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Secretary of Labor Thomas E. Perez
Grant of Individual Exemptions; SEI Investments Company (SEI Investments), SEI Investments Management Corporation (SIMC) and SEI Private Trust Company (STC) [Notices] [01/25/2001]

EBSA (Formerly PWBA) Federal Register Notice

Grant of Individual Exemptions; SEI Investments Company (SEI Investments), SEI Investments Management Corporation (SIMC) and SEI Private Trust Company (STC) [01/25/2001]

[PDF Version]

Volume 66, Number 17, Page 7786-7800



[[Page 7786]]

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 2001-04; Exemption Application No. D-
10538, et al.]

 
Grant of Individual Exemptions; SEI Investments Company (SEI 
Investments), SEI Investments Management Corporation (SIMC) and SEI 
Private Trust Company (STC)

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of Individual Exemptions.

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SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(the Act) and/or the Internal Revenue Code of 1986 (the Code).
    Notices were published in the Federal Register of the pendency 
before the Department of proposals to grant such exemptions. The 
notices set forth a summary of facts and representations contained in 
each application for exemption and referred interested persons to the 
respective applications for a complete statement of the facts and 
representations. The applications have been available for public 
inspection at the Department in Washington, D.C. The notices also 
invited interested persons to submit comments on the requested 
exemptions to the Department. In addition the notices stated that any 
interested person might submit a written request that a public hearing 
be held (where appropriate). The applicants have represented that they 
have complied with the requirements of the notification to interested 
persons. No public comments and no requests for a hearing, unless 
otherwise stated, were received by the Department.
    The notices of proposed exemption were issued and the exemptions 
are being granted solely by the Department because, effective December 
31, 1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. 
App. 1 (1996), transferred the authority of the Secretary of the 
Treasury to issue exemptions of the type proposed to the Secretary of 
Labor.

Statutory Findings

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

SEI Investments Company (SEI Investments), SEI Investments 
Management Corporation (SIMC) and SEI Private Trust Company (STC), 
Located in Oaks, PA

[Prohibited Transaction Exemption 2001-04; Exemption Application No. D-
10538]

Exemption

Section I. Exemption for the Purchase of Fund Shares With Assets 
Transferred in Kind From a Plan Account

    The restrictions of section 406(a) and section 406(b) of the Act 
and the sanctions resulting from the application of section 4975 of the 
Code, by reason of section 4975(c)(1)(A) through (F) of the Code, shall 
not apply, effective June 19, 1996, to the purchase of shares of one or 
more open-end management investment companies (the Fund or Funds) 
registered under the Investment Company Act of 1940 (the ICA), to which 
SEI Investments, SIMC, STC, or any of their affiliates (collectively, 
SEI) serve as investment adviser and may provide other services, by an 
employee benefit plan (the Plan or Plans) whose assets are held by SEI 
as trustee, investment manager, or as a discretionary fiduciary, in 
exchange for securities held by the Plan in an account (the Account) 
with SEI (the Purchase Transaction), provided the following conditions 
are met:
    (a) A fiduciary (the Second Fiduciary) who is acting on behalf of 
each affected Plan and who is independent of and unrelated to SEI, as 
defined in paragraph (g) of Section III below, receives advance written 
notice of the Purchase Transaction and full and written information 
concerning the Funds which includes the following:
    (1) A current prospectus for each Fund to which the Plan's assets 
may be transferred;
    (2) A statement describing the fees to be charged to, or paid by, 
the Plan and the Funds to SEI, including the nature and extent of any 
differential between the rates of the fees paid by the Fund and the 
rates of the fees otherwise payable by the Plan to SEI;
    (3) A statement of the reasons why SEI may consider the Purchase 
Transaction to be appropriate for the Plan;
    (4) A statement of whether there are any limitations on SEI with 
respect to which Plan assets may be invested in the Funds;
    (5) The identity of all securities that are deemed suitable by the 
Funds' sub-advisers for transfer to the Funds;
    (6) The identity of all such securities that will be valued in 
accordance with the procedures set forth in Rule 17a-7(b)(4) under the 
ICA; and
    (7) Upon such fiduciary's request, copies of the proposed and final 
exemptions pertaining to the exemptive relief provided herein for 
Purchase Transactions occurring after the date of the final exemption.
    (b) On the basis of the foregoing information, the Second Fiduciary 
gives SEI prior written approval with respect to--
    (1) Each Purchase Transaction, consistent with the 
responsibilities, obligations, and duties imposed on fiduciaries by 
Part 4 of Title I of the Act;
    (2) The transaction date proposed by SEI; and
    (3) The receipt of confirmation statements, described below in 
paragraph (g)(1) and (g)(2), by facsimile or electronic mail.
    (c) No sales commissions or other fees are paid by the Plans in 
connection with a Purchase Transaction.
    (d) All transferred assets are securities for which market 
quotations are readily available, or cash.
    (e) The transferred assets consist of assets transferred to the 
Plan's Account at the direction of the Second Fiduciary and constitute 
all of the assets held in the Account immediately prior to the transfer 
(other than Fund shares already held in the Account). With respect to 
any Plan assets transferred in-kind to an Account which are not 
suitable for acquisition by the Funds, such assets are liquidated as 
soon as reasonably practicable and the cash proceeds are invested 
directly in Fund shares.
    (f) With respect to assets transferred in-kind, each Plan receives 
shares of a Fund which have a total net asset value that is equal to 
the value of the assets of the Plan exchanged for such shares, based on 
the current market value of such assets at the close of the business 
day on which such Purchase Transaction occurs, using independent 
sources in accordance with the procedures set forth in Rule 17a-7b 
(Rule 17a-7) under the ICA and the procedures established by the Funds 
pursuant to Rule 17a-7 for the valuation of such assets. Such 
procedures must require that all securities for which a current market 
price cannot be obtained by reference to the last sale price for 
transactions reported on a recognized

[[Page 7787]]

securities exchange or NASDAQ be valued based on an average of the 
highest current independent bid and lowest current independent offer, 
as of the close of business on the last business day prior to the 
Purchase Transaction determined on the basis of reasonable inquiry from 
at least three sources that are broker-dealers or pricing services 
independent of SEI.
    (g) SEI sends by regular mail or personal delivery or, if 
applicable, by facsimile or electronic mail to the Second Fiduciary of 
each Plan that engages in a Purchase Transaction, the following 
information:
    (1) Not later than 30 business days after completion of each 
Purchase Transaction, a written confirmation which contains--
    (A) The identity of each of the assets that was valued for purposes 
of the transaction in accordance with Rule 17a-7(b)(4) under the ICA;
    (B) The current market price, as of the date of the Purchase 
Transaction, of each of the assets involved in the Purchase 
Transaction; and
    (C) The identity of each pricing service or market maker consulted 
in determining the value of such assets.
    (2) Not later than 90 days after completion of each Purchase 
Transaction, a written confirmation which contains--
    (A) The aggregate dollar value of the assets held in the Account 
immediately before the Purchase Transaction; and
    (B) The number of shares of the Funds that are held by the Account 
following the Purchase Transaction (and the related per share net asset 
value and the aggregate dollar value of the shares received).
    (h) With respect to each of the Funds in which a Plan continues to 
hold shares acquired in connection with a Purchase Transaction, SEI 
provides the Second Fiduciary with--
    (1) A copy of an updated prospectus of such Fund, at least 
annually; and
    (2) Upon request of the Second Fiduciary, a report or statement 
(which may take the form of the most recent financial report, the 
current statement of additional information, or some other statement) 
containing a description of all fees paid by the Fund to SEI.
    (i) As to each Plan, the combined total of all fees received by SEI 
for the provision of services to the Plan, and in connection with a 
Purchase Transaction, is not in excess of ``reasonable compensation'' 
within the meaning of section 408(b)(2) of the Act.
    (j) All dealings in connection with the Purchase Transaction 
between the Plan and the Fund are on a basis no less favorable to the 
Plan than dealings between the Fund and other shareholders.
    (k) Between June 19, 1996 and the date this final exemption is 
granted, no Plan may enter into more than one Purchase Transaction with 
the Funds. However, subsequent to the granting of this exemption, a 
Second Fiduciary may engage in more than one Purchase Transaction 
provided that such Second Fiduciary allocates additional securities 
representing a different asset class to a Plan Account.
    (l) SEI maintains for a period of six years, in a manner that is 
accessible for audit and examination, the records necessary to enable 
the persons, as described in paragraph (m) of this Section I, to 
determine wither the conditions of this proposed 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 SEI, the 
records are lost or destroyed prior to the end of the six year period; 
and
    (2) No party in interest, other than SEI, shall be subject to the 
civil penalty that may be assessed under section 502(i) of the Act, or 
to the taxes imposed by section 4975(a) and (b) of the Code, if the 
records are not maintained, or are not available for examination as 
required by paragraph (m) of this Section I.
    (m)(1) Except as provided in paragraph (m)(2) of this Section II 
and notwithstanding any provisions of subsections (a)(2) and (b) of 
section 504 of the Act, the records referred to in paragraph (l) of 
Section I above are unconditionally available at their customary 
location for examination during normal business hours by--
    (A) Any duly authorized employee or representative of the 
Department, the Internal Revenue Service or the Securities and Exchange 
Commission;
    (B) Any fiduciary of each of the Plans who has authority to acquire 
or dispose of shares of any of the Funds owned by such a Plan, or any 
duly authorized employee or representative of such fiduciary; and
    (C) Any participant or beneficiary of the Plans or duly authorized 
employee or representative of such participant or beneficiary.
    (2) None of the persons described in paragraph (m)(1)(B) or (C) of 
this Section I shall be authorized to examine the trade secrets of SEI 
or commercial or financial information which is privileged or 
confidential.

Section II. Availability of PTE 77-4

    Any purchase of Fund shares that complies with the conditions of 
Section I of this exemption shall be treated as a ``purchase or sale'' 
of shares of an open-end investment company for purposes of PTE 77-4 
and shall be deemed to have satisfied paragraphs (a), (d) and (e) of 
Section II of PTE 77-4 (42 FR 18732, April 3, 1977).\1\
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    \1\ In relevant part, PTE 77-4 permits the purchase and sale by 
an employee benefit plan of shares of a registered open-end 
investment company when a fiduciary with respect to such plan is 
also the investment adviser for the mutual fund. Section II(a) of 
PTE 77-4 requires that a plan does not pay a sales commission in 
connection with such purchase or sale. Section II(d) describes the 
disclosures that are to be received by an independent plan 
fiduciary. For example, the plan fiduciary must receive a current 
prospectus for the mutual fund as well as full and detailed written 
disclosure of the investment advisory and other fees that are 
charged to or paid by the plan and the investment company. Section 
II(e) requires that the independent plan fiduciary approve, in 
writing, purchases and sales of mutual fund shares on the basis of 
the disclosures given.
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Section III. Definitions

    For purposes of this exemption,
    (a) The term ``SEI'' means SEI Investments Company, SEI Investments 
Management Corporation, SEI Private Trust Company and any affiliate of 
SEI, as defined in paragraph (b) of this Section III.
    (b) An ``affiliate'' of a person includes:
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person;
    (2) Any officer, director, employee, relative, or partner in any 
such person; and
    (3) Any corporation or partnership of which such person is an 
officer, director, partner, or employee.
    (c) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (d) The term ``Fund'' or ``Funds'' means any open-end investment 
company or companies registered under the ICA for which SEI serves as 
investment adviser, and may also provide custodial or other services as 
approved by such Funds.
    (e) The term ``net asset value'' means the amount for purposes of 
pricing all purchases and sales calculated by dividing the value of all 
securities, determined by a method as set forth in a Fund's prospectus 
and statement of additional information, and other assets belonging to 
each of the portfolios in such Fund, less the liabilities charged to 
each portfolio, by the number of outstanding shares.
    (f) The term ``relative'' means a ``relative'' as that term is 
defined in section 3(15) of the Act (or a ``member

[[Page 7788]]

of the family'' as that term is defined in section 4975(e)(6) of the 
Code), or a brother, a sister, or a spouse of a brother or a sister.
    (g) The term ``Second Fiduciary'' means a fiduciary of a plan who 
is independent of and unrelated to SEI. For purposes of this exemption, 
the Second Fiduciary will not be deemed to be independent of and 
unrelated to SEI if--
    (1) Such Second Fiduciary directly or indirectly controls, is 
controlled by, or is under common control with SEI;
    (2) Such Second Fiduciary, or any officer, director, partner, 
employee, or relative of such Second Fiduciary is an officer, director, 
partner, or employee of SEI (or is a relative of such persons); or
    (3) Such Second Fiduciary directly or indirectly receives any 
compensation or other consideration from SEI for his or her own 
personal account in connection with any transaction described in this 
proposed exemption.
    If an officer, director, partner, or employee of SEI (or a relative 
of such persons), is a director of such Second Fiduciary, and if he or 
she abstains from participation in (A) the choice of the Plan's 
investment manager/adviser; (B) the approval of any purchase, continued 
holding or redemption by the Plan of shares of the Funds; and (C) the 
approval of any change of fees charged to or paid by the Plan, in 
connection with the transactions described above in Section I, then 
paragraph (g)(2) of this Section III, shall not apply.

