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Secretary of Labor Thomas E. Perez
Grant of Individual Exemptions; RREEF America L.L.C. (RREEF), et al. [Notices] [08/05/1999]

Grant of Individual Exemptions; RREEF America L.L.C. (RREEF), et al. [08/05/1999]

[PDF Version]

Volume 64, Number 150, Page 42717-42726

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 99-32; Exemption Application No.D-
09708, et al.]

 
Grant of Individual Exemptions; RREEF America L.L.C. (RREEF), et 
al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of individual exemptions.

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SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(the Act) and/or the Internal Revenue Code of 1986 (the Code).
    Notices were published in the Federal Register of the pendency 
before the Department of proposals to grant such exemptions. The 
notices set forth a summary of facts and representations contained in 
each application for exemption and referred interested persons to the 
respective applications for a complete statement of the facts and 
representations. The applications have been available for public 
inspection at

[[Page 42718]]

the Department in Washington, D.C. The notices also invited interested 
persons to submit comments on the requested exemptions to the 
Department. In addition the notices stated that any interested person 
might submit a written request that a public hearing be held (where 
appropriate). The applicants have represented that they have complied 
with the requirements of the notification to interested persons. No 
public comments and no requests for a hearing, unless otherwise stated, 
were received by the Department.
    The notices of proposed exemption were issued and the exemptions 
are being granted solely by the Department because, effective December 
31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR 
47713, October 17, 1978) transferred the authority of the Secretary of 
the Treasury to issue exemptions of the type proposed to the Secretary 
of Labor.

Statutory Findings

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

RREEF America L.L.C. (RREEF) Located in San Francisco, California

[Prohibited Transaction Exemption 99-32; Exemption Application No. D-
09708]

Exemption

    The Department is 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.)
Part I--Exemption for Payment of Certain Fees to RREEF
    The restrictions of sections 406(b)(1) and (b)(2) of the Act and 
the taxes imposed by section 4975 of the Code, by reason of section 
4975(c)(1)(E) of the Code, shall not apply, effective as of (i) May 16, 
1994, with respect to a single client, separate account established on 
behalf of the Shell Pension Trust (the Shell Account), and (ii) the 
date this final exemption is published in the Federal Register, with 
respect to any single client, separate account (Single Client Account) 
or any multiple client account (Multiple Client Account) formed on, or 
after, such a date, to the payment of certain initial investment fees 
(the Investment Fee), annual management fees based upon net operating 
income (the Asset Management Fee), and performance fees (the 
Performance Fee) to RREEF by employee benefit plans for which RREEF 
provides investment management services (the Client Plans) <SUP>1</SUP> 
pursuant to an investment management agreement (the Agreement) entered 
into between RREEF and the Client Plans either individually, through an 
establishment (or amendment) of a Single Client Account, or 
collectively as participants in a newly established Multiple Client 
Account (collectively, the Accounts), provided that the conditions set 
forth below in Part III are satisfied.
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    \1\ The Client Plans (including employee benefit plans that may 
become Client Plans in the future) consist of various pension plans 
as defined in section 3(2) of the Act and other plans as defined in 
section 4975(e)(1) of the Code with respect to which RREEF serves as 
a trustee or an investment manager.
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Part II--Exemption for Investments in a Multiple Client Account
    The restrictions of section 406(a)(1)(A) through (D) of the Act and 
the taxes imposed by section 4975(c)(1)(A) through (D) of the Code, 
shall not apply to any investment by a Client Plan in a Multiple Client 
Account managed by RREEF formed on, or after, the date the final 
exemption is published in the Federal Register, provided that the 
conditions set forth below in Part III are satisfied.
Part III--General Conditions
    (a)(1) The investment of plan assets in a Single or Multiple Client 
Account, including the terms and payment of any Investment Fee, Asset 
Management Fee and Performance Fee (collectively; the Fees), shall be 
approved in writing by a fiduciary of a Client Plan which is 
independent of RREEF and its affiliates (the Independent Fiduciary).
    (2) For purposes of the Fees, the fair market value of the 
Accounts' real property assets (other than in the case of actual sales) 
will be based on appraisals prepared by independent qualified 
appraisers that are Members of the Appraisal Institute (MAI 
Appraisers). In this regard, every agreement by which an appraiser is 
retained will include the appraiser's representation that: (1) Its 
ultimate client is the Account and its underlying Client Plan (and non-
Plan) investors, and (2) it will perform its duties in the interest of 
such Account (and investors). In addition, following the date this 
final exemption is published in the Federal Register, every agreement 
shall advise the appraiser that it owes a professional obligation to 
the Account when making an appraisal for properties held by the 
Account.
    (b) The terms of any investment in an Account and of the Fees, 
shall be at least as favorable to the Client Plans as those obtainable 
in arm's-length transactions between unrelated parties.
    (c) At the time any Account is established (or amended) and at the 
time of any subsequent investment of assets (including the reinvestment 
of assets) in such Account:
    (1) Each Client Plan in a Single Client Account shall have total 
net assets with a value in excess of $100 million, and each Client Plan 
that is an investor in a Multiple Client Account shall have total net 
assets with a value in excess of $50 million; and provided that 
seventy-five percent (75%) or more of the units of beneficial interests 
in a Multiple Client Account are held by Client Plans or other 
investors having total assets of at least $100 million. In addition, 50 
percent (50%) or more of the Client Plans investing in a Multiple 
Client Account shall have assets of at least $100 million. A group of 
Client Plans maintained by a single employer or controlled group of 
employers, any of which individually has assets of less than $100 
million, will be counted as a single Client Plan if the decision to 
invest in the Account (or the decision to make investments in the 
Account available as an option for an individually directed account) is 
made by a fiduciary other than RREEF, who exercises such discretion 
with respect to Client Plan assets in excess of $100 million.
    (2) No Client Plan shall invest, in the aggregate, more than 5% of 
its total assets in any Account or more than 10% of its total assets in 
all Accounts established by RREEF.
    (d) Prior to making an investment in any Account (or amending an 
existing Account), the Independent Fiduciary of each Client Plan 
investing in an Account shall have received offering materials from 
RREEF which disclose all material facts concerning the purpose, 
structure, and operation of the Account, including any Fee arrangements 
(provided that, in the case of an amendment to the Fee arrangements, 
such materials need address only the amended fees and any other 
material change to the Account's original offering materials).

