Grant of Individual Exemptions; Dimensional Fund Advisors Inc.

DEPARTMENT OF LABOR

[Prohibited Transaction Exemption 96-82; Exemption Application No. D-

10034, et al.]

Grant of Individual Exemptions; Dimensional Fund Advisors Inc.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of individual exemptions.

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SUMMARY: This document contains exemptions issued by the Department of

Labor (the Department) from certain of the prohibited transaction

restrictions of the Employee Retirement Income Security Act of 1974

(the Act) and/or the Internal Revenue Code of 1986 (the Code).

Notices were published in the Federal Register of the pendency

before the Department of proposals to grant such exemptions. The

notices set forth a summary of facts and representations contained in

each application for exemption and referred interested persons to the

respective applications for a complete statement of the facts and

representations. The applications have been available for public

inspection at the Department in Washington, D.C. The notices also

invited interested persons to submit comments on the requested

exemptions to the Department. In addition the notices stated that any

interested person might submit a written request that a public hearing

be held (where appropriate). The applicants have represented that they

have complied with the requirements of the notification to interested

persons. No public comments and no requests for a hearing, unless

otherwise stated, were received by the Department.

The notices of proposed exemption were issued and the exemptions

are being granted solely by the Department because, effective December

31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (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

[[Page 58232]]

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.

Dimensional Fund Advisors Inc. (DFA) Located in Santa Monica,

California

[Prohibited Transaction Exemption 96-82; Exemption Application No. D-

10034]

Exemption

The restrictions of sections 406(a), 406 (b)(1) and (b)(2) of the

Act and the sanctions resulting from the application of section 4975 of

the Code, by reason of section 4975(c)(1) (A) through (E) of the Code,

shall not apply to the in-kind transfers of the assets of employee

benefit plans (the Client Plans) for which DFA or an affiliate act as a

fiduciary 1 and which are held in DFA sponsored group trusts (the

Group Trusts) to the DFA Investment Trust Company (the Master Fund), in

exchange for the shares of the Master Fund, an open-end investment

company registered under the Investment Company Act of 1940 (the 1940

Act), for which DFA acts as investment advisor; provided that the

following conditions are satisfied:

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\1\ The applicant states that no retirement plan established by

DFA is invested in any of the Group Trusts, and no relief is being

requested herein on behalf of any of DFA's own plans. Accordingly,

the Department is not proposing relief for in-kind transfers

involving any plan established and maintained by DFA or its

affiliates or subsidiaries.

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(a) A fiduciary (the Second Fiduciary) who is acting on behalf of

each affected Client Plan and who is independent of and unrelated to

DFA, as defined in paragraph (g) of Section III below, will receive

advance written notice of the in-kind transfer of the Client Plan's

assets held in a subtrust of a Group Trust to a corresponding series of

the Master Fund in exchange for the shares of the Master Fund, and the

investment of such assets in the corresponding series of the Master

Fund, and will receive full written disclosures concerning the Master

Fund described in paragraph (c) of Section II below;

(b) On the basis of such information described in paragraph (c) of

Section II below, the Second Fiduciary will authorize in writing the

in-kind transfer of the Client Plan's assets from a subtrust of a Group

Trust to the corresponding series of the Master Fund in exchange for

the shares of the Master Fund, and the investment of such assets in the

corresponding series of the Master Fund. Such authorization is to be

consistent with the responsibilities, obligations, and duties imposed

on fiduciaries by Part 4 of Title I of the Act;

(c) No sales commissions, redemption fees or other fees are paid by

the Client Plans in connection with the in-kind transfer of the Group

Trust's assets, in exchange for the shares of the Master Fund;

(d) The transfers will be one-time transactions for each subtrust

of a Group Trust for which a comparable series of the Master Fund

exists;

(e) Each Group Trust receives shares of the Master Fund which have

a total net asset value that is equal to the value of the Client Plans'

all or pro rata share of the Group Trust's assets on the date of the

transfer;

(f) The current market value of the Group Trust's assets to be

transferred in-kind in exchange for the shares of the Master Fund, is

determined in a single valuation performed in the same manner at the

close of the same business day with respect to any such transfer, using

independent sources in accordance with the procedures set forth in Rule

17a-7 (Rule 17a-7) under the 1940 Act, as amended from time to time or

any successor rule, regulation, or similar pronouncement and the

procedures established by DFA pursuant to Rule 17a-7 for the valuation

of such assets. Such procedures must require that all securities for

which a current market price cannot be obtained by reference to the

last sales price for transactions reported on a recognized securities

exchange or NASDAQ, be valued based on the average of the highest

current independent bid and lowest current independent offer, as of the

close of business on the last business day preceding the day of the

Group Trust transfer, determined on the basis of reasonable inquiry

from at least three sources that are broker-dealers or pricing services

independent of DFA;