EFFECTIVE DATE: This exemption is effective as of June 19, 1996, with 
the exception of Section I(a)(7), which is applicable for Purchase 
Transactions occurring after the date of the final exemption.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption (the Notice) published on October 11, 
2000 at 65 FR 60456.

Written Comments

    The Department received one written comment with respect to the 
Notice and no requests for a public hearing. The comment, which was 
submitted on behalf of SEI suggested certain clarifications or 
modifications to the operative language and the Summary of Facts and 
Representations (the Summary) of the Notice. Following are a discussion 
of SEI's comments and the Department's responses with respect thereto.
    1. STC. On page 60459 of the Notice, Representation 3 of the 
Summary contains a description of STC, a wholly owned subsidiary of 
SEI. SEI wishes to clarify that the name ``SEI Trust Company'' has been 
changed to ``SEI Private Trust Company'' and that STC serves as trustee 
of the Plans but not as an investment manager.
    The Department has noted the foregoing revisions to Representation 
3 of the Summary. In addition, on page 60457 of the Notice, in the 
caption identifying SEI and its affiliates, the Department has revised 
the name ``SEI Trust Company'' to read ``SEI Private Trust Company.'' 
The Department has also made a corresponding change to Section III(a) 
of the final exemption in the definition of the term ``SEI.''
    2. The Funds--The Managed Trust. On page 60459 of the Notice, 
Representation 5(b) of the Summary identifies twelve Fund portfolios 
comprising the Managed Trust. SEI represents that, in addition to the 
listed portfolios, the Managed Trust also includes the ``Tax-Managed 
Small Cap Fund'' portfolio.
    In response to this comment, the Department has noted the revision 
to Representation 5(b).
    3. The Asset Allocation Strategy. On pages 60459 and 60460 of the 
Notice, Representation 7 of the Summary describes SEI's asset 
allocation strategy (the Strategy). SEI states that the sixth and 
seventh paragraphs of Representation 7 refer to ``no separate fee being 
charged for an asset allocation'' and to the allocation ``to only one 
asset allocation.'' SEI points out that the term ``asset allocation'' 
should refer instead to the term ``Strategy,'' as previously denoted in 
Representation 7.
    In response to this comment, the Department has noted this change 
to Representation 7.
    4. Footnote 8. On page 60460 of the Notice, in Representation 8 of 
the Summary, Footnote 8 states, in relevant part, that ``Although the 
requested exemption currently covers unaffiliated sub-advisers, SEI 
represents that it may wish to retain affiliated sub-advisers for the 
Funds in the future so that the benefits of the Purchase Transactions 
will not be diluted.'' However, SEI wishes to clarify that since this 
representation was originally made to the Department, it has retained 
an affiliated sub-adviser which it has a 47 percent ownership interest.
    In response to this comment, the Department has noted this 
clarification to Representation 8.
    5. Footnote 12. On page 60461 of the Notice, in Representation 10 
of the Summary, Footnote 12 describes the circumstances under which 
SIMC and SEI would become fiduciaries. SEI represents that the language 
set forth in the footnote is ambiguous. Therefore, it suggests the 
following language (shown in italics) be substituted to clarify the 
precise nature of SIMC's or SEI's potential fiduciary status:

    It is represented that SIMC does not become a discretionary 
investment management fiduciary until after the Second Fiduciary has 
specified which portion of the Plan's assets (including which 
specific assets) will be allocated to the Account. It is also 
represented that SEI may become a non-discretionary investment 
advisory fiduciary with respect to a particular pool of assets 
(e.g., helping the Plan develop its Strategy) before those assets 
are ``converted'' into Fund shares.

In response to this comment, the Department has noted this revision to 
Footnote 12.
    6. Footnote 14. On page 60461 of the Notice, in Representation 10 
of the Summary, Footnote 14 states, in part, that SIMC had accepted two 
or three new Plan clients which elected to engage in the Purchase 
Transactions. SEI explains that since this representation was 
originally made to the Department, approximately 18 new Plan clients 
have also elected to engage in the Purchase Transactions. However, SEI 
states that in no event has there been more than one such Purchase 
Transaction per Plan.
    SEI also represents that it has attempted to structure its client 
agreements to avoid undertaking fiduciary responsibility until after 
the completion of the Purchase Transactions. Therefore, it believes no 
exemptive relief is necessary. However, because of previously noted 
uncertainty on whether its services prior to the completion of a 
Purchase Transaction might involve the provision of investment advice, 
SEI maintains its request that the exemption be made retroactive to 
June 19, 1996 to cover all of the Purchase Transactions that have 
occurred since that time.
    In response to this comment, the Department has noted the revision 
to Footnote 14 and the fact that there has been no change in the 
retroactivity date of the exemption.
    7. Footnote 18. On page 60462 of the Notice, in Representation 14 
of the Summary, Footnote 18 describes the performance fees that may be 
charged to SEI. The footnote states, in part, that ``Both the weighting 
and the choice of indices are negotiated between the Plan and SEI.'' 
However, SEI wishes to clarify that these performance fee factors are 
not actively negotiated with each client Plan. Rather, SEI points out 
that the use of a performance fee and its

[[Page 7789]]

terms are always open to negotiation at the request of the client Plan.
    In response, the Department has noted this clarification to 
Footnote 18.
    8. Representation 14. On page 60463 of the Notice, the sixth 
paragraph of Representation 14 of the Summary states, in part, that 
SEI's current practice is to credit back to the Plans fees for 
Secondary Services in the same manner as SEI credits back its Fund-
level investment advisory fees. The paragraph also states that SEI 
reserves the right to retain such fees for Secondary Services in the 
future in accordance with the Department's advisory opinions involving 
PNC Financial Corp. (ERISA Advisory Opinion 93-12A, April 27, 1993) and 
the Frank Russell Company (ERISA Advisory Opinion 93-13A, April 27, 
1993). However, SEI states that since the original representation was 
made to the Department, it has exercised its right to retain some fees 
for Secondary Services in accordance with the referenced advisory 
opinions.
    In response to this comment, the Department has noted this 
clarification to Representation 14.
    10. Footnote 20. On page 60463 of the Notice, in Representation 15 
of the Summary, Footnote 20 sets forth the following notice provisions 
to be provided to a Plan's Second Fiduciary with respect to securities 
brokerage transactions that may be executed by SEI or its affiliates 
with respect to Fund portfolios.

    In some cases, SEI executes brokerage transactions for the 
investment portfolios of certain of the Funds as a Secondary 
Service. To the extent that SEI does not presently execute 
securities brokerage transactions with respect to any Fund for which 
an investment advisory fee is paid to SEI, but proposes to do so in 
the future, for any Plan that invests in the Fund (other than an 
SEI-sponsored Plan investing in the Fund pursuant to PTE 77-3), SEI 
will, at least 30 days in advance of the implementation of such 
additional service, provide a written notice to the Plan's Second 
Fiduciary which explains the nature of such additional brokerage 
service and the amount of the fees. Further, with respect to any 
Fund for which SEI does or will provide such brokerage services, SEI 
will provide, at least annually to each such Plan, a written 
disclosure indicating (a) the total, expressed in dollars, of 
brokerage commissions of each Fund's investment portfolio that are 
paid to SEI by such Fund; (b) the total, expressed in dollars, of 
brokerage commissions of each Fund's investment portfolio that are 
paid by such Fund to brokerage firms unrelated to SEI; (c) the 
average brokerage commissions per share, expressed as cents per 
share, paid to SEI by each portfolio of a Fund; and (d) the average 
brokerage commissions per share, expressed as cents per share, paid 
by each portfolio of a Fund to brokerage firms unrelated to SEI.

    SEI maintains that this type of disclosure is overly burdensome and 
unnecessary. Once Plans have invested in the Funds, SEI represents that 
it is relying on PTE 77-4 to address the fee issue. In the event 
brokerage services are added as Secondary Services, SEI maintains that 
it will comply with the provisions of PTE 77-4 by providing, at least 
30 days in advance of the implementation of such additional service, a 
written notice to the Plan's Second Fiduciary. Although the notice will 
explain the nature of the additional brokerage service and the amount 
of the fees, SEI explains that it does not wish to provide the annual 
notice as further described in the footnote.
    In response to this comment, the Department does not object to 
SEI's decision not to provide a Second Fiduciary with an annual 
disclosure pertaining to brokerage services. Although SEI proposed this 
additional disclosure in its application in order to provide the Second 
Fiduciary with information to assist such fiduciary in monitoring Fund 
investments that are made by a client Plan, the Department notes that 
SEI is relying on the provisions of PTE 77-4 which contain separate 
disclosure requirements as they pertain to fees and that no relief is 
provided under this exemption for SEI's receipt of fees from the Funds.
    Finally, the Department notes that SEI did not inform interested 
persons of the proposed exemption within the time frame specified in 
the proposed exemption. Therefore, the Department requested that SEI 
extend the comment period. Subsequently, SEI complied with the 
Department's request.
    For further information regarding SEI's comment letter and other 
matters discussed therein, interested persons are encouraged to obtain 
copies of the exemption application file (Exemption Application No. D-
10538) the Department is maintaining in this case. The complete 
application file, as well as all supplemental submissions received by 
the Department, are made available for public inspection in the Public 
Documents Room of the Pension and Welfare Benefits Administration, Room 
N-5638, U.S. Department of Labor, 200 Constitution Avenue, NW, 
Washington, DC 20210.
    Accordingly, after giving full consideration to the entire record, 
including the SEI's comment, the Department has decided to grant the 
exemption subject to the modifications described above.

