blood and products derived from blood and serum or biotechnology which are intended for use in the diagnosis, prevention, or treatment of human diseases.

Reviews and evaluates available scientific data concerning the safety of products which may be at risk for transmission of spongiform encephalopathies having an impact on the public health.

Reviews and evaluates data concerning the safety, effectiveness, and appropriate use of vaccines and related biological products which are intended for use in the prevention, treatment, or diagnosis of human diseases.

Persons nominated for membership on the committees shall have adequately diversified experience appropriate to the work of the committee in such fields as clinical and administrative medicine, engineering, biological and physical sciences, statistics, and other related professions. The nature of specialized training and experience necessary to qualify the nominee as an expert suitable for appointment may include experience in medical practice, teaching, and/or research relevant to the field of activity of the committee. The particular needs at this time for each committee are shown in the first paragraph of the SUPPLEMENTARY INFORMATION section of this document. The term of office is up to 4 years, depending on the appointment date.

Any interested person may nominate one or more qualified persons for membership on one or more of the advisory committees. Self-nominations are also accepted. Nominations shall include the name of the committee, a complete curriculum vitae of each nominee, current business address and telephone number, and shall state that the nominee is aware of the nomination, is willing to serve as a member (name of committee(s) must be specified), and appears to have no conflict of interest that would preclude membership. FDA will ask the potential candidates to provide detailed information concerning such matters as financial holdings, employment, and research grants and/or contracts to permit evaluation of possible sources of conflict of interest.

Any interested person may nominate one or more qualified persons for membership on one or more of the advisory committees to represent consumer interests. Self-nominations are also accepted. To be eligible for selection, the applicant's experience and/or education will be evaluated against Federal civil service criteria for the position to which the person will be appointed.

Selection of members representing consumer interests is conducted through procedures that include use of a group of consumer organizations that has the responsibility for recommending candidates for the agency's selection. Candidates should possess appropriate qualifications to understand and contribute to the committee's work.

Nominations shall include a complete curriculum vita of each nominee, current address and telephone numbers, and shall state that the nominee is aware of the nomination, is willing to serve as a member, and appears to have no conflict of interest that would preclude membership. FDA will ask the potential candidates to provide detailed information concerning such matters as financial holdings, employment, and research grants and/or contracts to permit evaluation of possible sources of conflict of interest. The nomination should state whether the nominee is interested only in a particular advisory committee or in any advisory committee. The term of office is up to 4 years, depending on the appointment date.

This notice is issued under the Federal Advisory Committee Act (5 U.S.C. app. 2) and 21 CFR part 14 relating to advisory committees.

In 1984, Congress enacted the Drug Price Competition and Patent Term Restoration Act of 1984 (Public Law 98-417) (the 1984 amendments), which authorized the approval of duplicate versions of drug products approved under an ANDA procedure. ANDA sponsors must, with certain exceptions, show that the drug for which they are seeking approval contains the same active ingredient in the same strength and dosage form as the “listed drug,” which is typically a version of the drug that was previously approved. Sponsors of ANDAs do not have to repeat the extensive clinical testing otherwise necessary to gain approval of a new drug application (NDA). The only clinical data required in an ANDA are data to show that the drug that is the subject of the ANDA is bioequivalent to the listed drug.

The 1984 amendments include what is now section 505(j)(7) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)(7)), which requires FDA to publish a list of all approved drugs. FDA publishes this list as part of the “Approved Drug Products With Therapeutic Equivalence Evaluations,” which is generally known as the “Orange Book.” Under FDA regulations, drugs are withdrawn from the list if the agency withdraws or suspends approval of the drug's NDA or ANDA for reasons of safety or effectiveness or if FDA determines that the listed drug was withdrawn from sale for reasons of safety or effectiveness (21 CFR 314.162).

Under § 314.161(a)(1) (21 CFR 314.161(a)(1)), the agency must determine whether a listed drug was withdrawn from sale for reasons of safety or effectiveness before an ANDA that refers to that listed drug may be approved. FDA may not approve an ANDA that does not refer to a listed drug.

Piperacillan for injection USP, 40-g pharmacy bulk package, is the subject of approved NDA 50-545 held by Lederle (part of Wyeth-Ayerst Pharmaceuticals) under the trade name PIPRACIL. Piperacillan for injection USP, 40-g pharmacy bulk package, is a broad-spectrum penicillin indicated for the treatment of serious infections and for prophylactic use in surgery. According to information from Wyeth-Ayerst submitted in 2001, production of the 40-g pharmacy bulk package was discontinued. On January 17, 2002, Mr. Michael Lisjak submitted a citizen petition (Docket No. 02P-0043) under 21 CFR 10.30 and 314.122, requesting that the agency determine whether piperacillan for injection USP, 40-g pharmacy bulk package, was withdrawn from sale for reasons of safety or effectiveness. The petitioner seeks this determination in preparation for filing an ANDA for piperacillan for injection USP, 40-g pharmacy bulk package.

The agency has determined that Wyeth-Ayerst's piperacillan for injection USP, 40-g pharmacy bulk package, was not withdrawn from sale for reasons of safety or effectiveness. Two grounds support the agency's finding. First, Wyeth-Ayerst continues to market PIPRACIL in 2-, 3-, and 4-g vials. The 40-g pharmacy bulk package is a larger package of the same product; it contains up to 20 doses of piperacillan for injection USP. Second, the petitioner identified no data or other information suggesting that PIPRACIL (piperacillan for injection USP, 40-g pharmacy bulk package) was withdrawn from sale as a result of safety or effectiveness concerns. FDA has independently evaluated relevant literature and data for possible postmarketing adverse event reports, but has found no information that would indicate this product was withdrawn for reasons of safety or effectiveness.

After considering the citizen petition and reviewing its records, FDA determines that, for the reasons outlined previously, Wyeth-Ayerst's piperacillan for injection USP, 40-g pharmacy bulk package, was not withdrawn from sale for reasons of safety or effectiveness. Accordingly, the agency will continue to list piperacillan for injection USP, 40-g pharmacy bulk package, in the “Discontinued Drug Product List” section of the Orange Book. The “Discontinued Drug Product List” delineates, among other items, drug products that have been discontinued from marketing for reasons other than safety or effectiveness. ANDAs that refer to piperacillan for injection USP, 40-g pharmacy bulk package, may be approved by the agency.

The “Food Security and Recalls” workshops help fulfill the Department of Health and Human Services’ and FDA’s important mission to protect the public health by preventing and countering terrorism related to the nation's food supply. FDA has made providing security guidance and information to the food industry a high priority.

The workshop helps to implement the objectives of section 406 of the FDA Modernization Act (21 U.S.C. 393) and the FDA Plan for Statutory Compliance, which includes working more closely with stakeholders and ensuring access to needed scientific and technical expertise. The workshop also furthers the goals of the Small Business Regulatory Enforcement Fairness Act (Public Law 104-121) by providing outreach activities by Government agencies directed to small businesses.

Mandatory Guidelines for Federal Workplace Drug Testing were developed in accordance with Executive Order 12564 and section 503 of Pub. L. 100-71. Subpart C of the Guidelines, “Certification of Laboratories Engaged in Urine Drug Testing for Federal Agencies,” sets strict standards which laboratories must meet in order to conduct urine drug testing for Federal agencies. To become certified an applicant laboratory must undergo three rounds of performance testing plus an on-site inspection.

To maintain that certification a laboratory must participate in a quarterly performance testing program plus periodic, on-site inspections.

Laboratories which claim to be in the applicant stage of certification are not to be considered as meeting the minimum requirements expressed in the HHS Guidelines. A laboratory must have its letter of certification from SAMHSA, HHS (formerly: HHS/NIDA) which attests that it has met minimum standards.

In accordance with Subpart C of the Guidelines, the following laboratories meet the minimum standards set forth in the Guidelines:

* The Standards Council of Canada (SCC) voted to end its Laboratory Accreditation Program for Substance Abuse (LAPSA) effective May 12, 1998. Laboratories certified through that program were accredited to conduct forensic urine drug testing as required by U.S. Department of Transportation (DOT) regulations. As of that date, the certification of those accredited Canadian laboratories will continue under DOT authority. The responsibility for conducting quarterly performance testing plus periodic on-site inspections of those LAPSA-accredited laboratories was transferred to the U.S. DHHS, with the DHHS' National Laboratory Certification Program (NLCP) contractor continuing to have an active role in the performance testing and laboratory inspection processes. Other Canadian laboratories wishing to be considered for the NLCP may apply directly to the NLCP contractor just as U.S. laboratories do.

Upon finding a Canadian laboratory to be qualified, the DHHS will recommend that DOT certify the laboratory (Federal Register, 16 July 1996) as meeting the minimum standards of the “Mandatory Guidelines for Workplace Drug Testing” (59 Federal Register, 9 June 1994, Pages After receiving the DOT certification, the laboratory will be included in the monthly list of DHHS certified laboratories and participate in the NLCP certification maintenance program.

Applicant requests a permit for recovery purposes to conduct presence/absence and monitoring surveys for southwestern willow flycatcher (Empidonax traillii extimus) within New Mexico.

Applicant requests a permit for recovery purposes to conduct presence/absence surveys for southwestern willow flycatcher (Empidonax traillii extimus) within San Juan Counties of New Mexico and Utah.

Applicant requests a permit for recovery purposes to conduct presence/absence surveys for southwestern willow flycatcher (Empidonax traillii extimus) within San Juan County, New Mexico.

Applicant requests a permit for recovery purposes to collect live plants and stem cuttings of Johnston's Frankenia (Frankenia johnstonii) within Texas.

Applicant requests a permit for recovery purposes to conduct presence/absence surveys and assess habitat for black-capped vireo (Vireo atricapillus) and to assess habitat for northern aplomado falcon (Falco femoralis septentrionalis), golden-cheeked warbler (Dendroica chrysoparia), and interior least tern (Sterna antillarum). All activities are to occur within Texas.

Applicant requests an amendment to an existing permit to allow presence/absence surveys for southwestern willow flycatcher (Empidonax traillii extimus) within Arizona and New Mexico.

Applicant requests a permit for recovery purposes to conduct presence/absence surveys within Texas for the following species: black-capped vireo (Vireo atricapillus), golden-cheeked warbler (Dendroica chrysoparia), red-cockaded woodpecker (Picoides borealis), ocelot (Leopardus pardalis), jaguarundi (Herpailurus yagouaroundi cacomitli), and Houston toad (Bufo houstonensis).

Applicant requests a permit for recovery purposes to conduct presence/absence and monitoring surveys for southwestern willow flycatcher (Empidonax traillii extimus) within New Mexico.

Applicant requests a permit for recovery purposes to conduct presence/absence surveys within Texas for the following species: black-capped vireo (Vireo atricapillus), golden-cheeked warbler (Dendroica chrysoparia), and southwestern willow flycatcher (Empidonax traillii extimus).

Applicant requests an amendment to an existing permit to allow presence/absence surveys for desert pupfish (Cyprinodon macularius) and Gila topminnow (Poeciliopsis occidentalis) within Arizona.

Diamond Bar Road provides access to Grand Canyon West, mainly for commercial and private vehicles originating from Las Vegas. Grand Canyon West is a development on the Hualapai Indian Reservation near the rim of the Grand Canyon. This development now consists of an airport and terminal building, a food service facility, restrooms, and a permit office. Implementing the 1994 Master Plan for Grand Canyon West is expected to increase the number of visitors up to sixfold over a 10-year period. This increase would greatly increase the number of vehicles on Diamond Bar Road. The proposed road improvement would accommodate this increased volume by providing a roadway designed for up to 2,400 vehicles per day.

Management concerns that have been addressed in the final EIS include impacts on vegetation, visual quality, recreation, cultural resources, socioeconomic conditions, public safety, and the Joshua Tree Forest Area of Critical Environmental Concern. Studies conducted include a native plant inventory, biological evaluation, cultural resource survey, traffic study, and visual impact analysis. Tribal consultation is ongoing under section 106 of the National Historic Preservation Act of 1966, as amended. The EIS has been prepared by an interdisciplinary team of resource specialists in vegetation, wildlife, visual quality, archaeological and traditional cultural resources, soils, range management, realty, and roadway design.

There were 41 comment letters received on the draft EIS. The concerns in these letters have been addressed in the final EIS. Most of the concerns were about the Entrance Realignment Option and related to the following: Building the road through a residential area and impacting residential quality of life; traffic, including traffic safety; noise; air quality; wildlife and Joshua trees; visual impacts; private property; access; and economics and efficiency. The BLM Preferred Alternative in the final EIS documents the preference of not using the Entrance Realignment Option. The final EIS addresses the above concerns as well as providing responses to individual comments.

If you wish to comment on the final EIS, please mail or hand deliver comments to the address listed in the ADDRESSES section of this notice. Comments will be accepted during this 30-day period with the comments being conveyed to the BLM Field Manager in Kingman, Arizona, who is the person authorized to make the decision for BLM on this project. The public may review the comments, including names and street addresses of respondents, at the above address from 7:30 a.m. to 4:30 p.m., Monday through Friday, except holidays. The comments may be published as part of the project record or other related documents. Individual respondents may request confidentiality. If you wish to withhold your name or street address from public review or disclosure under the Freedom of Information Act, you must state this request prominently at the beginning of your written comment. BLM will honor such requests to the extent allowed by law. The public may inspect in its entirety any submission from organizations or businesses or from representatives or officials of organizations or businesses.

Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of Reclamation's functions, including whether the information will have practical use; (b) the accuracy of Reclamation's estimated time and cost burdens of the proposed collection of information, including the validity of the methodology and assumptions used; (c) ways to enhance the quality, use, and clarity of the information on respondents, including increased use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted within 60 days of this publication.

Title: Summary of Water Requirements for Crops Grown on Eligible Land.

Abstract: Reclamation developed Form LS-924, Summary of Water Requirements for Crops Grown on Eligible Land, to facilitate and standardize the submission of data from the Sacramento River settlement contractors that divert water from Sacramento River sources. The information requested is required to ensure the proper implementaion of 43 CFR 426.15 and the commingling provisions in the Sacramento River settlement contracts.

Description of respondents: There are approximately 44 Sacramento River settlement contractors (individual/districts) that are required to file Form LS-924 for the purpose of contract administration.

Frequency: Annually.

Estimated completion time: An average of 60 minutes per respondent.

Annual responses: 44 respondents.

Annual burden hours: 44.

Our practice is to make comments, including names and home addresses of respondents, available for public review. Individual respondents may request that we withhold their home address from public disclosure, which we will honor to the extent allowable by law. If you wish us to withhold your name and/or address, you must state this prominently at the beginning of your comment. We will make all submissions from organizations or businesses, and from individuals identifying themselves as representatives or officials of organizations or businesses, available for public disclosure in their entirety.

Section 309 (2) (a) (1) (A) (iii) of the Workforce Investment Act (WIA) states that the Secretary of Labor shall oversee development, maintenance, and continuous improvements of the program to measure the incidence of, industrial and geographical location of, and number of workers displaced by, permanent layoffs and plant closings. Prior to the WIA, Section 462(e) of PL 97-300, the Job Training Partnership Act (JTPA), provided that the Secretary of Labor develop and maintain statistical data relating to permanent mass layoffs and plant closings and issue an annual report. The report includes, at a minimum, the number of plant closings and mass layoffs, and the number of workers affected. The data are summarized by geographic area and industry.