(g) No later than 30 days after completion of each in-kind transfer

of Group Trust's assets to the Master Fund, DFA will send by regular

mail to each Second Fiduciary, who is acting on behalf of each affected

Client Plan and who is independent of and unrelated to DFA, as defined

in paragraph (g) of Section III below, written confirmation containing

the following information:

1. the identity of each security that was valued for purposes of

the transaction in accordance with Rule 17a-7(b)(4) under the 1940 Act;

2. the price of each such security involved in the transaction; and

3. the identity of each pricing service or market maker consulted

in determining the value of such securities;

(h) No later than 90 days after completion of each in-kind transfer

of the Group Trust's assets to the Master Fund, DFA will send by

regular mail to the Second Fiduciary, who is acting on behalf of each

affected Client Plan and who is independent of and unrelated to DFA, as

defined in paragraph (g) of Section III below, written confirmation

that contains the following information:

1. the number of Group Trust's units held by the Client Plan

immediately before the transfer (and the related per unit value and the

total dollar amount of such Group Trust's units transferred); and

2. the number of shares in the Master Fund that are held by the

Client Plan following the transfer (and the related per share net asset

value and the total dollar amount of such shares received);

(i) The transferred securities will be valued using the same

methodology in the Group Trusts and in the Master Fund;

(j) DFA will not execute an in-kind transfer of the Client Plan's

assets unless the Second Fiduciary of each affected Client Plan

affirmatively consents to the in-kind transfer in writing; and

(k) There will be no penalty to a Client Plan for not participating

in the in-kind transfer.

Section II--General Conditions

(a) DFA maintains for a period of six years the records necessary

to enable the persons described below in paragraph (b) 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 DFA, the records are lost or

destroyed prior to the end of the six-year period, and (2) no party in

interest other than DFA shall be subject to the civil penalty that may

be assessed under section 502(i) of the Act or to the taxes imposed by

section 4975(a) and (b) of the Code if the records are not maintained

or are not available for examination as required by paragraph (b)

below.

(b) (1) Except as provided in paragraph (b)(2) and notwithstanding

any provisions of section 504(a)(2) and (b) of the Act, the records

referred to in paragraph (a) 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 the Client Plans who has authority to acquire

or dispose

[[Page 58233]]

of shares of the Funds owned by the Client Plans, or any duly

authorized employee or representative of such fiduciary, and

(iii) Any participant or beneficiary of the Client Plans or duly

authorized employee or representative of such participant or

beneficiary;

(2) None of the persons described in paragraph (b)(1)(ii) and (iii)

of Section II shall be authorized to examine trade secrets of DFA, or

commercial or financial information which is privileged or

confidential; and

(c) A Second Fiduciary who is acting on behalf of a Client Plan and

who is independent and unrelated to DFA, as defined in paragraph (g) of

Section III below, will receive in advance of the investment by a

Client Plan in the Master Fund full written disclosure of information

concerning the Master Fund which shall include, but not be limited to

the following:

(1) a current copy of SEC Form N-1A (regarding the registration of

an open end investment company under the 1940 Act) 2 with respect

to the Master Fund, plus certain additional information as specified in

the Advisory Opinion 94-35A 3;

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\2\ Form N-1A requires the registrant to answer a series of

questions regarding financial information, management of the fund,

risk factors and expenses.

\3\ In the Advisory Opinion 94-35A (AO 94-35A) issued by the

Department to DFA, DFA requested an advisory opinion with regard to

certain disclosures required by the Securities Act of 1933 (the 1933

Act), and which are provided by DFA to independent plan fiduciaries

in connection with the plans' investment in a certain open-end

investment company to which DFA serves as an investment advisor (the

Core Fund), and which is registered under the 1940 Act, but not

under the 1933 Act. Specifically, DFA requested an advisory opinion

that a receipt by the independent plan fiduciary of the Core Fund's

Form N-1A and the additional information as specified in AO 94-35A

complies with the prospectus disclosure requirement of paragraph (d)

of section II of PTCE 77-4. In AO 94-35A, the Department stated that

the disclosure of the Core Fund's Form N-1A information and the

additional information as specified in AO 94-35A to an independent

plan fiduciary, in lieu of a prospectus, will satisfy the prospectus

disclosure requirement of paragraph (d) of section II of PTCE 77-4,

provided that the additional information as specified in AO 94-35A

contains all the information, otherwise included in a prospectus,

that is relevant to the independent fiduciary's decision as to

whether to approve the purchase and sale of shares in the Core Fund.