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

DuPont Capital Management Corporation, Located in Wilmington, DE

[Prohibited Transaction Exemption 2001-05, Exemption Application Nos.: 
D-10744 through D-10746]

Exemption

I. Transactions

    The restrictions of section 406(a)(1)(A) through (D) and the 
sanctions resulting from the application of section 4975 of the Code by 
reason of section 4975(c)(1)(A) through (D),\2\ shall not apply to a 
transaction between a party in interest with respect to certain plans 
(the Former DuPont Related Plans), as defined in Section II(e), below, 
and an investment fund in which such plans have an interest (Investment 
Fund), as defined in Section II(k), below, provided that DuPont Capital 
Management Corporation (DCMC) has discretionary authority or control 
with respect to the plan assets involved in the transaction and the 
following conditions are satisfied:
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    \2\ For purposes of this exemption, references to specific 
provisions of Title I of the Act, unless otherwise specified, refer 
to the corresponding provisions of the Code.
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    (a) DCMC is an investment adviser registered under the Investment 
Advisers Act of 1940 that has, as of the last day of its most recent 
fiscal year, total assets, including in-house plan assets (In-house 
Plan Assets), as defined in Section II(g), below, under its management 
and control in excess of $100 million and either:
    (1) shareholders' or partners' equity, as defined in Section II(j), 
below, in excess of $750,000; or
    (2) payment of all its liabilities, including any liabilities that 
may arise by reason of a breach or violation of a duty described in 
sections 404 or 406 of the Act, is unconditionally guaranteed by a 
person with a relationship to DCMC, as described in Section II(a)(1), 
below, if DCMC and such affiliate have, as of the last day of their 
most recent fiscal year, shareholders' or partners' equity, in the 
aggregate, in excess of $750,000;
    (b) At the time of the transaction, as defined in Section II(m), 
below, the party in interest or its affiliate, as defined in Section 
II(a), below, does not have, and during the immediately preceding one 
(1) year has not exercised, the authority to--
    (1) Appoint or terminate DCMC as a manager of any of the Former 
DuPont Related Plans' assets, or
    (2) Negotiate the terms of the management agreement with DCMC 
(including renewals or modifications

[[Page 7790]]

thereof) on behalf of the Former DuPont Related Plans;
    (c) The transaction is not described in--
    (1) Prohibited Transaction Class Exemption 81-6 (PTCE 81-6) \3\ 
(relating to securities lending arrangements);
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    \3\ 46 FR 7527, January 23, 1981.
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    (2) Prohibited Transaction Class Exemption 83-1 (PTCE 83-1) \4\ 
(relating to acquisitions by plans of interests in mortgage pools), or
    (3) Prohibited Transaction Class Exemption 82-87 (PTCE 82-87) \5\ 
(relating to certain mortgage financing arrangements);
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    \4\ 48 FR 895, January 7, 1984.
    \5\ 47 FR 21331, May 18, 1982.
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    (d) The terms of the transaction are negotiated on behalf of the 
Investment Fund by, or under the authority and general direction of, 
DCMC, and either DCMC, or (so long as DCMC retains full fiduciary 
responsibility with respect to the transaction) a property manager 
acting in accordance with written guidelines established and 
administered by DCMC, makes the decision on behalf of the Investment 
Fund to enter into the transaction;
    (e) At the time the transaction is entered into, and at the time of 
any subsequent renewal or modification thereof that requires the 
consent of DCMC, the terms of the transaction are at least as favorable 
to the Investment Fund as the terms generally available in arm's length 
transactions between unrelated parties;
    (f) Neither DCMC nor any affiliate thereof, as defined in Section 
II(b), below, nor any owner, direct or indirect, of a 5 percent (5%) or 
more interest in DCMC is a person who, within the ten (10) years 
immediately preceding the transaction, has been either convicted or 
released from imprisonment, whichever is later, as a result of:
    (1) any felony involving abuse or misuse of such person's employee 
benefit plan position or employment, or position or employment with a 
labor organization;
    (2) any felony arising out of the conduct of the business of a 
broker, dealer, investment adviser, bank, insurance company, or 
fiduciary;
    (3) income tax evasion;
    (4) any felony involving the larceny, theft, robbery, extortion, 
forgery, counterfeiting, fraudulent concealment, embezzlement, 
fraudulent conversion, or misappropriation of funds or securities; 
conspiracy or attempt to commit any such crimes or a crime in which any 
of the foregoing crimes is an element; or (5) any other crime described 
in section 411 of the Act.
    For purposes of this Section I(f), a person shall be deemed to have 
been ``convicted'' from the date of the judgment of the trial court, 
regardless of whether the judgment remains under appeal;
    (g) The transaction is not part of an agreement, arrangement, or 
understanding designed to benefit a party in interest;
    (h) The party in interest dealing with the Investment Fund:
    (1) Is a party in interest with respect to the Former DuPont 
Related Plans (including a fiduciary) solely by reason of providing 
services to the Former DuPont Related Plans, or solely by reason of a 
relationship to a service provider described in section 
3(14)(F),(G),(H), or (I) of the Act;
    (2) Does not have discretionary authority or control with respect 
to the investment of plan assets involved in the transaction and does 
not render investment advice (within the meaning of 29 CFR Sec. 2510.3-
21(c)) with respect to those assets; and (3) Is neither DCMC nor a 
person related to DCMC, as defined in Section II(i), below;
    (i) DCMC adopts written policies and procedures that are designed 
to assure compliance with the conditions of the exemption;
    (j) An independent auditor, who has appropriate technical training 
or experience and proficiency with the fiduciary responsibility 
provisions of the Act and who so represents in writing, conducts an 
exemption audit, as defined in Section II(f), below, on an annual 
basis. Following completion of the exemption audit, the auditor shall 
issue a written report to the Former DuPont Related Plans presenting 
its specific findings regarding the level of compliance with the 
policies and procedures adopted by DCMC in accordance with Section 
I(i), above, of this exemption; and (k)(1) DCMC or an affiliate 
maintains or causes to be maintained within the United States, for a 
period of six (6) years from the date of each transaction, the records 
necessary to enable the persons described in Section I(k)(2), below, 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 DCMC and/or its 
affiliates, the records are lost or destroyed prior to the end of the 
six (6) year period, and (b) no party in interest or disqualified 
person other than DCMC 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 Section 
I(k)(2), below, of this exemption.
    (2) Except as provided in Section I(k)(3), below, of this 
exemption, and notwithstanding any provisions of subsections (a)(2) and 
(b) of section 504 of the Act, the records referred to in Section 
I(k)(1), above, of this exemption are unconditionally available for 
examination at their customary location during normal business hours 
by:
    (A) any duly authorized employee or representative of the 
Department of Labor (the Department) or of the Internal Revenue 
Service;
    (B) any fiduciary of any of the Former DuPont Related Plans 
investing in the Investment Fund or any duly authorized representative 
of such fiduciary;
    (C) any contributing employer to any of the Former DuPont Related 
Plans investing in the Investment Fund or any duly authorized employee 
representative of such employer;
    (D) any participant or beneficiary of any of the Former DuPont 
Related Plans investing in the Investment Fund, or any duly authorized 
representative of such participant or beneficiary; and, (E) any 
employee organization whose members are covered by such Former DuPont 
Related Plans;
    (3) None of the persons described in Section I(k)(2)(B) through 
(E), above, of this exemption shall be authorized to examine trade 
secrets of DCMC or its affiliates or commercial or financial 
information which is privileged or confidential.

II. Definitions

    (a) For purposes of Section I (a) and (b), above, of this 
exemption, an ``affiliate'' of a person means--
    (1) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person,
    (2) Any corporation, partnership, trust, or unincorporated 
enterprise of which such person is an officer, director, 5 percent (5%) 
or more partner, or employee (but only if the employer of such employee 
is the plan sponsor), and (3) Any director of the person or any 
employee of the person who is a highly compensated employee, as defined 
in section 4975(e)(2)(H) of the Code, or who has direct or indirect 
authority, responsibility, or control regarding the custody, 
management, or disposition of plan assets. A named fiduciary, within 
the meaning of section 402(a)(2) of the Act, of a plan, and an employer 
any of whose employees are covered by the plan, will also be considered 
affiliates with respect to each other for purposes of Section I(b), if 
such employer or an affiliate of such

[[Page 7791]]

employer has the authority, alone or shared with others, to appoint or 
terminate the named fiduciary or otherwise negotiate the terms of the 
named fiduciary's employment agreement.
    (b) For purposes of Section I(f), above, of this exemption, an 
``affiliate'' of a person means--
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person,
    (2) Any director of, relative of, or partner in, any such person,
    (3) Any corporation, partnership, trust, or unincorporated 
enterprise of which such person is an officer, director, or a 5 percent 
(5%) or more partner or owner, and
    (4) Any employee or officer of the person who--
    (A) Is a highly compensated employee (as defined in section 
4975(e)(2)(H) of the Code) or officer (earning 10 percent (10%) or more 
of the yearly wages of such person), or
    (B) Has direct or indirect authority, responsibility or control 
regarding the custody, management, or disposition of plan assets.
    (c) For purposes of Section II(e) and (g), below, of this exemption 
an ``affiliate'' of DCMC includes a member of either:
    (1) a controlled group of corporations, as defined in section 
414(b) of the Code, of which DCMC is a member, or
    (2) a group of trades or businesses under common control, as 
defined in section 414(c) of the Code, of which DCMC is a member; 
provided that ``50 percent'' shall be substituted for ``80 percent'' 
wherever ``80 percent'' appears in section 414(b) or 414(c) of the 
rules thereunder.
    (d) The term, ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (e) ``Former DuPont Related Plans'' mean:
    (1) CONSOL Inc. Employee Retirement Plan (the CONSOL Plan);
    (2) the Pension Plan for Consolidation Coal Company Local 5400 
Union Employees (the CONSOL Union Plan);
    (3) the Investment Plan for Salaried Employees of CONSOL Inc. (the 
CONSOL DC Plan);
    (4) the Thrift Plan for Employees of Conoco Inc. (the Conoco DC 
Plan);
    (5) any plan the assets of which include or have included assets 
that were managed by DCMC, as an in-house asset manager (INHAM), 
pursuant to Prohibited Transaction Class Exemption 96-23 (PTCE 96-23) 
\6\ but as to which PTCE 96-23 is no longer available because such 
assets are no longer held under a plan maintained by an affiliate of 
DCMC (as defined in Section II(c), above, of this exemption); and
---------------------------------------------------------------------------

    \6\ 61 FR 15975 (April 10, 1996)
---------------------------------------------------------------------------

