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Employee Benefits Security Administration

EBSA Federal Register Notice

Proposed Exemptions; John Hancock Life Insurance Company [01/22/2003]

[PDF Version]

Volume 68, Number 14, Page 3040-3051




[[Page 3040]]


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DEPARTMENT OF LABOR


Pension and Welfare Benefits Administration


[Application No. D-11061, et al.]


 
Proposed Exemptions; John Hancock Life Insurance Company


AGENCY: Pension and Welfare Benefits Administration, Labor.


ACTION: Notice of Proposed Exemptions.


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SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemptions 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).


Written Comments and Hearing Requests


    All interested persons are invited to submit written comments or 
requests for a hearing on the pending exemptions, unless otherwise 
stated in the Notice of Proposed Exemption, within 45 days from the 
date of publication of this Federal Register Notice. Comments and 
requests for a hearing should state: (1) The name, address, and 
telephone number of the person making the comment or request, and (2) 
the nature of the person's interest in the exemption and the manner in 
which the person would be adversely affected by the exemption. A 
request for a hearing must also state the issues to be addressed and 
include a general description of the evidence to be presented at the 
hearing.


ADDRESSES: All written comments and requests for a hearing (at least 
three copies) should be sent to the Pension and Welfare Benefits 
Administration (PWBA), Office of Exemption Determinations, Room N-5649, 
U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC 
20210. Attention: Application No. ------, stated in each Notice of 
Proposed Exemption. Interested persons are also invited to submit 
comments and/or hearing requests to PWBA via e-mail or FAX. Any such 
comments or requests should be sent either by e-mail to: 
moffittb@pwba.dol.gov, or by FAX to (202) 219-0204 by the end of the 
scheduled comment period. The applications for exemption and the 
comments received will be available for public inspection in the Public 
Documents Room of the Pension and Welfare Benefits Administration, U.S. 
Department of Labor, Room N-1513, 200 Constitution Avenue, NW., 
Washington, DC 20210.


Notice to Interested Persons


    Notice of the proposed exemptions will be provided to all 
interested persons in the manner agreed upon by the applicant and the 
Department within 15 days of the date of publication in the Federal 
Register. Such notice shall include a copy of the notice of proposed 
exemption as published in the Federal Register and shall inform 
interested persons of their right to comment and to request a hearing 
(where appropriate).


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


John Hancock Life Insurance Company, Located in Boston, MA


[Application No. D-11061]


Proposed Exemption


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


Section I: Transactions


    If the exemption is granted, the restrictions of sections 
406(a)(1)(A) and 406(a)(1)(D) of the Act and the sanctions resulting 
from the application of section 4975 of the Code, by reason of sections 
4975(c)(1)(A) and 4975(c)(1)(D) of the Code shall not apply to: \1\
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    \1\ For purposes of this proposed 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) The purchase of a timber asset (Timber Asset(s)), as defined in 
section III(f), below, from International Paper Company or any 
affiliate, as defined in section III(a), below, (collectively, 
International Paper) by a certain insurance company separate account 
(ForesTree IP), as defined in section III(d), below, maintained and 
managed by Hancock, as defined in section III(e), below, for the 
investment of the assets of one or more employee pension benefit plans 
sponsored by International Paper (the IP Plan or IP Plans); provided 
that the following conditions are satisfied:
    (1) The price paid by ForesTree IP for the Timber Asset is 
determined by an independent, qualified appraiser, as defined in 
section III(h), below, as of the date of the transaction,
    (2) The fair market value of the Timber Asset sold to ForesTree IP 
must be documented by an appraisal report in writing issued, as of the 
date of the transaction, by the independent, qualified appraiser;
    (3) The price paid by ForesTree IP for the Timber Asset does not 
exceed the fair market value of such asset at the time of the purchase; 
and
    (4) The general conditions set forth in section II, below, are 
satisfied.
    (b) The sale of a timber product (Timber Product(s)), as defined in 
section III(g), below, to International Paper by ForesTree IP; provided 
that the following conditions are satisfied:
    (1) Prior to soliciting bids for the sale of a Timber Product, 
Hancock establishes a minimum bid (the Minimum Bid) based on its 
assessment of the fair market value of the Timber Product offered for 
sale;
    (2) Hancock (or its designee) solicits from each party on the 
buyers list (the Buyer's List), as defined in section III(c), below, 
for the relevant geographic area in which the Timber Product is 
located, a written bid for the purchase of the Timber Product offered 
for sale;
    (3) The highest price bid for the Timber Product offered for sale 
must meet or exceed the Minimum Bid established by Hancock and must not 
be less than the fair market value of such Timber Product at the time 
the contract for sale is legally binding on the parties involved;
    (4) Where International Paper is the highest price bidder for the 
Timber Product offered for sale, the transaction may not go forward, 
unless Hancock has received bids on such Timber Product from at least 
two (2) other bidders, in addition to International Paper, provided 
that each such bidder satisfies the definition of a bona fide bidder, 
as set forth in section III (i), below; and provided further that 
neither Hancock's general account nor any other account managed by 
Hancock is either of the two other bidders; and


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    (5) The general conditions set forth in section II, below, are 
satisfied.


Section II: General Conditions


    (a) Any IP Plan that invests in ForesTree IP has total assets in 
excess of $100 million;
    (b) Hancock acts as a discretionary investment manager for 
ForesTree IP;
    (c) Hancock negotiates on behalf of ForesTree IP the terms and 
conditions of any purchase of a Timber Asset by ForesTree IP from 
International Paper and the terms and conditions of any sale of a 
Timber Product by ForesTree IP to International Paper;
    (d) Prior to ForestTree IP entering into any purchase of a Timber 
Asset or any sale of a Timber Product, Hancock determines on behalf of 
such account that each such transaction is feasible, in the interest of 
the account based on the investment policy and objectives of the 
account, and protective of the participants in the account;
    (e) The terms and conditions of each transaction involving the sale 
of a Timber Asset by International Paper to ForesTree IP or the 
purchase of a Timber Product by International from ForesTree IP are at 
least as favorable to ForesTree IP as the terms obtainable by ForesTree 
IP in a similar transaction negotiated at arm's length with an 
unrelated third party;
    (f) The transactions subject to this exemption are not part of an 
agreement, arrangement, or understanding designed to benefit a party in 
interest;
    (g) Each transaction subject to this exemption is exclusively a 
cash transaction;
    (h) ForesTree IP does not purchase Timber Assets from or sell 
Timber Products to Hancock's general account or any other account 
managed by Hancock;
    (i) The investment of plan assets by any IP Plan in ForesTree IP 
does not exceed 20 percent (20%) of the total assets of such plan;
    (j) The total amount of contributions received by Hancock from 
International Paper on behalf of the IP Plans and allocated to 
ForesTree IP must not in the aggregate exceed $100 million; and
    (k) Hancock maintains, or causes to be maintained, within the 
United States for a period of six (6) years from the date of each 
transaction which is subject to this exemption, in a manner that is 
convenient and accessible for audit and examination, such records as 
are necessary to enable the persons described, below in paragraph 
(1)(1), to determine whether the conditions of the exemption have been 
met, except that--
    (1) A prohibited transaction will not be considered to have 
occurred if, due to circumstances beyond the control of Hancock, the 
records are lost or destroyed prior to the end of the six (6) year 
period; and
    (2) No party in interest other than Hancock shall be subject to the 
civil penalty that may be assessed under section 502(i) of the Act, or 
to the taxes imposed by section 4975(a) and (b) of the Code, if the 
records are not maintained, or are not available for examination as 
required below by paragraph (l)(1).
    (l)(1) Except as provided in subparagraph (2) of this paragraph (l) 
and notwithstanding any provisions of subsections (a)(2) and (b) of 
section 504 of the Act, the records referred to in paragraph (k), 
above, are unconditionally available at their customary location for 
examination during normal business hours by--
    (i) Any duly authorized employee or representative of the 
Department, or the Internal Revenue Service;
    (ii) Any fiduciary of an IP Plan or any duly authorized 
representative of such fiduciary;
    (iii) Any contributing employer to an IP Plan or any duly 
authorized employee representative of such employer; and
    (iv) Any participant or beneficiary of an IP Plan, or any duly 
authorized representative of such participant or beneficiary.
    (2) None of the persons described above in subparagraphs 
(l)(1)(ii)-(iv) are authorized to examine the trade secrets of Hancock 
or its affiliates or commercial or financial information which is 
privileged or confidential.