The Mass Layoff Statistics (MLS) program uses a standardized, automated approach to identify, describe, and track the impact of major job cutbacks. The program utilizes, to the greatest degree possible, existing Unemployment Insurance (UI) records and computerized data files, supplemented by direct employer contact. Its major features include:

• The identification of major layoffs and closings through initial UI claims filed against the identified employer;

• The use of existing files on claimants to obtain basic demographic and economic characteristics on the individual;

• The telephone contact of those employers meeting mass layoff criteria to obtain specific information on the nature of the layoff and characteristics of the establishment;

• The identification of the continuing impact of the mass layoff on individuals by matching affected initial claimants with persons in claims status; and,

• The measurement of the incidence of the exhaustion of regular state UI benefits by affected workers.

In the program, State Employment Security Agencies (SESAs) submit seven comprehensive reports each quarter, and a preliminary, summary report each month. These computerized reports contain information from State administrative files and information obtained from those employers meeting the program criteria of a mass layoff.

Congress has provided for the implementation of the MLS program by the Bureau of Labor Statistics (BLS) through the Fiscal Years 1984-1992 appropriations for the Departments of Labor, Health and Human Services, Education, and related agencies. The program was not operational in Fiscal Years 1993 and 1994. Program operation resumed in Fiscal Year 1995 with funds provided by the Employment and Training Administration (ETA).

At the present time, all states (including the District of Columbia and Puerto Rico and the Virgin Islands) are participating in the program.

The Bureau of Labor Statistics is particularly interested in comments that:

• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;

• Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;

• Enhance the quality, utility, and clarity of the information to be collected; and

• Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submissions of responses.

Office of Management and Budget clearance is being sought for the Mass Layoff Statistics (MLS) Program.

In addition to the BLS uses of MLS data, such data are used by Congress, the Executive Branch, the business, labor, and academic communities, SESAs, and the U.S. Department of Labor for both macro- and microeconomic analysis, including specific labor market studies geared towards manpower assistance and development. Congress used these data in conjunction with the findings from a supplemental study of layoff actions in the development of the Worker Adjustment and Retraining Notification (WARN) Act, which was enacted in August 1988. Furthermore, the ETA uses MLS microdata in the evaluation of dislocated worker programs to assess the effectiveness of those activities and services.

A Congressionally mandated use of mass layoff data includes the WIA, which replaces Title III of the JTPA. Section 133 of the WIA encourages the use of MLS data in substate allocations relating to dislocated worker employment and training activities.

State agencies use the MLS data in various ways, including the identification of geographic areas in need of special manpower services; ailing or troubled industries; specific employers needing assistance; outreach activities for the unemployed; and workers in need of temporary health care services.

There is no other comprehensive source of statistics on either establishments or workers affected by mass layoffs and plant closings; therefore, none of the aforementioned data requirements could be fulfilled if this data collection did not occur.

Type of Review: Revision of a currently approved collection.

Agency: Bureau of Labor Statistics.

Title: Mass Layoff Statistics Program.

OMB Number: 1220-0090.

Affected Public: Business or other for profit; not-for-profit institutions; farms; Federal Government; State, Local or Tribal Government.

Total Respondents: 23,053.

Frequency: SESAs report quarterly and monthly. Affected employers report on occasion.

Total Responses: 23,848.

Average Time Per Response: 60 minutes for SESAs and 20 minutes for employers.

Estimated Total Burden Hours: 81,547 hours.

Total Burden Cost (capital/startup): $0.

Total Burden Cost (operating/maintenance): $0.

Comments submitted in response to this notice will be summarized and/or included in the request for Office of Management and Budget approval of the information collection request; they also will become a matter of public record.

The National Longitudinal Survey of Women (NLSW) has been conducted since the late 1960s. Historically, the NLSW was collected as two surveys, the Survey of Work Experience for Mature Women (which includes women born from April 1, 1922 to March 31, 1937) and the Survey of Work Experience for Young Women (which includes women born in the years 1943 to 1953). In 1995, the Bureau of the Census, which collects the data for the Bureau of Labor Statistics, combined the mature and young women's cohorts into a single survey, a change that has improved the efficiency of survey operations.

The data collected in the NLSW contribute to the knowledge about opportunities and services for women who are in the labor force, want to re-enter the labor force, or choose not to participate in the labor force. Survey data also contribute to the knowledge about women's ability to succeed in the job market and how their levels of success relate to educational attainment, vocational training, prior occupational experiences, general and job-specific experiences, and retirement decisions.

The mission of the Department of Labor (DOL) is to promote the development of the U.S. labor force and the efficiency of the U.S. labor market. The BLS contributes to this mission by gathering information about the labor force and labor market and disseminating it to policy makers and the public so that participants in those markets can make more informed, and thus more efficient, choices. Research based on the NLSW contributes to the formation of national policy in the areas of education, training and employment programs, unemployment compensation, and retirement income from pensions and Social Security. In addition, members of the academic community publish articles and reports based on NLSW data for the Department of Labor (DOL) and other funding agencies. The DOL uses the measurement of changes in the labor market to design programs that would ease employment and unemployment problems. The survey design provides data gathered over time to form the only data set that contains this type of information for this important population group. Without the collection of these data, an accurate longitudinal data set could not be provided to researchers and policymakers, and the DOL could not perform its policy- and report-making activities, as described above.

The Bureau of Labor Statistics is particularly interested in comments that:

• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;

• Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;

• Enhance the quality, utility, and clarity of the information to be collected; and

• Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submissions of responses.

The Bureau of Labor Statistics seeks approval to conduct the 2003 NLSW. The 2003 NLSW will document work experience, labor force attachment, participation in educational or training programs, financial status, health, and health insurance coverage. The survey will continue to obtain detailed information on the work history and pension coverage of respondents and their husbands. In addition, the survey will obtain information on intergenerational transfers of time and money between respondents and their children or their spouses' children. Respondents living in long-term care institutions who are mentally competent to answer questions will be interviewed in the 2003 NLSW; institutionalized respondents were considered to be out of scope in prior rounds of the survey. The 2003 NLSW will include contacts with approximately 6,677 women (2,810 ages 66 to 80 and 3,867 ages 49 to 60). A subsample of 50 women will be selected for a pretest to be conducted in January 2003 to ensure that the survey instrument and all procedures are working properly before the main fielding begins in June. Assuming the pretest works successfully, these 50 women will not be interviewed a second time during the main fielding. As in previous administrations of the NLSW, 10 percent of the sample in 2003 will be asked to participate in a brief follow-up interview that will last approximately 5 minutes. This reinterview is a quality-control tool, in which managers at the Census Bureau ask respondents a few questions to verify that an interview took place.

Type of Review: Reinstatement, with change, of a previously approved collection for which approval has expired.

Agency: Bureau of Labor Statistics.

Title: National Longitudinal Survey of Women.

OMB Number: 1220-0110.

Affected Public: Individuals or households.

On March 20, 2002, notice was published in the Federal Register (67 FR 13019) of the pendency before the Department of a proposed amendment to PTE 96-62. PTE 96-62 provides relief from a restriction described in sections 406(a) and 406(b) of the Employee Retirement Income Security Act (ERISA or the Act) or a parallel restriction described in section 8477(c)(2) of the Federal Employees' Retirement Systems Act (FERSA), and from the taxes imposed by section 4975(a) and (b) of the Internal Revenue Code of 1986 (the Code), by reason of a parallel provision described in section 4975(c)(1)(A) through (F) of the Code. The amendment adopted by this notice was proposed by the Department on its own motion pursuant to section 408(a) of ERISA and section 4975(c)(2) of the Code and in accordance with the procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, August 10, 1990). 1

The notice gave interested persons an opportunity to comment or to request a hearing on the proposed amendment. No public comments or requests for a hearing were received.

For the sake of convenience, the entire text of PTE 96-62, as amended, has been reprinted with this notice.

Section I of PTE 96-62 provides relief from certain of the restrictions described in section 406(a) of ERISA and from the taxes imposed by section 4975(a) and (b) of the Code, by reason of a parallel provision described in section 4975(c)(1)(A) through (D) of the Code, for a transaction between a plan and a party in interest with respect to such plan, provided the conditions of the exemption are met. Under section II, additional relief is provided from certain of the restrictions described in section 406(b) of ERISA and the parallel restrictions described in section 8477(c)(2) of FERSA, as well as from the taxes imposed by section 4975(a) and (b) of the Code, by reason of a parallel provision described in section 4975(c)(1)(E) and (F). Sections I(a) and II(a) require that the transaction be substantially similar (as defined in section IV(a) of PTE 96-62) to transactions described in at least two individual exemptions that were granted by the Department, and which provided relief from the same restrictions as requested by the party, within the 60-month period ending on the date of filing of the written submission. 2

The amendment granted by this notice expands sections I(a) and II(a) to permit parties to either base their submission on substantially similar transactions described in two individual exemptions granted within the past 60 months; or on one individual exemption granted within the past 120 months and one transaction which received final authorization by the Department under PTE 96-62 within the past 60 months (the Authorized Transaction). The Department believes that the alternate method for satisfying the requirements of sections I(a) and II(a) will continue to ensure that the transactions that the party compares to its proposed transaction reflect the current policies of the Department. 3 The amendment also adds a definition for the term “Authorized Transaction” in section IV(g).

The Department notes that all other conditions contained in PTE 96-62 must continue to be satisfied with respect to those parties seeking to base their submissions on an Authorized Transaction rather than on two substantially similar individual exemptions. Accordingly, these parties should submit, among other things, a comparison of the proposed transaction with the Authorized Transaction and the transaction which was the subject of the individual exemption, including an explanation as to why any differences should not be considered material.

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 section 4975(c)(2) of the Code does not relieve a fiduciary or other party in interest or disqualified person from certain other provisions of ERISA and the Code to which the exemption does not expressly apply and the general fiduciary provisions of section 404 of ERISA. Section 404 requires, in part, that a fiduciary discharge his or her duties respecting the plan solely in the interest of participants and beneficiaries of the plan and in a prudent fashion in accordance with section 404(a)(1)(B) of ERISA. This exemption, if granted, does not affect the requirement of section 401(a) of the Code that a plan must operate for the exclusive benefit of the employees of the employer maintaining the plan and their beneficiaries;

(2) The Department finds that the exemption is administratively feasible, in the interests of the plan(s) and of participants and beneficiaries, and protective of the rights of the participants and beneficiaries of the plan(s);

(3) This amendment is supplemental to and not in derogation of any other provisions of ERISA or the Code, including statutory or administrative exemptions and transitional rules. Furthermore, the fact that a transaction is subject to an administrative or statutory exemption is not dispositive of whether the transaction is in fact a prohibited transaction; and

(4) The amendment is applicable to a transaction only if the transaction satisfies the conditions specified in the class exemption.

Accordingly, PTE 96-62 is amended under the authority of section 408(a) of ERISA, section 4975(c)(2) of the Code and section 8477(c)(3) of FERSA, and in accordance with the procedures set forth in 29 CFR 2570, subpart B (55 FR 32836, August 10, 1990).

Section I—General Exemption. Effective July 31, 1996, a restriction described in section 406(a) of ERISA, and the taxes imposed by section 4975(a) and (b) of the Code, by reason of a parallel provision described in section 4975(c)(1)(A) through (D) of the Code, shall not apply to a transaction between a plan and a party in interest with respect to such plan, provided the following conditions are met:

(a) The transaction is substantially similar (as defined in section IV(a)) to transactions described in: (a) At least two individual exemptions that were granted by the Department, and provided relief from the same restriction, within the 60-month period ending on the date of filing of the written submission referred to in section III(a); or (b) effective July 3, 2002, one individual exemption that was granted by the Department, and provided relief from the same restriction, within the 120-month period ending on the date of filing of the written submission referred to in section III(a), and at least one Authorized Transaction (as defined in section IV(g));

(b) There is little, if any, risk of abuse or loss to the plan participants and beneficiaries as a result of the transaction; and

(c) Prior to its execution, the transaction has met the requirements described in section III.

Section II—Specific Exemption. Effective July 31, 1996, a restriction described in section 406(b) of ERISA, or a parallel restriction described in section 8477(c)(2) of FERSA, and the taxes imposed by sections 4975(a) and (b) of the Code, by reason of a parallel provision described in section 4975(c)(1)(E) and (F) of the Code, shall not apply to a transaction between a plan and a party in interest with respect to such plan, provided the following conditions are met:

(a) The transaction is substantially similar (as defined in section IV(a)) to transactions described in: (a) At least two individual exemptions that were granted by the Department, and provided relief from the same restriction, or if FERSA relief is requested, the ERISA relief provided parallels the restrictions of section 8477(c)(1) of FERSA, within the 60-month period ending on the date of filing of the written submission referred to in section III(a); or (b) effective July 3, 2002, one individual exemption that was granted by the Department, and provided relief from the same restriction, within the 120-month period ending on the date of filing of the written submission referred to in section III(a), and at least one Authorized Transaction (as defined in section IV(g));

(b) There is little, if any, risk of abuse or loss to the plan participants and beneficiaries as a result of the transaction;

(c) Prior to its execution, the transaction has met the requirements described in section III;

(d) Where either of the previously granted exemptions identified in the written submission described in section III, required the involvement of an independent fiduciary, an independent fiduciary has reviewed the proposed transaction and determined that the transaction would be in the interests and protective of the plan and its participants and beneficiaries;

(e) The independent fiduciary described in section II(d) represents the interests of the plan in the execution of the transaction; and

(f) If the transaction is continuing in nature, the independent fiduciary described in section II(d)—

(1) Represents the interests of the plan for the duration of the transaction and monitors the transaction on behalf of the plan;

(2) Enforces compliance with all conditions and obligations imposed on any party dealing with the plan with respect to the transaction; and

(3) Ensures that the transaction remains in the interests of the plan.

Section III—Authorization Requirements. The requirements for this section are met if:

(a) A written submission is filed with the Department with respect to the transaction which contains the following information:

(1) A separate written declaration by the party who is to engage in the transaction that the written submission is made with the intention of demonstrating compliance with the conditions of this class exemption,

(2) All information required to be submitted with an individual exemption application in accordance with the procedures set forth in 29 CFR 2570 subpart B,

(3) A specific statement demonstrating that the proposed transaction poses little, if any, risk of abuse or loss to the plan participants and beneficiaries,

(4) A comparison of the proposed transaction to at least two substantially similar transactions which were the subject of individual exemptions granted by the Department, or the subject of an individual exemption granted by the Department within the 120-month period and an Authorized Transaction, and an explanation as to why any differences should not be considered material for purposes of this exemption, and

(5) A complete and accurate draft of the notice (as defined in section IV(b)) prepared for distribution to interested persons and a description of the proposed method of distribution for such notice.

(b) With respect to a transaction described in section II of this exemption, the written submission referred to in section (a) above contains the following additional information:

(1) The identity of the independent fiduciary,

(2) A description of such fiduciary's independence from the parties in interest involved in the subject transaction,

(3) A statement by the independent fiduciary containing an explanation as to why the subject transaction is in the interest and protective of the participants and beneficiaries of the plan(s) involved,

(4) An agreement by the independent fiduciary to represent the interests of the plan(s) involved in the transaction, and

(5) A description of the procedures for replacement of the independent fiduciary, if necessary, during the term of the transaction.