[[Page 42719]]

    (e) With respect to its ongoing participation in an Account, each 
Client Plan shall receive the following written information from RREEF:
    (1) Audited financial statements of the Account prepared by 
independent public accountants selected by RREEF no later than 90 days 
after the end of the fiscal year of the Account;
    (2) Quarterly and annual reports prepared by RREEF relating to the 
overall financial position and operating results of the Account and, in 
the case of a Multiple Client Account, the value of each Client Plan's 
interest in the Account. Each such report shall include a statement 
regarding the amount of fees paid to RREEF during the period covered by 
such report;
    (3) Periodic appraisals (as agreed upon with the Client Plans) 
indicating the fair market value of the Account's assets as established 
by an MAI appraiser independent of RREEF and its affiliates. In the 
case of any appraisal that will serve as the basis for any ``deemed 
sale'' of such property for purposes of calculating the Performance Fee 
payable to RREEF (as discussed in paragraph (j) below), then:
    (i) In the case of any Single Client Account, such MAI appraiser 
shall be either (A) selected by the Independent Fiduciary of the Client 
Plan subject to the affirmative approval of RREEF, or (B) selected by 
RREEF subject to approval by the Independent Fiduciary of the Client 
Plan;
    (ii) In the case of any Multiple Client Account, such MAI appraiser 
shall be approved in advance by the Responsible Independent Fiduciaries 
(as defined in Part IV(e) below) owning a majority of the interests in 
the Accounts, determined according to the latest valuation of the 
Account's assets performed no more than 12 months prior to such 
appraisal, which approval may be by written notice and deemed consent 
by such Fiduciaries' failure to object to the appraiser within 30 days 
of such notice; and
    (iii) In either case, the selected MAI appraiser shall acknowledge 
in writing that the Client Plan(s) and other investors (in the case of 
a Multiple Client Account), rather than RREEF, is (are) its clients, 
and that in performing its services for the Account it shall act in the 
sole interest of such Client Plan(s) and other investors. In addition, 
following the date this final exemption is published in the Federal 
Register, every appraiser selected shall acknowledge that it owes a 
professional obligation to the Client Plan(s) and other investors in 
the Account in performing its services as an appraiser for properties 
in the Account. If an MAI appraiser selected by RREEF, or an appraisal 
performed by a previously approved appraiser, is rejected by the 
Independent Fiduciary for a Single Client Account or the Responsible 
Independent Fiduciaries for the Multiple Client Account, determined 
according to the latest valuation of the Account's assets performed no 
more than 12 months prior to such appraisal, the fair market value of 
the assets for any ``deemed sale'', relating to the payment of a 
Performance Fee (as described in paragraphs (i) and (j) below) shall be 
determined as follows: (A) the Client Plans shall appoint a second 
appraiser and, if the value established for the property does not 
deviate by more than 10% (or such lesser amount as may be agreed upon 
between RREEF and the Client Plan(s)), then the two appraisals shall be 
averaged; (B) if the values differ by more than 10%, then the two 
appraisers shall select a third appraiser, that is independent of RREEF 
and its affiliates, who will attempt to mediate the difference; (C) if 
the third appraiser can cause the first two to reach an agreement on a 
value, that figure shall be used; however, (D) if no agreement can be 
reached, the third appraiser shall determine the value based on 
procedures set out in the governing agreements of the Account or, if no 
such procedures are established, shall conduct its own appraisal and 
the two closest of the three shall be averaged;
    (4) In the case of any Multiple Client Account, a list of all other 
investors in the Account;
    (5) Annual operating and capital budgets with respect to the 
Account, to be distributed to a Client Plan within 60 days prior to the 
beginning of the fiscal year to which such budgets relate; and
    (6) An explanation of any material deviation from the budgets 
previously provided to such Client Plan for the prior year.
    (f) The total fees paid to RREEF shall constitute no more than 
``reasonable compensation'' within the meaning of section 408(b)(2) of 
the Act.
    (g) The Investment Fee shall be equal to a specified percentage of 
the net value of the Client Plan assets allocated to the Account which 
shall be payable either:
    (1) At the time assets are deposited (or deemed deposited in the 
case of reinvestment of assets) in the Account; or
    (2) In periodic installments, the amount (as a percentage of the 
aggregate Investment Fee) and timing of which have been specified in 
advance based on the percentage of the Client Plan's assets invested in 
real property as of the payment date; provided that (i) the installment 
period is no less than three months, and (ii) if the percentage of the 
Client Plan assets which have actually been invested by a payment date 
is less than the percentage required for the aggregate Investment Fee 
to be paid in full through that date (both determined on a cumulative 
basis), the Investment Fee paid on such a date shall be reduced by the 
amount necessary to cause the percentage of the aggregate Investment 
Fee paid to equal only the percentage of the Client Plan assets 
actually invested by that date. The unpaid portion of such Investment 
Fee shall be deferred to and payable on a cumulative basis on the next 
scheduled payment date (subject to the percentage limitation described 
in the preceding sentence).
    (h) The Asset Management Fee shall be payable for each quarter from 
the net operating income (NOI) of the Account. The amount of the Asset 
Management Fee, expressed as a percentage of the NOI of the Account, 
shall be established by the Agreement and agreed to by the Independent 
Fiduciaries of the Client Plans:
    (1) The Asset Management Fee for any Account will be calculated as 
follows. The Asset Management Fee for a specific Account real property 
will be based solely on items of operating income and expense that are 
identified as line items on an operating budget for such property 
disclosed to each Client Plan that participates in the Account. The 
disclosures have to be made at least 30 days in advance of the fiscal 
year to which the budget relates, and approved in the manner described 
in (2) below;
    (2) Each Client Plan must provide affirmative approval of the 
operating budget. Specifically, when the proposed budget (or any 
material deviation therefrom) is sent to a Client Plan, it will be 
accompanied by a written notice that the Client Plan may object to the 
budget or any specific line item therein, for purposes of calculating 
the Asset Management Fees for the next fiscal year. The written notice 
will contain a statement that affirmative approval of the budget is 
required prior to the end of the 30-day period following such 
disclosure. In the case of a Multiple Client Account, affirmative 
approval by a majority of investors (by interest) will constitute 
approval of the proposed budget (or deviation); and
    (3) In the event of any subsequent decrease in previously approved 
budgeted operating expenses for the fiscal year in excess of the limits 
previously described (i.e., no more than 15% for any line item or 5% 
overall), then the resulting increase in NOI (i.e., over and above the 
allowable deviation)