Section III: Definitions


    (a) The term, ``affiliate'' or ``affiliates,'' of a person means:
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person;
    (2) Any officer, director, employee, relative of, or partner in any 
such person; and
    (3) Any corporation or partnership of which such person is an 
officer, director, partner, or employee.
    (b) The term, ``control,'' means the power to exercise a 
controlling influence over the management or policies of a person other 
than an individual.
    (c) The term, ``Buyer's List,'' means a comprehensive and current 
list of the names of the active forest products companies and 
prospective buyers of Timber Products in the geographic area in which 
such Timber Products are located, which is compiled and maintained by 
Hancock for each such geographic area for the purpose of selling Timber 
Products in such area on behalf of any of the timber accounts managed 
by Hancock, provided that, with respect to the Buyer's List utilized by 
ForesTree IP:
    (1) International Paper's name may not be added to the Buyer's List 
for a geographic area solely for the purpose of a sale by ForesTree IP 
of Timber Products in such area; and
    (2) The name of a prospective buyer of Timber Products in a 
geographic area may not be removed by Hancock from the Buyer's List for 
such geographic area, unless such buyer:
    (A) Has failed to perform satisfactorily in a previous transaction;
    (B) Is no longer in business;
    (C) Requests, orally or in writing, to be removed from such list; 
or
    (D) Has failed to respond for a period of two (2) years to previous 
solicitations by ForesTree IP to bid on Timber Products offered for 
sale in the geographic area;
    (d) The term, ``ForesTree IP,'' refers to the non-pooled insurance 
company separate account maintained and managed by Hancock for the 
investment of assets of one or more of the IP Plans, as well as to any 
partnership, limited liability company, or corporation in which 
ForesTree IP invests. The term, ``ForesTree IP,'' does not include the 
other ForesTree Separate Accounts managed by Hancock.
    (e) The term, ``Hancock,'' means John Hancock Financial Services 
(Financial Services); John Hancock Life Insurance Company (JHLIC); John 
Hancock Variable Life Insurance Company (Variable Life); Hancock 
Natural Resources Group (Resources Group); John Hancock Timber Resource 
Corporation (Timber Resource); or other affiliates of JHLIC, as defined 
in section III(a), above.
    (f) The term, ``Timber Asset(s),'' means a fee simple in timberland 
(and appurtenant rights) \2\, or a timber lease, or a timber deed, 
provided that, with respect to any timber lease, or timber deed:
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    \2\ It is represented that certain property rights, including 
mineral rights, easements, and recreational leases, are appurtenant 
to a fee simple and are bought and sold, and appraised along with 
the fee simple.
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    (1) The underlying fee simple is owned by a person other than 
International Paper, Hancock, or any other account managed by Hancock 
at the time of the sale; and
    (2) The entire deed or lease held by International Paper is 
purchased by ForesTree IP.


[[Page 3042]]


    (g) The term, ``Timber Product(s),'' means standing timber or 
timber in the form of logs.
    (h) The term, ``independent, qualified appraiser,'' means an 
individual or firm which is qualified to serve in the capacity as an 
appraiser; is independent of the parties in interest engaging in the 
transaction and their affiliates; and satisfies the following 
conditions:
    (1) Other than serving as the independent, qualified appraiser for 
a transaction which is subject to this exemption, the individual or 
firm has no current employment relationship with Hancock or with 
International Paper;
    (2) No individual or firm may serve as an independent, qualified 
appraiser during any year in which the gross receipts such individual 
or firm received from business with Hancock and from business with 
International Paper for that year exceeds 5 percent (5%) of such 
individual's or firm's gross receipts from all sources for the prior 
year;
    (3) If an individual is selected to serve as the independent, 
qualified appraiser, then such individual must:
    (A) Have a forestry degree; and
    (B) Have a minimum of five (5) years of experience as a timberland 
appraiser; or
    (C) Otherwise demonstrate proficiency in timberland appraisal work 
which is equivalent to the level of expertise demonstrated by the 
requirements, as set forth in section III(h)(3)(A) and (B), above;
    (4) If a firm is selected to serve as the independent, qualified 
appraiser, then such firm must have:
    (A) A minimum of five (5) years of experience as a timberland 
appraiser; or
    (B) Otherwise demonstrate proficiency in timberland appraisal work; 
and
    (5) The individual or the firm that serves as the independent, 
qualified appraiser for transactions covered by this exemption must 
have the ability to access appropriate timberland sales comparison 
data.
    (i) The term, ``bona fide bidder,'' means a bidder on a Timber 
Product offered for sale by ForesTree IP, only if
    (1) The bidder has made an offer to purchase the Timber Product, in 
accordance with the terms of the bid solicitation;
    (2) The bidder's name appears on the Buyer's List at the time of 
bid solicitation and at the time of the bid;
    (3) Hancock neither knows or should know of any impediment to the 
bidder's consummation of the purchase of the Timber Product offered for 
sale upon which the bidder has bid; and
    (4) Hancock has no reason to believe that the bid was not made in 
good faith by the bidder with the present intent of procuring the 
Timber Product offered for sale by ForesTree IP.


Summary of Facts and Representations


    1. The Retirement Plan of the International Paper Company, (the IP 
Retirement Plan), located in Memphis, Tennessee is affected by this 
proposed exemption. The IP Retirement Plan is an employee pension 
benefit plan covered by the Act. As of January 10, 2002, the estimated 
number of participants and beneficiaries in the IP Retirement Plan was: 
(a) 61,100 actives; (b) 35,600 retired or separated individuals; and 
(c) 30,600 terminated vested individuals.
    International Paper and certain of its affiliates sponsor and 
maintain the IP Retirement Plan for their employees. As employers any 
of whose employees are covered by the IP Retirement Plan, International 
Paper and certain of its affiliates are parties in interest with 
respect to such plan, pursuant to section 3(14)(C) of the Act.
    The fair market value of the total assets of the IP Retirement Plan 
was approximately $6,884,329,000, as of June 30, 2001. The assets of 
the IP Retirement Plan are held in the International Paper Company 
Trust Agreement to Fund Pension Plans (the IP Trust). It is represented 
that the IP Trust may also, from time to time, hold the assets of other 
plans sponsored and maintained by International Paper and its 
affiliates for their employees. The trustee of the IP Trust is State 
Street Bank and Trust Company (State Street).
    2. The application for this proposed exemption was submitted on 
behalf of JHLIC, Financial Services, Variable Life, Resources Group, 
and Timber Resource. JHLIC is a wholly-owned subsidiary of Financial 
Services. Variable Life is a wholly-owned subsidiary of JHLIC. 
Resources Group and Timber Resource are wholly-owned indirect 
subsidiaries of JHLIC.\3\
    Through Resources Group, John Hancock manages timberland for its 
customers and for its own general account. In this regard, as of June 
30, 2001, Resources Group managed over 2.4 million acres of timberland 
in the United States valued at approximately $2.2 billion, and managed 
nearly .5 million acres of Australian timberland valued at 
approximately $362 million.
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    \3\ Throughout the Summary of Facts and Representations for this 
proposed exemption, JHLIC and Variable Life are referred to 
collectively as ``John Hancock,'' and the term, ``Hancock,'' is 
defined, as set forth in section III(e) of this proposed exemption.
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    3. John Hancock offers annuity contracts and funding agreements to 
customers (Contract Holders), including employee pension benefit plans 
subject to the Act. Such Contract Holders may invest directly or 
indirectly in timberland through pooled and non-pooled separate 
accounts available under John Hancock group annuity contracts and 
funding agreements. It is represented that these contracts and 
agreements provide that, in accordance with the Contract Holders' 
direction, the premium or contribution received from such Contract 
Holder will be allocated internally on the books of John Hancock to 
segregated asset accounts or ``separate accounts.'' The separate 
account investments are held in John Hancock's name, but the value of 
the contract or agreement to the Contract Holder fluctuates with the 
value of the investments allocated to the separate account. The direct 
expenses of managing the investments and John Hancock's fees are 
charged against the value of the separate account.
    4. John Hancock manages a number of separate accounts, both pooled 
and non-pooled, that invest in timber. These separate accounts are 
generally known as the ForesTree Separate Accounts. It is represented 
that these ForesTree Separate Accounts may invest in Timber Assets, 
including a fee simple (with appurtenant rights), as well as timber 
leases, and timber deeds. It is represented that a timber lease is a 
contract between a landowner (the lessor) and another party (the 
lessee) under which the lessee is granted the right to use the land for 
the production of lumber for a specified period of time. Timber leases 
typically specify how the land is to be managed and the condition to 
which the land is to be returned upon expiration of the lease. A timber 
deed is a contract under which the landowner grants to a third party 
the right (but not the obligation) to harvest existing timber.
    It is represented that over one million acres of Timber Assets are 
allocated to the ForesTree Separate Accounts. As of June 30, 2001, 
these Timber Assets had a value of over $1 billion.
    As part of its timberland management, John Hancock or an affiliate 
also periodically sells Timber Products in the form of standing timber 
or logs from its ForesTree Separate Accounts to companies in the forest 
products industry. John Hancock, through its affiliates, has the 
discretion to determine when and how much of the Timber Products in the 
ForesTree Separate Accounts to sell, based on the market conditions for 
each type of timber and the geographic location.


[[Page 3043]]