(c) The transaction meets the requirements for tentative authorization (as defined in section IV(c)) from the Department.

(d) Following tentative authorization, the party who is to engage in the transaction provides written notice (as defined in section IV(b)) to interested persons in a manner that is reasonably calculated to result in the receipt of such notice by interested persons, informs interested persons of the date of the expiration of the comment period, and resolves all substantive adverse comments (as defined in section IV(f)) to the satisfaction of the Department.

(e) The transaction meets the requirements for final authorization (as defined in section IV(d)).

Section IV—Definitions. (a) The term “substantially similar” means alike in all material respects as determined by the Department, in its sole discretion.

(b) The term “notice” means written notification to interested persons which includes—

(1) An objective description of the transaction, including all material terms and conditions,

(2) The approximate date on which the transaction will occur,

(3) A statement that the proposed transaction has met the requirements for tentative authorization under this exemption,

(4) A statement apprising interested persons of their right to comment to the Department on the proposed transaction at the following address: Office of Exemption Determinations, U.S. Department of Labor, 200 Constitution Ave, NW, Room N-5649, Washington, DC 20210,

(5) The expiration date of the comment period, and

(6) The Federal Register citations for the prior exemption(s) and/or the final authorization number of the Authorized Transaction (including the related Federal Register citations for the prior exemptions cited therein) identified by the party as substantially similar to the contemplated transaction.

(c) For purposes of this exemption, “tentative authorization” occurs upon the earlier of:

(1) The expiration of the 45-day period following an acknowledgment by the Department of receipt of the written submission with respect to the transaction under this exemption unless the Department has notified the party who is to engage in the transaction during that period that the transaction is not eligible for authorization under the terms of this exemption, or

(2) The issuance of a written determination by the Department during the 45-day period that the proposed transaction meets the requirements for tentative authorization.

(d) For purposes of this exemption, “final authorization” occurs upon the expiration of:

(1) The five (5) day period immediately following the comment period (as defined in section IV(e)), unless the Department notifies the party that the transaction is not eligible for authorization under the terms of this exemption, and

(2) If necessary in order to resolve any substantive adverse comments received by the Department from interested persons within the comment period, a period of time extending beyond the five-day period immediately following the comment period as mutually agreed between the Department and the party.

(e) The term “comment period” means the 25-day period following the completion of distribution of the notice to interested persons by the party who is to engage in the transaction. For this purpose, distribution of notice by first class mail will be deemed complete three business days following the date of mailing to interested persons.

(f) The term “substantive adverse comments” means those comments submitted by interested persons to the Department within the prescribed comment period which raise significant factual, legal or policy issues regarding the transaction as determined by the Department.

(g) The term “Authorized Transaction” means a transaction that has received final authorization pursuant to PTE 96-62 within a 60-month period ending on the date of the filing of the written submission referred to in section III(a).

Section V—Optional Checklist. Completion and submission of the following optional checklist to accompany the written submission described in section III(a) will assist the Department in the consideration of the transaction under the class exemption.

The written submission filed with the Department contains the following information:

[ ] A separate written declaration of the intent to comply with the conditions of the class exemption.

[ ] All information required to be submitted with an individual exemption application under 29 CFR 2570 subpart B.

[ ] A statement demonstrating that the transaction poses little, if any, risk of abuse or loss to the plan participants and beneficiaries.

[ ] A comparison of the proposed transaction to at least two substantially similar transactions which were the subject of individual exemptions granted within the 60-month period ending on the date of the filing, or the subject of one individual exemption that was granted by the Department within the 120-month period ending on the date of filing, and at least one Authorized Transaction and an explanation why any differences should not be considered material.

[ ] A complete and accurate draft of the notice to interested persons (as described in section IV(b)).

[ ] A description of the proposed method of distribution for such notice.

If either of the previously granted exemptions or the Authorized Transactions identified in the written submission required the involvement of an independent fiduciary, the written submission must contain the following additional information:

[ ] The identity of the independent fiduciary responsible for reviewing the proposed transaction, and representing the interests of the plan in the execution of the transaction. (If the transaction is continuing in nature, the independent fiduciary represents the interests of the plans for the duration of the transaction and takes all necessary action on behalf of the plan.)

[ ] A description of such fiduciary's independence from the parties involved in the transaction.

[ ] A statement from the independent fiduciary explaining why the transaction is in the interests and protective of the plan participants and beneficiaries.

[ ] An agreement by the independent fiduciary to represent the interests of the plan.

[ ] A description of the procedures for the replacement of the independent fiduciary, if necessary, during the term of the transaction.

The notice to interested persons filed with the Department includes the following information:

[ ] An objective description of the transaction, including all material terms and conditions.

[ ] The approximate date on which the transaction will occur.

[ ] A statement that the transaction has met the requirements for tentative authorization under the exemption.

[ ] A statement apprising interested persons of their right to comment on the proposed transaction at the address contained in the exemption.

[ ] The expiration date of the comment period.

[ ] The Federal Register citations for the prior exemption(s) and/or the final authorization number of the Authorized Transaction (including the related Federal Register citations for the prior exemptions cited therein) identified by the party as substantially similar to the contemplated transaction.

The proposed exemptions were requested in applications filed pursuant to section 408(a) of the Act and/or section 4975(c)(2) of the Code, and in accordance with procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990). Effective December 31, 1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 (1996), transferred the authority of the Secretary of the Treasury to issue exemptions of the type requested to the Secretary of Labor. Therefore, these notices of proposed exemption are issued solely by the Department.

The applications contain representations with regard to the proposed exemptions which are summarized below. Interested persons are referred to the applications on file with the Department for a complete statement of the facts and representations.

The Department is considering granting an exemption under the authority of section 408(a) of the Act and section 4975(c)(2) of the Code and in accordance with the procedures as set forth in 29 CFR part 2570, subpart B (55 FR 32836, 32847, August 10, 1990). 1

If the exemption is granted, the restrictions of section 406(a)(1)(A) through (D) of the Act and the sanctions resulting from the application of section 4975 of the Code, by reason of section 4975(c)(1)(A) through (D) of the Code, shall not apply, as of April 24, 2001, to

(a) the lending of securities, under certain “exclusive borrowing” arrangements, to

(1) Deutsche Bank AG (Deutsche Bank); or

(2) Its affiliates Deutsche Bank Securities Inc. (DBS), Deutsche Bank AG, New York Branch (DBNY), and the “Foreign Borrowers,” as defined in Section III (collectively, with Deutsche Bank, referred to as the “Borrowers,” as defined in Section III)

(b) The receipt of compensation by Deutsche Bank or its affiliates in connection with the securities lending transactions, provided that the conditions, set forth in Section II, are satisfied.

(a) For each Plan, neither the Borrower nor any affiliate has or exercises discretionary authority or control over the Plan's investment in the securities available for loan, nor do they render investment advice (within the meaning of 29 CFR 2510.3-21(c)) with respect to those assets.

(b) The party in interest dealing with the Plan is a party in interest with respect to the Plan (including a fiduciary) solely by reason of providing services to the Plan, or solely by reason of a relationship to a service provider described in section 3(14)(F), (G), (H), or (I) of the Act.

(c) The Borrower directly negotiates an exclusive borrowing agreement (the Borrowing Agreement) with a Plan fiduciary that is independent of the Borrower and its affiliates.

(d) The terms of each loan of securities by a Plan to a Borrower are at least as favorable to such Plan as those of a comparable arm's length transaction between unrelated parties, taking into account the exclusive arrangement.

(e) In exchange for granting the Borrower the exclusive right to borrow certain securities, the Plan receives from the Borrower either (i) a flat fee (which may be equal to a percentage of the value of the total securities subject to the Borrowing Agreement from time to time), (ii) a periodic payment that is equal to a percentage of the value of the total balance of the outstanding borrowed securities, or (iii) any combination of (i) and (ii) (collectively, the Exclusive Fee). If the Borrower deposits cash collateral, all the earnings generated by such cash collateral shall be returned to the Borrower—provided that the Borrower may, but shall not be obligated to, agree with the independent fiduciary of the Plan that a percentage of the earnings on the collateral may be retained by the Plan, or the Plan may agree to pay the Borrower a rebate fee and retain the earnings on the collateral (the Shared Earnings Compensation). If the Borrower deposits non-cash collateral, all earnings on the non-cash collateral shall be returned to the Borrower—provided that the Borrower may, but shall not be obligated to, agree to pay the Plan a lending fee (the Lending Fee)(the Lending Fee and the Shared Earnings Compensation are collectively referred to as the “Transaction Lending Fee”). The Transaction Lending Fee, if any, shall be either in addition to the Exclusive Fee or an offset against such Exclusive Fee. The Exclusive Fee and the Transaction Lending Fee may be determined in advance or pursuant to an objective formula, and may be different for different securities or different groups of securities subject to the Borrowing Agreement. Any change in the Exclusive Fee or the Transaction Lending Fee that the Borrower pays to the Plan with respect to any securities loan requires the prior written consent of the independent fiduciary of the Plan, except that consent is presumed where the Exclusive Fee or the Transaction Lending Fee changes pursuant to an objective formula. Where the Exclusive Fee or the Transaction Lending Fee changes pursuant to an objective formula, the independent fiduciary of the Plan must be notified at least 24 hours in advance of such change and such independent Plan fiduciary must not object in writing to such change, prior to the effective time of such change.

(f) The Borrower may, but shall not be required to, agree to maintain a minimum balance of borrowed securities subject to the Borrowing Agreement. Such minimum balance may be a fixed U.S. dollar amount, a flat percentage, or other percentage determined pursuant to an objective formula.

(g) By the close of business on or before the day the loaned securities are delivered to the Borrower, the Plan receives from the Borrower (by physical delivery, book entry in a securities depository located in the United States, wire transfer, or similar means) collateral consisting of U.S. currency, securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, irrevocable bank letters of credit issued by a U.S. bank other than Deutsche Bank or any affiliate thereof, or any combination thereof, or other collateral permitted under Prohibited Transaction Exemption (PTE) 81-6 (46 FR 7527, January 23, 1981, as amended at 52 FR 18754, May 19, 1987) (and as further amended or superseded). 2 Such collateral will be deposited and maintained in an account which is separate from the Borrower's accounts and will be maintained with an institution other than the Borrower. For this purpose, the collateral may be held with a third party, an affiliate of the Borrower, or a branch of Deutsche Bank other than the Borrower that is a trustee or custodian of the Plan. If maintained by an affiliate of the Borrower or a branch of Deutsche Bank other than the Borrower, the collateral will be segregated from the assets of such affiliate or branch.

(h) The market value (or in the case of a letter of credit, the stated amount) of the collateral initially equals at least 102 percent of the market value of the loaned securities on the close of business on the day preceding the date of the loan and, if the market value of the collateral at any time falls below 100 percent (or such higher percentage as the Borrower and the independent fiduciary of the Plan may agree upon) of the market value of the loaned securities, the Borrower delivers additional collateral on the following day to bring the level of the collateral back to at least 102 percent. The level of the collateral is monitored daily by the Plan or its designee, which may be Deutsche Bank or any of its affiliates, including Deutsche Bank Trust Company Americas (DBT), which provides custodial or directed trustee services in respect of the securities covered by the Borrowing Agreement for the Plan. The Borrowing Agreement will provide the Plan with a continuing security interest in, and a lien on, the collateral, or will provide for the transfer of title to the collateral to the Plan.

(i) Before entering into a Borrowing Agreement, the Borrower furnishes to the Plan the most recent publicly available audited and unaudited statements of its financial condition, as well as any publicly available information which it believes is necessary for the independent fiduciary to determine whether the Plan should enter into or renew the Borrowing Agreement—provided, however, that in the case of a Borrower that is a branch of Deutsche Bank, the Borrower will furnish to the Plan the most recent publicly available audited and unaudited statement of Deutsche Bank's financial condition.

(j) The Borrowing Agreement contains a representation by the Borrower that, as of each time it borrows securities, there has been no material adverse change in its financial condition since the date of the most recently furnished statements of financial condition.

(k) The Plan receives the equivalent of all distributions made during the loan period, including, but not limited to, cash dividends, interest payments, shares of stock as a result of stock splits, and rights to purchase additional securities, that the Plan would have received (net of tax withholdings)  3 had it remained the record owner of the securities.

(l) The Borrowing Agreement and/or any securities loan outstanding may be terminated by either party at any time without penalty (except for, if the Plan has terminated its Borrowing Agreement, the return to the Borrower of a pro-rata portion of the Exclusive Fee paid by the Borrower to the Plan) whereupon the Borrower delivers securities identical to the borrowed securities (or the equivalent thereof in the event of reorganization, recapitalization, or merger of the issuer of the borrowed securities) to the Plan within the lesser of five business days of written notice of termination or the customary settlement period for such securities.

(m) In the event that the Borrower fails to return securities in accordance with the Borrowing Agreement, the Plan will have the right under the Borrowing Agreement to purchase securities identical to the borrowed securities and apply the collateral to payment of the purchase price. If the collateral is insufficient to satisfy the Borrower's obligation to return the Plan's securities, the Borrower will indemnify the Plan in the United States with respect to the difference between the replacement cost of securities and the market value of the collateral on the date the loan is declared in default, together with expenses incurred by the Plan plus applicable interest at a reasonable rate, including reasonable attorneys' fees incurred by the Plan for legal action arising out of default on the loans, or failure by the Borrower to properly indemnify the Plan.

(n) Except as otherwise provided herein, all procedures regarding the securities lending activities, at a minimum, conform to the applicable provisions of PTE 81-6 (as amended or superseded), as well as to applicable securities laws of the United States, Germany, the United Kingdom, Japan, Canada, and/or Australia, as appropriate.

(o) Only Plans with total assets having an aggregate market value of at least $50 million are permitted to lend securities to the Borrowers—provided, however, that

(1) In the case of two or more Plans which are maintained by the same employer, controlled group of corporations, or employee organization (the Related Plans), whose assets are commingled for investment purposes in a single master trust or any other entity the assets of which are “plan assets” under 29 CFR 2510.3-101 (the Plan Asset Regulation), which entity is engaged in securities lending arrangements with the Borrowers, the foregoing $50 million requirement shall be deemed satisfied if such trust or other entity has aggregate assets which are in excess of $50 million—provided that if the fiduciary responsible for making the investment decision on behalf of such master trust or other entity is not the employer or an affiliate of the employer, such fiduciary has total assets under its management and control, exclusive of the $50 million threshold amount attributable to plan investment in the commingled entity, which are in excess of $100 million.

(2) In the case of two or more Plans which are not maintained by the same employer, controlled group of corporations, or employee organization (the Unrelated Plans), whose assets are commingled for investment purposes in a group trust or any other form of entity the assets of which are “plan assets” under the Plan Asset Regulation, which entity is engaged in securities lending arrangements with the Borrowers, the foregoing $50 million requirement is satisfied if such trust or other entity has aggregate assets which are in excess of $50 million (excluding the assets of any Plan with respect to which the fiduciary responsible for making the investment decision on behalf of such group trust or other entity or any member of the controlled group of corporations including such fiduciary is the employer maintaining such Plan or an employee organization whose members are covered by such Plan). However, the fiduciary responsible for making the investment decision on behalf of such group trust or other entity

(i) Has full investment responsibility with respect to plan assets invested therein; and

(ii) Has total assets under its management and control, exclusive of the $50 million threshold amount attributable to plan investment in the commingled entity, which are in excess of $100 million. (In addition, none of the entities described above is formed for the sole purpose of making loans of securities.)