[[Page 42720]]

will not be taken into account in calculating RREEF's management fee 
unless affirmative approval for the payment of such fee is obtained in 
writing from the Independent Fiduciary for the Client Plan in the 
Single Client Account or the Responsible Independent Fiduciaries for 
the Multiple Client Account.
    (i) In the case of any Multiple Client Account, the Performance Fee 
shall be payable after the Client Plan has received distributions from 
the Account in excess of an amount equal to 100% of its invested 
capital plus a pre-specified annual compounded cumulative rate of 
return (the Threshold Amount or Hurdle Rate). However, in the case of 
RREEF's removal or resignation, RREEF shall be entitled to receive a 
Performance Fee payable either at the time of removal or, in the event 
of RREEF's resignation, upon sale of the assets to which the 
Performance Fee is allocable or upon termination of the Account as the 
case may be, subject to the requirements of paragraph (l) below, as 
determined by a deemed distribution of the assets of the Account based 
on an assumed sale of such assets at their fair market value (in 
accordance with independent appraisals), only to the extent that the 
Client Plan would receive deemed distributions from the Account in 
excess of an amount equal to the Threshold Amount at the time of 
RREEF's removal or resignation. Both the Threshold Amount and the 
amount of the Performance Fee, expressed as a percentage of the net 
proceeds from a capital event distributed (or deemed distributed) from 
the Account in excess of the Threshold Amount, shall be established by 
the Agreement and agreed to by the Independent Fiduciaries of the 
Client Plans.
    (j) In the case of any Single Client Account, the Performance Fee 
shall be determined and paid either: (1) in the same manner as in the 
case of a Multiple Client Account, as described in paragraph (i) above; 
or (2) at the end of any pre-specified period of not less than one 
year, provided that such Fee is based upon the sum of all actual 
distributions from the Account during such period, plus deemed 
distributions of the assets of the Account based on an assumed sale of 
all such assets at their fair market value as of the end of such period 
(in accordance with independent appraisals performed within 12 months 
of the calculation) which are calculated to be in excess of the 
Threshold Amount or the Hurdle Rate through the end of such period. For 
this purpose, the Performance Fee measuring period shall be established 
by the Agreement and agreed to by the Independent Fiduciary of the 
Client Plan, provided that such period is not less than one year. In 
addition, RREEF shall provide notice to the Client Plan within 60 days 
of each Performance Fee calculation for a Single Client Account that 
the Independent Fiduciary of the Client Plan has the right to request 
updated appraisals of the properties held by the Account if such 
Fiduciary determines that the existing independent appraisals 
(performed within 12 months of the calculation) are no longer 
sufficient.
    (k) The Threshold Amount for any Performance Fee shall include as 
least a minimum rate of return to the Client Plan, as defined below in 
Part IV, paragraph (f).
    (l) In the event RREEF resigns as investment manager for an 
Account, the Performance Fee shall be calculated at the time of 
resignation as described above in paragraph (i) and allocated among 
each property, based on the appraised value of such property in 
relationship to the total appraised value of the Account. Each amount 
arrived at through this calculation shall be multiplied by a fraction, 
the numerator of which will be the actual sales price received by the 
Account on subsequent disposition of the property (or in the case of a 
property which has not been sold prior to the termination of a Multiple 
Client Account, the appraised value of the property as of the 
termination date), and the denominator of which will be the appraised 
value of the property which was used in connection with determining the 
Performance Fee at the time of resignation, provided that this fraction 
shall never exceed 1.0. The resulting amount for each property shall be 
the Performance Fee payable to RREEF upon the sale of such property or 
termination of the Multiple Client Account, as the case may be.
    (m) In cases where RREEF does have discretion to reinvest proceeds 
from capital events, the reinvested amount shall not be treated as a 
new contribution of capital by the Client Plan for purposes of the 
Investment Fee, as described above in paragraph (g), or having been 
distributed for purposes of the payment of Performance Fee as described 
above in paragraphs (i) and (j);
    (n) RREEF or its affiliates shall maintain, for a period of six 
years, the records necessary to enable the persons described in 
paragraph (o) of this Part III to determine whether the conditions of 
this exemption have been met, except that: (1) a prohibited transaction 
will not be considered to have occurred if, due to circumstances beyond 
the control of RREEF or its affiliates, the records are lost or 
destroyed prior to the end of the six year period; and (2) no party in 
interest, other than RREEF, shall be subject to the civil penalty that 
may be assessed under section 502(i) of the Act or the taxes imposed by 
section 4975(a) and (b) of the Code if the records are not maintained 
or are not available for examination as required by paragraph (o) 
below.
    (o)(1) Except as provided in paragraph (o)(2) and notwithstanding 
any provisions of section 504(a)(2) and (b) of the Act, the records 
referred to in paragraph (n) of this Part III shall be 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 a Client Plan or any duly authorized employee 
or representative of such fiduciary;
    (iii) Any contributing employer to a Client Plan or any duly 
authorized employee or representative of such employer; and
    (iv) Any participant or beneficiary of a Client Plan or any duly 
authorized employee or representative of such participant or 
beneficiary;
    (2) None of the persons described above in paragraph (o)(1)(ii)-
(iv) shall be authorized to examine the trade secrets of RREEF and its 
affiliates or any commercial or financial information which is 
privileged or confidential.
    (p) RREEF shall provide a copy of the proposed exemption and a copy 
of the final exemption to all Client Plans that invest in any Single 
Client Account or any Multiple Client Account formed on, or after, the 
date the final exemption is published in the Federal Register.
Part IV--Definitions
    (a) An ``affiliate'' of a person includes:
    (1) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person;
    (2) Any officer, director, employee, relative of, or partner of any 
such person; and
    (3) Any corporation or partnership of which such person is an 
officer, director, partner or employee.
    (b) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (c) The term ``management services'' means:
    (1) Development of an investment strategy for the Account and 
identification of suitable real estate-related investments;

[[Page 42721]]