    John Hancock is the sole legal owner of the assets in each of the 
ForesTree Separate Accounts. Under the applicable contract or 
agreement, John Hancock or an affiliate has the right to control, 
manage, and administer the ForesTree Separate Accounts, including the 
sole discretion to select and dispose of investments in such accounts 
in accordance with the investment policy for such accounts.
    John Hancock's management responsibilities under the ForesTree 
Separate Accounts are performed by Resources Group, a wholly-owned 
indirect subsidiary of John Hancock which was established in 1995. 
Subject to review and approval by John Hancock's internal investment 
committees, Resources Group is responsible for all decisions regarding 
the acquisition and disposition of timberland properties held in the 
ForesTree Separate Accounts. In addition, Resources Group is 
responsible for the ongoing management of John Hancock's timberland 
properties, including site preparation and planting, road building and 
construction, leasing to tenants, maintenance, acquisition of 
insurance, and payment of taxes. It is represented that on-site work is 
performed either by independent forest managers under contract to 
Resources Group or by employees of Timber Resource. In this regard, 
Resources Group currently contracts with three regional forest 
management firms. Such firms include Olympic Resource Management (in 
the western United States and Canada), Resource Management Services (in 
the southern United States), and Wagner Forest Management (in the 
northern United States). In addition to these regional forest 
management firms, Cahaba Forest Management, Inc., a wholly-owned 
subsidiary of Resources Group established in February of 2000, provides 
property management services and manages International Paper's Redstone 
investment in Alabama.
    5. ForesTree IP is a non-pooled separate account established on 
January 1, 2000. ForesTree IP is maintained pursuant to a Group Annuity 
Contract (No. 14756 GAC), entered into on January 31, 2000, between 
John Hancock and the IP Trust. ForesTree IP is one of the ForesTree 
Separate Accounts managed by John Hancock that are invested in Timber 
Assets. ForesTree IP is the only one of the ForesTree Separate Accounts 
to which the relief provided by this proposed exemption is applicable. 
It is represented that, as of December 31, 2001, the real, dollar-
weighted internal rate of return since the inception of ForesTree IP 
was 6.5 percent (6.5%) (after John Hancock's fees).\4\ ForesTree IP was 
established with an intended allocation of $25 million to be invested 
in Timber Assets. In February 2000, $10 million of the allocation was 
invested in Timber Assets in Alabama. John Hancock expects that the 
remaining $15 million will be allocated before the end of the year 
2002. In addition, it is represented that there is the potential for 
additional funding in the range of $10 million to $30 million.
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    \4\ The applicants have not requested an exemption for the 
receipt of incentive management fees or other fees in connection 
with John Hancock or its affiliates serving as investment manager 
for ForesTree IP under the terms of the group annuity contract (No. 
14756 GAC) between John Hancock and the IP Trust. The Department 
herein offers no opinion as to whether the fee structure, as set 
forth in such group annuity contract, raises issues under the 
prohibited transaction provisions of section 406 of the Act, nor is 
the Department providing relief, herein, for the receipt by John 
Hancock or any of its affiliates of incentive management fees or 
other fees in connection with the assets held by ForesTree IP.
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    Following an expected allocation of $25 million to ForesTree IP, it 
is represented that the percentage of the fair market value of the 
total assets of the IP Retirement Plan (approximately $6.9 billion, as 
of June 30, 2001) involved in the proposed transactions will be .36 
percent (.36%). It is represented that approximately .27 percent (.27%) 
of the fair market value of the assets of the IP Retirement Plan are 
invested in timber related assets outside of ForesTree IP.
    As a result of the investment in ForesTree IP by the IP Retirement 
Plan, the assets of such account are deemed to be assets of the IP 
Retirement Plan, pursuant to the Department's regulations, as set forth 
in 29 CFR Sec.  2510.3-101(h)(1)(iii).
    Assets invested in ForesTree IP are managed by John Hancock and 
Resource Group in accordance with the investment policy established for 
the account. The investment objective of ForesTree IP is to establish 
and maintain a diversified portfolio of individual or shared equity 
interests in timberland investments. Timberland investments consist 
primarily of interests in timber producing real estate, and in 
contracts relating to real estate for the production and harvesting of 
Timber Products. Timberland investments may be located either inside 
the United States, or, with the consent of the Contract Holder, the IP 
Retirement Plan, outside the United States.\5\
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    \5\ The applicants represent that John Hancock satisfies the 
indicia of ownership requirements, as set forth in section 404(b) of 
the Act. In this regard, it is represented that where John Hancock 
invests in foreign timber, it does so through an entity qualified as 
a ``real estate operating company,'' pursuant to 29 CFR Sec.  
2510.3-101(e) of the Department's plan assets regulation. Further, 
it is represented that the indicia of ownership of such entity is 
held in the United States. The Department, herein, expresses no 
opinion as to whether the applicants have satisfied the indicia of 
ownership requirements, as set forth in section 404(b)of the Act.
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    Pursuant to the investment policy of ForesTree IP, Timber Assets 
are purchased or sold opportunistically to generate returns to meet 
performance objectives of the account. ForesTree IP may invest directly 
in a Timber Asset, or it may invest in entities that own Timber Assets, 
directly or indirectly. These entities include corporations, 
partnerships, 501(c)(25) organizations, and their international 
equivalents (Holding Entities). Although ForesTree IP does not 
currently invest through such Holding Entities, if it were to do so, it 
is represented that Resources Group would likely be appointed the 
investment manager of such entity, or that Resources Group (or an 
employee) would be appointed as an officer of the entity that holds the 
Timber Assets.
    It is represented that the assets of any of the Holding Entities 
through which ForesTree IP may invest in Timber Assets could constitute 
plan assets, pursuant to the Department's regulations, as set forth at 
29 CFR Sec.  2510.3-101(a)(2). It is further represented that as 
investment managers for ForesTree IP, John Hancock, and Resources Group 
are fiduciaries of the IP Retirement Plan, pursuant to section 3(14)(A) 
of the Act. Resources Group is also a fiduciary with respect to the IP 
Retirement Plan, pursuant to section 3(14)(A) of the Act, as 
discretionary manager of the timberland held by any pass-through 
entity.
    6. John Hancock desires to purchase Timber Assets from 
International Paper on behalf of ForesTree IP. In this regard, John 
Hancock anticipates that $1 million to $2 million worth of Timber 
Assets will be marketed by International Paper for sale over the next 
two (2) years, as a result of the May 2000 merger of International 
Paper and Champion International. As the sale of Timber Assets from 
International Paper to ForesTree IP would constitute a violation of 
section 406(a)(1)(A) and (D) of the Act, John Hancock and its 
affiliates request an administrative exemption; provided certain 
general and specific conditions are satisfied at the time each 
transaction is entered.
    It is further represented that section 406(a)(1)(A) and (D) of the 
Act would be violated by any sale of Timber Products from ForesTree IP 
to International Paper. Accordingly, John Hancock also


[[Page 3044]]


requests an administrative exemption that would permit it or Resources 
Group periodically to sell Timber Products from ForesTree IP, to 
International Paper; provided certain general and specific conditions 
are satisfied at the time each transaction is entered.
    7. In the opinion of John Hancock, the proposed transactions are in 
the interest of the IP Retirement Plan and any IP Plan subsequently 
sponsored by International Paper which participates through the IP 
Trust in ForesTree IP. In this regard, if permitted to purchase Timber 
Assets held by International Paper, ForesTree IP will have access to 
the broadest range of potential timber investments, in a market in 
which such investments are limited.
    It is represented that an exemption permitting the sale of Timber 
Products from ForesTree IP to International Paper is in the interest of 
the IP Plan and its participants and beneficiaries, because it will 
enhance John Hancock's ability to maximize the return of such account. 
In this regard, the exemption will create a more competitive market in 
which to sell Timber Products harvested from the Timber Assets held on 
behalf of such account. John Hancock notes that the number of 
purchasers of Timber Products has declined in the last few years due to 
the consolidation of the forest products industry. In the opinion of 
John Hancock, in order to ensure that ForesTree IP is obtaining the 
highest value for its Timber Products, it should be able to market such 
products to all available purchasers, including International Paper. It 
is represented that, if International Paper is precluded from bidding 
on Timber Products sold by ForesTree IP, the account may not obtain the 
highest price for its timber to the detriment of the IP Retirement 
Plan.
    8. It is represented that the proposed exemption contains 
sufficient safeguards to protect the participants and beneficiaries of 
the IP Retirement Plan. In this regard, before purchasing a Timber 
Asset from International Paper, John Hancock, as the investment manager 
of ForesTree IP, will independently determine that the purchase of such 
asset is in the interest of the account and consistent with the 
policies and objectives of such account. Moreover, John Hancock will 
obtain an appraisal from an independent, qualified appraiser of the 
value of the Timber Asset prior to purchase to ensure that ForesTree IP 
pays no more than the fair market value of such asset. The fair market 
value of the Timber Asset sold to ForesTree IP must be documented by an 
appraisal report in writing issued, as of the date of the transaction, 
by the independent, qualified appraiser, and such report must be 
retained for a period of six (6) years from the date of the 
transaction.
    Because of the ongoing nature of the requested exemption, it is 
represented that the applicants cannot now identify the appraisers who 
will perform the required appraisals. However, the Department notes 
that any appraiser selected to value the Timber Asset to be purchased 
by ForesTree IP from International Paper, pursuant to the terms of this 
exemption, must satisfy the requirements for independence and 
qualification, as set forth in section III(h) of this exemption.
    Before selling a Timber Product, John Hancock will independently 
determine that the sale is in the interest of ForesTree IP. Further, it 
is represented that the price received by ForesTree IP for Timber 
Products offered for sale will be established through a competitive 
bidding process among the prospective buyers in the relevant geographic 
area in which the Timber Products are located.
    It is represented that John Hancock's regional forest managers 
compile and maintain Buyer's Lists of the names of active forest 
products companies and timber buyers in each geographic region in which 
Timber Products are located for the purpose of selling such Timber 
Products for any timber account. The relevant geographic area is 
generally a 100-mile radius from the harvest area, because the cost to 
truck logs beyond this distance is typically uneconomical. However, 
there is no fixed requirement for such radius. It is represented that 
John Hancock's regional forest managers take into account the distance 
of a potential buyer from the location of the properties under 
management and determine what is the appropriate target area.
    It is further represented that Buyer's Lists typically contain 
between 50 and 100 potential buyers. However, the number may vary from 
list to list depending upon the depth of the timber markets and the 
number of wood processing facilities in the relevant geographic area. 
It is in the interest of John Hancock, and all of its client accounts, 
to maintain the most comprehensive Buyer's Lists for all transactions. 
In this regard, prospective buyers are identified via word of mouth 
through day to day dealing with logging contractors and timber buyers 
by John Hancock's regional forest managers. In addition, prospective 
buyers may be added to a particular Buyer's List upon the request, 
either oral or written, of such buyers. It is represented that John 
Hancock's regional forest managers will add a potential buyer to the 
Buyer's List, so long as a manager has no knowledge of unsatisfactory 
past performance by such buyer. The applicants have informed the 
Department that John Hancock's general account and the names of other 
accounts managed by John Hancock may appear on any of the Buyer's 
Lists. In this regard, the Department notes that section II(h) of this 
exemption precludes relief for the purchase by ForesTree IP of Timber 
Assets from or sale by ForesTree IP of Timber Products to Hancock's 
general account or any other account managed by Hancock.
    With respect to the Buyer's List utilized by ForesTree IP, John 
Hancock's forest manager in the region where such Timber Products are 
located will solicit bids from all of the buyers in that geographic 
area whose names are on the Buyer's List then currently in effect. It 
is represented that John Hancock will not modify the Buyer's List for a 
geographical area to add International Paper's name to such list solely 
for the purpose of engaging in a sale by ForesTree IP of Timber 
Products in such area to International Paper. Further, with respect to 
the Buyer's List utilized by ForesTree IP, John Hancock's regional 
forest managers will not remove a buyer from the Buyer's List for a 
geographic area, unless the buyer has failed to perform satisfactorily 
in a previous transaction; is no longer in business; requests, orally 
or in writing, to be removed from such list; or has failed to respond 
for a period of two (2) years to previous solicitations by ForesTree IP 
to bid on Timber Products offered for sale in the geographic area.
    Prior to sending out a solicitation for bids on Timber Products, 
John Hancock will establish a Minimum Bid based on its assessment of 
the fair market value of the Timber Products being sold. It is 
represented that John Hancock manages Timber Assets through individuals 
in its regional offices (the Hancock Forester(s)). The Hancock 
Foresters contract for management of Timber Assets in specific regions 
with affiliates or with third party forest managers (the Contract 
Forest Managers). Each of the Contract Forest Managers are represented 
by a timberland manager (the Timberland Managers). Individual field 
foresters (the Field Forester(s)) report to the Timberland Managers.
    It is represented that Field Foresters are responsible for day-to-
day management of ForesTree IP. Such Field Foresters determine when, 
consistent with annual budgets established by the Hancock Foresters, to 
sell specific Timber Products. Each time a Timber Product is sold using 
the bid solicitation process, a Field Forester determines the current 
fair market value of such