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(2) a table listing management fees for the most recent completed

fiscal period, all other expenses broken down by category and total

portfolio operating expenses;

(3) a chart showing the effect of such fees on an investment in the

Master Fund over one, three, five and ten years; and

(4) a list of per share income and capital changes for shares

outstanding throughout the year, including investment income, expenses,

net investment income, dividends from net investment income, net

realized and unrealized gains (losses) on securities; distributions

from net realized gains (losses) on securities; net increase (decrease)

in net asset value, net asset value at the beginning of the period, net

asset value at the end of the period, expenses to average net assets,

portfolio turnover rate, and number of shares outstanding at the end of

the period.

Section III--Definitions

For purposes of this proposed exemption:

(a) The term ``DFA'' means Dimensional Fund Advisors Inc., and any

affiliate thereof as defined below in paragraph (b) of this section.

(b) An ``affiliate'' of a person includes:

(1) Any person directly or indirectly through one or more

intermediaries, controlling, controlled by, or under common control

with the person;

(2) Any officer, director, employee, relative, or partner in any

such person; and

(3) Any corporation or partnership of which such person is an

officer, director, partner, or employee.

(c) The term ``control'' means the power to exercise a controlling

influence over the management or policies of a person other than an

individual.

(d) The term ``Fund'' or ``Funds'' shall include the DFA Investment

Trust Company, such additional series as may be added to the DFA

Investment Trust Company, or any other diversified open-end investment

company or companies registered under the 1940 Act for which DFA serves

as an investment advisor and may also serve as a custodian, shareholder

servicing agent, or transfer agent.

(e) The term ``net asset value'' means the amount for purposes of

pricing all purchases and sales calculated by dividing the value of all

securities, determined by a method as set forth in the Fund's SEC Form

N-1A and statement of additional information, and other assets

belonging to each of the portfolios in the Fund or the Fund, less the

liabilities charged to each such portfolio or the Fund, by the number

of outstanding shares.

(f) The term ``relative'' means a ``relative'' as that term is

defined in section 3(15) of the Act (or a ``member of the family'' as

that term is defined in section 4975(e)(6) of the Code), or a brother,

a sister, or a spouse of a brother or a sister.

(g) The term ``Second Fiduciary'' means a fiduciary of a Client

Plan who is independent of and unrelated to DFA. For purposes of this

exemption, the Second Fiduciary will not be deemed to be independent of

and unrelated to DFA if:

(1) Such Second Fiduciary directly or indirectly controls, is

controlled by, or is under common control with DFA;

(2) Such Second Fiduciary, or any officer, director, partner,

employee, or relative of the fiduciary is an officer, director, partner

or employee of DFA (or is a relative of such persons);

(3) Such Second Fiduciary directly or indirectly receives any

compensation or other consideration for his or her own personal account

in connection with any transaction described in this exemption.

If an officer, director, partner or employee of DFA (or relative of

such persons), is a director of such Second Fiduciary, and if he or she

abstains from participation in (i) the choice of the Client Plan's

investment manager advisor, (ii) the approval of any such purchase or

sale between the Client Plan and the Funds, and (iii) the approval of

any change in fees charged to or paid by the Client Plan in connection

with any of the transactions described in Section I above, then

paragraph (g)(2) of this Section III shall not apply.

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 published on September 18, 1996 at 61

FR 49156/49160.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department,

telephone (202) 219-8883. (This is not a toll-free number.)

Operating Engineers Local 150 Apprenticeship Fund (the Plan) Located in

Plainfield, Illinois

[Prohibited Transaction Exemption 96-83; Exemption Application No. L-

10279]

Exemption

The restrictions of sections 406(a), 406 (b)(1) and (b)(2) of the

Act shall not apply to the sale by the Plan of a parcel of unimproved

real property in Will County, Illinois (the Property) to the

International Union of Operating Engineers Local 150, AFL-CIO, a party

in interest with respect to the Plan; provided the following conditions

are satisfied:

(A) All terms of the transaction are at least as favorable to the

Plan as those which the Plan could obtain in an arm's-length

transaction with an unrelated party;

(B) The Plan incurs no costs or expenses related to the

transaction; and

[[Page 58234]]

(C) The Plan receives a purchase price no less than the greater of

(1) $65,000, or (2) the fair market value of the Property as of the

sale date.