    (2) Directing the investments of the assets of the Account, 
including the determination of the structure of each investment, the 
negotiation of its terms and conditions and the performance of all 
requisite due diligence;
    (3) Determination of the timing of, and directing, the disposition 
of assets of the Account and directing the liquidation of the Account 
upon termination;
    (4) Administration of the overall operation of the investments of 
the Account, including all applicable leasing, management, financing 
and capital improvement decisions;
    (5) Establishing and maintaining accounting records of the Account 
and distributing reports to Client Plans as described in Part III; and
    (6) Selecting and directing all service providers of ancillary 
services as defined in this Part IV; provided, however, that some or 
all of the foregoing management services may be subject to the final 
discretion of the Independent Fiduciary(ies) for the Client Plan(s).
    (d) The term ``ancillary services'' means:
    (1) Legal services;
    (2) Services of architects, designers, engineers, construction 
managers, hazardous materials consultants, contractors, leasing agents, 
real estate brokers, and others in connection with the acquisition, 
construction, improvement, management and disposition of investments in 
real property;
    (3) Insurance brokerage and consultation services;
    (4) Services of independent auditors and accountants in connection 
with auditing the books and records of the Accounts and preparing tax 
returns;
    (5) Appraisal and mortgage brokerage services; and
    (6) Services for the development of income-producing real property.
    (e) The term ``Independent Fiduciary'' with respect to any Client 
Plan means a fiduciary (including an in-house fiduciary) independent of 
RREEF and its affiliates. With respect to a Multiple Client Account, 
the terms ``Independent Fiduciary'' or ``Responsible Independent 
Fiduciaries'' mean the Independent Fiduciaries of the Client Plans 
invested in the Account and other authorized persons acting for 
investors in the Account which are not employee benefit plans as 
defined under section 3(3) of ERISA (such as governmental plans, 
university endowment funds, etc.) that are independent of RREEF and its 
affiliates, and that collectively hold more than 50% of the interests 
in the Account.
    (f) The terms ``Threshold Amount'' or ``Hurdle Rate'' mean, with 
respect to any Performance Fee, an amount which equals all of a Client 
Plan's capital invested in an Account plus a pre-specified annual 
compounded cumulative rate of return that is at least a minimum rate of 
return determined as follows:
    (1) A ``floating'' or non-fixed rate which is at least equal to the 
lesser of seven percent, or the rate of change in the consumer price 
index (CPI), during the period from the deposit of the Client Plan's 
assets into the Account until the determination date; or
    (2) A fixed rate which is at least equal to the lesser of seven 
percent or the average rate of change in the CPI over some period of 
time specified in the Agreement, which shall not exceed 10 years.
    (g) The terms ``Net Operating Income'' or ``NOI'' means all 
operating income of the Account (i.e., rents, interest, and other 
income from day-to-day investment activities of the Account) less 
operating expenses, determined on an accrual basis in accordance with 
generally accepted accounting principles, but without regard to 
depreciation (or other non-cash) expense and capital expenditures and 
without regard to payments of interest and principal with respect to 
any acquisition indebtedness relating to the property.
    (h) The term ``Net Proceeds of a Capital Event'' means all proceeds 
from capital events of an Account (i.e., sales or non-recourse 
refinances of real property investments owned by the Account) less 
repayment of debt with respect to such property, closing expenses paid, 
and reasonable reserves established in connection therewith, whether 
such reserves are for repayment of existing or anticipated obligations 
or for contingent liabilities.

EFFECTIVE DATE: This exemption is effective as of (i) May 16, 1994, 
with respect to the Shell Account, and (ii) the date this final 
exemption is published in the Federal Register, with respect to any 
Single Client Account and any Multiple Client Account formed on, or 
after, such date.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption (the Notice) published on June 3, 1999 
at 64 FR 29896.

Written Comments

    The Department received one written comment (the Comment) with 
respect to the Notice and no requests for a public hearing. The Comment 
was filed by RREEF and generally requests clarifications and 
modifications to the Notice. Set forth below in section I is RREEF's 
discussion concerning RREEF's notification of interested parties. 
Section II discusses those aspects of the Comment which relate to the 
language of the final exemption (the Exemption). In addition, section 
III below discusses those aspects of the Comment which relate to the 
Summary of Facts and Representations (the Summary) contained in the 
Notice.
I. Discussion Concerning Notification of Interested Persons
    RREEF represents that RREEF notified all interested parties of the 
Notice by First Class Mail on June 8, 1999, and informed such persons 
that they would have thirty-one (31) days from the date of mailing 
(i.e., 36 days from the date of the Notice's publication in the Federal 
Register) to file comments with the Department. Although the Notice 
stated that the comment period would be sixty (60) days from the date 
of publication in the Federal Register, it is RREEF's understanding 
that the Department's purpose in establishing the 60-day period was to 
give RREEF up to 30 days to mail the Notices and to give interested 
parties at least thirty (30) days after such mailing to comment. RREEF, 
however, did not require the initial 30-day period to mail the Notices 
and, after discussion with the Department staff, shortened the overall 
time period to reflect the actual date of mailing. All interested 
parties retained the 30-day comment period and were advised by RREEF 
that the correct comment deadline date would be July 9, 1999.
    Notwithstanding the foregoing, RREEF also had an understanding with 
the Department that if comments from the general public were received 
within a reasonable time after July 9, 1999, the Department would 
require RREEF to respond. However, no such comments were received.
    The Department acknowledges RREEF's modification of the 
notification of interested persons, and, based upon the representations 
made by RREEF's counsel, has determined that the notice requirements 
contained in the Department's exemption procedures (see 29 CFR 2570.43) 
have been met.
II. Discussion Concerning the Exemption
    1. Part I of the Exemption states, in relevant part, that the 
restrictions of section 406(b)(1) and (b)(2) of the Act and the taxes 
imposed by section 4975 of the Code, by reason of section

[[Page 42722]]

4975(c)(1)(E) of the Code, shall not apply, as of the date the final 
exemption is published in the Federal Register, to the subject 
transactions ``* * * with respect to any single client, separate 
account (Single Client Account) or any multiple Client account 
(Multiple Client Account) formed on, or after, such a date * * *'' (see 
(ii) of Part I). RREEF wishes to confirm that the phrase ``* * * formed 
on, or after, such a date * * *'' refers only to Multiple Client 
Accounts.
    The Department confirms RREEF's understanding of this phrase.
    2. Under Part III(i) of the Exemption, a Performance Fee shall be 
payable to RREEF after the Client Plan has received distributions from 
the Account in excess of the applicable Threshold Amount. Part III(i) 
also discusses the possible payment of a Performance Fee to RREEF in 
the case of RREEF's removal or resignation, as determined by a deemed 
distribution of the assets of the Account based on an assumed sale of 
such assets at their market value, but only to the extent that the 
Client Plan would receive distributions from the Account in excess of 
an amount equal to the Threshold Amount at the time of RREEF's removal 
or resignation. In this regard, the Comment relates to the phrase in 
Part III(i) which states, in relevant part, that ``* * * the Client 
Plan would receive distributions from the Account in excess of an 
amount equal to the Threshold Amount at the time of RREEF's removal or 
resignation.'' RREEF suggests adding the word ``deemed'' to this phrase 
so that Part III(i) reads, in relevant part, ``* * * the Client Plan 
would receive deemed distributions from the Account * * *'' [Emphasis 
added].
    The Department acknowledges RREEF's clarification, and has modified 
the language of Part III(i) of the Exemption accordingly.
    3. Part IV(f) of the Exemption states, in relevant part, that ``the 
terms ``Threshold Amount'' or ``Hurdle Rate'' mean, with respect to any 
Performance Fee, an amount which equals all of a Client Plan's capital 
invested in an Account plus a pre-specified annual compounded 
cumulative rate of return * * *'' RREEF wishes to confirm that it may 
use a Hurdle Rate that is compounded more frequently than annually, 
e.g., quarterly or monthly, if so negotiated with the Client Plans. 
<SUP>2</SUP>
---------------------------------------------------------------------------