[[Page 3045]]


product. It is further represented that the Minimum Bid is equal to the 
current fair market value of such product.
    It is represented that to determine the fair market value (and 
consequently, the Minimum Bid) for a solicitation, a Field Forester 
reviews: (1) Information about recent sales of Timber Products in the 
area, gleaned from conversations with mill owners and other timber 
buyers on a regular basis, (2) information on sales of standing timber 
and so-called ``gatewood'' (harvested timber delivered directly to the 
gate of a mill), and (3) routine disclosures of actual recent winning 
and low bids received for Timber Products.
    Once a Field Forester determines the fair market value for the 
Timber Product to be sold, the price is compared to the ``per unit 
annual budgeted price'' for the applicable Timber Product. It is 
represented that every year a budget for each Timber Asset is adopted. 
Among other things, the budget includes a projection of the average 
sales price for specific types of Timber Products to be sold during the 
year. If the Minimum Bid proposed by a Field Forester for a Timber 
Product is more than 10 percent (10%) below the budgeted price, a 
Hancock Forester must review the solicitation. It is the responsibility 
such Hancock Forester to then determine whether the price difference is 
justified by changes in circumstances, and whether or not to approve 
the proposed Minimum Bid. Rather than approve the proposed Minimum Bid, 
a Hancock Forester may insist that the sale of the Timber Product be 
delayed.
    The applicants indicate that is not customary at John Hancock or in 
the timber industry in which it operates to disclose the Minimum Bid in 
advance for a timber sale in a competitive bid situation. Minimum Bids 
are not disclosed because that disclosure could adversely affect the 
price received by the seller. The Minimum Bid is published with final 
bid results.
    It is represented that the highest bid must meet or exceed the 
Minimum Bid and must be at least as favorable to ForesTree IP as the 
fair market value of the Timber Product being sold at the time that the 
contract for sale is legally binding on the parties involved. Where 
International Paper is the highest bidder for a Timber Product being 
sold by ForesTree IP, it is represented that the sale will not go 
forward, unless Hancock has received bids on such Timber Product from 
at least two (2) other bidders, in addition to International Paper, 
provided that each such bidder satisfies the definition of a bona fide 
bidder, as set forth in section III (i), below; and that neither 
Hancock's general account nor any other account managed by Hancock is 
either of the two other bidders.
    9. It is represented that the proposed transactions are 
administratively feasible, because each transaction involving the IP 
Retirement Plan can be readily identified and audited. Furthermore, the 
exemption will not require continued monitoring or other involvement on 
behalf of the Department or the Internal Revenue Service. Furthermore, 
John Hancock or an affiliate is responsible for maintaining or causing 
to be maintained certain records for a period of six (6) years from the 
date of any transaction covered by this exemption which will enable 
certain persons to determine whether the conditions of the exemption 
have been met.
    10. In summary, the applicants represent that the proposed 
transactions meet the statutory criteria for an exemption under section 
408(a) of the Act because:
    (a) The price paid by ForesTree IP for the Timber Assets will be 
determined, as of the date of each transaction, by an independent, 
qualified appraiser; and will be documented in writing by an appraisal 
report;
    (b) The price paid by ForesTree IP for the Timber Assets will not 
exceed the fair market value of such assets at the time of the 
purchase;
    (c) Prior to soliciting bids for the sale of a Timber Product, John 
Hancock will establish a Minimum Bid based on its assessment of the 
fair market value of the Timber Product offered for sale;
    (d) John Hancock (or its designee) will solicit from each party on 
the Buyer's List utilized by ForesTree IP for the relevant geographic 
area in which the Timber Product is located, a written bid for the 
purchase of the Timber Product offered for sale;
    (e) The highest price bid for the Timber Product offered for sale 
must meet or exceed the Minimum Bid established by John Hancock and 
must not be less than the fair market value of such Timber Product at 
the time the contract for sale is legally binding on the parties 
involved;
    (f) Where International Paper's is the highest price bidder for the 
Timber Product offered for sale, the transaction may not go forward, 
unless bids have been received on such Timber Product from at least two 
(2) other bidders, in addition to International Paper, provided that 
each such bidder satisfies the definition of a bona fide bidder, as set 
forth in section III (i), below; and provided further that neither 
Hancock's general account nor any other account managed by Hancock is 
either of the two other bidders;
    (g) any plan that invests in ForesTree IP will have total assets in 
excess of $100 million;
    (h) John Hancock or an affiliate will act as discretionary 
investment manager for ForesTree IP;
    (i) John Hancock or an affiliate will negotiate on behalf of 
ForesTree IP the terms and conditions of the purchase of Timber Assets 
or the sale of Timber Products by ForesTree IP;
    (j) prior to entering into the purchase of Timber Assets or the 
sale of Timber Products by ForesTree IP, John Hancock or an affiliate 
will determine on behalf of such account that each such transaction is 
feasible, in the interest of the account based on the investment policy 
and objectives of such account, and protective of the participants in 
such account;
    (k) The terms and conditions of each transaction involving the 
purchase of Timber Assets or the sale of Timber Products by ForestTree 
IP are at least as favorable to such account as those obtainable in an 
arm's length transaction with an unrelated party;
    (l) The transactions which are the subject of this exemption are 
not part of an agreement, arrangement, or understanding designed to 
benefit a party in interest;
    (m) ForesTree IP will not purchase Timber Assets from or sell 
Timber Products to Hancock's general account or any other account 
managed by Hancock;
    (n) The investment of plan assets by any IP Plan in ForesTree IP 
will not exceed 20 percent (20%) of the total assets of such plan;
    (o) The total amount invested by International Paper on behalf of 
the IP Plans and allocated to ForesTree IP will not in the aggregate 
exceed $100 million; and
    (p) John Hancock or its affiliates shall maintain or cause to be 
maintained certain records for a period of six (6) years from the date 
of any transaction covered by this exemption.


Notice to Interested Persons


    It is represented that those persons who may be interested in the 
publication in the Federal Register of the Notice of Proposed Exemption 
(the Notice) include International Paper, State Street Bank, and the 
active participants in the IP Retirement Plan.
    John Hancock proposes to provide notification of the publication of 
the Notice to these interested persons through different methods. In 
this regard, John Hancock will provide notification to International 
Paper and


[[Page 3046]]


State Street by first class mail or by overnight delivery within 
fifteen (15) calendar days of the date of publication of the Notice in 
the Federal Register. Such mailing will contain a copy of the Notice, 
as it appears in the Federal Register on the date of publication, plus 
a copy of the supplemental statement (the Supplemental Statement), as 
required, pursuant to 29 CFR Sec.  2570.43(b)(2), which will advise 
such interested persons of their right, to comment on the proposed 
exemption.
    With regard to notification to the active participants in the IP 
Retirement Plan, John Hancock proposes: (1) To ask International Paper 
to distribute the required notification pursuant to its usual and 
customary procedures for dissemination of information to employees; and 
(2) to direct that notification be posted within twenty-one (21) 
calendar days of the date of publication of the Notice in the Federal 
Register. Such postings will contain a copy of the Notice, as it 
appears in the Federal Register on the date of publication, plus a copy 
of the Supplemental Statement, as required, pursuant to 29 CFR Sec.  
2570.43(b)(2), which will advise interested persons of their right to 
comment. International Paper has agreed to post the required 
notification on bulletin boards in prominent areas at those 
International Paper work sites at which more than ten (10) participants 
of the IP Retirement Plan work. Further, it is represented that 
International Paper will also provide written confirmation to the 
Department that it posted the required notification at the various work 
sites on a specified date.
    The Department must receive all written comments and requests for a 
hearing no later than thirty (30) days from the later of: (1) The date 
when posting of a copy of the Notice and a copy the Supplemental 
Statement was completed at all those International Paper work sites at 
which more than ten (10) participants in the IP Retirement Plan work; 
or (2) the date a copy of the Notice and a copy of the Supplemental 
Statement was received in the mail or by overnight delivery by State 
Street.


FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the Department, 
telephone (202) 693-8540 (This is not a toll-free number.)


G.D. Castillo, M.D., Ltd, Profit Sharing Plan (the Plan), Located in 
Savoy, IL


[Application No. D-11107]


Proposed Exemption


    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR Part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the proposed 
exemption is granted, the restrictions of sections 406(a) and 406(b)(1) 
and (b)(2) of the Act and the sanctions resulting from the application 
of section 4975 of the Code, by reason of section 4975(c)(1)(A) through 
(E) of the Code, shall not apply, effective August 23, 1999, to the 
sale of two parcels of unimproved real property (the Properties) by the 
Plan to Doctor G.D. Castillo (the Sales), a party in interest with 
respect to such Plan, provided that the following conditions are met: 
\6\
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    \6\ The application for this proposed exemption, which was filed 
on January 19, 2001, was initially assigned the number D-10967 
before being reassigned the above-referenced application number on 
July 22, 2002.
---------------------------------------------------------------------------


    (a) The terms and conditions of the Sales were at least as 
favorable to the Plan as those obtainable in similar arm's-length 
transactions involving unrelated parties;
    (b) Each Sale was a one-time transaction for cash;
    (c) The amount of cash received by the Plan for each Property was 
not less than the fair market value of such Property as of the date of 
the Sales as determined by a qualified, independent appraiser; and
    (d) The Plan did not pay any fees or commissions in connection with 
the Sales.


EFFECTIVE DATE: August 23, 1999.


Summary of Facts and Representations


    1. Doctor G.D. Castillo (Dr. Castillo), a physician specializing in 
plastic surgery, is the sole owner of G.D. Castillo, M.D., Ltd., a 
medical office located in Savoy, Illinois. G.D. Castillo, M.D., Ltd. is 
the sponsor of the Plan, a profit sharing plan having three 
participants and approximately $2,667,475 in assets as of December 31, 
1999. On the date of the Sales, the assets of the Plan were invested 
primarily in the Properties, stock, and other non-cash assets.
    2. The assets of the Plan are invested according to the sole 
discretion of Dr. Castillo. In 1995 and 1996, Dr. Castillo directed the 
Plan to acquire the Properties from unrelated third parties (the 
Acquisitions). The first of the Properties is located at 1804A 
Woodfield Drive, Savoy, Illinois (the First Property) and is described 
as a commercial lot comprising approximately 17,178 square feet. Dr. 
Castillo directed the Plan to acquire this property for $72,000 in 
1995. The second of the Properties is located at Lot 50, J.L. Smith 
Lane, Monee, Illinois (the Second Property) and is described as an air 
park subdivision lot comprising approximately 43,200 square feet. Dr. 
Castillo directed the Plan to acquire this property for $39,845 in 
1996.
    3. Subsequent to the Acquisitions, Dr. Castillo decided that the 
Properties were no longer appropriate investments for the Plan. In this 
regard, by 1999, Dr. Castillo determined that the Properties, while 
incurring certain costs to the Plan, were not appreciating as 
expected.\7\ As a result, Dr. Castillo directed the Plan to sell the 
Properties on the open market.
---------------------------------------------------------------------------


    \7\ The applicant represents that at the time of the Sales, 
these costs (i.e., taxes, association dues, and maintenance) totaled 
$1,297.
---------------------------------------------------------------------------


    4. Concurrent with the offering of the Properties on the open 
market, Dr. Castillo identified a new investment opportunity for the 
Plan. In this regard, Dr. Castillo sought to acquire a certain improved 
real property located in Golden, Colorado (the New Property) on behalf 
of the Plan. Given that the Plan lacked sufficient liquid assets to 
acquire the New Property, Dr. Castillo initiated the Sales. In this 
regard, on August 23, 1999, the Plan sold the First Property and the 
Second Property to Dr. Castillo for $70,000 and $42,000, respectively. 
Dr. Castillo represents that both transactions were for cash and that 
the Plan was not charged any costs or fees arising in connection with 
the Sales.\8\ Thereafter, an accountant reviewed the Sales when 
preparing an Internal Revenue Service Form 5500 on behalf of the Plan 
with respect to the 1999 Plan year. Upon being notified that the Sales 
constituted a prohibited transaction, Dr. Castillo voluntarily filed 
this application for an exemption on January 15, 2001.
---------------------------------------------------------------------------


    \8\ Using the cash received from the Sales, the applicant states 
that the Plan acquired the New Property on August 27, 1999 from an 
unrelated third party for approximately $690,000. Dr. Castillo 
states further that he has been unsuccessful in his attempts to 
resell the Properties on the open market.
---------------------------------------------------------------------------


    5. Dr. Castillo states that the amount of cash the Plan received 
for the Properties pursuant to the Sales equaled the fair market value 
of the Properties as of the date of the Sales. In this regard, Dr. 
Castillo states that the Properties were appraised by Mr. Carl Hill 
(Mr. Hill), a real estate appraiser with over 22 years of specialized 
experience in valuing commercial properties. In appraising these 
Properties, Mr. Hill used the sales comparison approach and determined 
that the fair market value of the First Property was $70,000 as of 
March 15, 1999 and the fair market value of the Second Property was 
$42,000 as of March 15, 1999.


[[Page 3047]]


    6. Dr. Castillo states that the participation by the Plan in the 
Sales benefited the participants and beneficiaries of the Plan. In this 
regard, Dr. Castillo states that the cash received by the Plan from the 
Sales enabled the Plan to acquire the New Property. In so doing, the 
Plan acquired an asset that Dr. Castillo anticipates will provide a 
suitable rate of return to the Plan.
    7. Dr. Castillo represents that the Sales were protective of the 
participants and beneficiaries of the Plan since the terms of the Sales 
were no less favorable to the Plan than the terms available between 
unrelated parties. In this regard, the Plan received the current fair 
market value of the Properties without incurring any of the costs or 
fees associated therein. In addition, Dr. Castillo states that the Sale 
was in the best interests of the Plan since it enabled the Plan to sell 
a non-appreciating asset that had limited marketability. Finally, Dr. 
Castillo states that the proposed exemption is administratively 
feasible in that the Sales involved one-time transactions for cash.
    8. In summary, Dr. Castillo represents that the Sales satisfy the 
criteria of section 408(a) of the Act since:
    (a) The terms and conditions of the Sales were at least as 
favorable to the Plan as those obtainable in similar arm's-length 
transactions involving unrelated parties;
    (b) Each Sale was a one-time transaction for cash;
    (c) The amount of cash received by the Plan for each Property 
equaled the fair market value of such Property as of the date of the 
Sales as determined by a qualified, independent appraiser; and
    (d) The Plan did not pay any fees or commissions in connection with 
the Sales.


FOR FURTHER INFORMATION CONTACT: Christopher J. Motta of the 
Department, telephone (202) 693-8544. (This is not a toll-free number.)


DuPont Capital Management Corporation (DCMC), Located in Wilmington, DE


[Application Nos. D-11111, 11112, 11113]


Proposed Exemption


    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption 
is granted, the restrictions of sections 406(a) of the Act and the 
sanctions resulting from the application of section 4975(a) and (b) of 
the Code, by reason of section 4975(c)(1)(A) through (D) of the Code, 
shall not apply to the past extension of credit from the DuPont Pension 
and Retirement Plan, the Pioneer Hi-Bred International, Inc. Retirement 
Plan and the Protein Technologies International Retirement Plan 
(collectively, the Plans)\9\ to the Dow Chemical Company (Dow), a party 
in interest with respect to the Plans, as a result of the holding by 
the Plans of certain corporate debt securities (the Bonds) issued by 
Dow, for the period from October 25, 2000 until July 10, 2001 provided 
the following conditions were satisfied:
---------------------------------------------------------------------------


    \9\ Because the Plans are funded through the same trust and each 
has an undivided interest in the assets of such trust, this 
application will treat the purchase of the Bonds (as defined herein) 
by the Plans as a single transaction and information concerning such 
purchase will be discussed on an aggregate basis.
---------------------------------------------------------------------------


    (a) The purchase of the Bonds by the Plans was a one-time 
transaction for cash;
    (b) The Plans paid no more than the current fair market value for 
the Bonds at the time of the transaction, as determined by a reputable, 
independent, third party market source;
    (c) The Bonds were sold on July 10, 2001 for $1,975,320 at a profit 
of $126,580 for the Plans;
    (d) The purchase of the Bonds was not part of an agreement, 
arrangement or understanding designed to benefit Dow or any other party 
in interest with respect to the Plans; and
    (e) The transaction represented less than .02% of each Plan's total 
assets.


Effective Date of Exemption


    The proposed exemption, if granted, will be effective for the 
period from October 25, 2000 (the date of the acquisition of the Bonds 
by the Plans) until July 10, 2001 (the date the Bonds were sold).