(p) Prior to any Plan's approval of the lending of its securities to the Borrowers, a copy of this exemption, if granted, (and the notice of pendency) is provided to the Plan, and the Borrower informs the independent fiduciary that the Borrower is not acting as a fiduciary of the Plan in connection with its borrowing securities from the Plan. 4

(q) The independent fiduciary of the Plan receives monthly reports with respect to the securities lending transactions, including, but not limited to, the information set forth in the following sentence, so that an independent Plan fiduciary may monitor such transactions with the Borrowers. The monthly report will list for a specified period all outstanding or closed securities lending transactions. The report will identify for each open loan position, the securities involved, the value of the security for collateralization purposes, the current value of the collateral, the rebate or premium (if applicable) at which the security is loaned, and the number of days the security has been on loan. At the request of the Plan, such a report will be provided on a daily or weekly basis, rather than a monthly basis. Also, upon request of the Plan, the Borrower will provide the Plan with daily confirmations of securities lending transactions.

(r) In addition to the above conditions, all loans involving Foreign Borrowers must satisfy the following supplemental requirements:

(1) Such Foreign Borrower is subject to regulation by (i) the Bundesaufsichtsamt fuer das Kreditwesen (the BAK) and the Deutsche Bundesbank in Germany, (ii) the Financial Services Authority and the Securities and Futures Authority in the United Kingdom, (iii) the Ministry of Finance or the Financial Services Agency and the Tokyo Stock Exchange or the Osaka Stock Exchange in Japan, (iv) the Office of the Superintendent of Financial Institutions Canada, Ontario Securities Commission, and the Investment Dealers Association in Canada, or (v) the Australian Prudential Regulation Authority, Australian Securities and Investments Commission, and the Australian Stock Exchange Limited in Australia.

(2) Such Foreign Borrower is in compliance with all applicable provisions of Rule 15a-6 (17 C.F.R. 240.15a-6) under the Securities Exchange Act of 1934 (the 1934 Act) that provides foreign broker-dealers a limited exception from U.S. registration requirements;

(3) All collateral is maintained in U.S. dollars or in U.S. dollar-denominated securities or letters of credit, or other collateral permitted under PTE 81-6 (as amended or superseded);

(4) All collateral is held in the United States and the situs of the Borrowing Agreement is maintained in the United States under an arrangement that complies with the indicia of ownership requirements under section 404(b) of the Act and the regulations promulgated under 29 CFR 2550.404(b)-1; and

(5) Prior to entering into a transaction involving a Foreign Borrower, Deutsche Bank or the Foreign Borrower must:

(i) Agree to submit to the jurisdiction of the United States;

(ii) Agree to appoint an agent for service of process in the United States, which may be an affiliate (the Process Agent);

(iii) Consent to the service of process on the Process Agent; and

(iv) Agree that enforcement by a Plan of the indemnity provided by Deutsche Bank or the Foreign Borrower will occur in the U.S. courts.

(s) Deutsche Bank or the Borrower maintains, or causes to be maintained, within the United States for a period of six years from the date of such transaction, in a manner that is convenient and accessible for audit and examination, such records as are necessary to enable the persons described in paragraph (t)(1) to determine whether the conditions of the exemption have been met, except that

(1) A prohibited transaction will not be considered to have occurred if, due to circumstances beyond the control of Deutsche Bank and/or its affiliates, the records are lost or destroyed prior to the end of the six-year period; and

(2) No party in interest other than the Borrower 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 below by paragraph (t)(1).

(t)(1) Except as provided in subparagraph (t)(2) of this paragraph and notwithstanding any provisions of subsections (a)(2) and (b) of section 504 of the Act, the records referred to in paragraph (s) 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 (SEC);

(ii) Any fiduciary of a participating Plan or any duly authorized representative of such fiduciary;

(iii) Any contributing employer to any participating Plan or any duly authorized employee representative of such employer; and

(iv) Any participant or beneficiary of any participating Plan or any duly authorized representative of such participant or beneficiary.

(2) None of the persons described above in subparagraphs (t)(1)(ii)-(t)(1)(iv) are authorized to examine the trade secrets of Deutsche Bank or its affiliates or commercial or financial information which is privileged or confidential.

(a) An “affiliate” of a person means:

(i) any person, directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with, the person. (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);

(ii) any officer, director, employee, or relative (as defined in section 3(15) of the Act) of any such other person or any partner in any such person; and

(iii) any corporation or partnership of which such person is an officer, director, or employee, or in which such person is a partner.

(b) The term “Foreign Borrower” or “Foreign Borrowers” means any broker-dealer or bank that, now or in the future, is an affiliate of Deutsche Bank that is subject to regulation by (i) the BAK and the Deutsche Bundesbank in Germany, (ii) the Financial Services Authority and the Securities and Futures Authority in the United Kingdom, (iii) the Ministry of Finance or the Financial Services Agency and the Tokyo Stock Exchange or the Osaka Stock Exchange in Japan, (iv) the Office of the Superintendent of Financial Institutions Canada, Ontario Securities Commission, and the Investment Dealers Association in Canada, or (v) the Australian Prudential Regulation Authority, Australian Securities and Investments Commission, and the Australian Stock Exchange Limited in Australia.

(c) The term “Borrower” or “Borrowers” means Deutsche Bank, DBS, DBNY, the Foreign Borrowers, and any other affiliate of Deutsche Bank that, now or in the future, is a U.S. registered broker-dealer or a government securities broker or dealer or a U.S. bank.

Effective Date: The proposed exemption, if granted, will be effective as of April 24, 2001.

1. Deutsche Bank AG, a full service universal bank, is organized under German law and is regulated by the Deutsche Bundesaufsichtsamt fuer das Kreditwesen (i.e., the BAK) and the Deutsche Bundesbunk. Deutsche Bank, as of December 31, 2000, had approximately € 697,306,000 in assets and € 19,807,000 in stockholders’ equity.

Deutsche Bank Trust Company Americas (i.e., DBT), a wholly owned subsidiary of Deutsche Bank, is a New York banking corporation and a leading commercial bank, providing a wide range of banking, fiduciary, custodial, brokerage, and investment services to corporations, institutions, governments, employee benefit plans, governmental retirement plans, and private investors. Deutsche Bank indirectly owns all of the equity interest of DBT, which is also a member bank of the Federal Reserve system. DBT is one of the largest trustees of ERISA plans and a large manager of passively managed funds. Other Deutsche Bank asset managers may also manage ERISA assets in passively managed styles in the future.

Deutsche Bank AG, New York Branch (i.e., DBNY) is subject to regulation by the New York State Banking Authority and the Board of Governors of the Federal Reserve Bank. In addition, DBNY is subject to regulation by the BAK and the Deutsche Bundesbank. Deutsche Bank Securities Inc. (i.e., DBS), an affiliate of Deutsche Bank, is incorporated under the laws of the State of Delaware and is registered with and regulated by the SEC as a U.S. broker-dealer under Section 15 of the 1934 Act. As of December 31, 2000, DBS had approximately $98,070,582,098 in assets and $6,705,615,063 in stockholders' equity. Deutsche Bank has foreign branches and affiliates worldwide that are in the business of trading securities and engaging in broker-dealer activities (among other investment and trading activities) in their respective countries. The affiliated foreign broker-dealers or banks of Deutsche Bank to be covered by this proposed exemption (i.e., the Foreign Borrowers), and their respective regulating entities, are as follows:

(a) Deutsche Bank AG, located in Frankfurt am Main, is subject to regulation in Germany by the BAK and the Deutsche Bundesbank;

(b) Deutsche Bank AG, London Branch, located in London, is subject to regulation by the BAK and the Deutsche Bundesbank and, in the United Kingdom, is subject to regulation by the Securities and Futures Authority in respect of the conduct of investment business;

(c) Morgan Grenfell & Co., Ltd., located in London, is subject to regulation in the United Kingdom by the Financial Services Authority in respect of prudential supervision;

(d) Deutsche Bank Securities Limited, Tokyo Branch, located in Tokyo, is subject to regulation in Japan by the Ministry of Finance, the Financial Services Agency, the Tokyo Stock Exchange, and the Osaka Stock Exchange;

(e) Deutsche Bank AG, Canada Branch, Deutsche Bank Canada, and Deutsche Bank Securities Limited, located in Toronto, are subject to regulation in Canada by the Office of the Superintendent of Financial Institutions Canada and the Ontario Securities Commission, as well as the Investment Dealers Association, a self-regulatory organization. In addition, Deutsche Bank AG, Canada Branch is also subject to regulation by the BAK and the Deutsche Bundesbank; and

(f) Deutsche Bank AG, Sydney Branch and Deutsche Securities Australia Ltd., located in Sydney, are subject to regulation in Australia by the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission, and the Australian Stock Exchange Limited. In addition, Deutsche Bank AG, Sydney Branch is also subject to regulation by the BAK and the Deutsche Bundesbank.

Deutsche Bank requests an individual exemption to cover the Foreign Borrowers identified above, as well as any broker-dealer or bank that, now or in the future, is an affiliate of Deutsche Bank that is subject to regulation by (i) the BAK, and the Deutsche Bundesbank in Germany, (ii) the Financial Services Authority and the Securities and Futures Authority in the United Kingdom, (iii) the Ministry of Finance or the Financial Services Agency and the Tokyo Stock Exchange or the Osaka Stock Exchange in Japan, (iv) the Office of the Superintendent of Financial Institutions Canada, Ontario Securities Commission, and the Investment Dealers Association in Canada, or (v) the Australian Prudential Regulation Authority, Australian Securities and Investments Commission, and the Australian Stock Exchange Limited in Australia.

2. The Borrowers, acting as principals, actively engage in the borrowing and lending of securities. The Borrowers utilize borrowed securities either to satisfy their own trading requirements or to re-lend to other broker-dealers and entities which need a particular security for a certain period of time. The Borrowers represent that in the United States, as described in the Federal Reserve Board's Regulation T, borrowed securities are often used in short sales, for non-purpose loans to exempted borrowers, or in the event of a failure to receive securities that a broker-dealer is required to deliver.

3. Deutsche Bank represents that the Foreign Borrowers are subject to regulation by a governmental agency in the foreign country in which they are located. Deutsche Bank further represents that registration of a foreign broker-dealer or bank with the governmental agency in these cases addresses regulatory concerns similar to those concerns addressed by registration of a broker-dealer with the SEC under the 1934 Act. The rules and regulations set forth by the above-referenced agencies and the SEC share a common objective: The protection of the investor by the regulation of securities markets.

With respect to Germany, the BAK, a federal institution with ultimate responsibility to the Ministry of Finance, in cooperation with the Deutsche Bundesbank, the central bank of the German banking system, provides extensive regulation of the banking sector. The BAK ensures that Deutsche Bank has procedures for monitoring and controlling its worldwide activities through various statutory and regulatory standards, such as requirements regarding adequate internal controls, oversight, administration, and financial resources. The BAK reviews compliance with these limitations on operations and internal control requirements through an annual audit performed by the year-end auditor and through special audits, e.g., on specific sections of the Banking Act, as ordered by the BAK and the respective State Central Bank auditors. The BAK obtains information on the condition of Deutsche Bank by requiring submission of periodic, consolidated financial reports and through a mandatory annual report prepared by the auditor. The BAK also receives information regarding capital adequacy, country risk exposure, and foreign exchange exposure from Deutsche Bank. German banking law mandates penalties to ensure correct reporting to the BAK. The auditors face penalties for gross violation of their duties in auditing, for reporting misleading information, omitting essential information from the audit report, failing to request pertinent information, or failing to report to the BAK.

Germany, the United Kingdom, Japan, Canada, and Australia all have comprehensive financial resource and reporting/disclosure rules concerning broker-dealers. Broker-dealers are required to demonstrate their capital adequacy. The reporting/disclosure rules impose requirements on broker-dealers with respect to risk management, internal controls, and records relating to counterparties. All such records must be produced at the request of the agency at any time. The agencies' registration requirements for broker-dealers are enforced by fines and penalties and thus constitute a comprehensive disciplinary system for the violation of such rules.

4. Deutsche Bank represents that, in addition to the protections afforded by the applicable foreign regulatory body, compliance by the Foreign Borrowers with any applicable requirements of Rule 15a-6 (17 CFR 240.15a-6) of the 1934 Act (and the amendments and interpretations thereof) will offer further protections to the Plans. 5 SEC Rule 15a-6 provides an exemption from U.S. registration requirements for a foreign broker-dealer that induces or attempts to induce the purchase or sale of any security (including over-the-counter equity and debt options) by a “U.S. institutional investor” or a “major U.S. institutional investor,” provided that the foreign broker-dealer, among other things, enters into these transactions through a U.S. registered broker-dealer intermediary. The term “U.S. institutional investor,” as defined in Rule 15a-6(b)(7), includes an employee benefit plan within the meaning of the Act if (a) the investment decision is made by a plan fiduciary, as defined in section 3(21) of the Act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or (b) the employee benefit plan has total assets in excess of $5 million, or (c) the employee benefit plan is a self-directed plan with investment decisions made solely by persons that are “accredited investors,” as defined in Rule 501(a)(1) of Regulation D of the Securities Act of 1933, as amended. The term “major U.S. institutional investor” is defined as a person that is a U.S. institutional investor that has, or has under management, total assets in excess of $100 million, or an investment adviser registered under section 203 of the Investment Advisers Act of 1940 that has total assets under management in excess of $100 million. 6 The Borrowers represent that the intermediation of the U.S. registered broker-dealer imposes upon the foreign broker-dealer the requirement that the securities transaction be effected in accordance with a number of U.S. securities laws and regulations applicable to U.S. registered broker-dealers.

The Borrowers represent that under SEC Rule 15a-6, a foreign broker-dealer that induces or attempts to induce the purchase or sale of any security by a U.S. institutional or major U.S. institutional investor in accordance with Rule 15a-6  7 must, among other things:

(a) Consent to service of process for any civil action brought by, or proceeding before, the SEC or any self-regulatory organization;

(b) Provide the SEC with any information or documents within its possession, custody or control, any testimony of any such foreign associated persons, and any assistance in taking the evidence of other persons, wherever located, that the SEC requests and that relates to the transactions effected pursuant to the Rule;

(c) Rely on the U.S. registered broker-dealer through which the transactions with the U.S. institutional and major U.S. institutional investors are effected to (among other things):

(1) Effect the transactions, other than negotiating the terms;

(2) Issue all required confirmations and statements;

(3) As between the foreign broker-dealer and the U.S. registered broker-dealer, extend or arrange for the extension of credit in connection with the transactions;

(4) Maintain required books and records relating to the transactions, including those required by SEC Rules 17a-3 (Records to be Made by Certain Exchange Members) and 17a-4 (Records to be Preserved by Certain Exchange Members, Brokers and Dealers) of the 1934 Act;

(5) Receive, deliver, and safeguard funds and securities in connection with the transactions on behalf of the U.S. institutional investor or major U.S. institutional investor in compliance with Rule 15c3-3 of the 1934 Act (Customer Protection—Reserves and Custody of Securities);  8 and

(6) Participate in certain oral communications (e.g., telephone calls) between the foreign associated person and the U.S. institutional investor (not the major U.S. institutional investor), and accompany the foreign associated person on certain visits with both U.S. institutional and major U.S. institutional investors. The Borrowers represent that, under certain circumstances, the foreign associated person may have direct communications and contact with the U.S. Institutional Investor. 9 (See April 9, 1997 No-Action Letter.)