For a more complete statement of the facts and representations

supporting this exemption, refer to the notice of proposed exemption

published on July 31, 1996 at 61 FR 40011.

FOR FURTHER INFORMATION CONTACT: Ronald Willett of the Department,

telephone (202) 219-8881. (This is not a toll-free number.)

HSBC Securities, Inc. (HSBC) Located in New York, New York

[Prohibited Transaction Exemption 96-84; Exemption Application No. D-

10316]

Exemption

I. Transactions

A. The restrictions of sections 406(a) and 407(a) 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 to the

following transactions involving trusts and certificates evidencing

interests therein:

(1) The direct or indirect sale, exchange or transfer of

certificates in the initial issuance of certificates between the

sponsor or underwriter and an employee benefit plan when the sponsor,

servicer, trustee or insurer of a trust, the underwriter of the

certificates representing an interest in the trust, or an obligor is a

party in interest with respect to such plan;

(2) The direct or indirect acquisition or disposition of

certificates by a plan in the secondary market for such certificates;

and

(3) The continued holding of certificates acquired by a plan

pursuant to subsection I.A. (1) or (2).

Notwithstanding the foregoing, section I.A. does not provide an

exemption from the restrictions of sections 406(a)(1)(E), 406(a)(2) and

407 for the acquisition or holding of a certificate on behalf of an

Excluded Plan by any person who has discretionary authority or renders

investment advice with respect to the assets of that Excluded

Plan.4

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\4\ Section I.A. provides no relief from sections 406(a)(1)(E),

406(a)(2) and 407 for any person rendering investment advice to an

Excluded Plan within the meaning of section 3(21)(A)(ii) and

regulation 29 CFR 2510.3-21(c).

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B. The restrictions of sections 406(b)(1) and 406(b)(2) of the Act

and the taxes imposed by section 4975 (a) and (b) of the Code by reason

of section 4975(c)(1)(E) of the Code shall not apply to:

(1) The direct or indirect sale, exchange or transfer of

certificates in the initial issuance of certificates between the

sponsor or underwriter and a plan when the person who has discretionary

authority or renders investment advice with respect to the investment

of plan assets in the certificates is (a) an obligor with respect to 5

percent or less of the fair market value of obligations or receivables

contained in the trust, or (b) an affiliate of a person described in

(a); if:

(i) the plan is not an Excluded Plan;

(ii) solely in the case of an acquisition of certificates in

connection with the initial issuance of the certificates, at least 50

percent of each class of certificates in which plans have invested is

acquired by persons independent of the members of the Restricted Group

and at least 50 percent of the aggregate interest in the trust is

acquired by persons independent of the Restricted Group;

(iii) a plan's investment in each class of certificates does not

exceed 25 percent of all of the certificates of that class outstanding

at the time of the acquisition; and

(iv) immediately after the acquisition of the certificates, no more

than 25 percent of the assets of a plan with respect to which the

person has discretionary authority or renders investment advice are

invested in certificates representing an interest in a trust containing

assets sold or serviced by the same entity.5 For purposes of this

paragraph B.(1)(iv) only, an entity will not be considered to service

assets contained in a trust if it is merely a subservicer of that

trust;

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\5\ For purposes of this exemption, each plan participating in a

commingled fund (such as a bank collective trust fund or insurance

company pooled separate account) shall be considered to own the same

proportionate undivided interest in each asset of the commingled

fund as its proportionate interest in the total assets of the

commingled fund as calculated on the most recent preceding valuation

date of the fund.

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(2) The direct or indirect acquisition or disposition of

certificates by a plan in the secondary market for such certificates,

provided that the conditions set forth in paragraphs B.(1) (i), (iii)

and (iv) are met; and

(3) The continued holding of certificates acquired by a plan

pursuant to subsection I.B. (1) or (2).

