EBSA Federal Register Notice
Proposed Exemptions; John Hancock Life Insurance Company [01/22/2003]
[PDF Version]
Volume 68, Number 14, Page 3040-3051
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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.
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(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.
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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.
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(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.
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\7\ The applicant represents that at the time of the Sales,
these costs (i.e., taxes, association dues, and maintenance) totaled
$1,297.
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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.
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\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.
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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:
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\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.
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(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).
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\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.
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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\
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\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.
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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:
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\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.
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(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).
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\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.
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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\
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\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.
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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).
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\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.
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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\
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\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.
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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.
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\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.
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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