    (6) any plan (the Add-On Plan) that is sponsored or becomes 
sponsored by an entity that was, but has ceased to be, an affiliate of 
DCMC (as defined in Section II(c), above, of this exemption); provided 
that: (A) the assets of the Add-On Plan are invested in a commingled 
fund (the Commingled Fund), as defined in Section II(n), below, of this 
exemption, with the assets of a plan or plans, described in Section 
II(e)(1)-(5), above, of this exemption; and (B) the assets of the Add-
On Plan in the Commingled Fund do not comprise more than 25 percent 
(25%) of the value of the aggregate assets of such fund, as measured on 
the day immediately following the commingling of their assets (the 25% 
Test);
    For purposes of the 25% Test, as set forth in Section II(e)(6), 
above:
    (i) in the event that less than all of the assets of an Add-On Plan 
are invested in a Commingled Fund on the date of the initial transfer 
of such Add-On Plan's assets to such fund, and if such Add-On Plan 
subsequently transfers to such Commingled Fund some or all of the 
assets that remain in such plan, then for purposes of compliance with 
the 25% Test, the sum of the value of the initial and each additional 
transfer of assets of such Add-On Plan shall not exceed 25 percent 
(25%) of the value of the aggregate assets in such Commingled Fund, as 
measured on the day immediately following the addition of each 
subsequent transfer of such Add-On Plan's assets to such Commingled 
Fund;
    (ii) where the assets of more than one Add-On Plan are invested in 
a Commingled Fund with the assets of plans described in Section 
II(e)(1)-(5), above, of the exemption, the 25% Test will be satisfied, 
if the aggregate amount of the assets of such Add-On Plans invested in 
such Commingled Fund do not represent more than 25 percent (25%) of the 
value of all of the assets of such Commingled Fund, as measured on the 
day immediately following each addition of Add-On Plan assets to such 
Commingled Fund;
    (iii) if the 25% Test is satisfied at the time of the initial and 
any subsequent transfer of an Add-On Plan's assets to a Commingled 
Fund, as provided in Section II(e), above, this requirement shall 
continue to be satisfied notwithstanding that the assets of such Add-On 
Plan in the Commingled Fund exceed 25 percent (25%) of the value of the 
aggregate assets of such fund solely as a result of: (AA) a 
distribution to a participant in a Former DuPont Related Plan; (BB) 
periodic employer or employee contributions made in accordance with the 
terms of the governing plan documents; (CC) the exercise of discretion 
by a Former DuPont Related Plan participant to re-allocate an existing 
account balance in a Commingled Fund managed by DCMC or to withdraw 
assets from a Commingled Fund; or (DD) an increase in the value of the 
assets of the Add-On Plan held in such Commingled Fund due to 
investment earnings or appreciation;
    (iv) if, as a result of a decision by an employer or a sponsor of a 
plan described in Section II(e)(1)-(5) of the exemption to withdraw 
some or all of the assets of such plan from a Commingled Fund, the 25% 
Test is no longer satisfied with respect to any Add-On Plan in such 
Commingled Fund, then the exemption will immediately cease to apply to 
all of the Add-On Plans invested in such Commingled Fund; and
    (v) where the assets of a Commingled Fund include assets of plans 
other than Former DuPont Related Plans, as defined in Section II(e), 
above, of this exemption, the 25% Test will be determined without 
regard to the assets of such other plans in such Commingled Fund.
    (f) ``Exemption audit'' of any of the Former DuPont Related Plans 
must consist of the following:
    (1) A review of the written policies and procedures adopted by 
DCMC, pursuant to Section I(i), above, of this exemption for 
consistency with each of the objective requirements of this exemption, 
as described in Section II(f)(5), below;
    (2) A test of a representative sample of the subject transactions 
in order to make findings regarding whether DCMC is in compliance with:
    (A) the written policies and procedures adopted by DCMC, pursuant 
to Section I(i), above, of this exemption; and
    (B) the objective requirements of this exemption;
    (3) A determination as to whether DCMC has satisfied the 
requirements of Section I(a), above, of this exemption;
    (4) Issuance of a written report describing the steps performed by 
the auditor during the course of its review and the auditor's findings; 
and
    (5) For purposes of Section II(f) of this exemption, the written 
policies and procedures must describe the following

[[Page 7792]]

objective requirements of the exemption and the steps adopted by DCMC 
to assure compliance with each of these requirements:
    (A) the requirements of Section I(a), above, of this exemption 
regarding registration under the Investment Advisers Act of 1940, total 
assets under management, and shareholders' or partners' equity;
    (B) the requirements of Part I and Section I(d) of this exemption 
regarding the discretionary authority or control of DCMC with respect 
to the assets of the Former DuPont Related Plans involved in the 
transaction, in negotiating the terms of the transaction, and with 
regard to the decision on behalf of the Former DuPont Related Plans to 
enter into the transaction;
    (C) the transaction is not entered into with any person who is 
excluded from relief under Section I(h)(1), above, of this exemption, 
or Section I(h)(2) to the extent such person has discretionary 
authority or control over the plan assets involved in the transaction, 
or Section I(h)(3); and
    (D) the transaction is not described in any of the class exemptions 
listed in Section I(c), above, of this exemption.
    (g) ``In-house Plan Assets'' means the assets of any plan 
maintained by an affiliate of DCMC, as defined in Section II(c), above, 
of this exemption and with respect to which DCMC exercises 
discretionary authority or control.
    (h) The term, ``party in interest,'' means a person described in 
section 3(14) of the Act and includes a ``disqualified person,'' as 
defined in section 4975(e)(2) of the Code.
    (i) DCMC is ``related'' to a party in interest for purposes of 
Section I(h)(3) of this exemption, if the party in interest (or a 
person controlling, or controlled by, the party in interest) owns a 5 
percent (5%) or more interest in DCMC, or if DCMC (or a person 
controlling, or controlled by DCMC) owns a 5 percent (5%) or more 
interest in the party in interest.
    For purposes of this definition:
    (1) the term, ``interest,'' means with respect to ownership of an 
entity--
    (A) The combined voting power of all classes of stock entitled to 
vote or the total value of the shares of all classes of stock of the 
entity if the entity is a corporation,
    (B) The capital interest or the profits interest of the entity if 
the entity is a partnership; or
    (C) The beneficial interest of the entity if the entity is a trust 
or unincorporated enterprise; and
    (2) A person is considered to own an interest held in any capacity 
if the person has or shares the authority--
    (A) To exercise any voting rights or to direct some other person to 
exercise the voting rights relating to such interest, or
    (B) To dispose or to direct the disposition of such interest.
    (j) For purposes of Section I(a) of this exemption, the term, 
``shareholders'' or partners' equity,'' means the equity shown in the 
most recent balance sheet prepared within the two (2) years immediately 
preceding a transaction undertaken pursuant to this exemption, in 
accordance with generally accepted accounting principles.
    (k) ``Investment Fund'' includes single customer and pooled 
separate accounts maintained by an insurance company, individual trust 
and common, collective or group trusts maintained by a bank, and any 
other account or fund to the extent that the disposition of its assets 
(whether or not in the custody of DCMC) is subject to the discretionary 
authority of DCMC.
    (l) The term, ``relative,'' means a relative as that term is 
defined in section 3(15) of the Act, or a brother, sister, or a spouse 
of a brother or sister.
    (m) The ``time'' as of which any transaction occurs is the date 
upon which the transaction is entered into. In addition, in the case of 
a transaction that is continuing, the transaction shall be deemed to 
occur until it is terminated. If any transaction is entered into on or 
after the date when the grant of this exemption is published in the 
Federal Register or a renewal that requires the consent of DCMC occurs 
on or after such publication date and the requirements of this 
exemption are satisfied at the time the transaction is entered into or 
renewed, respectively, the requirements will continue to be satisfied 
thereafter with respect to the transaction. Nothing in this subsection 
shall be construed as exempting a transaction entered into by an 
Investment Fund which becomes a transaction described in section 406 of 
the Act or section 4975 of the Code while the transaction is 
continuing, unless the conditions of this exemption were met either at 
the time the transaction was entered into or at the time the 
transaction would have become prohibited but for this exemption. In 
determining compliance with the conditions of the exemption at the time 
that the transaction was entered into for purposes of the preceding 
sentence, Section I(h) of this exemption will be deemed satisfied if 
the transaction was entered into between a plan and a person who was 
not then a party in interest.
    (n) ``Commingled Fund'' means a trust fund managed by DCMC 
containing assets of some or all of the plans, described in Section 
II(e)(1)-(5), above, of this exemption, plans other than Former DuPont 
Related Plans, and, if applicable, any Add-On Plan, as to which the 25% 
Test, provided in Section II(e)(6), above, of this exemption has been 
satisfied; provided that: (1) where DCMC manages a single sub-fund or 
investment portfolio within such trust, the sub-fund or portfolio will 
be treated as a single Commingled Fund; and (2) where DCMC manages more 
than one sub-fund or investment portfolio within such trust, the 
aggregate value of the assets of such sub-funds or portfolios managed 
by DCMC within such trust will be treated as though such aggregate 
assets were invested in a single Commingled Fund.

Temporary Nature of Exemption

    The Department has determined that the relief provided by this 
exemption is temporary in nature. The exemption is effective upon the 
date this exemption is published in the Federal Register and expires on 
the day which is six (6) years from the date of such publication. 
Accordingly, the relief provided by this exemption will not be 
available upon the expiration of such six-year period for any new or 
additional transactions, as described herein, after such date, but 
would continue to apply beyond the expiration of such six-year period 
for continuing transactions entered into within the six-year period; 
provided the conditions of the exemption continue to be satisfied. 
Should the applicant wish to extend, beyond the expiration of such six-
year period, the relief provided by this exemption to new or additional 
transactions, the applicant may submit another application for 
exemption. In this regard, the Department expects that prior to filing 
another exemption application seeking relief for new or additional 
transactions, the applicant would be prepared to document compliance 
with the conditions of this exemption.

Written Comments

    In the Notice of Proposed Exemption (the Notice), the Department 
invited all interested persons to submit written comments and requests 
for a hearing on the proposed exemption. As set forth in the Notice, 
interested persons consist of the investment committee or trustees of 
each of the Former DuPont Related Plans. The deadline for submission of 
such comments and requests for hearing was within forty-five (45) days 
of the date of the publication of the Notice in the Federal Register on 
August 17, 2000. All comments and requests for a hearing were due on 
October 2, 2000.

[[Page 7793]]

    During the comment period, the Department received no requests for 
a hearing. However, the Department did receive several comment letters 
from DCMC, the applicant. In this regard, in a letter dated September 
25, 2000, DCMC requested that the Department make certain substantive 
changes to the operant language of the exemption and correct various 
typographical errors found in the Notice. Subsequently, in a letter 
dated October 17, 2000, DCMC withdrew the comment submitted on 
September 25, 2000, and instead requested clarification concerning 
certain aspects of the exemption and sought confirmation from the 
Department that the final exemption would still apply in certain 
factual circumstances. Thereafter, in follow-up letters dated October 
18, and October 23, 2000, DCMC suggested certain changes to the 
contents of its October 17 letter. DCMC's comments and suggested 
changes and the Department's responses, thereto, are summarized below.
    (A) DCMC asserts that the exemption would apply to trust assets 
managed by DCMC (assuming all other requirements of the exemption are 
met) in the case of a trust that has more than one asset portfolio, 
with participating plans having pro-rata undivided interests in all of 
the trust's assets, if: (a) DCMC manages assets within one or more of 
such asset portfolios, and (b) the plans utilizing the trust are all 
plans described in Section II(e)(1)-(5) of the exemption or any Add-On 
Plan, described in Section II(e)(6) of the exemption, as to which the 
25 percent (25%) test (the 25% Test) is satisfied by treating the trust 
as a single Commingled Fund.
    In response to this comment, it is the Department's view that for 
purposes of calculating compliance with the 25% Test with respect to 
assets of any Add-On Plan to be added to such trust, a single portfolio 
within the trust managed by DCMC shall be treated as a single 
Commingled Fund, and where DCMC manages more than one portfolio within 
such trust, the aggregate value of the assets of such portfolios 
managed by DCMC within such trust shall be treated as though such 
aggregate assets were invested in a single Commingled Fund.
    (B) DCMC asserts that the exemption would apply to trust assets 
managed by DCMC (assuming all other applicable requirements of the 
exemption are met) in the case of a single trust that has multiple 
separately valued investment sub-funds, with covered plan participants 
generally having the right to allocate the amounts held for them among 
the sub-funds in their discretion, if: (a) DCMC manages assets within 
one or more of such sub-funds, and (b) the plans participating in the 
trust are all plans described in Section II(e)(1)-(5) of the exemption 
or any Add-On Plan as to which the 25% Test, provided in Section 
II(e)(6) of the exemption, is satisfied by treating the trust as a 
single Commingled Fund.
    In response to this comment, it is the Department's position that, 
under the circumstances described above, the exemption will apply to 
the assets managed by DCMC within the trust, assuming all other 
requirements of the exemption are met. Further, it is the Department's 
view that for purposes of calculating compliance with the 25% Test with 
respect to assets of any Add-On Plan to be added to such trust under 
the circumstances described above, that each sub-fund within such trust 
managed by DCMC shall be treated as a single Commingled Fund and where 
DCMC manages more than one sub-fund within such trust, the aggregate 
value of the assets of such sub-funds managed by DCMC within such trust 
shall be treated as though such aggregate assets were invested in a 
single Commingled Fund.
    With respect to the two comments above, for purposes of clarity, 
the Department has added a new definition at paragraph (n), as set 
forth below, to Section II of the exemption:

    (n) ``Commingled Fund'' means a trust fund managed by DCMC 
containing assets of some or all of the assets of plans, described 
in Section II(e)(1)-(5), above, of this exemption, plans other than 
Former DuPont Related Plans, and, if applicable, any Add-On Plan, as 
to which the 25% Test, provided in Section II(e)(6), above, of this 
exemption has been satisfied; provided that: (1) where DCMC manages 
a single sub-fund or investment portfolio within such trust, the 
sub-fund or portfolio will be treated as a single Commingled Fund; 
and (2) where DCMC manages more than one sub-fund or investment 
portfolio within such trust, the aggregate value of the assets of 
such sub-funds or portfolios managed by DCMC within such trust will 
be treated as though such aggregate assets were invested in a single 
Commingled Fund.