    \2\ RREEF also notes references to annual compounding in 
Paragraphs 5 and 12 of the Summary.
---------------------------------------------------------------------------

    The Department acknowledges RREEF's confirmation.
III. Discussion Concerning the Summary
    In the Comment, RREEF wishes to clarify the description of the 
Performance Fees in the Summary as applied to Single Client Accounts. 
RREEF notes that there is a substantial difference between the proposed 
Performance Fee calculation as applied to Multiple Client Accounts 
(described in Part III(i) of the Notice) and the Fee calculation 
applicable to Single Client Accounts (described in Part III(j) of the 
Notice). RREEF states that Part III(i) clearly reflects that although 
distributions from operations serve to reduce the Threshold Amount with 
respect to Multiple Client Accounts, once the Threshold Amount is 
reduced to zero the Performance Fee for Multiple Client Accounts is 
payable only with respect to subsequent distributions from capital 
events. However, Part III(j) of the Exemption provides that the 
Performance Fee for Single Client Accounts may be paid ``* * * based on 
the sum of all actual distributions from the Account during such 
period, plus deemed distributions * * *.''
    RREEF represents that the difference in the language was 
intentional. In the case of a Multiple Client Account, since periodic 
Performance Fees are not available under the Exemption, RREEF states 
that it is highly unlikely that any Performance Fee will be calculated 
and paid until the Account has reached the end of its term and is in 
liquidation.
    In contrast, RREEF states that distributions from any source, 
including operating revenues, would continue to enter into the 
Performance Fee calculation for Single Client Accounts even after the 
Threshold Amount is reduced to zero (as reflected in the language of 
Part III(j) of the Exemption).
    Accordingly, RREEF wishes to make several clarifications to the 
information contained in the Summary.
    1. Paragraph 5(iii) of the Summary contains a description of the 
Performance Fee. RREEF requests that the word ``certain'' be inserted 
into Paragraph 5(iii) and that the words ``* * * of capital proceeds'' 
be deleted such that it reads, in relevant part, ``* * * the 
Performance Fee, a fee charged upon certain actual or deemed 
distributions from the Account in excess of a Client Plan's invested 
capital * * *.'' [Emphasis added].
    2. RREEF requests that the phrase ``* * * will not be payable 
until'' be substituted for ``will be payable with respect to'' in the 
third section of Paragraph 13 of the Notice, such that the sentence 
reads, in relevant part, ``Because the Threshold Amount has been 
reduced to $0 at year 6, an additional Performance Fee will not be 
payable until any subsequent distribution of cash from a capital event 
* * *.'' [Emphasis added].
    3. RREEF requests that the word ``the'' be deleted in the last 
sentence of Paragraph 14 of the Notice, and that the sentence should 
read ``* * * Such proceeds, net of these expenses and reserves, 
generally will be distributable net proceeds of capital events upon 
which the Performance Fee may be payable.''
    4. RREEF states it wishes to clarify for the record that because 
the calculation of the Shell Account's Performance Fee will be done 
retroactively, such Fee will be based solely on actual property sales. 
Accordingly, all references in the Summary to appraisals and appraisers 
with respect to the Shell Account are irrelevant.
    5. RREEF notes that the second section of Paragraph 1 of the 
Summary requires certain clarifications. RREEF wishes to clarify this 
information as follows (RREEF's modifications are in italic):
    ``On January 27, 1998, substantially all of the assets of RREEF 
America L.L.C. and its affiliate, RREEF Corporation (collectively, 
RREEF), were acquired by RoProperty Services, B.V. (RoProperty), a 
major Dutch investment advisory firm, now known as RoProperty 
Investment Management, N.V. As a result, the assets of RREEF's advisory 
entities were combined into a newly created Delaware limited liability 
company, which continues to use the name ``RREEF America L.L.C.'' RREEF 
operates as an autonomous entity which continues to provide investment 
management services, and its affiliate, RREEF Management Company, 
continues to provide property management services.'' [Emphasis added].
    6. Paragraph 3 of the Summary contains footnote 2 which states:

    ``* * * The applicant represents that in some instances a Client 
Plan's investment in a Multiple Client Account that is a common or 
collective trust fund maintained by a bank would be exempt from the 
restrictions of section 406(a) of the Act by reason of section 
408(b)(8). The Department expresses no opinion herein whether all 
the conditions of section 408(b)(8) will be satisfied in such 
transactions.''

    RREEF states that this footnote, while legally accurate, should be 
deleted because it is inapplicable to RREEF since RREEF is not a bank.
    7. RREEF requests that in paragraph 3(f) of the Summary, the phrase 
``also has'' be changed to ``also may have'' such that the modified 
paragraph 3(f) reads as follows:

[[Page 42723]]

    ``RREEF also may have complete discretion in the selection and 
direction of the ancillary services (Ancillary Services) defined in 
Part IV, paragraph (d) above.'' [Emphasis added].
    8. RREEF wishes to clarify certain information contained in 
Paragraph 7 of the Summary, which discusses the services for which 
RREEF receives an Asset Management Fee. Specifically, RREEF makes the 
following points:
    (a) The Asset Management Fee is not intended to compensate RREEF 
for selection of properties and other assets for acquisition by an 
Account; this service is effectively covered by the Investment Fee.
    (b) The Asset Management Fee does not compensate RREEF for 
``performance'' (as stated therein) of property management and leasing 
services, because such services are provided by separate parties for 
separate compensation. However, this Fee does compensate RREEF for 
``supervising and overseeing the performance'' of such services, 
including the hiring of those separate parties.
    (c) RREEF states that the phrase ``* * * and maintaining'' should 
be added to section (v) of paragraph 7 so that the modified section 
reads as follows: ``establishing and maintaining tax-exempt title-
holding corporations under section 501(a) of the Code for the 
properties''. [Emphasis added].
    (d) RREEF also states that the Asset Management Fee also covers 
supervising the preparation and filing of tax (and other) reports.
    9. RREEF also notes that paragraph 8 of the Summary states that 
RREEF's current property management agreements permit no more than a 
15% variance in individual budget line items and 5% overall. However, 
RREEF states that these figures were used as an example and were not 
intended to be fixed at such percentages for all property management 
agreements. In this regard, it is possible that a Client Plan may 
negotiate a lesser variance in the future, or a lesser variance for a 
single line item.
    RREEF also notes that at the end of the second paragraph in 
paragraph 8 of the Summary, the last two sentences should be deleted 
and following two sentences substituted in their place:
    ``Property management agreements used by RREEF permit no more than 
a 15% variance between any individual line item expense in the 
operating budget and actual expenditures, without the Client's 
approval. In addition, without the Client's approval, actual 
expenditures for any year typically may not exceed budgeted expenses by 
more than 5% in the aggregate.'' [Emphasis added].
    In this regard, the Department has also modified the language of 
paragraph (h)(3) of Part III as follows:

    ``* * * (3) In the event of any subsequent decrease in 
previously approved budgeted operating expenses for the fiscal year 
in excess of the limits previously described (i.e., no more than 15% 
for any line item, or 5% overall), then the resulting increase in 
NOI * * *.'' [Emphasis added].

    10. RREEF also requests that in the last sentence of Paragraph 12 
of the Summary, the word ``by'' be replaced by the word ``to'' so that 
the sentence reads, in relevant part: * * * the Threshold Amount would 
be increased to the full amount of the deemed distribution * * *'' 
[Emphasis added.]
    11. RREEF also requests that the phrase ``* * * either the Client 
Plan(s) or'' be added at the beginning of last sentence of paragraph 16 
of the Summary to clarify that the discretion used by the appropriate 
fiduciaries for an Account, as discussed therein, will be exercised by 
someone other than RREEF. Therefore, the revised sentence should have 
read as follows:

    ``Either the Client Plan(s) or the replacement investment 
manager of the Account (unrelated to RREEF) will have discretion as 
to when the property is sold or when the Account is terminated.'' 
[Emphasis added].

    The Department acknowledges all of RREEF's clarifications to the 
information contained in the Summary, as discussed above, as well as 
certain other minor discussions and information contained in the 
Comment.
    Accordingly, after giving full consideration to the entire record, 
including the Comment, the Department has decided to grant the 
exemption subject as modified herein. The Comment has been included as 
part of the public record of the exemption application.
    Interested persons are invited to review the complete exemption 
file, which is available for public inspection in the Public Disclosure 
Room of the Pension and Benefits Administration, Room N-5638, U.S. 
Department of Labor, 200 Constitution Avenue, NW., Washington DC 20210.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department, 
telephone (202) 219-8883. (This is not a toll-free number.)

General Motors Hourly Rate Employees Pension Plan, General Motors 
Retirement Program for Salaried Employees, Saturn Individual 
Retirement Plan for Represented Team Members, Saturn Personal 
Choices Retirement Plan for Non-Represented Team Members, 
Employees' Retirement Plan for GMAC Mortgage Corporation, Delphi 
Automotive Systems Hourly Rate Employees Pension Plan, Delphi 
Automotive Systems Retirement Program for Salaried Employees 
(collectively, the Plans) Located in New York, New York

[Prohibited Transaction Exemption 99-33; Exemption Application Nos. D-
10473 through D-10476]

Exemption

Part I--Covered Transactions
    The restrictions of section 406(a)(1)(A) through (D) of the Act and 
the taxes imposed by section 4975(a) and (b) of the Code, by reason of 
section 4975(c)(1)(A) through (D) of the Code, shall not apply 
effective December 11, 1998, to a transaction between AEW Industrial, 
L.L.C. (the LLC), an entity which currently holds ``plan assets'' of 
the Plans, or any subsidiary of the LLC (as defined in Part IV(d) 
below) which may hold ``plan assets'' of the Plans in the future, as a 
result of investments made by the Plans in the LLC or any subsidiary 
through the First Plaza Group Trust (the Trust), and a party in 
interest with respect to any of the Plans, provided that the Specific 
Conditions set forth below in Part II and the General Conditions set 
forth in Part III are met:
Part II--Specific Conditions
    (a) In the case of a transaction by the LLC or any subsidiary that 
involves the acquisition, financing, or disposition of any real 
property asset, the terms of the transaction are negotiated on behalf 
of the Plan by AEW Capital Management, L.P. or a successor thereto 
(AEW), under the authority and general direction of General Motors 
Investment Management Corporation (GMIMCo), a wholly-owned subsidiary 
of General Motors Corporation (GM), and GMIMCo makes the decision on 
behalf of the Plan to enter into the transaction.
    Notwithstanding the foregoing, a transaction involving an amount of 
$5 million or more, which has been negotiated on behalf of the Plans by 
AEW and approved by GMIMCo in the manner described above, will not fail 
to meet the requirements of this Part II(a) solely because GM or its 
designee retains the right to veto or approve such transaction;

[[Page 42724]]