5. An institutional investor, such as a pension fund, lends securities in its portfolio to a broker-dealer or bank in order to earn a fee while continuing to enjoy the benefits of owning the securities (e.g., from the receipt of any interest, dividends, or other distributions due on those securities and from any appreciation in the value of the securities). The lender generally requires that the securities loan be fully collateralized, and the collateral usually is in the form of cash or high quality liquid securities, such as U.S. Government or Federal Agency obligations or irrevocable bank letters of credit. If the borrower deposits cash collateral, the lender invests the collateral, and the borrowing agreement may provide that the lender pay the borrower a previously-agreed upon amount or rebate fee and keep the earnings on the collateral. If the borrower deposits government securities, the borrower is entitled to the earnings on its deposited securities and may pay the lender a lending fee. If the borrower deposits irrevocable bank letters of credit as collateral, the borrower pays the lender a fee as compensation for the loan of its securities. These fees, defined below as the Transaction Lending Fee, may be determined in advance or pursuant to an objective formula, and may be different for different securities or different groups of securities subject to the Borrowing Agreement.

6. The Borrowers request an individual exemption for the lending of securities, under certain exclusive borrowing arrangements, by Plans with respect to which Deutsche Bank or any of its affiliates is a party in interest (including a fiduciary) solely by reason of providing services to the Plan, or solely by reason of a relationship to a service provider described in section 3(14)(F), (G), (H), or (I) of the Act. For each Plan, neither the Borrower nor any of its affiliates will have discretionary authority or control over the Plan's investment in the securities available for loan, nor will they render investment advice (within the meaning of 29 CFR 2510.3-21(c)) with respect to those assets. It is represented that because the Borrowers, by exercising their contractual rights under the proposed exclusive borrowing arrangements, will have discretion with respect to whether there is a loan of particular Plan securities to the Borrowers, the lending of securities to the Borrowers may be outside the scope of relief provided by PTE 81-6. 10

7. For each Plan, the Borrowers will directly negotiate a Borrowing Agreement with a Plan fiduciary which is independent of the Borrowers. Under the Borrowing Agreement, the Borrowers will have exclusive access for a specified period of time to borrow certain securities of the Plan, pursuant to certain conditions. The Borrowing Agreement will specify all material terms of the agreement, including the basis for compensation to the Plan under each category of securities available for loan. The Borrowing Agreement will also contain a requirement that the Borrowers pay all transfer fees and transfer taxes relating to the securities loans. The terms of each loan of securities by a Plan to a Borrower will be at least as favorable to such Plan as those of a comparable arm's length transaction between unrelated parties, taking into account the exclusive arrangement.

8. The Borrowers may, but shall not be required to, agree to maintain a minimum balance of borrowed securities subject to the Borrowing Agreement. Such minimum balance may be a fixed U.S. dollar amount, a flat percentage, or other percentage determined pursuant to an objective formula.

9. In exchange for granting the Borrower the exclusive right to borrow certain securities, the Borrower will pay the Plan either (i) a flat fee (which may be equal to a percentage of the value of the total securities subject to the Borrowing Agreement), (ii) a periodic payment that is equal to a percentage of the value of the total balance of outstanding borrowed securities, or (iii) any combination of (i) and (ii) (i.e., the Exclusive Fee).

If the Borrower deposits cash collateral, all the earnings generated by such cash collateral shall be returned to the Borrower—provided that the Borrower may, but shall not be obligated to, agree with the independent fiduciary of the Plan that a percentage of the earnings on the collateral may be retained by the Plan, or the Plan may agree to pay the Borrower a rebate fee and retain the earnings on the collateral (i.e., the Shared Earnings Compensation). If the Borrower deposits non-cash collateral, all earnings on the non-cash collateral shall be returned to the Borrower—provided that the Borrower may, but shall not be obligated to, agree to pay the Plan a lending fee. The Lending Fee, together with the Shared Earnings Compensation, is referred to as the Transaction Lending Fee.

The Transaction Lending Fee, if any, may be in addition to the Exclusive Fee or an offset against such Exclusive Fee. The Exclusive Fee and the Transaction Lending Fee may be determined in advance or pursuant to an objective formula, and may be different for different securities or different groups of securities subject to the Borrowing Agreement. For example, in addition to the Borrower's paying different fees to different Plans, the Borrower may pay different fees for different portfolios of securities (i.e., the fee for a domestic securities portfolio may be different from the fee for a foreign securities portfolio). The Borrower may also pay different fees for securities of issuers in different foreign countries; for example, there may be a different fee for German securities than for French securities. In addition, with respect to, for example, the French securities, there may be different fees for liquid securities than for illiquid securities.

Any change in the Exclusive Fee or the Transaction Lending Fee that the Borrower pays to the Plan with respect to any securities loan requires the prior written consent of the independent fiduciary of the Plan, except that consent is presumed where the Exclusive Fee or the Transaction Lending Fee changes pursuant to an objective formula. Where the Exclusive Fee or the Transaction Lending Fee changes pursuant to an objective formula, the independent fiduciary of the Plan must be notified at least 24 hours in advance of such change and such independent Plan fiduciary must not object in writing to such change, prior to the effective time of such change.

The Plan will be entitled to the equivalent of all distributions made to holders of the borrowed securities during the loan period, including, but not limited to, cash dividends, interest payments, shares of stock as a result of stock splits, and rights to purchase additional securities that the Plan would have received (net of tax withholdings in the case of foreign securities), had it remained the record owner of the securities.

10. By the close of business on or before the day the loaned securities are delivered to the Borrower, the Plan will receive from the Borrower (by physical delivery, book entry in a securities depository located in the United States, wire transfer, or similar means) collateral consisting of U.S. currency, securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, irrevocable bank letters of credit issued by U.S. banks other than Deutsche Bank or its affiliates, or other collateral permitted under PTE 81-6 (as amended or superseded). Such collateral will be deposited and maintained in an account on behalf of a Plan which is separate from the Borrower's accounts and will be maintained with an institution other than the Borrower. For this purpose, the collateral may be held on behalf of the Plan by an affiliate of the Borrower that is the trustee or custodian of the Plan. If maintained by an affiliate of the Borrower or a branch of Deutsche Bank other than the Borrower, the collateral will be segregated from the assets of such affiliate or branch.

The market value (or in the case of a letter of credit, a stated amount) of the collateral on the close of business on the day preceding the day of the loan will be at least 102 percent of the market value of the loaned securities. The Plan, its independent fiduciary or its designee, which may be Deutsche Bank or any of its affiliates which provides custodial or directed trustee services in respect of the securities covered by the Borrowing Agreement for the Plan, will monitor the level of the collateral daily and, if the market value of the collateral on the close of a business day falls below 100 percent (or such higher percentage as the Borrower and the independent fiduciary of the Plan may agree upon) of the market value of the loaned securities at the close of business on such day, the Borrower will deliver additional collateral by the close of business on the following day to bring the level of the collateral back to at least 102 percent. The Borrowing Agreement will provide the Plan with a continuing security interest in, and lien on, the collateral, or will provide for the transfer of title to the collateral to the Plan.

If the Borrower deposits cash collateral, the Plan invests the collateral, and all earnings on such cash collateral shall be returned to the Borrower—except that the Borrowing Agreement may provide that the Plan receive Shared Earnings Compensation, which, as discussed above, may be a percentage of the earnings on the collateral which may be retained by the Plan, or the Plan may agree to pay the Borrower a rebate fee and retain the earnings on the collateral. The terms of the rebate fee for each loan will be at least as favorable to the Plan as those of a comparable arm's length transaction between unrelated parties, taking into account the exclusive arrangement, and will be based upon an objective methodology which takes into account several factors, including potential demand for the loaned securities, the applicable benchmark cost of fund indices (typically, the U.S. Federal Funds rate established by the U.S. Federal Reserve System (the Federal Funds), the overnight REPO  11 rate, or the like), and anticipated investment return on overnight investments permitted by the independent fiduciary of the Plan. If the Borrower deposits non-cash collateral, such as government securities or irrevocable bank letters of credit, the Borrower shall be entitled to the earnings on its non-cash collateral—except that the Borrower may, but shall not be obligated to, agree to pay the Plan a Lending Fee. The Exclusive Fee and the Transaction Lending Fee may be determined in advance or pursuant to an objective formula, and may be different for different securities or different groups of securities subject to the Borrowing Agreement.

The Borrower will provide a monthly report to the independent fiduciary of the Plan which includes the following information. The monthly report will list for a specified period all outstanding or closed securities lending transactions. The report will identify for each open loan position, the securities involved, the value of the security for collateralization purposes, the current value of the collateral, the rebate or premium (if applicable) at which the security is loaned, and the number of days the security has been on loan. At the request of the Plan, such a report will be provided on a daily or weekly basis, rather than a monthly basis. Also, upon request of the Plan, the Borrower will provide the Plan with daily confirmations of securities lending transactions.

11. Before entering into a Borrowing Agreement, the Borrower will furnish to the Plan the most recent publicly available audited and unaudited statements of its financial condition, as well as any publicly available information which it believes is necessary for the independent fiduciary to determine whether the Plan should enter into or renew the Borrowing Agreement—provided, however, that in the case of a Borrower that is a branch of Deutsche Bank, the Borrower will furnish to the Plan the most recent publicly available audited and unaudited statement of Deutsche Bank's financial condition. Further, the Borrowing Agreement will contain a representation by the Borrower that as of each time it borrows securities, there has been no material adverse change in its financial condition since the date of the most recently furnished statements of financial condition.

12. Prior to any Plan's approval of the lending of its securities to the Borrowers, a copy of this exemption, if granted, (and the notice of pendency) will be provided to the Plan, and the Borrower will inform the independent fiduciary that the Borrower is not acting as a fiduciary of the Plan in connection with its borrowing securities from the Plan.

13. With regard to those Plans for which Deutsche Bank or any of its affiliates provides custodial, directed trustee, clearing and/or reporting functions relative to securities loans, Deutsche Bank and a Plan fiduciary independent of Deutsche Bank and its affiliates will agree in advance, and in writing, to any fee that Deutsche Bank or any of its affiliates is to receive for such custodial, directed trustee, clearing and/or reporting services. Such fees, if any, would be fixed fees (e.g., Deutsche Bank or any of its affiliates might negotiate to receive a fixed percentage of the value of the assets with respect to which it performs these services, or to receive a stated dollar amount), and any such fee would be in addition to any fee Deutsche Bank or any of its affiliates has negotiated to receive from any such Plan for standard custodial or other services unrelated to the securities lending activity. The arrangement for Deutsche Bank or any of its affiliates to provide such functions relative to securities loans to the Borrowers will be terminable by the Plan within five business days of the receipt of written notice without penalty to the Plan, except for the return to the Borrowers of a pro-rata portion of the Exclusive Fee paid by the Borrowers to the Plan, if the Plan has also terminated its exclusive borrowing arrangement with the Borrowers.

14. The Borrowing Agreement and/or any securities loan outstanding may be terminated by either party at any time without penalty. Upon termination of any securities loan, the Borrower will deliver securities identical to the borrowed securities (or the equivalent thereof in the event of reorganization, recapitalization, or merger of the issuer of the borrowed securities) to the Plan within the lesser of five business days of written notice of termination or the customary settlement period for such securities.

15. In the event that the Borrower fails to return securities in accordance with the Borrowing Agreement, the Plan will have the right under the Borrowing Agreement to purchase securities identical to the borrowed securities and apply the collateral to payment of the purchase price. If the collateral is insufficient to satisfy the Borrower's obligation to return the Plan's securities, the Borrower will indemnify the Plan in the United States with respect to the difference between the replacement cost of securities and the market value of the collateral on the date the loan is declared in default, together with expenses incurred by the Plan plus applicable interest at a reasonable rate, including reasonable attorneys' fees incurred by the Plan for legal action arising out of default on the loans, or failure by the Borrower to properly indemnify the Plan.

16. Except as provided herein, all the procedures under the Borrowing Agreement will, at a minimum, conform to the applicable provisions of PTE 81-6 (as amended or superseded), as well as to applicable securities laws of the United States, Germany, the United Kingdom, Japan, Canada and/or Australia, as appropriate. In addition, in order to ensure that the independent fiduciary representing a Plan has the experience, sophistication, and resources necessary to adequately review the Borrowing Agreement and the fee arrangements thereunder, only Plans with total assets having an aggregate market value of at least $50 million are permitted to lend securities to the Borrowers—provided, however, that

(a) In the case of two or more Related Plans whose assets are commingled for investment purposes in a single master trust or any other entity the assets of which are “plan assets” under the Plan Asset Regulation, which entity is engaged in securities lending arrangements with the Borrowers, the foregoing $50 million requirement shall be deemed satisfied if such trust or other entity has aggregate assets which are in excess of $50 million—provided that if the fiduciary responsible for making the investment decision on behalf of such master trust or other entity is not the employer or an affiliate of the employer, such fiduciary has total assets under its management and control, exclusive of the $50 million threshold amount attributable to plan investment in the commingled entity, which are in excess of $100 million.

(b) In the case of two or more Unrelated Plans whose assets are commingled for investment purposes in a group trust or any other form of entity the assets of which are “plan assets” under the Plan Asset Regulation, which entity is engaged in securities lending arrangements with the Borrowers, the foregoing $50 million requirement is satisfied if such trust or other entity has aggregate assets which are in excess of $50 million (excluding the assets of any Plan with respect to which the fiduciary responsible for making the investment decision on behalf of such group trust or other entity or any member of the controlled group of corporations including such fiduciary is the employer maintaining such Plan or an employee organization whose members are covered by such Plan). However, the fiduciary responsible for making the investment decision on behalf of such group trust or other entity.

(i) Has full investment responsibility with respect to plan assets invested therein; and

(ii) Has total assets under its management and control, exclusive of the $50 million threshold amount attributable to plan investment in the commingled entity, which are in excess of $100 million. (In addition, none of the entities described above is formed for the sole purpose of making loans of securities.)

The Borrowers represent that the opportunity for the Plans to enter into exclusive borrowing arrangements with the Borrowers under the flexible fee structures described herein is in the interests of the Plans because the Plans will then be able to choose among an expanded number of competing exclusive borrowers, as well as maximizing the volume of securities lent and the return on such securities.