    Further, the Department has amended the language of Section 
II(e)(6) to include a reference to the definition of a Commingled Fund 
and a reference to the 25% Test, as indicated below by the underlined 
passages:

    (6) any plan (the Add-On Plan) that is sponsored or becomes 
sponsored by an entity that was, but has ceased to be, an affiliate 
of DCMC (as defined in Section II(c), above, of this exemption); 
provided that: (A) the assets of the Add-On Plan are invested in a 
commingled fund (the Commingled Fund), as defined in Section II(n), 
below, of this exemption, with the assets of a plan or plans, 
described in Section II(e)(1)-(5), above, of this exemption; and (B) 
the assets of the Add-On Plan in the Commingled Fund do not comprise 
more than 25 percent (25%) of the value of the aggregate assets of 
such fund, as measured on the day immediately following the 
commingling of their assets (the 25% Test).

    (C) DCMC asserts that it is not necessary, in order for the 
exemption to apply with respect to assets of a Commingled Fund which 
are managed by DCMC, that the assets of plans described in Section 
II(e)(1)-(5) of the exemption and/or the assets of any Add-On Plan 
invested in such Commingled Fund represent all of the assets of such 
plans. In this regard, the applicant believes that the exemption will 
apply (if all other applicable requirements of the exemption are 
satisfied) where only a portion of the assets of a plan described in 
Section II(e)(1)-(5) of the exemption are invested in a Commingled 
Fund.
    In response to this comment, the Department agrees with DCMC. In 
this regard, it is the Department's view that it is not necessary for 
all the assets of plans described in Section II(e) of the exemption to 
be invested in a Commingled Fund in order for the exemption to apply, 
assuming all applicable requirements of the exemption are satisfied. 
However, in the event that less than all of the assets of an Add-On 
Plan are invested in a Commingled Fund on the date of the initial 
transfer of such Add-On Plan's assets to such fund, it is the 
Department's view that subsequent transfers to such Commingled Fund of 
some or all of the assets that remain in such plan would trigger a re-
calculation of the 25% Test. Accordingly, the Department has decided to 
amend Section II(e)(6) of the exemption to include a new sub-paragraph 
(i), as follows:

    (i) in the event that less than all of the assets of an Add-On 
Plan are invested in a Commingled Fund on the date of the initial 
transfer of such Add-On Plan's assets to such fund, and if such Add-
On Plan subsequently transfers to such Commingled Fund some or all 
of the assets that remain in such plan, then for purposes of 
compliance with the 25% Test, the sum of the value of the initial 
and each additional transfer of assets of such Add-On Plan shall not 
exceed 25 percent (25%) of the value of the aggregate assets in such 
Commingled Fund, as measured on the day immediately following the 
addition of each subsequent transfer of such Add-On Plan's assets to 
such Commingled Fund.

    (D) DCMC maintains that where the assets of more than one Add-On 
Plan are invested in a Commingled Fund with the assets of plans 
described in Section II(e)(1)-(5) of the exemption, the 25% Test will 
be satisfied, if the

[[Page 7794]]

aggregate amount of the assets of such Add-On Plans invested in such 
Commingled Fund do not represent more than 25 percent (25%) of the 
value of all of the assets of such Commingled Fund, as measured on the 
day immediately following each addition of Add-On Plan assets to such 
Commingled Fund.
    The Department concurs with DCMC's comment. Accordingly, the 
Department has decided for purposes of clarity to amend Section 
II(e)(6) of the exemption to include a new sub-paragraph (ii), as set 
forth below:

    (ii) where the assets of more than one Add-On Plan are invested 
in a Commingled Fund with the assets of plans described in Section 
II(e)(1)-(5), above, of the exemption, the 25% Test will be 
satisfied, if the aggregate amount of the assets of such Add-On 
Plans invested in such Commingled Fund do not represent more than 25 
percent (25%) of the value of all of the assets of such Commingled 
Fund, as measured on the day immediately following each addition of 
Add-On Plan assets to such Commingled Fund.

    (E) DCMC has expressed concern over the application of the 25% Test 
in a type of arrangement normally used for 401(k)Plans. Specifically, 
DCMC describes a situation where a trust is established with a single 
trustee under a single trust agreement: (a) with provision for separate 
sub-funds representing different types of investment portfolios; and 
(b) plan participants generally having the right to allocate amounts 
contributed for them among the sub-funds as well as the right to 
transfer existing account balances among such sub-funds in such a 
trust. DCMC indicates that participants may make these choices at their 
discretion and often through telephonic contact with the trustee 
without the employer's personnel having any involvement in or knowledge 
of such transactions. DCMC maintains that where a number of plans are 
funded through such a trust, the proportionate interest of a particular 
plan will be different for the various sub-funds, because of differing 
investment choices made by participants in such plans using the trust. 
Because these investment choices can be made by participants on a daily 
basis, a particular plan's proportionate interest in a particular sub-
fund can change over a short period of time.
    Further, DCMC has expressed concern over the application of the 25% 
Test with regard to increases in the value of Add-On Plan assets in a 
Commingled Fund. In this regard, DCMC maintains that investment 
earnings on Add-On Plan assets held in such Commingled Fund should not 
be considered to involve an addition of assets for purposes of 
compliance with the 25% Test. It is DCMC's position that, if the 25% 
Test is met at the time assets of an Add-On Plan are added to a 
Commingled Fund, the 25% Test will not thereafter fail to be satisfied 
merely because the assets of the Add-On Plan held in the Commingled 
Fund have appreciated to a greater extent than the assets of the other 
plans (described in Section II(e)(1)-(5) of the exemption) that are 
held in such Commingled Fund.
    To address this issue, DCMC, as a follow-up to its comment letters 
of October 17 and October 18, 2000, requested that the Department 
consider the following language:

    If during any calendar year DCMC manages assets within fewer 
than all of the sub-funds and the 25% test, is not satisfied for 
such year (on a weighted-average basis) taking into account only the 
sub-funds as to which DCMC has asset management responsibilities, 
the Exemption will not apply to such Commingled Fund during the next 
following calendar year.

    The Department has decided not to accept DCMC's suggestion, as set 
forth above. However, the Department recognizes that with respect to 
Add-On Plan Assets in a Commingled Fund, it would be burdensome to 
require continual testing of the percentage of Add-On Plan assets to 
the total assets in a Commingled Fund, as a result of events that occur 
in the ordinary operation of a plan or as a result of increases in the 
value of an Add-On Plan's assets held in a Commingled Fund. 
Accordingly, the Department has decided to clarify the language of the 
exemption by adding the following new sub-paragraph (iii) to Section 
II(e)(6) of the exemption:
    (iii) if the 25% Test is satisfied at the time of the initial 
and any subsequent transfer of an Add-On Plan's assets to a 
Commingled Fund, as provided in Section II(e), above, this 
requirement shall continue to be satisfied notwithstanding that the 
assets of such Add-On Plan in the Commingled Fund exceed 25 percent 
(25%) of the value of the aggregate assets of such fund solely as a 
result of: (AA) a distribution to a participant in a Former DuPont 
Related Plan; (BB) periodic employer or employee contributions made 
in accordance with the terms of the governing plan documents; (CC) 
the exercise of discretion by a Former DuPont Related Plan 
participant to re-allocate an existing account balance in a 
Commingled Fund managed by DCMC or to withdraw assets from a 
Commingled Fund; or (DD) an increase in the value of the assets of 
the Add-On Plan held in such Commingled Fund due to investment 
earnings or appreciation.

    (F) DCMC acknowledges that where a Commingled Fund includes assets 
of Add-On Plans, the 25% Test is to be applied to such Commingled Fund 
on the next day immediately following each addition of Add-On Plan 
assets to such Commingled Fund. However, DCMC maintains that, if the 
25% Test is met at the time the assets of an Add-On Plan are 
transferred to a Commingled Fund, the 25% Test will not thereafter fail 
to be satisfied merely because the assets of plans (described in 
Section II(e)(1)-(5) of the exemption) that are held in such Commingled 
Fund are withdrawn from such fund. In this regard, DCMC believes that 
after such a withdrawal, if Add-On Plan assets are added to such 
Commingled Fund, the exemption would cease to apply, if the 25% Test 
were not then satisfied.
    In response to this comment, it is the position of the Department 
that other than, as set forth, above, in Section II(e)(6)(iii)of this 
exemption, the 25% Test is to be satisfied each time assets of an Add-
On Plan are transferred to or invested in a Commingled Fund. Failure to 
satisfy the 25% Test or any other condition of this exemption would 
cause the exemption immediately to become unavailable to Add-On Plans. 
The Department notes that, if as a result of a decision by an employer 
or a sponsor of a plan (described in Section II(e)(1)-(5) of the 
exemption), the assets of such plan are withdrawn from a Commingled 
Fund, and if as a result of such withdrawal the 25% Test is no longer 
satisfied with respect to any Add-On Plan in such Commingled Fund, then 
it is the position of the Department that the exemption would 
immediately cease to apply to all of the Add-On Plans invested in such 
Commingled Fund. Accordingly, the Department has decided to clarify the 
language of the exemption by adding the following new sub-paragraph 
(iv) to Section II(e)(6) of the exemption:

    (iv) if, as a result of a decision by an employer or a sponsor 
of a plan described in Section II(e)(1)-(5) of the exemption to 
withdraw some or all of the assets of such plan from a Commingled 
Fund, the 25% Test is no longer satisfied with respect to any Add-On 
Plan in such Commingled Fund, then the exemption will immediately 
cease to apply to all of the Add-On Plans invested in such 
Commingled Fund.

    (G) DCMC asserts that where the assets of a Commingled Fund include 
assets of plans, other than Former DuPont Related Plans, the inclusion 
of the assets of such other plans in such Commingled Fund will not 
prevent the application of the exemption to Former DuPont Related 
Plans, provided that the assets of such other plans will be disregarded 
in applying the 25% Test to any Add-On Plan whose assets are held in 
such Commingled Fund.

[[Page 7795]]

    With respect to this comment, the Department concurs with DCMC. 
Accordingly, for purposes of clarity, the Department has decided to 
amend Section II(e)(6) of the exemption to include a new paragraph (v) 
as follows:

    (v) where the assets of a Commingled Fund include assets of 
plans other than Former DuPont Related Plans, as defined in Section 
II(e), above, of this exemption, the 25% Test will be determined 
without regard to the assets of such other plans in such Commingled 
Fund.

    After giving full consideration to the entire record, including the 
written comments from DCMC, the Department has decided to grant the 
exemption, as amended by the Department herein. The comment letters 
submitted to the Department have been included as part of the public 
record of the exemption application. The complete application file, 
including all supplemental submissions received by the Department, is 
made available for public inspection in the Public Documents Room of 
the Pension Welfare Benefits Administration, Room N-1513, U.S. 
Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C. 
20210.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the Notice published on August 17, 2000, at 65 FR 50226.