    (b) In the case of any transaction by the LLC or any subsidiary 
that does not involve acquisitions, financings or dispositions of real 
property assets, the terms of the transaction are negotiated on behalf 
of the Plans by AEW, under the authority and general direction of 
GMIMCo, and either AEW or a property manager acting in accordance with 
written guidelines or business plans (including budgets), adopted with 
the approval of GMIMCo, makes the decision on behalf of the Plans to 
enter into the transaction. Notwithstanding the foregoing, a 
transaction involving an amount of $5 million or more, which has been 
negotiated on behalf of the Plans in accordance with the foregoing, 
will not fail to meet the requirements of this Part II(b) solely 
because GM or its designee retains the right to veto or approve such 
transaction;
    (c) The transaction is not described in--
    (1) Prohibited Transaction Exemption 81-6 (46 FR 7527, January 23, 
1981), relating to securities lending arrangements,
    (2) Prohibited Transaction Exemption 83-1 (48 FR 895, January 7, 
1983), relating to acquisitions by plans of interests in mortgage 
pools, or
    (3) Prohibited Transaction Exemption 88-59 (53 FR 24811; June 30, 
1988), relating to certain mortgage financing arrangements;
    (d) The transaction is not part of an agreement, arrangement or 
understanding designed to benefit a party in interest with respect to 
any of the Plans;
    (e) At the time the transaction is entered into, and at the time of 
any subsequent renewal or modification thereof that requires the 
consent of GMIMCo, GM, or AEW the terms of the transaction are at least 
as favorable to the Plans as the terms generally available in arm's-
length transactions between unrelated parties;
    (f) The party in interest dealing with the LLC: (1) is a party in 
interest with respect to a Plan (including a fiduciary) solely by 
reason of providing services to the Plan, or solely by reason of a 
relationship to a service provider described in section 
3(14)(F),(G),(H) or (I) of the Act; and (2) does not have discretionary 
authority or control with respect to the investment of the Plan's 
assets in the Trust or the LLC, and does not render investment advice, 
within the meaning of 29 CFR 2510.3-21(c), with respect to the 
investment of those assets in the Trust or the LLC;
    (g) The party in interest dealing with the LLC is neither GMIMCo or 
AEW nor a person ``related'' to GMIMCo or AEW within the meaning of 
Part IV(c) below;
    (h) GMIMCo adopts written policies and procedures that are designed 
to assure compliance with the conditions of this exemption; and
    (i) An independent auditor, who has appropriate technical training 
or experience and proficiency with the fiduciary responsibility 
provisions of the Act, and who so represents in writing, conducts an 
exemption audit, as defined in Part IV(f) below, on an annual basis. 
Following completion of the exemption audit, the auditor issues a 
written report to each Plan representing its specific findings 
regarding the level of compliance with the policies and procedure 
adopted by GMIMCo in accordance with Part II(h) above.
Part III--General Conditions
    (a) At all times during the term of this exemption (if granted), 
GMIMCo shall be--
    (1) A direct or indirect wholly owned subsidiary of GM, and
    (2) An investment adviser registered under the Investment Advisers 
Act of 1940 that, as of the last day of its most recent fiscal year, 
has under its management and control total assets attributable to Plans 
maintained by GM or its affiliates (as defined in Part IV(a) of this 
exemption) in excess of $50 million. In addition, Plans maintained by 
affiliates of GMIMCo must have, as of the last day of each plan's 
reporting year, aggregate assets of at least $250 million;
    (b) AEW or any successor, as investment manager for assets held by 
the LLC, meets the conditions for a ``qualified professional asset 
manager'' (QPAM) as set forth in section V(a) of Prohibited Transaction 
Class Exemption 84-14 (49 FR 9494, March 13, 1984);
    (c) AEW and GMIMCo, or their affiliates, shall maintain, for a 
period of six years from the date of each transaction described above, 
the records necessary to enable the persons described below in Part 
III(d)(1) to determine whether the conditions of this exemption have 
been met, except that (1) a prohibited transaction will not be deemed 
to have occurred if, due to circumstances beyond the control of AEW or 
GMIMCo, or their affiliates, the records are lost or destroyed prior to 
the end of the six-year period, and (2) no party in interest, other 
than AEW or GMIMCo, shall be subject to the civil penalty which may be 
assessed under section 502(i) of the Act or to the taxes imposed by 
sections 4975 (a) and (b) of the Code, if the records are not available 
for examination as required by section (d) below; and
    (d)(1) Except as provided in subsection (2) of this section (d), 
and notwithstanding any provisions of subsection (a)(2) and (b) of 
section 504 of the Act, the records referred to in section (c) of this 
Part III shall be made unconditionally available by GMIMCo or AEW, at 
the customary location for the maintenance and/or retention of such 
records, for examination during normal business hours by:
    (A) Any duly authorized employee or representative of the 
Department of Labor or the Internal Revenue Service;
    (B) The persons described in Part II(i) of this exemption (relating 
to an independent audit of covered transactions as discussed therein); 
and
    (C) Any fiduciary of the Plans or the Trust;
    (2) None of the persons described in subsections (1)(B) and (C) of 
this section (d) shall be authorized to examine trade secrets of AEW or 
GMIMCo, or commercial or financial information which is privileged or 
confidential in nature.
Part IV--Definitions
    For purposes of this exemption:
    (a) ``Affiliate'' of GM means a member of either (1) a controlled 
group of corporations (as defined in section 414(b) of the Code) of 
which GM is a member, or (2) a group of trades or businesses under 
common control (as defined in section 414(c) of the Code) of which GM 
is a member; provided that ``50 percent'' shall be substituted for ``80 
percent'' wherever ``80 percent'' appears in Code section 414(b) or 
414(c) or the regulations thereunder.
    (b) ``Party in interest'' means a person described in section 3(14) 
of the Act and includes a ``disqualified person'' as defined in section 
4975(e)(2) of the Code.
    (c) GMIMCo or AEW are ``related'' to a party in interest with 
respect to a Plan for purposes of this exemption if the party in 
interest (or a person controlling or controlled by the party in 
interest) owns a five percent (5%) or more interest in GMIMCo or AEW, 
or if GMIMCo or AEW (or a person controlling or controlled by GMIMCo or 
AEW) owns a five percent (5%) or more interest in the party in 
interest. For purposes of this definition:
    (1) ``Interest'' means with respect to ownership of an entity:
    (A) The combined voting power of all classes of stock entitled to 
vote, or the total value of the shares of all classes of stock of the 
entity, if the entity is a corporation;
    (B) The capital interest, or the profits interest of the entity, if 
the entity is a partnership; or

[[Page 42725]]

    (C) The beneficial interest of the entity, if the entity is a trust 
or unincorporated enterprise;
    (2) A person is considered to own an interest held in any capacity 
if the person has or shares the authority--
    (A) To exercise any voting rights or to direct some other person to 
exercise the voting rights relating to such interest, or
    (B) To dispose or to direct the disposition of such interest; and
    (3) ``Control'' means the power to exercise a controlling influence 
over the management or policies of a person other than an individual.
    (d) ``Subsidiary'' means any limited liability company or other 
entity organized by the LLC, through which it acquires and holds title 
to its real property investments.
    (e) An ``exemption audit'' of each Plan's interest in the LLC must 
consist of the following:
    (1) A review of the written policies and procedures adopted by 
GMIMCo pursuant to Part II(h) for consistency with each of the 
objective requirements of this exemption (as described herein);
    (2) A test of a representative sample of the Plan's transactions 
through investments made by the LLC, as described in Part I, in order 
to make findings regarding whether GMIMCo is in compliance with both: 
(i) the written policies and procedures adopted by GMIMCo pursuant to 
Part II(i) of this exemption; and (ii) the objective requirements of 
this exemption; and
    (3) Issuance of a written report describing the steps performed by 
the independent auditor during the course of its review and the 
independent auditor's findings regarding the Plan's interest in the 
LLC.
    (f) For purposes of Part IV(e), the written policies and procedures 
must describe the following objective requirements of Part II of the 
exemption and the steps adopted by GMIMCo to assure compliance with 
each of these requirements:
    (1) The requirements of Part III;
    (2) The requirements of sections (a) and (b) of Part II regarding 
the discretionary authority or control of GMIMCo with respect to the 
Plan assets involved in each transaction, in negotiating the terms of 
the transaction, and with regard to the decision made on behalf of the 
Plan, as an investor in the LLC, to enter into the transaction;
    (3) The requirements of sections (a) and (b) of Part II with 
respect to any procedure for approval or veto of the transaction;
    (4) That:
    (A) The transaction is not entered into with any person who is 
excluded from relief under sections (f) or (g) of Part II; and
    (B) The transaction is not described in any of the class exemptions 
listed in section (c) of Part II.
    (g) ``Plan'' means an employee benefit plan established and 
maintained by GM or an Affiliate, as well as the Delphi Automotive 
Systems Hourly Rate Employees Pension Plan, and the Delphi Automotive 
Systems Retirement Program for Salaried Employees.