17. In addition to the above conditions, all loans involving Foreign Borrowers must satisfy the following supplemental requirements:

(i) Such Foreign Borrower is a bank which is subject to regulation by (a) the BAK and the Deutsche Bundesbank in Germany, (b) the Financial Services Authority and the Securities and Futures Authority in the United Kingdom, (c) the Ministry of Finance or the Financial Services Agency and the Tokyo Stock Exchange or the Osaka Stock Exchange in Japan, (d) the Office of the Superintendent of Financial Institutions Canada, Ontario Securities Commission, and the Investment Dealers Association in Canada, or (e) the Australian Prudential Regulation Authority, Australian Securities and Investments Commission, and the Australian Stock Exchange Limited in Australia;

(ii) Such Foreign Borrower is in compliance with all applicable provisions of Rule 15a-6 (17 CFR 240.15a-6) under the 1934 Act that provides foreign broker-dealers a limited exception from U.S. registration requirements;

(iii) All collateral is maintained in U.S. dollars or in U.S. dollar-denominated securities or letters of credit, or other collateral permitted under PTE 81-6 (as amended or superseded);

(iv) All collateral is held in the United States and the situs of the Borrowing Agreement is maintained in the United States under an arrangement that complies with the indicia of ownership requirements under section 404(b) of the Act and the regulations promulgated under 29 CFR 2550.404(b)-1; and

(v) Prior to entering into a transaction involving a Foreign Borrower, Deutsche Bank or the Foreign Borrower must:

(1) Agree to submit to the jurisdiction of the United States;

(2) Agree to appoint a Process Agent in the United States;

(3) Consent to the service of process on the Process Agent; and

(4) Agree that enforcement by a Plan of the indemnity provided by Deutsche Bank or the Foreign Borrower will occur in the U.S. courts.

18. In summary, the Borrowers represent that the subject transactions satisfy the statutory criteria of section 408(a) of the Act because:

(a) Each Borrower will directly negotiate a Borrowing Agreement with an independent fiduciary of each Plan;

(b) The Plans will be permitted to lend to the Borrower, a major securities borrower who will be added to an expanded list of competing exclusive borrowers, enabling the Plans to earn additional income from the loaned securities on a secured basis, while continuing to enjoy the benefits of owning the securities;

(c) In exchange for granting the Borrower the exclusive right to borrow certain securities, the Borrower will pay the Plan the Exclusive Fee, which as discussed above may be either (i) a flat fee (which may be a percentage of the value of the total securities subject to the Borrowing Agreement), (ii) a percentage of the value of the total balance of outstanding borrowed securities, or (iii) any combination of (i) and (ii);

(d) Any change in the Exclusive Fee or Shared Earnings Compensation that the Borrower pays to the Plan with respect to any securities loan will require the prior written consent of the independent fiduciary, except that consent will be presumed where the Exclusive Fee or Shared Earnings Compensation changes pursuant to an objective formula specified in the Borrowing Agreement, and the independent fiduciary is notified at least 24 hours in advance of such change and does not object in writing thereto, prior to the effective time of such change;

(e) The Borrower will provide sufficient information concerning its financial condition to a Plan before a Plan lends any securities to the Borrower;

(f) The collateral posted with respect to each loan of securities to the Borrower initially will be at least 102 percent of the market value of the loaned securities and will be monitored daily by the independent fiduciary;

(g) The Borrowing Agreement and/or any securities loan outstanding may be terminated by either party at any time without penalty, except for the return to the Borrower of a pro-rata portion of the Exclusive Fee paid by the Borrower to the Plan, and whereupon the Borrower will return any borrowed securities (or the equivalent thereof in the event of reorganization, recapitalization, or merger of the issuer of the borrowed securities) to the Plan within the lesser of five business days of written notice of termination or the customary settlement period for such securities;

(h) Neither the Borrower nor any of its affiliates will have discretionary authority or control over the Plan's investment in the securities available for loan;

(i) The minimum Plan size requirement (as specified in Section II(o) above) will ensure that the Plans will have the resources necessary to adequately review and negotiate all aspects of the exclusive borrowing arrangements; and

(j) All the procedures will, at a minimum, conform to the applicable provisions of PTE 81-6 (as amended or superseded), as well as applicable securities laws of the United States, Germany, the United Kingdom, Japan, Canada and/or Australia, as appropriate.

For Further Information Contact: Ms. Karin Weng of the Department, telephone (202) 693-8540. (This is not a toll-free number.)

The Department of Labor is considering granting an exemption under the authority of section 408(a) of the Act and section 4975(c)(2) of the Code and in accordance with the procedures as set forth in 29 CFR part 2570, subpart B (55 FR 32836, 32847, August 10, 1990). 12

If the exemption is granted, the restrictions of section 406(a)(1)(A) through (D) of the Act and the sanctions resulting from the application of section 4975 of the Code, by reason of section 4975(c)(1)(A) through (D) of the Code, shall not apply as of March 22, 2002, to:

(a) The lending of securities, under certain exclusive borrowing arrangements, to:

(1) Goldman, Sachs & Co. (Goldman) and any affiliate of Goldman that, now or in the future, is a U.S. registered broker-dealer, a government securities broker or dealer or U.S. bank (together with Goldman, the “U.S. Broker-Dealers”);

(2) Goldman Sachs Canada Inc., which is subject to regulation in Canada by the Ontario Securities Commission and the Investment Dealers Association;

(3) Goldman Sachs International and Goldman Sachs Equity Securities (U.K.), which are subject to regulation in the United Kingdom by the Financial Services Authority (the UK FSA) (formerly, the Securities and Futures Authority (the UK SFA));

(4) Goldman, Sachs & Co. oHG, which is subject to regulation in Germany by the Deutsche Bundesbank and the Federal Banking Supervisory Authority, e.g., der Bundesaufsichtsamt für das Kreditwesen (the BAK);

(5) Goldman Sachs (Japan) Ltd., which is subject to regulation in Japan by the Financial Services Agency and the Tokyo Stock Exchange;

(6) Goldman Sachs Australia Pty Limited, which is subject to regulation in Australia by the Australian Securities & Investments Commission (the ASIC);

(7) Goldman, Sachs & Co. Bank, which is subject to regulation in Switzerland by the Swiss Federal Banking Commission; and

(8) Any broker-dealer or bank that, now or in the future, is an affiliate of Goldman which is subject to regulation by the Ontario Securities Commission and the Investment Dealers Association in Canada, the UK FSA in the United Kingdom, the Deutsche Bundesbank and/or the BAK in Germany, the Financial Services Agency and the Tokyo Stock Exchange in Japan, the ASIC in Australia or the Swiss Federal Banking Commission in Switzerland (each such affiliated foreign broker-dealer or bank referred to as a “Foreign Borrower,” and, together with the U.S. Broker-Dealers, collectively referred to as the “Borrowers”), by employee benefit plans, including commingled investment funds holding assets of such plans (Plans) with respect to which Goldman or any of its affiliates is a party in interest; and

(b) The receipt of compensation by Goldman or any of its affiliates in connection with securities lending transactions, provided that the following conditions set forth in Section II, below, are satisfied.

(a) For each Plan, neither the Borrower nor any affiliate has or exercises discretionary authority or control over the Plan's investment in the securities available for loan, nor do they render investment advice (within the meaning of 29 CFR 2510.3-21(c)) with respect to those assets.

(b) The party in interest dealing with the Plan is a party in interest with respect to the Plan (including a fiduciary) solely by reason of providing services to the Plan, or solely by reason of a relationship to a service provider described in section 3(14)(F), (G), (H) or (I) of the Act.

(c) The Borrower directly negotiates an exclusive borrowing agreement (the Borrowing Agreement) with a Plan fiduciary which is independent of the Borrower and its affiliates.

(d) The terms of each loan of securities by a Plan to a Borrower are at least as favorable to such Plan as those of a comparable arm's-length transaction between unrelated parties, taking into account the exclusive arrangement.

(e) In exchange for granting the Borrower the exclusive right to borrow certain securities, the Plan receives from the Borrower either (i) a flat fee (which may be equal to a percentage of the value of the total securities subject to the Borrowing Agreement from time to time), (ii) a periodic payment that is equal to a percentage of the value of the total balance of outstanding borrowed securities, or (iii) any combination of (i) and (ii) (collectively, the Exclusive Fee). If the Borrower pledges cash collateral, any earnings generated by such cash collateral shall be returned to the Borrower; provided that the Borrower may, but shall not be obligated to, agree with the independent fiduciary of the Plan that a percentage of the earnings on the collateral may be retained by the Plan and/or the Plan may agree to pay the Borrower a rebate fee and retain any earnings on the collateral (the Shared Earnings Compensation). If the Borrower pledges non-cash collateral, any earnings on the non-cash collateral shall be returned to the Borrower; provided that the Borrower may, but shall not be obligated to, agree to pay the Plan a lending fee (the “Lending Fee”) (the Lending Fee and the Shared Earnings Compensation are referred to herein as the “Transaction Lending Fee”). The Transaction Lending Fee, if any, shall be either in addition to the Exclusive Fee or an offset against such Exclusive Fee. The Exclusive Fee and the Transaction Lending Fee may be determined in advance or pursuant to an objective formula, and may be different for different securities or different groups of securities subject to the Borrowing Agreement. Any change in the Exclusive Fee or the Transaction Lending Fee that the Borrower pays to the Plan with respect to any securities loan requires the prior written consent of the independent fiduciary of the Plan, except that consent is presumed where the Exclusive Fee or the Transaction Lending Fee changes pursuant to an objective formula. Where the Exclusive Fee or the Transaction Lending Fee changes pursuant to an objective formula, the independent fiduciary of the Plan must be notified at least 24 hours in advance of such change and such independent Plan fiduciary must not object in writing to such change, prior to the effective time of such change.

(f) The Borrower may, but shall not be required to, agree to maintain a minimum balance of borrowed securities subject to the Borrowing Agreement. Such minimum balance may be a fixed U.S. dollar amount, a flat percentage of portfolio value or other percentage determined pursuant to an objective formula.

(g) By the close of business on or before the day on which the loaned securities are delivered to the Borrower, the Plan receives from the Borrower (by physical delivery, book entry in a securities depository located in the United States, wire transfer, or similar means) collateral consisting of U.S. currency, securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, irrevocable bank letters of credit issued by a U.S. bank other than Goldman or an affiliate of Goldman, or any combination thereof, or other collateral permitted under Prohibited Transaction Exemption 81-6 (46 FR 7527, Jan. 23 1981, as amended at 52 FR 18754, May 19, 1987) (PTE 81-6) (as amended or superseded) 13 having, as of the close of business on the preceding business day, a market value or, in the case of letters of credit a stated amount, equal to not less than 102 percent of the then market value of the securities lent. Such collateral will be deposited and maintained in an account which is separate from the Borrower's accounts and will be maintained with an institution other than the Borrower. For this purpose, the collateral may be held on behalf of the Plan by an affiliate of the Borrower that is the trustee or a custodian of the Plan. If maintained by an affiliate of the Borrower, the collateral will be segregated from the assets of such affiliate.

(h) If the market value of the collateral at any time falls below 100 percent (or such higher percentage as the Borrower and the independent fiduciary of the Plan may agree upon) of the market value of the loaned securities, the Borrower delivers additional collateral on the following day to bring the level of the collateral back to at least 102 percent. The level of the collateral is monitored daily by the Plan or its designee, which may be Goldman or any of its affiliates which provides custodial or directed trustee services in respect of the securities covered by the Borrowing Agreement for the Plan. The applicable Borrowing Agreement shall give the Plan a continuing security interest in, title to, or the rights of a secured creditor with respect to the collateral and a lien on the collateral.

(i) Before entering into a Borrowing Agreement, the Borrower furnishes to the Plan the most recent publicly available audited and unaudited statements of its financial condition, as well as any publicly available information which it believes is necessary for the independent fiduciary to determine whether the Plan should enter into or renew the Borrowing Agreement.

(j) The Borrowing Agreement contains a representation by the Borrower that, as of each time it borrows securities, there has been no material adverse change in its financial condition since the date of the most recently furnished statements of financial condition.

(k) The Plan receives the equivalent of all distributions made during the loan period, including, but not limited to, any cash dividends, interest payments, shares of stock as a result of stock splits, and rights to purchase additional securities, that the Plan would have received (net of tax withholdings) 14 had it remained the record owner of the securities.

(l) The Borrowing Agreement and/or any securities loan outstanding may be terminated by either party at any time without penalty (except for, if the Plan has terminated its Borrowing Agreement, the return to the Borrower of a pro-rata portion of the Exclusive Fee paid by the Borrower to the Plan) whereupon the Borrower delivers securities identical to the borrowed securities (or the equivalent thereof in the event of reorganization, recapitalization, or merger of the issuer of the borrowed securities) to the Plan within the lesser of five business days of written notice of termination or the customary settlement period for such securities.

(m) In the event that the Borrower fails to return securities in accordance with the Borrowing Agreement and paragraph (l) above, the Plan's remedy will be the right under the Borrowing Agreement to purchase securities identical to the borrowed securities and apply the collateral to payment of the purchase price. If the collateral is insufficient to satisfy the Borrower's obligation to return the Plan's securities, the Borrower will indemnify the Plan in the U.S. against any losses resulting from its use of the borrowed securities equal to the difference between the replacement cost of securities and the market value of the collateral on the date the loan is declared in default together with expenses incurred by the Plan plus applicable interest at a reasonable rate including reasonable attorneys fees incurred by the Plan for legal action arising out of default on the loans, or failure by the Borrower to properly indemnify the Plan.

(n) Except as otherwise provided herein, all procedures regarding the securities lending activities, at a minimum, conform to the applicable provisions of PTE 81-6 (as amended or superseded), as well as to applicable securities laws of the United States, Canada, the United Kingdom, Germany, Japan, Australia, or Switzerland, as appropriate.

(o) Only Plans with total assets having an aggregate market value of at least $50 million are permitted to lend securities to the Borrower; provided, however, that—

(1) In the case of two or more Plans which are maintained by the same employer, controlled group of corporations or employee organization (the Related Plans), whose assets are commingled for investment purposes in a single master trust or any other entity the assets of which are “plan assets” under 29 CFR 2510.3-101 (the Plan Asset Regulation), which entity is engaged in securities lending arrangements with the Borrower, the foregoing $50 million requirement shall be deemed satisfied if such trust or other entity has aggregate assets which are in excess of $50 million; provided that if the fiduciary responsible for making the investment decision on behalf of such master trust or other entity is not the employer or an affiliate of the employer, such fiduciary has total assets under its management and control, exclusive of the $50 million threshold amount attributable to plan investment in the commingled entity, which are in excess of $100 million.

(2) In the case of two or more Plans which are not maintained by the same employer, controlled group of corporations or employee organization (the Unrelated Plans), whose assets are commingled for investment purposes in a group trust or any other form of entity the assets of which are “plan assets” under the Plan Asset Regulation, which entity is engaged in securities lending arrangements with the Borrower, the foregoing $50 million requirement is satisfied if such trust or other entity has aggregate assets which are in excess of $50 million (excluding the assets of any Plan with respect to which the fiduciary responsible for making the investment decision on behalf of such group trust or other entity or any member of the controlled group of corporations including such fiduciary is the employer maintaining such Plan or an employee organization whose members are covered by such Plan). However, the fiduciary responsible for making the investment decision on behalf of such group trust or other entity——

(i) Has full investment responsibility with respect to plan assets invested therein; and

(ii) Has total assets under its management and control, exclusive of the $50 million threshold amount attributable to plan investment in the commingled entity, which are in excess of $100 million. (In addition, none of the entities described above are formed for the sole purpose of making loans of securities.)