Summary of Facts and Representations


    1. The applicant is DuPont Capital Management Corporation (DCMC), a 
wholly owned subsidiary of E.I. dupont de Nemours and company (DuPont), 
and organized as a Delaware corporation with its principal office in 
Wilmington, Delaware. As of December 31, 2001, DCMC had total assets 
under its management with an aggregate market value of approximately 
$19.3 billion. DCMC is an investment advisor, registered under the 
Investment Advisers Act of 1940, for the assets of the DuPont Pension 
Trust Fund (the Trust), which holds the assets of the Plans. DCMC has 
managed the assets of the Trust since July 1997. The aggregate fair 
market value of the Trust's assets is in excess of $13 billion.
    2. DuPont is the plan sponsor of the DuPont Pension and Retirement 
Plan. The applicant estimates that there are currently 156,677 
participants and beneficiaries in the DuPont Pension and Retirement 
Plan. Pioneer Hi-Bred International Inc. and Protein Technologies 
International, each of which is a subsidiary of DuPont, are the plan 
sponsors of the Pioneer Hi-Bred International Inc. Retirement Plan and 
the Protein Technologies International Retirement Plan, respectively. 
The applicant represents that there are currently 5,000 participants 
and beneficiaries in the Pioneer Hi-Bred International, Inc. Retirement 
Plan, and 734 participants and beneficiaries in the Protein 
Technologies International Retirement Plan.
    3. The applicant represents that DCMC provides investment 
management services to various employee benefit plans, including plans 
sponsored by DuPont and its subsidiaries (i.e., Pioneer Hi-Bred 
International, Inc. and Protein Technologies International) and 
affiliates (collectively, the DuPont Group), with respect to a spectrum 
of investments consisting primarily of domestic and international 
equities, fixed-income securities, and various alternative investments 
(including real estate, venture capital, and commodity futures). DCMC 
utilizes value-based investment strategies with the objective of 
achieving maximum return consistent with levels of risk suitable to 
each Plan.
    4. DuPont and Dow participate in a 50/50 joint venture known as 
DuPont Dow Elastomers LLC (DDE), as a result of which Dow is a party in 
interest with respect to the Plans. In this regard, Dow is a party in 
interest with respect to the Plans under section 3(14)(I) of the Act 
because it is a 10% or more joint venturer of DDE. DDE is a party in 
interest with respect to the DuPont Pension and Retirement Plan under 
section 3(14)(G) of the Act, as an entity 50% owned by DuPont (which is 
a party in interest with respect to such Plan under section 3(14)(C) of 
the Act). DDE is a party in interest with respect to the Pioneer Hi-
Bred International, Inc. Retirement Plan and the Protein Technologies 
International Retirement Plan under section 3(14)(G) of the Act, as an 
entity 50% owned by DuPont which is a party in interest with respect to 
such Plans under section 3(14)(E) of the Act. The annual sales of DDE 
represent less than 2% of DuPont's total annual sales.
    5. According to the applicant, as a result of the inadvertent 
failure to


[[Page 3048]]


identify Dow as a party in interest with respect to the Plans,\10\ DCMC 
purchased on October 25, 2000, on behalf of the Plans, certain 
corporate debt securities issued by Dow (i.e., the Bonds). The decision 
to purchase the Bonds was made by employees of DCMC who specialize in 
purchases of corporate debt securities. The principal amount of the 
Bonds purchased by the Plans was $2,000,000. The Bonds were purchased 
in a principal transaction by the Plans from UBS Warburg, an entity 
unrelated to the Plans. The Bonds were sold in a subsequent principal 
transaction by the Plans to Lehman Brothers, an entity unrelated to the 
Plans. The Bonds were purchased on October 25, 2000 for $1,975,320 
(including accrued but unpaid interest) and were sold on July 10, 2001 
for $2,101,900 (including accrued but unpaid interest).
---------------------------------------------------------------------------


    \10\ In this proposed exemption, the Department is providing no 
opinion as to whether the Plans' acquisition and holding of the 
Bonds violated any of the fiduciary responsibility provisions of 
Part 4 of Title I of the Act other than section 406(a). In this 
regard, the applicant has not requested, nor is the Department 
providing, any relief from section 406(b) of the Act in connection 
with the subject transactions. The Department notes that section 
406(b) of the Act provides, in pertinent part, that a fiduciary of a 
plan shall not deal with the assets of the plan in his own interest 
or for his own account, nor act on behalf of a party (or represent a 
party) whose interests are adverse to the interests of the plan or 
the interests of its participants or beneficiaries. In addition, 
section 404(a) of the Act requires, among other things, that a 
fiduciary of a plan act prudently, solely in the interest of the 
plan's participants and beneficiaries, and for the exclusive purpose 
of providing benefits to participants and beneficiaries when making 
investment decisions on behalf of a plan.
---------------------------------------------------------------------------


    6. It is represented that Dow issued a total of $1 billion of the 
Bonds. Accordingly, the Plans purchased 0.2% of the total Bond issue. 
The coupon rate on the Bonds was 7\3/8\% per annum. The Bonds had a 
credit rating of A/A1 by Standard and Poor's Rating Services and 
Moody's Investor Service, Inc., respectively, at the time of the Plans' 
purchase. The applicant represents that the expected duration of the 
Bonds was approximately 11.9 years. The Bonds were debentures with 
interest payable semi-annually and principal payable at maturity. The 
Bonds represented a de minimus percentage of each Plan's total assets. 
In the aggregate the Bonds represented less than .02% of the Trust's 
total assets at the time of the acquisition.
    7. The applicant states that the transaction was in the interests 
of the Plans' participants and beneficiaries since the acquisition and 
sale of the Bonds resulted in a profit totaling $126,580. Moreover, the 
applicant represents that the purchase of the Bonds was equitable to 
the Plans since the Plans paid no more than the current fair market 
value for the Bonds at the time of the acquisition. In this regard, it 
is represented that in providing the acquisition price of the Bonds to 
DCMC, the DCMC trader responsible for the purchase of the Bonds 
utilized pricing mechanisms commonly employed in the over-the-counter 
fixed income markets. Specifically, the purchase price was determined 
in consideration of competitive offers from multiple dealers.\11\
---------------------------------------------------------------------------


    \11\ Pricing sources for the acquisition of the Bonds were 
electronic sources on trader desks. Information concerning dealer 
quotes is updated via computer monitors available to each of the 
primary security dealers. These sources include, but are not limited 
to, Bloomberg, Telerate, Reuters, Salomon Yield Book and Lehman 
Brothers PC Product in addition to daily flow and pricing 
indications received directly from 10-15 broker/dealers.
---------------------------------------------------------------------------


    The applicant represents that upon identifying the extension of 
credit as a prohibited transaction, DCMC acted promptly to deal with 
the problem by filing for a retroactive exemption with the Department. 
In addition, the applicant has established new internal compliance 
procedures for considering any new purchases of debt instruments for 
client pension plans in order to avoid future prohibited transactions 
under the Act. According to the applicant, special lists must now be 
maintained for each Plan of all joint ventures of DuPont or a 
subsidiary where DuPont owns (directly or indirectly) at least 50% of 
the joint venture and another joint venturer owns at least 10% of the 
joint venture. Pursuant to compliance procedures, the applicant's bond 
trading personnel must check these lists prior to any new purchases of 
such bonds for the Plans. The lists must be updated monthly.
    8. In summary, the applicant represents that the proposed exemption 
will satisfy the criteria of section 408(a) of the Act because:
    (a) The purchase of the Bonds by the Plans was a one-time cash 
transaction;
    (b) The Plans purchased the Bonds at their current fair market 
value from an unrelated party, based on prices determined by a 
reputable, independent third party market source;
    (c) The purchase of the Bonds was not part of an arrangement, 
agreement, or understanding designed to benefit Dow or any other party 
in interest with respect to the Plans;
    (d) The purchase and sale of the Bonds resulted in the Plan's 
receipt of a profit totaling $126,580; and
    (e) The applicant has established new internal compliance 
procedures to avoid future prohibited transactions under the Act for 
acquisition of bonds by the Plans.


FOR FURTHER INFORMATION CONTACT: Brian Buyniski of the Department at 
(202) 693-8545. (This is not a toll-free number).


DuPont Capital Management Corporation (DCMC), Located in Wilmington, DE


[Application Nos. D-11114, 11115, 11116, 11117, 11118]


Proposed Exemption


    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption 
is granted, the restrictions of sections 406(a) of the Act and the 
sanctions resulting from the application of section 4975(a) and (b) of 
the Code, by reason of section 4975(c)(1)(A) through (D) of the Code, 
shall not apply to the past extension of credit from the DuPont Pension 
and Retirement Plan, the Pioneer Hi-Bred International, Inc. Retirement 
Plan, the Protein Technologies International Retirement Plan and the 
DuPont Savings and Investment Plan (collectively, the Plans)\12\ to 
ConAgra Foods, Inc. (ConAgra), a party in interest with respect to the 
Plans, as a result of the holding by the Plans of certain corporate 
debt securities (the Bonds) issued by ConAgra, for the period from 
September 5, 2001 until October 17, 2001, provided the following 
conditions were satisfied:
---------------------------------------------------------------------------


    \12\ Because the Plans are funded through the same trust and 
each has an undivided interest in the assets of such trust, this 
application will treat the purchase of the Bonds (as defined herein) 
by the Plans as a single transaction and information concerning such 
purchase will be discussed on an aggregate basis.
---------------------------------------------------------------------------


    (a) The purchase of the Bonds by the Plans was a one-time 
transaction for cash;
    (b) The Plans paid no more than the current fair market value for 
the Bonds at the time of the transaction, as determined by reputable, 
independent, third party market sources;
    (c) The Bonds were sold on October 17, 2001 for $4,234,531 at a 
profit of $185,638 for the Plans;
    (d) The purchase of the Bonds was not part of an agreement, 
arrangement or understanding designed to benefit ConAgra or any other 
party in interest with respect to the Plans; and
    (e) The transaction represented less than 1% of each Plan's total 
assets.


Effective Date of Exemption


    The proposed exemption, if granted, will be effective for the 
period from


[[Page 3049]]


September 5, 2001 (the date of the acquisition of the Bonds by the 
Plans) until October 17, 2001 (the date the Bonds were sold).