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

General Motors Investment Management Corporation, Located in New 
York, NY

[Prohibited Transaction Exemption 2001-06, Exemption Application Nos.: 
D-10782 through D-10785]

Exemption

I. Transactions

    The restrictions of section 406(a)(1)(A) through (D) and the 
sanctions resulting from the application of section 4975 of the Code by 
reason of section 4975(c)(1)(A) through (D),\7\ shall not apply, as of 
May 28, 1999, to a transaction between a party in interest with respect 
to certain plans (the Transition Plans), as defined in Section II(e), 
below, and an investment fund in which such plans have an interest (the 
Investment Fund), as defined in Section II(k), below, provided that 
General Motors Investment Management Corporation or its successor 
(collectively, GMIMCO) has discretionary authority or control with 
respect to the plan assets involved in the transaction and the 
following conditions are satisfied:
---------------------------------------------------------------------------

    \7\ For purposes of this exemption, references to specific 
provisions of Title I of the Act unless otherwise specified, refer 
to the corresponding provisions of the Code.
---------------------------------------------------------------------------

    (a) GMIMCO or its successor is an investment adviser registered 
under the Investment Advisers Act of 1940 that has, as of the last day 
of its most recent fiscal year, total assets, including in-house plan 
assets (the In-house Plan Assets), as defined in Section II(g), below, 
under its management and control in excess of $100 million and 
shareholders' or partners' equity, as defined in Section II(j), below, 
in excess of $750,000;
    (b) At the time of the transaction, as defined in Section II(m), 
below, the party in interest or its affiliate, as defined in Section 
II(a), below, does not have, and during the immediately preceding one 
(1) year has not exercised, the authority to--
    (1) Appoint or terminate GMIMCO as a manager of any of the 
Transition Plans' assets, or
    (2) Negotiate the terms of the management agreement with GMIMCO 
(including renewals or modifications thereof) on behalf of the 
Transition Plans;
    (c) The transaction is not described in--
    (1) Prohibited Transaction Class Exemption 81-6 (PTCE 81-6) \8\ 
(relating to securities lending arrangements);
---------------------------------------------------------------------------

    \8\ 46 FR 7527, January 23, 1981.
---------------------------------------------------------------------------

    (2) Prohibited Transaction Class Exemption 83-1 (PTCE 83-1) \9\ 
(relating to acquisitions by plans of interests in mortgage pools), or
---------------------------------------------------------------------------

    \9\ 48 FR 895, January 7, 1983.
---------------------------------------------------------------------------

    (3) Prohibited Transaction Class Exemption 82-87 (PTCE 82-87) \10\ 
(relating to certain mortgage financing arrangements);
---------------------------------------------------------------------------

    \10\ 47 FR 21331, May 18, 1982.
---------------------------------------------------------------------------

    (d) The terms of the transaction are negotiated on behalf of the 
Investment Fund by, or under the authority and general direction of, 
GMIMCO, and either GMIMCO, or (so long as GMIMCO retains full fiduciary 
responsibility with respect to the transaction) a property manager 
acting in accordance with written guidelines established and 
administered by GMIMCO, makes the decision on behalf of the Investment 
Fund to enter into the transaction;
    (e) At the time the transaction is entered into, and at the time of 
any subsequent renewal or modification thereof that requires the 
consent of GMIMCO, the terms of the transaction are at least as 
favorable to the Investment Fund as the terms generally available in 
arm's length transactions between unrelated parties;
    (f) Neither GMIMCO nor any affiliate thereof, as defined in Section 
II(b), below, nor any owner, direct or indirect, of a 5 percent (5%) or 
more interest in GMIMCO is a person who, within the ten (10) years 
immediately preceding the transaction, has been either convicted or 
released from imprisonment, whichever is later, as a result of:
    (1) any felony involving abuse or misuse of such person's employee 
benefit plan position or employment, or position or employment with a 
labor organization;
    (2) any felony arising out of the conduct of the business of a 
broker, dealer, investment adviser, bank, insurance company, or 
fiduciary;
    (3) income tax evasion;
    (4) any felony involving the larceny, theft, robbery, extortion, 
forgery, counterfeiting, fraudulent concealment, embezzlement, 
fraudulent conversion, or misappropriation of funds or securities; 
conspiracy or attempt to commit any such crimes or a crime in which any 
of the foregoing crimes is an element; or
    (5) any other crime described in section 411 of the Act.
    For purposes of this Section I(f), a person shall be deemed to have 
been ``convicted'' from the date of the judgment of the trial court, 
regardless of whether the judgment remains under appeal;
    (g) The transaction is not part of an agreement, arrangement, or 
understanding designed to benefit a party in interest;
    (h) The party in interest dealing with the Investment Fund:
    (1) Is a party in interest with respect to the Transition Plans 
(including a fiduciary) solely by reason of providing services to the 
Transition Plans, or solely by reason of a relationship to a service 
provider described in section 3(14)(F),(G),(H), or (I) of the Act;
    (2) Does not have discretionary authority or control with respect 
to the investment of plan assets involved in the transaction and does 
not render investment advice (within the meaning of 29 CFR Sec. 2510.3-
21(c)) with respect to those assets; and
    (3) Is neither GMIMCO nor a person related to GMIMCO, as defined in 
Section II(i),below;
    (i) GMIMCO adopts written policies and procedures that are designed 
to assure compliance with the conditions of the exemption;
    (j) An independent auditor, who has appropriate technical training 
or experience and proficiency with the

[[Page 7796]]

fiduciary responsibility provisions of the Act and who so represents in 
writing, conducts an exemption audit, as defined in Section II(f), 
below, on an annual basis. Following completion of the exemption audit, 
the auditor shall issue a written report to the Transition Plans 
presenting its specific findings regarding the level of compliance with 
the policies and procedures adopted by GMIMCO in accordance with 
Section I(i), above, of this exemption; and
    (k)(1) GMIMCO or an affiliate maintains or causes to be maintained 
within the United States, for a period of six (6) years from the date 
of each transaction, the records necessary to enable the persons 
described in Section I(k)(2) 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 GMIMCO and/or its affiliates, the records are lost or 
destroyed prior to the end of the six (6) year period, and (b) no party 
in interest or disqualified person other than GMIMCO 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 Section I(k)(2), below, of this exemption.
    (2) Except as provided in Section I(k)(3),below, of this exemption, 
and notwithstanding any provisions of subsections (a)(2) and (b) of 
section 504 of the Act, the records referred to in Section 
I(k)(1),above, of this exemption are unconditionally available for 
examination at their customary location during normal business hours 
by:
    (A) any duly authorized employee or representative of the 
Department of Labor (the Department) or of the Internal Revenue 
Service;
    (B) any fiduciary of any of the Transition Plans investing in the 
Investment Fund or any duly authorized representative of such 
fiduciary;
    (C) any contributing employer to any of the Transition Plans 
investing in the Investment Fund or any duly authorized employee 
representative of such employer;
    (D) any participant or beneficiary of any of the Transition Plans 
investing in the Investment Fund, or any duly authorized representative 
of such participant or beneficiary; and
    (E) any employee organization whose members are covered by such 
Transition Plans;
    (3) None of the persons described in Section I(k)(2)(B) through 
(E), above, of this exemption shall be authorized to examine trade 
secrets of GMIMCO or its affiliates or commercial or financial 
information which is privileged or confidential.

II. Definitions

    (a) For purposes of Section I(b) of this exemption, an 
``affiliate'' of a person means--
    (1) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person,
    (2) Any corporation, partnership, trust, or unincorporated 
enterprise of which such person is an officer, director, 5 percent (5%) 
or more partner, or employee (but only if the employer of such employee 
is the plan sponsor), and
    (3) Any director of the person or any employee of the person who is 
a highly compensated employee, as defined in section 4975(e)(2)(H) of 
the Code, or who has direct or indirect authority, responsibility, or 
control regarding the custody, management, or disposition of plan 
assets. A named fiduciary (within the meaning of section 402(a)(2) of 
the Act) of a plan, and an employer any of whose employees are covered 
by the plan, will also be considered affiliates with respect to each 
other for purposes of Section I(b) if such employer or an affiliate of 
such employer has the authority, alone or shared with others, to 
appoint or terminate the named fiduciary or otherwise negotiate the 
terms of the named fiduciary's employment agreement.
    (b) For purposes of Section I(f), above, of this exemption, an 
``affiliate'' of a person means--
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person,
    (2) Any director of, relative of, or partner in, any such person,
    (3) Any corporation, partnership, trust, or unincorporated 
enterprise of which such person is an officer, director, or a 5 percent 
(5%) or more partner or owner, and
    (4) Any employee or officer of the person who --
    (A) Is a highly compensated employee (as defined in section 
4975(e)(2)(H) of the Code) or officer (earning 10 percent (10%) or more 
of the yearly wages of such person), or
    (B) Has direct or indirect authority, responsibility or control 
regarding the custody, management, or disposition of plan assets.
    (c) For purposes of Section II(e) and (g), below, of this exemption 
an ``affiliate'' of GMIMCO includes a member of either:
    (1) a controlled group of corporations, as defined in section 
414(b) of the Code, of which GMIMCO is a member, or
    (2) a group of trades or businesses under common control, as 
defined in section 414(c) of the Code, of which GMIMCO is a member; 
provided that ``50 percent'' shall be substituted for ``80 percent'' 
wherever ``80 percent'' appears in section 414(b) or 414(c) of the 
rules thereunder.
    (d) The term, ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (e) ``Transition Plans'' mean:
    (1) the Delphi Retirement Program for Salaried Employees; Delphi 
Hourly-Rate Employees Pension Plan; Delphi Automotive Systems 
Corporation Personal Savings Plan, Delphi Automotive Systems 
Corporation Income Security Plan, Delphi Automotive Systems Corporation 
Savings-Stock Purchase Program, Packard-Hughes Interconnect Non-
Bargaining Retirement Plan, Packard-Hughes Interconnect Bargaining 
Retirement Plan, Packard-Hughes Interconnect Foley-Alabama Facility 
Retirement Plan, and ASEC Manufacturing Retirement Program 
(collectively, the Delphi Plans);
    (2) any plan the assets of which include or have included assets 
that were managed by GMIMCO, as an in-house asset manager (INHAM), 
pursuant to Prohibited Transaction Class Exemption 96-23 (PTCE 96-
23);\11\ but as to which PTCE 96-23 is no longer available because such 
assets are no longer held under a plan maintained by an affiliate of 
GMIMCO (as defined in Section II(c), above, of this exemption); and
---------------------------------------------------------------------------

    \11\ 61 FR 15975 (April 10, 1996).
---------------------------------------------------------------------------

    (3) any plan (the Add-On Plan) that is sponsored or becomes 
sponsored by an entity that was, but has ceased to be, an affiliate of 
GMIMCO (as defined in Section II(c), above, of this exemption); 
provided that: (A) The assets of the Add-On Plan are invested in a 
commingled fund (the Commingled Fund), as defined in Section II(n), 
below, of this exemption, with the assets of a plan or plans, described 
in Section II(e)(1)-(2), above, of this exemption; and (B) the assets 
of the Add-On Plan in the Commingled Fund do not comprise more than 25 
percent (25%) of the value of the aggregate assets of such fund, as 
measured on the day immediately following the commingling of their 
assets (the 25% Test);

[[Page 7797]]