(p) Prior to any Plan's approval of the lending of its securities to the Borrower, a copy of this exemption, if granted, (and the notice of pendency) is provided to the Plan, and the Borrower informs the independent fiduciary that the Borrower is not acting as a fiduciary of the Plan in connection with its borrowing securities from the Plan. 15

(q) The independent fiduciary of the Plan receives monthly reports with respect to the securities lending transactions, including but not limited to the information set forth in the following sentence, so that an independent Plan fiduciary may monitor such transactions with the Borrower. The monthly report will list for a specified period all outstanding or closed securities lending transactions. The report will identify for each open loan position, the securities involved, the value of the security for collateralization purposes, the current value of the collateral, the rebate or premium (if applicable) at which the security is loaned, and the number of days the security has been on loan. At the request of the Plan, such a report will be provided on a daily or weekly basis, rather than a monthly basis. Also, upon request of the Plan, the Borrower will provide the Plan with daily confirmations of securities lending transactions.

(r) In addition to the above conditions, all loans involving a Foreign Borrower must satisfy the following supplemental requirements:

(1) Such Foreign Borrower is a registered broker-dealer subject to regulation in Canada by the Ontario Securities Commission and the Investment Dealers Association, in the United Kingdom by the UK FSA, in Germany by the Deutsche Bundesbank and the BAK, in Japan by the Financial Services Agency and the Tokyo Stock Exchange, in Australia by the ASIC, or in Switzerland by the Swiss Federal Banking Commission;

(2) Such Foreign Borrower is in compliance with all applicable provisions of Rule 15a-6 (17 C.F.R. 240.15a-6) under the Securities Exchange Act of 1934 (the 1934 Act) which provides foreign broker-dealers a limited exception from United States registration requirements;

(3) All collateral is maintained in United States dollars or in U.S. dollar-denominated securities or letters of credit or such other collateral as may be permitted under PTE 81-6 (as amended or superseded);

(4) All collateral is held in the United States and the situs of the Borrowing Agreement is maintained in the United States under an arrangement that complies with the indicia of ownership requirements under section 404(b) of the Act and the regulations promulgated under 29 CFR 2550.404(b)-1; and

(5) Prior to entering into a transaction involving a Foreign Borrower, the Foreign Borrower must:

(i) Agree to submit to the jurisdiction of the United States;

(ii) Agree to appoint an agent for service of process in the United States, which may be an affiliate (the Process Agent);

(iii) Consent to the service of process on the Process Agent; and

(iv) Agree that enforcement by a Plan of the indemnity provided by the Foreign Borrower will occur in the United States courts.

(s) Goldman or the Borrower maintains, or causes to be maintained, within the United States for a period of six years from the date of such transaction, in a manner that is convenient and accessible for audit and examination, such records as are necessary to enable the persons described in paragraph (t)(1) to determine whether the conditions of the exemption have been met, except that—

(1) A prohibited transaction will not be considered to have occurred if, due to circumstances beyond the control of Goldman and/or its affiliates, the records are lost or destroyed prior to the end of the six year period; and

(2) No party in interest other than the Borrower 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 below by paragraph (t)(1).

(t)(1) Except as provided in subparagraph (t)(2) of this paragraph and notwithstanding any provisions of subsections (a)(2) and (b) of section 504 of the Act, the records referred to in paragraph (s) 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 (SEC);

(ii) Any fiduciary of a participating Plan or any duly authorized representative of such fiduciary;

(iii) Any contributing employer to any participating Plan or any duly authorized employee representative of such employer; and

(iv) Any participant or beneficiary of any participating Plan, or any duly authorized representative of such participant or beneficiary.

(2) None of the persons described above in subparagraphs (t)(1)(ii)-(t)(1)(iv) are authorized to examine the trade secrets of Goldman or its affiliates or commercial or financial information which is privileged or confidential.

(a) An “affiliate” of a person means:

(i) any person directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with the person. (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);

(ii) any officer, director, employee or relative (as defined in section 3(15) of the Act) of any such other person or any partner in any such person; and

(iii) any corporation or partnership of which such person is an officer, director or employee, or in which such person is a partner.

(b) The term “Foreign Borrower” or “Foreign Borrowers” means Goldman Sachs Canada Inc. or any broker-dealer or bank, now or in the future, that is an affiliate of Goldman subject to regulation in Canada by the Ontario Securities Commission and the Investment Dealers Association, Goldman Sachs International and Goldman Sachs Equity Securities (U.K.) or any broker-dealer or bank, now or in the future, that is an affiliate of Goldman subject to regulation in the United Kingdom by the UK FSA, Goldman, Sachs & Co. oHG or any broker-dealer or bank, now or in the future, that is an affiliate of Goldman subject to regulation in Germany by the Deutsche Bundesbank and the BAK, Goldman Sachs (Japan) Ltd. or any broker-dealer or bank, now or in the future, that is an affiliate of Goldman subject to regulation in Japan by the Financial Services Agency and the Tokyo Stock Exchange, Goldman Sachs Australia Pty Limited or any broker-dealer or bank, now or in the future, that is an affiliate of Goldman subject to regulation in Australia by the ASIC, Goldman, Sachs & Co. Bank or any broker-dealer or bank, now or in the future, that is an affiliate of Goldman subject to regulation in Switzerland by the Swiss Federal Banking Commission.

(c) The term “Borrower” includes Goldman, the U.S. Broker-Dealers, and the Foreign Borrowers.

Effective Date: This proposed exemption, if granted, will be effective as of March 22, 2002.

1. Goldman, Sachs & Co. (Goldman), a New York limited partnership, is a wholly owned subsidiary and the principal operating subsidiary of The Goldman Sachs Group, Inc. (the GS Group), a Delaware corporation. Goldman, a full-line investment services firm, is registered with and regulated by the Securities and Exchange Commission (the SEC) as a broker-dealer and as an investment adviser, is registered with and regulated by the Commodity Futures Trading Commission (the CFTC) as a futures commission merchant, is a member of the New York Stock Exchange (the NYSE) and other principal securities exchanges in the United States, and is also a member of the National Association of Securities Dealers, Inc. (the NASD). As of August 31, 2001, the GS Group had approximately $302 billion in assets and $17.96 billion in shareholders' equity.

Goldman has several foreign affiliates which are broker-dealers or banks. The affiliated foreign broker-dealers or banks of Goldman that will be covered by this proposed exemption (the Foreign Borrowers), and their respective regulating entities, are as follows: (a) Goldman Sachs Canada Inc., located in Toronto, is subject to regulation by the Ontario Securities Commission and the Investment Dealers Association in Canada, (b) Goldman Sachs International and Goldman Sachs Equity Securities (U.K.), located in London, are subject to regulation by the Securities and Futures Authority (the UK FSA) (formerly, the Securities and Futures Authority (the UK SFA)) in the United Kingdom, (c) Goldman, Sachs & Co. oHG, located in Frankfurt, is subject to regulation by the Deutsche Bundesbank and the Federal Banking Supervisory Authority, i.e., der Bundesaufsichtsamt für das Krewitwesen (the BAK) in Germany, (d) Goldman Sachs (Japan) Ltd., located in Tokyo, is subject to regulation by the Financial Services Agency and the Tokyo Stock Exchange in Japan, (e) Goldman Sachs Australia Pty Limited, located in Sydney, is subject to regulation by the Australian Securities & Investments Commission (the ASIC) in Australia, (f) Goldman, Sachs & Co. Bank, located in Zurich, is subject to regulation by the Swiss Federal Banking Commission in Switzerland, and (g) any broker-dealer or bank that, now or in the future, is an affiliate of Goldman which is subject to regulation by the Ontario Securities Commission and the Investment Dealers Association in Canada, the UK SFA in the United Kingdom, the Deutsche Bundesbank and the BAK in Germany, the Financial Services Agency and the Tokyo Stock Exchange in Japan, the ASIC in Australia, or the Swiss Federal Banking Commission in Switzerland.

2. The Borrowers, acting as principal, actively engage in the borrowing and lending of securities. The Borrowers utilize borrowed securities either to satisfy their own trading requirements or to re-lend to other broker-dealers and entities which need a particular security for a certain period of time. The Applicants represent that in the United States, as described in the Federal Reserve Board's Regulation T, borrowed securities are often used in short sales, for non-purpose loans to exempted borrowers, or in the event of a failure to receive securities that a broker-dealer is required to deliver.

The Applicants wish to enter into exclusive borrowing arrangements with employee benefit plans, including commingled investment funds holding the assets of such plans (Plans), for which Goldman or any affiliate of Goldman may be a party in interest. For example, Goldman or an affiliate may be an investment manager for assets of a Plan that are unrelated to the assets involved in the transaction. Goldman or any of its affiliates may provide securities custodial services, directed trustee services, clearing and/or reporting functions in connection with securities lending transactions, or other services to the Plan.

3. The Applicants represent that although the Foreign Borrowers will not be registered with the SEC, their activities are subject to regulation by a governmental agency in the foreign country in which they are located. The Applicants further represent that registration of a foreign broker-dealer or bank with the governmental agency in these cases addresses regulatory concerns similar to those concerns addressed by registration of a broker-dealer with the SEC under the 1934 Act. The rules and regulations set forth by the above-referenced agencies and the SEC share a common objective: the protection of the investor by the regulation of securities markets.

4. The Applicants represent that although Goldman Sachs International and Goldman Sachs Equity Securities (U.K.) or any other foreign broker-dealer of Goldman in the United Kingdom will not be registered with the SEC, their activities are governed by the rules, regulations and membership requirements of the UK FSA. In this regard, the Applicants state that these broker-dealers are subject to the UK FSA rules relating to, among other things, minimum capitalization, reporting requirements, periodic examinations, client money and safe custody rules, and books and records requirements with respect to client accounts. The Applicants represent that the UK FSA rules require each firm which employs registered representatives or registered traders to have positive tangible net worth and to be able to meet its obligations as they may fall due, and that the UK FSA rules set forth comprehensive financial resource and reporting/disclosure rules regarding capital adequacy. In addition, to demonstrate capital adequacy, the Applicants state that the UK FSA rules impose reporting/disclosure requirements on broker-dealers with respect to risk management, internal controls, and transaction reporting and recordkeeping requirements. In this regard, required records must be produced at the request of the UK FSA at any time. The Applicants further state that the rules and regulations of the UK FSA for broker-dealers are backed up by potential fines and penalties as well as a comprehensive disciplinary system.

5. With respect to Canada, the United Kingdom, Japan, and Australia, all these countries have comprehensive financial resource and reporting/disclosure rules concerning broker-dealers. Broker-dealers are required to demonstrate their capital adequacy. The reporting/disclosure rules impose requirements on broker-dealers with respect to risk management, internal controls, and records relating to counterparties. All such records must be produced at the request of the agency at any time. The agencies' registration requirements for broker-dealers are enforced by fines and penalties and thus constitute a comprehensive disciplinary system for the violation of such rules.

6. With respect to Germany, the BAK, an independent federal institution with ultimate responsibility to the Ministry of Finance, in cooperation with the Deutsche Bundesbank, the central bank of the German banking system, provides extensive regulation of the banking sector. The BAK insures that Goldman, Sachs & Co. oHG has procedures for monitoring and controlling its worldwide activities through various statutory and regulatory standards, such as requirements regarding adequate internal controls, oversight, administration and financial resources. The BAK reviews compliance with these limitations on operations and internal control requirements through an annual audit performed by the year-end auditor and through special audits, e.g., on specific sections of the Banking Act, as ordered by the BAK and the respective State Central Bank auditors. The BAK obtains information on the condition of Goldman, Sachs & Co. oHG by requiring submission of periodic, consolidated financial reports and through a mandatory annual report prepared by the auditor. The BAK also receives information regarding capital adequacy, country risk exposure, and foreign exchange exposure from Goldman, Sachs & Co. oHG. German banking law mandates penalties to insure correct reporting to the BAK. The auditors face penalties for gross violation of their duties in auditing, for reporting misleading information, omitting essential information from the audit report, failing to request pertinent information, or failing to report to the BAK.

7. With respect to Switzerland, the powers of the Swiss Federal Banking Commission include licensing banks, issuing directives to address violations by or irregularities involving banks, requiring information from a bank or its auditor regarding supervisory matters and revoking bank licenses. The Swiss Federal Banking Commission exercises oversight over Swiss banks, such as Goldman, Sachs & Co. Bank, through independent auditors known as “Recognized Auditors,” which act on behalf of the Commission under detailed statutory provisions. Each Swiss bank, including Goldman, Sachs & Co. Bank, must appoint a recognized Auditor and notify the Swiss Federal Banking Commission of an intent to change its auditor. The Recognized Auditor may take action within a bank as deemed necessary or as instructed by the Swiss Federal Banking Commission and must inform the Commission of supervisory matters. The Swiss Federal Banking Commission insures that Goldman, Sachs & Co. Bank has procedures for monitoring and controlling its worldwide activities through various statutory and regulatory standards. Among these standards are requirements for adequate internal controls, oversight, administration, and financial resources. The Swiss Federal Banking Commission reviews compliance with these limitations on operations and internal control requirements through an annual audit performed by the Recognized Auditor.

The Swiss Federal Banking Commission obtains information on the condition of Goldman, Sachs & Co. Bank and its foreign offices and subsidiaries by requiring submission of periodic, consolidated financial reports and through a mandatory annual report prepared by the Recognized Auditor. The Swiss Federal Banking Commission also receives information regarding capital adequacy, country risk exposure, and foreign exchange exposures from Goldman, Sachs & Co. Bank.

Swiss banking law mandates penalties to insure correct reporting to the Swiss Federal Banking Commission. Recognized Auditors face penalties for gross violations of their duties in auditing, or reporting misleading information, omitting essential information from the audit report, failing to request pertinent information or failing to report to the Swiss Federal Banking Commission.

8. With respect to Australia, Goldman Sachs Australia Pty Limited is subject to regulation by ASIC, and as a participating organization, by the Australian Stock Exchange Limited (ASX). The rules of ASX (which are more detailed than those of ASIC) require each firm to have a positive tangible net worth and be able to meet its obligations as they may fall due. In addition, the rules of ASX set forth comprehensive financial resource and reporting/disclosure rules regarding capital adequacy. Further, to demonstrate capital adequacy, the rules of the ASX impose reporting/disclosure requirements on broker-dealers with respect to risk management, internal controls, and transaction reporting, and recordkeeping requirements, to the effect that required records must be produced upon request. ASIC also has rules covering these matters. Finally, the rules and regulations of ASX and ASIC impose potential fines and penalties on broker-dealers, establishing a comprehensive disciplinary system.