Summary of Facts and Representations


    1. The applicant is DuPont Capital Management Corporation (DCMC), a 
wholly owned subsidiary of E.I. duPont de Nemours and Company (DuPont), 
and organized as a Delaware corporation with its principal office in 
Wilmington, Delaware. As of December 31, 2001, DCMC had total assets 
under its management with an aggregate market value of approximately 
$19.3 billion. DCMC is an investment advisor, registered under the 
Investment Advisers Act of 1940, for the assets of the DuPont Pension 
Trust Fund (the Trust), which holds the assets of the Plans. DCMC has 
managed the assets of the Trust since July 1997. The aggregate fair 
market value of the Trust's assets is in excess of $13 billion.
    2. DuPont is the plan sponsor of the DuPont Pension and Retirement 
Plan and the DuPont Savings and Investment Plan. The applicant 
estimates that there are currently 156,677 participants and 
beneficiaries in the DuPont Pension and Retirement Plan and 84,562 in 
the DuPont Savings and Investment Plan. Pioneer Hi-Bred International 
Inc. and Protein Technologies International, each of which is a 
subsidiary of DuPont, are the plan sponsors of the Pioneer Hi-Bred 
International Inc. Retirement Plan and the Protein Technologies 
International Retirement Plan, respectively. The applicant represents 
that there are currently 5,000 participants and beneficiaries in the 
Pioneer Hi-Bred International, Inc. Retirement Plan, and 734 
participants and beneficiaries in the Protein Technologies 
International Retirement Plan.
    3. The applicant represents that DCMC provides investment 
management services to various employee benefit plans, including plans 
sponsored by DuPont and its subsidiaries (i.e., Pioneer Hi-Bred 
International, Inc. and Protein Technologies International) and 
affiliates (collectively, the DuPont Group), with respect to a spectrum 
of investments consisting primarily of domestic and international 
equities, fixed-income securities, and various alternative investments 
(including real estate, venture capital, and commodity futures). DCMC 
utilizes value-based investment strategies with the objective of 
achieving maximum return consistent with levels of risk suitable to 
each Plan.
    4. DuPont and ConAgra participate in a 50/50 joint venture known as 
Ecological Chemical Products (Ecochem), as a result of which ConAgra is 
a party in interest with respect to the Plans. In this regard, ConAgra 
is a party in interest with respect to the Plans under section 3(14)(I) 
of the Act because it is a 10% or more joint venturer of Ecochem. 
Ecochem is a party in interest with respect to the DuPont Pension and 
Retirement Plan and the DuPont Savings and Investment Plan under 
section 3(14)(G) of the Act, as an entity 50% owned by DuPont (which is 
a party in interest with respect to such Plan under section 3(14)(C) of 
the Act). Ecochem is a party in interest with respect to each of DuPont 
Dow Elastomers Pension and Retirement Plan, the Pioneer Hi-Bred 
International, Inc. Retirement Plan and the Protein Technologies 
International Retirement Plan under section 3(14)(G) of the Act, as an 
entity 50% owned by DuPont which is a party in interest with respect to 
such Plans under section 3(14)(E) of the Act. According to the 
applicant, the value of DuPont's interest in Ecochem represents less 
than 1% of DuPont's total net value.
    5. According to the applicant, as a result of the inadvertent 
failure to identify ConAgra as a party in interest with respect to the 
Plans,\13\ DCMC purchased on September 5, 2001, on behalf of the Plans, 
certain corporate debt securities issued by ConAgra (i.e., the Bonds). 
The decision to purchase the Bonds was made by employees of DCMC who 
specialize in purchases of corporate debt securities. The principal 
amount of the Bonds purchased by the Plans was $4,051,000. The Bonds 
were purchased in a principal transaction by the Plans from Merrill 
Lynch, an entity unrelated to the Plans, as part of a new issuance of 
the Bonds by the issuer, ConAgra. The Bonds were sold in a subsequent 
principal transaction by the Plans to UBS Warburg, an entity unrelated 
to the Plans. The Bonds were purchased by the Plans on September 5, 
2001 for $4,048,893 (including accrued but unpaid interest) and were 
sold on October 17, 2001 for $4,234,531 by the Plans (including accrued 
but unpaid interest).
---------------------------------------------------------------------------


    \13\ In this proposed exemption, the Department is providing no 
opinion as to whether the Plans' acquisition and holding of the 
Bonds violated any of the fiduciary responsibility provisions of 
Part 4 of Title I of the Act other than section 406(a). In this 
regard, the applicant has not requested, nor is the Department 
providing, any relief from section 406(b) of the Act in connection 
with the subject transactions. The Department notes that section 
406(b) of the Act provides, in pertinent part, that a fiduciary of a 
plan shall not deal with the assets of the plan in his own interest 
or for his own account, nor act on behalf of a party (or represent a 
party) whose interests are adverse to the interests of the plan or 
the interests of its participants or beneficiaries. In addition, 
section 404(a) of the Act requires, among other things, that a 
fiduciary of a plan act prudently, solely in the interest of the 
plan's participants and beneficiaries, and for the exclusive purpose 
of providing benefits to participants and beneficiaries when making 
investment decisions on behalf of a plan.
---------------------------------------------------------------------------


    6. It is represented that ConAgra issued a total of $1 billion of 
the Bonds. Accordingly, the Pension Plans and Savings Plan purchased 
0.41% of the total Bond issue. The coupon rate on the Bonds was 6.75% 
per annum. The Bonds had a credit rating of BBB+/Baa1 by Standard and 
Poor's Rating Services and Moody's Investor Service, Inc., 
respectively, at the time of the Plans' purchase. No change in such 
rating occurred while the Bonds were held by the Plans. The applicant 
represents that the expected duration of the Bonds was approximately 
6.7 years. The Bonds paid interest semi-annually, with the total 
principal amount payable at maturity. The Bonds also had certain 
special features that allowed them to be called (i.e., redeemed) by the 
issuer, at certain times. The Bonds represented a de minimus percentage 
of each Plan's total assets. In the aggregate the Bonds represented 
less than 1% of the Trust's total assets at the time of the 
acquisition.
    7. The applicant states that the transaction was in the interests 
of the Plans' participants and beneficiaries since the acquisition and 
sale of the Bonds resulted in a profit totaling $185,638. Moreover, the 
applicant represents that the purchase of the Bonds was equitable to 
the Plans since the Plans paid no more than the current fair market 
value for the Bonds at the time of the acquisition. In this regard, the 
Bonds were purchased by the Plans at the same price that was paid by 
all other investors at the time of issuance by ConAgra. Thus, the DCMC 
trader responsible for the purchase of the Bonds relied on the pricing 
mechanisms that were used by Merrill Lynch and the other underwriters 
in determining the price of the Bonds at the time of issuance. DCMC 
represents that the pricing mechanisms for the Bonds were those 
commonly employed in the over-the-counter fixed-income markets.
    The applicant represents that upon identifying the extension of 
credit as a prohibited transaction, DCMC acted promptly to deal with 
the problem by filing for a retroactive exemption with the Department. 
In addition, the applicant has established new internal compliance 
procedures for considering any new purchases of debt instruments for 
client pension plans in order to avoid future prohibited transactions 
under the Act. According to the applicant, special lists must now be 
maintained for each Plan of all joint ventures of DuPont or a 
subsidiary


[[Page 3050]]


where DuPont owns (directly or indirectly) at least 50% of the joint 
venture and another joint venturer owns at least 10% of the joint 
venture. Pursuant to compliance procedures, the applicants bond trading 
personnel must check these lists prior to any new purchases of such 
bonds for the Plans. The lists must be updated monthly.
    8. In summary, the applicant represents that the proposed exemption 
will satisfy the criteria of section 408(a) of the Act because:
    (a) The purchase of the Bonds by the Plans was a one-time cash 
transaction;
    (b) The Plans' purchased the Bonds at their current fair market 
value from an unrelated party, based on prices determined by a 
reputable, independent third party market sources;
    (c) The Bonds were sold by the Plans on October 17, 2001 for 
$4,234,531 at a profit of $185,638 for the Plans, and;
    (d) The purchase of the Bonds was not part of an agreement, 
arrangement or understanding designed to benefit ConAgra or any other 
party in interest with respect to the Plans; and
    (e) The transaction represented less than 1% of each Plan's total 
assets.


FOR FURTHER INFORMATION CONTACT: Brian Buyniski of the Department at 
(202) 693-8545. (This is not a toll-free number).


DuPont Capital Management Corporation (DCMC), Located in Wilmington, DE


[Application Nos. D-11119, 11120]


Proposed Exemption


    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption 
is granted, the restrictions of sections 406(a) of the Act and the 
sanctions resulting from the application of section 4975(a) and (b) of 
the Code, by reason of section 4975(c)(1)(A) through (D) of the Code, 
shall not apply to the past extension of credit from the CONSOL Inc. 
Employee Retirement Plan and the CONSOL Inc. Investment Plan for 
Salaried Plans (collectively, the Plans) to Conoco Inc. (Conoco), a 
party in interest with respect to the Plans, as a result of the holding 
by the Plans of certain corporate debt securities (the Bonds) issued by 
Conoco, for the period from December 29, 1999 through August 16, 2001, 
provided the following conditions were satisfied:
    (a) The purchase of the Bonds by the Plans was a one-time 
transaction for cash;
    (b) The Plans paid no more than the current fair market value for 
the Bonds at the time of the transaction, as determined by reputable, 
independent, third party market sources;
    (c) The Bonds were sold on August 16, 2001 for $816,641 at a profit 
of $61,858 for the Plans;
    (d) The purchase of the Bonds was not part of an agreement, 
arrangement or understanding designed to benefit Conoco or any other 
party in interest with respect to the Plans; and
    (e) The transaction represented less than 1% of each Plan's total 
assets.