    For purposes of the 25% Test, as set forth in Section II(e)(3), 
above:
    (i) in the event that less than all of the assets of an Add-On Plan 
are invested in a Commingled Fund on the date of the initial transfer 
of such Add-On Plan's assets to such fund, and if such Add-On Plan 
subsequently transfers to such Commingled Fund some or all of the 
assets that remain in such plan, then for purposes of compliance with 
the 25% Test, the sum of the value of the initial and each additional 
transfer of assets of such Add-On Plan shall not exceed 25 percent 
(25%) of the value of the aggregate assets in such Commingled Fund, as 
measured on the day immediately following the addition of each 
subsequent transfer of such Add-On Plan's assets to such Commingled 
Fund;
    (ii) where the assets of more than one Add-On Plan are invested in 
a Commingled Fund with the assets of plans described in Section 
II(e)(1)-(2), above, of the exemption, the 25% Test will be satisfied, 
if the aggregate amount of the assets of such Add-On Plans invested in 
such Commingled Fund do not represent more than 25 percent (25%) of the 
value of all of the assets of such Commingled Fund, as measured on the 
day immediately following each addition of Add-On Plan assets to such 
Commingled Fund;
    (iii) if the 25% Test is satisfied at the time of the initial and 
any subsequent transfer of an Add-On Plan's assets to a Commingled 
Fund, as provided in Section II(e), above, this requirement shall 
continue to be satisfied notwithstanding that the assets of such Add-On 
Plan in the Commingled Fund exceed 25 percent (25%) of the value of the 
aggregate assets of such fund solely as a result of: (AA) a 
distribution to a participant in a Transition Plan; (BB) periodic 
employer or employee contributions made in accordance with the terms of 
the governing plan documents; (CC) the exercise of discretion by a 
Transition Plan participant to re-allocate an existing account balance 
in a Commingled Fund managed by GMIMCO or to withdraw assets from a 
Commingled Fund; or (DD) an increase in the value of the assets of the 
Add-On Plan held in such Commingled Fund due to investment earnings or 
appreciation;
    (iv) if, as a result of a decision by an employer or a sponsor of a 
plan described in Section II(e)(1)-(2) of the exemption to withdraw 
some or all of the assets of such plan from a Commingled Fund, the 25% 
Test is no longer satisfied with respect to any Add-On Plan in such 
Commingled Fund, then the exemption will immediately cease to apply to 
all of the Add-On Plans invested in such Commingled Fund; and
    (v) where the assets of a Commingled Fund include assets of plans 
other than Transition Plans, as defined in Section II(e), above, of 
this exemption, the 25% Test will be determined without regard to the 
assets of such other plans in such Commingled Fund.
    (f) ``Exemption audit'' of any of the Transition Plans must consist 
of the following:
    (1) A review of the written policies and procedures adopted by 
GMIMCO, pursuant to Section I(i), above, of this exemption, for 
consistency with each of the objective requirements of this exemption, 
as described in Section II(f)(5), below;
    (2) A test of a representative sample of the subject transactions 
in order to make findings regarding whether GMIMCO is in compliance 
with:
    (A) the written policies and procedures adopted by GMIMCO, pursuant 
to Section I(i), above, of this exemption; and
    (B) the objective requirements of this exemption;
    (3) A determination as to whether GMIMCO has satisfied the 
requirements of Section I(a), above, of this exemption;
    (4) Issuance of a written report describing the steps performed by 
the auditor during the course of its review and the auditor's findings; 
and
    (5) For purposes of Section II(f) of this exemption, the written 
policies and procedures must describe the following objective 
requirements of the exemption and the steps adopted by GMIMCO to assure 
compliance with each of these requirements:
    (A) the requirements of Section I(a), above, of this exemption 
regarding registration under the Investment Advisers Act of 1940, total 
assets under management, and shareholders' or partners' equity;
    (B) the requirements of Part I and Section I(d) of this exemption 
regarding the discretionary authority or control of GMIMCO with respect 
to the assets of the Transition Plans involved in the transaction, in 
negotiating the terms of the transaction, and with regard to the 
decision on behalf of the Transition Plans to enter into the 
transaction;
    (C) the transaction is not entered into with any person who is 
excluded from relief under Section I(h)(1), above, of this exemption, 
Section I(h)(2) to the extent such person has discretionary authority 
or control over the plan assets involved in the transaction, or Section 
I(h)(3); and
    (D) the transaction is not described in any of the class exemptions 
listed in Section I(c), above, of this exemption.
    (g) ``In-house Plan Assets'' means the assets of any plan 
maintained by an affiliate of GMIMCO, as defined in Section II(c), 
above, of this exemption and with respect to which GMIMCO exercises 
discretionary authority or control.
    (h) The term, ``party in interest,'' means a person described in 
section 3(14) of the Act and includes a ``disqualified person,'' as 
defined in section 4975(e)(2) of the Code.
    (i) GMIMCO is ``related'' to a party in interest for purposes of 
Section I(h)(3) of this exemption, if the party in interest (or a 
person controlling, or controlled by, the party in interest) owns a 5 
percent (5%) or more interest in GMIMCO, or if GMIMCO (or a person 
controlling, or controlled by GMIMCO) owns a 5 percent (5%) or more 
interest in the party in interest.
    For purposes of this definition:
    (1) the term, ``interest,'' means with respect to ownership of an 
entity--
    (A) The combined voting power of all classes of stock entitled to 
vote or the total value of the shares of all classes of stock of the 
entity if the entity is a corporation,
    (B) The capital interest or the profits interest of the entity if 
the entity is a partnership; or
    (C) The beneficial interest of the entity if the entity is a trust 
or unincorporated enterprise; and
    (2) A person is considered to own an interest held in any capacity 
if the person has or shares the authority--
    (A) To exercise any voting rights or to direct some other person to 
exercise the voting rights relating to such interest, or
    (B) To dispose or to direct the disposition of such interest.
    (j) For purposes of Section I(a) of this exemption, the term, 
``shareholders' or partners' equity,'' means the equity shown in the 
most recent balance sheet prepared within the two (2) years immediately 
preceding a transaction undertaken pursuant to this exemption, in 
accordance with generally accepted accounting principles.
    (k) ``Investment Fund'' includes single customer and pooled 
separate account maintained by an insurance company, individual trust 
and common, collective or group trusts maintained by a bank, and any 
other account or fund to the extent that the disposition of its assets 
(whether or not in the custody of GMIMCO) is subject to the 
discretionary authority of GMIMCO.
    (l) The term, ``relative,'' means a relative as that term is 
defined in

[[Page 7798]]

section 3(15) of the Act, or a brother, sister, or a spouse of a 
brother or sister.
    (m) The ``time'' as of which any transaction occurs is the date 
upon which the transaction is entered into. In addition, in the case of 
a transaction that is continuing, the transaction shall be deemed to 
occur until it is terminated. If any transaction is entered into on or 
after the date when the grant of this exemption is published in the 
Federal Register or a renewal that requires the consent of GMIMCO 
occurs on or after such publication date and the requirements of this 
exemption are satisfied at the time the transaction is entered into or 
renewed, respectively, the requirements will continue to be satisfied 
thereafter with respect to the transaction. Nothing in this subsection 
shall be construed as exempting a transaction entered into by an 
Investment Fund which becomes a transaction described in section 406 of 
the Act or section 4975 of the Code while the transaction is 
continuing, unless the conditions of this exemption were met either at 
the time the transaction was entered into or at the time the 
transaction would have become prohibited but for this exemption. In 
determining compliance with the conditions of the exemption at the time 
that the transaction was entered into for purposes of the preceding 
sentence, Section I(h) of this exemption will be deemed satisfied if 
the transaction was entered into between a plan and a person who was 
not then a party in interest.
    (n) ``Commingled Fund'' means a trust fund managed by GMIMCO 
containing assets of some or all of the assets of plans, described in 
Section II(e)(1)-(2), above, of this exemption, plans other than 
Transition Plans, and, if applicable, any Add-On Plan, as to which the 
25% Test, provided in Section II(e)(3), above, of this exemption has 
been satisfied; provided that: (1) where GMIMCO manages a single sub-
fund or investment portfolio within such trust, the sub-fund or 
portfolio will be treated as a single Commingled Fund; and (2) where 
GMIMCO manages more than one sub-fund or investment portfolio within 
such trust, the aggregate value of the assets of such sub-funds or 
portfolios managed by GMIMCO within such trust will be treated as 
though such aggregate assets were invested in a single Commingled Fund.

Temporary Nature of Exemption

    The Department has determined that the relief provided by this 
exemption is temporary in nature. The exemption is effective May 28, 
1999, and expires on the day which is five (5) years from the date of 
the publication of the final exemption in the Federal Register. 
Accordingly, the relief provided by this exemption will not be 
available upon the expiration of such five-year period for any new or 
additional transactions, as described herein, after such date, but 
would continue to apply beyond the expiration of such five-year period 
for continuing transactions entered into within the five-year period; 
provided the conditions of this exemption continue to be satisfied. 
Should the applicant wish to extend, beyond the expiration of such 
five-year period, the relief provided by this exemption to new or 
additional transactions, the applicant may submit another application 
for exemption. In this regard, the Department expects that prior to 
filing another exemption application seeking relief for new or 
additional transactions, the applicant would be prepared to demonstrate 
compliance with the conditions of this exemption.

Written Comments

    In the Notice of Proposed Exemption (the Notice), the Department 
invited all interested persons to submit written comments and requests 
for a hearing on the proposed exemption. As set forth in the Notice, 
interested persons consist of the investment committee of each of the 
Delphi Plans. The deadline for submission of such comments was within 
forty-five (45) days of the date of the publication of the Notice in 
the Federal Register on August 17, 2000. All comments and requests for 
a hearing were due on October 2, 2000.
    By letter dated September 1, 2000, the applicant confirmed that a 
copy of the Notice and a copy of the supplemental statement (the 
Supplemental Statement), described at 29 CFR Sec. 2570.43.(b)(2) were 
delivered by first class mail via Federal Express on August 31, 2000, 
to the Executive Committee of the Board of Directors of Delphi 
Automotive Systems Corporation. As the committee responsible for 
appointing GMIMCO, as named fiduciary and investment manager for the 
Transition Plans, the Executive Committee of the Board of Directors of 
Delphi Automotive Systems Corporation is an interested person with 
respect to the Transition Plans.
    Subsequently, the applicant represented that the ASEC Manufacturing 
Benefits Committee, and the Packard-Hughes Interconnect Administrative 
Committee, are also interested persons, as the committees responsible 
for appointing GMIMCO, as named fiduciary and investment manager, 
respectively for the ASEC Manufacturing Retirement Program and the 
Packard-Hughes Interconnect Non-Bargaining Retirement Plan, the 
Packard-Hughes Interconnect Bargaining Retirement Plan, and the 
Packard-Hughes Interconnect Foley-Alabama Facility Retirement Plan. By 
letter dated September 14, 2000, the applicant confirmed that a copy of 
the Notice and a copy of the Supplemental Statement were delivered by 
first class mail via Federal Express on September 11, 2000, to the ASEC 
Manufacturing Benefits Committee, and the Packard-Hughes Interconnect 
Administrative Committee.
    In light the fact that the notification to ASEC Manufacturing 
Benefits Committee, and the Packard-Hughes Interconnect Administrative 
Committee was delayed until September 11, 2000, and in order to give 
all interested persons the benefit of the full thirty (30) day comment 
period the Department required, and the applicant agreed to, an 
extension of the deadline when comments and requests for hearing would 
be due on the proposed exemption. In a letter dated October 16, 2000, 
the applicant confirmed that ASEC Manufacturing Benefits Committee, and 
the Packard-Hughes Interconnect Administrative Committee were informed 
that all comments and requests for a hearing were due by October 11, 
2000.
    During the comment period, the Department received no requests for 
a hearing. However, the Department did receive a comment letter from 
GMIMCO relating to a Notice of Proposed Exemption published in the 
Federal Register on August 17, 2000, for DuPont Capital Management 
Corporation (DCMC).\12\ Because, GMIMCO requested a similar exemption, 
the Department has determined to treat GMIMCO's submission, as though 
the comments were filed by GMIMCO with respect to its own Notice of 
Proposed Exemption \13\ which was published on the same date. Because 
the two proposals provide identical relief, the Department believes 
that, in the interest of clarity and consistency, both exemptions 
should operate in the same manner. In this regard, the Department has 
summarized below its position with respect to certain issues which may 
affect both exemptions. GMIMCO's comments and the Department's 
responses thereto, are also summarized below.
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    \12\ 65 FR 50226, August 17, 2000.
    \13\ 65 FR 50232, August 17, 2000.
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    (A) Questions have arisen as to what constitutes a Commingled Fund 
for purposes of compliance with the 25%