9. Goldman represents that, in connection with the transactions covered by this proposed exemption, the Foreign Borrowers' compliance with any applicable requirements of Rule 15a-6 (17 C.F.R. 240.15a-6) of the 1934 Act (as discussed further in Paragraph 10, below), and SEC interpretations thereof, providing for foreign affiliates a limited exemption from U.S. registration requirements, will offer additional protections to the Plans. 16

10. Rule 15a-6 provides an exemption from U.S. registration requirements for a foreign broker-dealer that induces or attempts to induce the purchase or sale of any security (including over-the-counter equity and debt options) by a “U.S. institutional investor” or a “major U.S. institutional investor,” provided that the foreign broker-dealer, among other things, enters into these transactions through a U.S. registered broker-dealer intermediary. The term “U.S. institutional investor,” as defined in Rule 15a-6(b)(7), includes an employee benefit plan within the meaning of the Act if (a) the investment decision is made by a plan fiduciary, as defined in section 3(21) of the Act, which is either a bank, savings and loan association, insurance company or registered investment advisor, or (b) the employee benefit plan has total assets in excess of $5 million, or (c) the employee benefit plan is a self-directed plan with investment decisions made solely by persons that are “accredited investors” as defined in Rule 501(a)(1) of Regulation D of the Securities Act of 1933, as amended. The term “major U.S. institutional investor” is defined as a person that is a U.S. institutional investor that has, or has under management, total assets in excess of $100 million or an investment adviser registered under section 203 of the Investment Advisers Act of 1940 that has total assets under management in excess of $100 million. 17 The Applicants represent that the intermediation of the U.S. registered broker-dealer imposes upon the foreign broker-dealer the requirement that the securities transaction be effected in accordance with a number of U.S. securities laws and regulations applicable to U.S. registered broker-dealers.

The Applicants represent that under Rule 15a-6, a foreign broker-dealer that induces or attempts to induce the purchase or sale of any security by a U.S. institutional or major U.S. institutional investor in accordance with Rule 15a-6  18 must, among other things:

(a) Consent to service of process for any civil action brought by, or proceeding before, the SEC or any self-regulatory organization;

(b) Provide the SEC with any information or documents within its possession, custody or control, any testimony of any such foreign associated persons, and any assistance in taking the evidence of other persons, wherever located, that the SEC requests and that relates to the transactions effected pursuant to the Rule;

(c) Rely on the U.S. registered broker-dealer through which the transactions with the U.S. institutional and major U.S. institutional investors are effected to (among other things):

(1) Effect the transactions, other than negotiating the terms;

(2) Issue all required confirmations and statements;

(3) As between the foreign broker-dealer and the U.S. registered broker-dealer, extend or arrange for the extension of credit in connection with the transactions;

(4) Maintain required books and records relating to the transactions, including those required by Rules 17a-3 (Records to be Made by Certain Exchange Members) and 17a-4 (Records to be Preserved by Certain Exchange Members, Brokers and Dealers) of the 1934 Act;

(5) Receive, deliver, and safeguard funds and securities in connection with the transactions on behalf of the U.S. institutional investor or major U.S. institutional investor in compliance with Rule 15c3-3 of the 1934 Act (Customer Protection—Reserves and Custody of Securities); 19 and

Notice is hereby given of the pendency before the Department of a proposed exemption to amend PTE 95-31. PTE 95-31 provides an exemption from certain prohibited transaction restrictions of section 406 of the Employee Retirement Income Security Act of 1974 (the Act) and from the sanctions resulting from the application of section 4975 of the Internal Revenue Code of 1986 (the Code), as amended, by reason of section 4975(c)(1) of the Code.

The proposed exemption has been requested in an application filed on behalf of the Fund and the Thrift Plan (together, the Applicants) pursuant to section 408(a) of the Act and section 4975(c)(2) of the Code, and in accordance with the procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, August 10, 1990). Effective December 31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR 47713, October 17, 1978) transferred the authority of the Secretary of the Treasury to issue exemptions of the type requested to the Secretary of Labor. Accordingly, the proposed exemption is being issued solely by the Department.

PTE 95-31 provides that—

• 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 provision of certain services, and the receipt of compensation for such services, by Pentegra Services, Inc. (Pentegra), a wholly-owned, for-profit subsidiary corporation of the Fund, to employee benefit plans (the Plans) and to their sponsoring employers (the Employers) that participate in the Fund and the Thrift Plan; provided that [certain] conditions are met.

As set forth in the Summary of Facts and Representations contained in the proposed notice to PTE 95-31 (60 FR 5700 (January 30, 1995)), the exemption provides relief for the provision of administrative services by Pentegra to the Plans and the Employers, and the receipt of compensation by Pentegra for such provision of services. The services provided by Pentegra include document preparation, the procurement of favorable determination letters from the Internal Revenue Service, the maintenance of plan books, and other similar plan administration services. At the time the exemption was granted, Pentegra did not offer trust services to any of its clients, including the Plans and/or the Employers.

The Applicants state that, to date, Pentegra has been successful in providing services to 66 defined contribution plans, 72 employee stock ownership plans, and 32 nonqualified plans. In addition, the Applicants represent that, in building a large and diverse client base, the Fund and the Thrift Plan complied with all of the conditions contained in PTE 95-31. The Fund now intends to create Trustco, a for-profit, limited purpose, national trust company as a means of providing trust services to, among others, the Plans, the Employers, the Thrift Fund, and the IRAs. The Applicants represent that the Fund seeks to create Trustco primarily in response to requests by numerous of Pentegra's current and prospective clients that Pentegra offer trust services to complement its various other administrative services.

The Applicants state that, once established, Trustco will offer trust services that are similar in nature to the services described in PTE 95-31. In this regard, the Applicants state that Trustco will provide only directed, non-discretionary trust services. 1 Accordingly, the Applicants request that such provision of services be subject to substantially the same conditions as those contained in PTE 95-31.

The Applicants state that the Fund, the Plans, the IRAs, and the Thrift Plan will be adequately protected with respect to the receipt by each such entity of services from Trustco. In this regard, with respect to the Fund, the Applicants state that the provision of trust services by Trustco to the Thrift Plan, the Plans, the IRAs and the Employers will be subject to, among other things, the prior approval of an independent fiduciary. In addition, the financial statements of Trustco will be subject to an annual audit conducted by an independent certified accountant and an annual review conducted by an independent fiduciary. With respect to the adequate protection of the Plans and the IRAs, the Applicants state that, among other things, the terms associated with any receipt of services by the Plans and the IRAs from Trustco will be no less favorable to the Plans and the IRAs than the terms contained in comparable agreements for services between unrelated parties. With respect to the adequate protection of the Thrift Plan, the Applicants state that, among other things, any selection of Trustco as provider of trust services to the Thrift Plan will be made by the Board of Directors of the Thrift Plan upon the Thrift Plan Board's determination that the services are necessary and the associated fees are reasonable. 2

The Applicants additionally seek relief for the provision of certain services by Pentegra to the Thrift Plan and the IRAs. The Applicants state that such provision of services is important to the continued success of Pentegra given that the employer market for pension plan services appears to be declining. The Applicants state that the proposed transactions involve services of the same nature and type as those described in PTE 95-31 and request that the terms and conditions applicable to this proposed provision of services be substantially the same as the terms and conditions contained therein. The Applicants state that the Thrift Plan will be adequately protected since, among other things, any selection of Pentegra as provider of trust services to Thrift Plan will be made by the Board of Directors of the Thrift Plan, such Board being independent of Pentegra as described in footnote 2, upon the Thrift Plan Board's determination that the services are necessary and the associated fees are reasonable. The Applicants additionally state that the IRAs will be adequately protected since, among other things, the terms associated with any receipt of services by the IRAs from Pentegra will be no less favorable to the IRAs than the terms contained in comparable agreements for services between unrelated parties.

Accordingly, this proposed exemption amends and revises the operative language of PTE 95-31 through the addition of: (1) The provision of non-discretionary, directed trust services by Trustco to the Plans, the Employers, the IRAs, and the Thrift Plan; and (2) the provision of certain services by Pentegra to the IRAs and the Thrift Plan.

Notice to Interested Persons: The applicant represents that notice to interested persons will be made within forty-five (45) business days following publication of this notice in the Federal Register . Comments and requests for a hearing must be received by the Department not later than seventy-five (75) days from the date of publication of this notice of proposed exemption in the Federal Register .

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 section 4975(c)(2) of the Code does not relieve a fiduciary or other party in interest or disqualified person from certain other provisions of the Act and the Code, including any prohibited transaction provisions to which the exemption does not apply and the general fiduciary responsibility provisions of section 404 of the Act, which require, among other things, a fiduciary to discharge his or her 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 requirements of section 401(a) of the Code that the plan operate for the exclusive benefit of the employees of the employer maintaining the plan and their beneficiaries;

(2) The proposed exemption, if granted, will not extend to transactions prohibited under section 406(b)(3) of the Act and section 4975(c)(1)(F) of the Code;

(3) Before an exemption can be granted under section 408(a) of the Act and section 4975(c)(2) of the Code, the Department must find that the exemption is administratively feasible, in the interest of the plan and of its participants and beneficiaries and protective of the rights of participants and beneficiaries of the plan;

(4) This proposed exemption, if granted, will be supplemental to, and not in derogation of, any other provisions of the Act and the Code, including statutory or administrative exemptions. 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

(5) This proposed exemption, if granted, is subject to the express condition that the facts and representations set forth in the notice of proposed exemption relating to PTE 95-31 and this notice, accurately describe, where relevant, the material terms of the transactions to be consummated pursuant to this exemption.

All interested persons are invited to submit written comments or requests for a hearing on the pending exemption to the address above, within the time frame set forth above, after the publication of this proposed exemption in the Federal Register . All comments will be made a part of the record. Comments received will be available for public inspection with the referenced applications at the address set forth above.

Based on the facts and representations set forth in the application, the Department is considering granting the requested exemption under the authority of section 408(a) of the Act and section 4975(c)(2) of the Code and in accordance with the procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, August 10, 1990).

If the exemption is granted, 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 provision of certain services, and the receipt of compensation for such services, by Pentegra Services, Inc. (Pentegra), a wholly-owned, for-profit subsidiary corporation of the Fund, and Trustco, a wholly-owned subsidiary corporation of Pentegra (collectively, the Service Providers), to: The Thrift Plan; employers that participate in the Fund and/or the Thrift Plan (the Employers); employee benefit plans sponsored by the Employers (the Plans); and the individual retirement accounts (the IRAs) established by certain employees, officers, directors and/or shareholders of the Employers (the Individuals); provided that the following conditions are met:

(a) A qualified, independent fiduciary of the Fund determines that the services provided by the Service Providers are in the best interests of the Fund and are protective of the rights of the participants and beneficiaries of the Fund;

(b) The terms associated with the provision of services by the Service Providers to the Plans, the Thrift Fund, and the IRAs, at the time such services are entered into, are not less favorable to all parties to the transaction than the terms generally available in comparable arm's-length transactions involving unrelated parties;

(c) The Service Providers receive reasonable compensation for the provision of services, as determined by an independent fiduciary;

(d) Prior to the provision of services by the Service Providers, the independent fiduciary will first review such services and will determine that such services are reasonable and appropriate for the Service Providers, taking into account such factors as: whether the Service Providers have the capability to perform such services, whether the fees to be charged reflect arm's-length terms, whether Service Provider personnel have the qualifications to provide such services, and whether such arrangements are reasonable based upon a comparison with similarly qualified firms in the same or similar locales in which the Service Providers propose to operate;

(e) No services will be provided by the Service Providers without the prior review and approval of the independent fiduciary;

(f) Not less frequently than quarterly, the independent fiduciary will perform periodic reviews to ensure that the services offered by the Service Providers remain appropriate for the Service Providers and that the fees charged by the Service Providers represent reasonable compensation for such services;

(g) Not less frequently than annually, the Service Providers will provide a written report to the board of directors of the Fund describing in detail the services provided to the Plans, the Employers, the IRAs, and the Thrift Plan, a detailed accounting of the fees received for such services, and an estimate as to the amount of fees the Service Providers expect to receive during the following year from such Plans and Employers;

(h) Not less frequently than annually, the independent fiduciary will conduct a detailed review of approximately 10 percent of all transactions completed by the Service Providers which will include a reasonable cross-section of all services performed; such transactions will be reviewed for compliance with the terms and conditions of this exemption;

(i) The financial statements of the Service Providers will be audited each year by an independent certified public accountant, and such audited statements will be reviewed by the independent fiduciary;

(j) The independent fiduciary shall have the authority to prohibit the Service Providers from performing services that such fiduciary deems inappropriate and not in the best interests of the Service Providers and the Fund;

(k) Each Service Provider contract with an Employer, an IRA, the Thrift Plan or a Plan will be subject to termination without penalty by any of the parties to the contract for any reason upon reasonable written notice;

(l) Trustco will act solely as a directed trustee and will not:

(1) Have any investment discretion with respect to the assets being held in trust,

(2) engage in any securities lending transactions, and/or

(3) provide any cash management services; and

(m) A majority of the Board of Directors of the Thrift Plan will at all times be independent of, and separate from, the Board of Directors of the Fund, the Board of Directors of Pentegra, and the Board of Directors of Trustco, and, with respect to the selection of Trustco and/or Pentegra as provider(s) of services to the Thrift Plan:

(1) Such majority members alone will give prior approval upon determining that such services are necessary and the associated fees charged are reasonable; and

(2) Any member of the Board of Directors of the Thrift Plan contemporaneously participating as a member of the Board of Directors of Pentegra (Trustco) will remove himself or herself from all consideration by the Thrift Plan regarding the provision of services by Trustco (Pentegra) to the Thrift Plan and will not otherwise exercise, with respect to such provision(s) of services, any of the authority, control or responsibility which makes him or her a fiduciary.

(1) The independent fiduciary and the Fund will maintain, or cause to be maintained, for a period of 6 years, the records necessary to enable the persons described in paragraph (2) of this section to determine whether the conditions of this exemption have been met, except that: (a) A prohibited transaction will not be considered to have occurred if, due to circumstances beyond the control of the independent fiduciary and the Fund, or their agents, the records are lost or destroyed before the end of the six year period; and (b) no party in interest other than the independent fiduciary and the Board of Directors of the Fund 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 (2) below.

(2)(a) Except as provided in section (b) of this paragraph and notwithstanding any provisions of subsections (a)(2) and (b) of section 504 of the Act, the records referred to in paragraph (1) of this section shall be unconditionally available at their customary location during normal business hours by:

(1) Any duly authorized employee or representative of the Department or the Internal Revenue Service;

(2) Any employer participating in the Fund and/or Thrift Plan or any duly authorized employee or representative of such employer;

(3) Any participant or beneficiary of the Fund, Thrift Plan, or Plan or any duly authorized representative of such participant or beneficiary; and

(4) Any Individual.

(b) None of the persons described above in subparagraphs (a)(2) and (a)(3) of this paragraph (2) shall be authorized to examine trade secrets of the independent fiduciary or the Fund, or their affiliates, or commercial or financial information which is privileged or confidential.

(3) For purposes of this section, references to the Fund shall also include the Service Providers.

The availability of this proposed exemption is subject to the express condition that the material facts and representations contained in the application for exemption are true and complete and accurately describe all material terms of the transactions. In the case of continuing transactions, if any of the material facts or representations described in the applications change, the exemption will cease to apply as of the date of such change. In the event of any such change, an application for a new exemption must be made to the Department.

For a more complete statement of the facts and representations supporting the Department's decision to grant PTE 95-31, refer to the proposed exemption and the grant notice which are cited above.