Effective Date of Exemption


    The proposed exemption, if granted, will be effective for the 
period from December 29, 1999 (the date of the acquisition of the Bonds 
by the Plans) until August 16, 2001 (the date the Bonds were sold).


Summary of Facts and Representations


    1. The applicant is DuPont Capital Management Corporation (DCMC), a 
wholly owned subsidiary of E.I. duPont de Nemours and Company (DuPont), 
and organized as a Delaware corporation with its principal office in 
Wilmington, Delaware. As of December 31, 2001, DCMC had total assets 
under its management with an aggregate market value of approximately 
$19.3 billion. DCMC is an investment advisor, registered under the 
Investment Advisers Act of 1940, for the assets of the DuPont Pension 
Trust Fund (the Trust), which holds the assets of the Plans. DCMC has 
managed the assets of the Trust since July 1997. The aggregate fair 
market value of the Trust's assets is in excess of $13 billion.
    2. CONSOL Energy Inc., is the plan sponsor of the CONSOL Inc. 
Employee Retirement Plan and the CONSOL Inc. Investment Plan for 
Salaried Employees. The applicant represents that there are currently 
7,049 participants and beneficiaries in the CONSOL Inc. Employee 
Retirement Plan, and 7,509 participants and beneficiaries in the CONSOL 
Inc. Investment Plan for Salaried Employees.
    3. The applicant represents that DCMC provides investment 
management services to various employee benefit plans, including plans 
sponsored by DuPont and its subsidiaries [(i.e., Pioneer Hi-Bred 
International, Inc. and Protein Technologies International) and 
affiliates (collectively, the DuPont Group)], with respect to a 
spectrum of investments consisting primarily of domestic and 
international equities, fixed-income securities, and various 
alternative investments (including real estate, venture capital, and 
commodity futures). DCMC utilizes value-based investment strategies 
with the objective of achieving maximum return consistent with levels 
of risk suitable to each Plan.
    CONSOL, Inc. (CONSOL) was a member of the DuPont Group prior to 
November 5, 1998. At that time, the Trust held assets of the Plans. On 
November 5, 1998, DuPont divested substantially all of its holdings in 
CONSOL. Thus, DCMC is no longer an affiliate of the employer 
maintaining the Plans. However, DCMC continues to manage the assets of 
the Plans.\14\
---------------------------------------------------------------------------


    \14\ See Prohibited Transaction (PTE) 2001-05, 66 FR 7789 
(January 25, 2001), which provides relief for transactions between 
parties in interest and certain former DuPont related employee 
benefit plans whose assets are managed by DCMC. In this regard, PTE 
2001-05 was not effective at the time of the subject transactions to 
which this proposed exemption relates.
---------------------------------------------------------------------------


    4. CONSOL Energy Inc. and Conoco participate in two 50/50 joint 
ventures known as the Cardinal States Gathering Partnership and the 
Pocahontas Gas Partnership as a result of which Conoco is a party in 
interest with respect to the Plans. In this regard, each of the joint 
ventures is a party in interest with respect to the Plans under section 
3(14)(G) of the Act, as an entity 50% owned by CONSOL (which is a party 
in interest with respect to such Plan under section 3(14)(C) of the 
Act). Conoco is a party in interest with respect to the Plans under 
section 3(14)(I) because it is a 10% or more joint venturer of each of 
the joint ventures. According to the applicant, Conoco is a Fortune 500 
company and CONSOL had sales in excess of $2 billion for the year 2000. 
Additionally, the value of CONSOL's aggregate interest in the joint 
ventures represents less than 1% of CONSOL's total net value.
    5. According to the applicant, as a result of the inadvertent 
failure to identify Conoco as a party in interest with respect to the 
Plans,\15\ DCMC


[[Page 3051]]


purchased on December 29, 1999, on behalf of the Plans, certain 
corporate debt securities issued by Conoco (i.e., the Bonds). The 
decision to purchase the Bonds was made by employees of DCMC who 
specialize in purchases of corporate debt securities. The principal 
amount of the Bonds purchased by the Plans was $820,000. The Bonds were 
purchased in a principal transaction by the Plans from Prudential 
Bache, an entity unrelated to the Plans. The Bonds were sold in a 
subsequent principal transaction by the Plans to ABN AMRO, an entity 
unrelated to the Plans. The Bonds were purchased by the Plans on 
December 29, 1999 for $754,783 (including accrued but unpaid interest) 
and were sold on August 16, 2001 for $816,641 by the Plans (including 
accrued but unpaid interest).
---------------------------------------------------------------------------


    \15\ In this proposed exemption, the Department is providing no 
opinion as to whether the Plans' acquisition and holding of the 
Bonds violated any of the fiduciary responsibility provisions of 
Part 4 of Title I of the Act other than section 406(a). In this 
regard, the applicant has not requested, nor is the Department 
providing, any relief from section 406(b) of the Act in connection 
with the subject transactions. The Department notes that section 
406(b) of the Act provides, in pertinent part, that a fiduciary of a 
plan shall not deal with the assets of the plan in his own interest 
or for his own account, nor act on behalf of a party (or represent a 
party) whose interests are adverse to the interests of the plan or 
the interests of its participants or beneficiaries. In addition, 
section 404(a) of the Act requires, among other things, that a 
fiduciary of a plan act prudently, solely in the interest of the 
plan's participants and beneficiaries, and for the exclusive purpose 
of providing benefits to participants and beneficiaries when making 
investment decisions on behalf of a plan.
---------------------------------------------------------------------------


    6. It is represented that Conoco issued a total of $1.9 billion of 
the Bonds. Accordingly, the Plans purchased 0.043% of the total Bond 
issue. The coupon rate on the Bonds was 6.95% per annum. The Bonds had 
a credit rating of BBB+/Baa1 by Standard and Poor's Rating Services and 
Moody's Investor Service, Inc., respectively, at the time of the Plans' 
purchase. No change in such rating occurred while the Bonds were held 
by the Plans. The applicant represents that the expected duration of 
the Bonds was approximately 11.5 years. The Bonds paid interest semi-
annually, with the total principal amount payable at maturity. The 
Bonds also had certain special features that allowed them to be called 
(i.e., redeemed) by the issuer, at certain times. The Bonds represented 
a de minimus percentage of each Plan's total assets. In the aggregate, 
the Bonds represented less than 1% of the Trust's total assets at the 
time of the acquisition.
    7. The applicant states that the transaction was in the interests 
of the Plans' participants and beneficiaries since the acquisition and 
sale of the Bonds resulted in a profit totaling $61,858. Moreover, the 
applicant represents that the purchase of the Bonds was equitable to 
the Plans since the Plans paid no more than the current fair market 
value for the Bonds at the time of the acquisition. In this regard, it 
is represented that in providing the acquisition price of the Bonds to 
DCMC, the DCMC trader responsible for the purchase of the Bonds 
utilized pricing mechanisms commonly employed in the over-the-counter 
fixed-income markets. Specifically, the purchase price was determined 
in consideration of competitive offers from multiple dealers.\16\
---------------------------------------------------------------------------


    \16\ Pricing sources for the acquisition of the Bonds were 
electronic sources on trader desks. Information concerning dealer 
quotes is updated via computer monitors available to each of the 
primary security dealers. These sources include, but are not limited 
to, Bloomberg, Telerate, Reuters, Salomon Yield Book and Lehman 
Brothers PC Product in addition to daily flow and pricing 
indications received directly from 10-15 broker/dealers.
---------------------------------------------------------------------------


    The applicant represents that upon identifying the extension of 
credit as a prohibited transaction, DCMC acted promptly to deal with 
the problem by filing for a retroactive exemption from the Department. 
In addition, the applicant has established new internal compliance 
procedures for considering any new purchases of debt instruments for 
client pension plans in order to avoid future prohibited transactions 
under the Act.\17\ According to the applicant, special lists must now 
be maintained for each Plan of all joint ventures where CONSOL owns 
(directly or indirectly) at least 50% of the joint venture and another 
joint venturer owns at least 10% of the joint venture. Pursuant to 
compliance procedures, the applicant's bond trading personnel must 
check these lists prior to any new purchases of such bonds for the 
Plans. The lists must be updated monthly.
---------------------------------------------------------------------------


    \17\ The Department is providing no opinion in this proposed 
exemption as to whether such prohibited transactions, if entered 
into by the Plans, would be covered by PTE 2001-05.
---------------------------------------------------------------------------


    8. In summary, the applicant represents that the proposed exemption 
will satisfy the criteria of section 408(a) of the Act because:
    (a) The purchase of the Bonds by the Plans was a one-time cash 
transaction;
    (b) The Plans' purchased the Bonds at their current fair market 
value from an unrelated party, based on prices determined by reputable, 
independent third party market sources;
    (c) The Bonds were sold by the Plans on August 16, 2001 for 
$816,641 at a profit of $61,858 for the Plans; and
    (d) The purchase of the Bonds was not part of an agreement, 
arrangement or understanding designed to benefit Conoco or any other 
party in interest with respect to the Plans; and
    (e) The transaction represented less than 1% of each Plan's total 
assets.


FOR FURTHER INFORMATION CONTACT: Brian Buyniski of the Department at 
(202) 693-8545. (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 of the Act and/or the Code, 
including any prohibited transaction provisions to which the exemption 
does not apply and the general fiduciary responsibility provisions of 
section 404 of the Act, which, 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) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries, and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemptions, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
rules. Furthermore, the fact that a transaction is subject to an 
administrative or statutory exemption is not dispositive of whether the 
transaction is in fact a prohibited transaction; and
    (4) The proposed exemptions, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete, and that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.


    Signed at Washington, DC, this 16th day of January, 2003.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 03-1354 Filed 1-21-03; 8:45 am]

BILLING CODE 4510-29-P