[[Page 7799]]

Test and how the exemption should apply where a trust has multiple 
separately valued sub-funds, with covered plan participants generally 
having the right to allocate the amounts held among the sub-funds at 
their discretion, or where a trust has one or more investment 
portfolios with participating plans having pro-rata undivided interests 
in all of the trust's assets, if: (a) GMIMCO manages assets within one 
or more of such sub-funds or portfolios, and (b) the plans utilizing 
the trust are plans described in Section II(e)(1)-(2) of the exemption 
or any Add-On Plan, described in Section II(e)(3), as to which the 25 
percent(25%) test (the 25% Test), is satisfied.
    It is the Department's view that for purposes of calculating 
compliance with the 25% Test with respect to the assets of any Add-On 
Plan to be added to such trust, a single sub-fund or portfolio within 
such trust managed by GMIMCO shall be treated as a single Commingled 
Fund, and where GMIMCO manages more than one sub-fund or portfolio 
within such trust, the aggregate value of the assets of such sub-funds 
or portfolios managed by GMIMCO within such trust shall be treated as 
though such aggregate assets were invested in a single Commingled Fund. 
Accordingly, for purposes of clarity, the Department has added a new 
definition at paragraph (n), as set forth below, to Section II of the 
exemption:

    (n) ``Commingled Fund'' means a trust fund managed by GMIMCO 
containing assets of some or all of the assets of plans, described 
in Section II(e)(1)-(2), above, of this exemption, plans other than 
Transition Plans, and, if applicable, any Add-On Plan, as to which 
the 25% Test, provided in Section II(e)(3), above, of this exemption 
has been satisfied; provided that: (1) where GMIMCO manages a single 
sub-fund or investment portfolio within such trust, the sub-fund or 
portfolio will be treated as a single Commingled Fund; and (2) where 
GMIMCO manages more than one sub-fund or investment portfolio within 
such trust, the aggregate value of the assets of such sub-funds or 
portfolios managed by GMIMCO within such trust will be treated as 
though such aggregate assets were invested in a single Commingled 
Fund.

    Further, the Department has amended the language of Section 
II(e)(3) of the exemption to include a reference to the definition of a 
Commingled Fund and a reference to the 25% Test, as indicated below, by 
the underlined passages:

    (3) any plan (the Add-On Plan) that is sponsored or becomes 
sponsored by an entity that was, but has ceased to be, an affiliate 
of GMIMCO (as defined in Section II(c), above, of this exemption); 
provided that: (A) the assets of the Add-On Plan are invested in a 
commingled fund (the Commingled Fund), as defined in Section 
II(n),below, of this exemption, with the assets of a plan or plans, 
described in Section II(e)(1)-(2), above; and (B) the assets of the 
Add-On Plan in the Commingled Fund do not comprise more than 25 
percent (25%) of the value of the aggregate assets of such fund, as 
measured on the day immediately following the commingling of their 
assets (the 25% Test).

    (B) Questions have arisen whether, in order for the exemption to 
apply with respect to assets of a Commingled Fund, it is necessary for 
the assets of plans described in Section II(e)(1)-(2) of the exemption 
and/or the assets of any Add-On Plan invested in such Commingled Fund 
to represent all of the asset of such plans.
    It is the Department's view that it is not necessary for all the 
assets of plans described in Section II(e) of the exemption to be 
invested in a Commingled Fund in order for the exemption to apply, 
assuming all applicable requirements of the exemption are satisfied. 
However, in the event that less than all of the assets of an Add-On 
Plan are invested in a Commingled Fund on the date of the initial 
transfer of such Add-On Plan's assets to such fund, it is the 
Department's view that subsequent transfers to such Commingled Fund of 
some or all of the assets that remain in such plan would trigger a re-
calculation of the 25% Test. Accordingly, the Department has decided to 
amend Section II(e)(3) of the exemption to include a new sub-paragraph 
(i), as follows:

    (i) in the event that less than all of the assets of an Add-On 
Plan are invested in a Commingled Fund on the date of the initial 
transfer of such Add-On Plan's assets to such fund, and if such Add-
On Plan subsequently transfers to such Commingled Fund some or all 
of the assets that remain in such plan, then for purposes of 
compliance with the 25% Test, the sum of the value of the initial 
and each additional transfer of assets of such Add-On Plan shall not 
exceed 25 percent (25%) of the value of the aggregate assets in such 
Commingled Fund, as measured on the day immediately following the 
addition of each subsequent transfer of such Add-On Plan's assets to 
such Commingled Fund;

    (C) Questions have arisen as to the calculation of the 25% Test 
where the assets of more than one Add-On Plan are invested in a 
Commingled Fund with the assets of plans described in Section II(e)(1)-
(2) of the exemption. In this regard, the Department has decided for 
purposes of clarity to amend Section II(e)(3) of the exemption to 
include a new sub-paragraph (ii),as set forth below:

    (ii) where the assets of more than one Add-On Plan are invested 
in a Commingled Fund with the assets of plans described in Section 
II(e)(1)-(2), above, of the exemption, the 25% Test will be 
satisfied, if the aggregate amount of the assets of such Add-On 
Plans invested in such Commingled Fund do not represent more than 25 
percent (25%) of the value of all of the assets of such Commingled 
Fund, as measured on the day immediately following each addition of 
Add-On Plan assets to such Commingled Fund;

    (D) GMIMCO believes that, for purposes of compliance with the 25% 
Test, it would be burdensome to require continual testing of the 
percentage of Add-On Plan assets to the total assets in a Commingled 
Fund. In GMIMCO's view, whether or not an Add-On Plan is covered by the 
exemption should be determined at the time such plan is brought into a 
Commingled Fund and not on a continuing basis. In this regard, GMIMCO 
believes that re-calculation of compliance with the 25% Test should be 
required in the event that all of the assets of an Add-On Plan are not 
initially invested in such Commingled Fund and to the extent that 
additional Add-On Plan assets are later added to or removed from the 
assets in such Commingled Fund for reasons other than: (i) normal 
contributions to or distributions from the plans in a Commingled Fund 
made under the terms of such plans, (ii) changes in specific investment 
selections within a Commingled Fund, or (iii) changes in the amount of 
plan assets in such Commingled Fund resulting from investment 
performance.
    As indicated above, the Department concurs with GMIMCO that re-
calculation of the 25% Test must occur where less than all of the 
assets of an Add-On Plan are initially invested in a Commingled Fund. 
Further, the Department recognizes that it would be administratively 
burdensome to require continuous recalculation of the 25% Test as a 
result of events that occur in the ordinary operation of a plan or as a 
result of increases in the value of an Add-On Plan's assets held in a 
Commingled Fund. Accordingly, the Department has decided to clarify the 
language of the exemption by adding the following new sub-paragraph 
(iii) to Section II(e)(3) of the exemption:

    (iii) if the 25% Test is satisfied at the time of the initial 
and any subsequent transfer of an Add-On Plan's assets to a 
Commingled Fund, as provided in Section II(e),above, this 
requirement shall continue to be satisfied notwithstanding that the 
assets of such Add-On Plan in the Commingled Fund exceed 25 percent 
(25%) of the value of the aggregate assets of such fund solely as a 
result of: (AA) a distribution to a participant in a Transition 
Plan; (BB) periodic employer or employee contributions made in 
accordance with the terms of the governing plan documents; (CC) the 
exercise of discretion by a Transition

[[Page 7800]]

Plan participant to re-allocate an existing account balance in a 
Commingled Fund managed by GMIMCO or to withdraw assets from a 
Commingled Fund; or (DD) an increase in the value of the assets of 
the Add-On Plan held in such Commingled Fund due to investment 
earnings or appreciation;

    (E) GMIMCO maintains that failure to satisfy the 25% Test should 
only cause the exemption to become unavailable for the Add-On Plans in 
a Commingled Fund but should not cause the exemption to be unavailable 
for the entire Commingled Fund.
    In response to this comment, it is the position of the Department 
that other than, as set forth, above, in Section II(e)(3)(iii)of this 
exemption, the 25% Test is to be satisfied each time assets of an Add-
On Plan are transferred to or invested in a Commingled Fund. Failure to 
satisfy the 25% Test or any other condition of this exemption would 
cause the exemption immediately to become unavailable for Add-On Plans. 
The Department notes that, if as a result of a decision by an employer 
or a sponsor of a plan (described in Section II(e)(1)-(2) of the 
exemption), the assets of such plan are withdrawn from a Commingled 
Fund, and if as a result of such withdrawal the 25% Test is no longer 
satisfied with respect to any Add-On Plan in the Commingled Fund, then 
it is the Department's position that the exemption will immediately 
cease to apply to all of the Add-On Plans invested in such Commingled 
Fund. Accordingly, the Department has decided to clarify the language 
of the exemption by adding the following new sub-paragraph (iv) to 
Section II(e)(3) of the exemption:

    (iv) if, as a result of a decision by an employer or a sponsor 
of a plan described in Section II(e)(1)-(2) of the exemption to 
withdraw some or all of the assets of such plan from a Commingled 
Fund, the 25% Test is no longer satisfied with respect to any Add-On 
Plan in such Commingled Fund, then the exemption will immediately 
cease to apply to all of the Add-On Plans invested in such 
Commingled Fund;

    (F) Questions have arisen whether the inclusion of the assets of 
plans, other than plans described in Section II(e) of this exemption, 
in a Commingled Fund would result in the exemption being unavailable 
for assets of plans described in Section II(e) of this exemption which 
are held in such Commingled Fund.
    It is the Department's view that, under the circumstances described 
above, the inclusion of the assets of other plans in a Commingled Fund 
will not result in the exemption being unavailable for assets of 
Transition Plans, described in Section II(e) of this exemption, held in 
such Commingled Fund, provided that the assets of such other plans are 
disregarded for purposes of applying the 25% Test to any Add-On Plan 
whose assets are held in such Commingled Fund. Accordingly, for 
purposes of clarification, the Department has decided to amend Section 
II(e)(3) of the exemption to include a new sub-paragraph (v) as 
follows:

    (v) where the assets of a Commingled Fund include assets of 
plans other than Transition Plans, as defined in Section II(e), 
above, of this exemption, the 25% Test will be determined without 
regard to the assets of such other plans in such Commingled Fund.

    After giving full consideration to the entire record, including the 
written comment from the applicant, the Department has decided to grant 
the exemption, as amended by the Department, herein. The comment letter 
submitted by the applicant has been included as part of the public 
record of the exemption application. The complete application file, 
including the supplemental submission received by the Department, is 
made available for public inspection in the Public Documents Room of 
the Pension Welfare Benefits Administration, Room N-1513, U.S. 
Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C. 
20210.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the Notice published on August 17, 2000, at 65 FR 50232.

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

General Information

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

    Signed at Washington, D.C., this 19th day of January, 2001.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 01-2162 Filed 1-24-01; 8:45 am]
BILLING CODE 4510-29-P