EFFECTIVE DATE: This exemption is effective as of December 11, 1998.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption (the Notice) published on June 3, 1999 
at 64 FR 29914.

Written Comments

    The Department received one written comment (the Comment) with 
respect to the Notice and no requests for a public hearing. The Comment 
was filed by AEW and suggests that certain clarifications and 
modifications be made to the Notice. Set forth below in section I is 
AEW's discussion concerning the language of the final exemption (the 
Exemption). Section II discusses those aspects of the Comment which 
relate to the Summary of Facts and Representations (the Summary) 
contained in the Notice.
I. Discussion of the Comment Regarding the Exemption
    1. AEW states that Delphi Automotive Systems Corporation (Delphi) 
was spun-off by General Motors on May 28, 1999. Delphi maintained two 
plans, the Delphi Automotive Systems Hourly Rate Employees Pension Plan 
and the Delphi Automotive Systems Retirement Program for Salaried 
Employees. The assets of both of these plans are still held in the 
First Plaza Group Trust and still managed by GMIMCo. Therefore, AEW 
requests that the Delphi Automotive Systems Hourly Rate Employees 
Pension Plan and the Delphi Automotive Systems Retirement Program for 
Salaried Employees be added to the caption of the Exemption, so that 
the revised caption reads as follows:

    ``General Motors Hourly Rate Employees Pension Plan, General 
Motors Retirement Program for Salaried Employees, Saturn Individual 
Retirement Plan for Represented Team Members, Saturn Personal 
Choices Retirement Plan for Non-Represented Team Members, Employees' 
Retirement Plan for GMAC Mortgage Corporation, Delphi Automotive 
Systems Hourly Rate Employees Pension Plan, Delphi Automotive 
Systems Retirement Program for Salaried Employees (collectively, the 
Plans).'' [Emphasis added].

    The Department acknowledges AEW's request and has modified the 
caption of the Exemption accordingly. In addition, the Department has 
modified the definition of the term ``Plan'' in Part IV(g) of the 
Exemption to include the Delphi Automotive Systems Hourly Rate 
Employees Pension Plan, and the Delphi Automotive Systems Retirement 
Program for Salaried Employees.
    2. AEW also notes that Part I of the Notice states, in relevant 
part, that the restrictions of section 406(a)(1)(A) through (D) of the 
Act, and the taxes imposed by section 4975(a) and (b) of the Code, 
shall not apply to ``* * * a transaction between AEW Industrial, L.L.C. 
(the LLC), an entity which currently holds ``plan assets'' of the 
Plans, or any subsidiary of the LLC (as defined in Part IV(d) below) * 
* *'' Since Part I refers to transactions by the LLC or any subsidiary, 
AEW requests that the phrase ``* * * or any subsidiary * * *'' also be 
added immediately after the reference to the LLC in the first sentence 
of Part II(a) of the Exemption and the first sentence of Part II(b) of 
the Exemption in order to be consistent with Part I.
    Thus, Part II(a) should read, in relevant part, ``In the case of 
transaction by the LLC or any subsidiary * * *.'' [Emphasis added]. 
Furthermore, Part II(b) should read, in relevant part, ``In the case of 
transaction by the LLC or any subsidiary * * *.'' [Emphasis added].
    The Department acknowledges AEW's request and has modified the 
language of Part II(a) and Part II(b) of the Exemption accordingly.
II. Discussion of the Comment Regarding the Summary
    1. For the same reasons discussed in the Comment at Section I(1) 
above, AEW states that the following sentence should be added after the 
first sentence in paragraph 2 of the Summary, so that the paragraph 
reads, in relevant part:

    ``For a portion of their assets, the Plans make investments 
through an entity known as the First Plaza Group Trust (i.e., the 
Trust), which is a group trust established pursuant to IRS Revenue 
Ruling 81-100. In addition, the Delphi Automotive Systems Hourly 
Rate Employees Pension Plan and the Delphi Automotive Systems 
Retirement Program for Salaried Employees (hereinafter these two 
plans are included in all references to the Plans), which are plans 
sponsored by a former GM affiliate, make investments through the 
Trust.'' [Emphasis added].

    2. AEW requests that the word ``billion'' replace the word 
``million'' in the last sentence of paragraph 1 of the Summary so that 
the sentence reads, in

[[Page 42726]]

relevant part, ``* * * the Plans had total assets of approximately 
$73.2 billion, of which approximately $4.39 billion were invested in 
private real estate assets.'' [Emphasis added].
    3. AEW also requests that the word ``billion'' replace the word 
``million'' in the third sentence of paragraph 5 of the Summary so that 
the sentence reads, in relevant part, ``* * * [New England Investment 
Companies] NEIC is a publicly-traded holding company with approximately 
$90 billion in assets under management * * *.'' [Emphasis added].
    The Department acknowledges all of AEW's clarifications to the 
information contained in the Summary.
    Accordingly, after giving full consideration to the entire record, 
including the Comment, the Department has decided to grant the 
exemption subject as modified herein.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department, 
telephone (202) 219-8883. (This is not a toll-free number.)

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions to which the 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) These exemptions are supplemental to and not in derogation of, 
any other provisions of the Act and/or the Code, including statutory or 
administrative exemptions and transactional rules. Furthermore, the 
fact that a transaction is subject to an administrative or statutory 
exemption is not dispositive of whether the transaction is in fact a 
prohibited transaction; and
    (3) The availability of these exemptions is subject to the express 
condition that the material facts and representations contained in each 
application are true and complete and accurately describe all material 
terms of the transaction which is the subject of the exemption. In the 
case of continuing exemption transactions, if any of the material facts 
or representations described in the application change after the 
exemption is granted, the exemption will cease to apply as of the date 
of such change. In the event of any such change, application for a new 
exemption may be made to the Department.

    Signed at Washington, D.C., this 2nd day of August, 1999.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 99-20191 Filed 8-4-99; 8:45 am]
BILLING CODE 4510-29-P