C. The restrictions of sections 406(a), 406(b) and 407(a) of the

Act, and the taxes imposed by section 4975 (a) and (b) of the Code by

reason of section 4975(c) of the Code, shall not apply to transactions

in connection with the servicing, management and operation of a trust,

provided:

(1) such transactions are carried out in accordance with the terms

of a binding pooling and servicing arrangement; and

(2) the pooling and servicing agreement is provided to, or

described in all material respects in the prospectus or private

placement memorandum provided to, investing plans before they purchase

certificates issued by the trust.6

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\6\ In the case of a private placement memorandum, such

memorandum must contain substantially the same information that

would be disclosed in a prospectus if the offering of the

certificates were made in a registered public offering under the

Securities Act of 1933. In the Department's view, the private

placement memorandum must contain sufficient information to permit

plan fiduciaries to make informed investment decisions.

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Notwithstanding the foregoing, section I.C. does not provide an

exemption from the restrictions of section 406(b) of the Act or from

the taxes imposed by reason of section 4975(c) of the Code for the

receipt of a fee by a servicer of the trust from a person other than

the trustee or sponsor, unless such fee constitutes a ``qualified

administrative fee'' as defined in section III.S.

D. The restrictions of sections 406(a) and 407(a) of the Act, and

the taxes imposed by sections 4975 (a) and (b) of the Code by reason of

sections 4975(c)(1) (A) through (D) of the Code, shall not apply to any

transactions to which those restrictions or taxes would otherwise apply

merely because a person is deemed to be a party in interest or

disqualified person (including a fiduciary) with respect to a plan by

virtue of providing services to the plan (or by virtue of having a

relationship to such service provider described in section 3(14) (F),

(G), (H) or (I) of the Act or section 4975(e)(2) (F), (G), (H) or (I)

of the Code), solely because of the plan's ownership of certificates.

II. General Conditions

A. The relief provided under Part I is available only if the

following conditions are met:

(1) The acquisition of certificates by a plan is on terms

(including the certificate price) that are at least as favorable to the

plan as they would be in an arm's-length transaction with an unrelated

party;

(2) The rights and interests evidenced by the certificates are not

subordinated to the rights and interests evidenced by other

certificates of the same trust;

(3) The certificates acquired by the plan have received a rating at

the time of such acquisition that is in one of the three highest

generic rating categories from either Standard & Poor's Corporation

(S&P's), Moody's Investors Service, Inc. (Moody's), Duff & Phelps Inc.

(D & P) or Fitch Investors Service, Inc. (Fitch);

[[Page 58235]]

(4) The trustee is not an affiliate of any member of the Restricted

Group. However, the trustee shall not be considered to be an affiliate

of a servicer solely because the trustee has succeeded to the rights

and responsibilities of the servicer pursuant to the terms of a pooling

and servicing agreement providing for such succession upon the

occurrence of one or more events of default by the servicer;

(5) The sum of all payments made to and retained by the

underwriters in connection with the distribution or placement of

certificates represents not more than reasonable compensation for

underwriting or placing the certificates; the sum of all payments made

to and retained by the sponsor pursuant to the assignment of

obligations (or interests therein) to the trust represents not more

than the fair market value of such obligations (or interests); and the

sum of all payments made to and retained by the servicer represents not

more than reasonable compensation for the servicer's services under the

pooling and servicing agreement and reimbursement of the servicer's

reasonable expenses in connection therewith; and

(6) The plan investing in such certificates is an ``accredited

investor'' as defined in Rule 501(a)(1) of Regulation D of the

Securities and Exchange Commission under the Securities Act of 1933.

B. Neither any underwriter, sponsor, trustee, servicer, insurer,

nor any obligor, unless it or any of its affiliates has discretionary

authority or renders investment advice with respect to the plan assets

used by a plan to acquire certificates, shall be denied the relief

provided under Part I, if the provision of subsection II.A.(6) above is

not satisfied with respect to acquisition or holding by a plan of such

certificates, provided that (1) such condition is disclosed in the

prospectus or private placement memorandum; and (2) in the case of a

private placement of certificates, the trustee obtains a representation

from each initial purchaser which is a plan that it is in compliance

with such condition, and obtains a covenant from each initial purchaser

to the effect that, so long as such initial purchaser (or any

transferee of such initial purchaser's certificates) is required to

obtain from its transferee a representation regarding compliance with

the Securities Act of 1933, any such transferees will be required to

make a written representation regarding compliance with the condition

set forth in subsection II.A.(6) above.

III. Definitions

For purposes of this exemption:

A. ``Certificate'' means:

(1) a certificate--

(a) that represents a beneficial ownership interest in the assets

of a trust; and

(b) that entitles the holder to pass-through payments of principal,

interest, and/or other payments made with respect to the assets of such

trust; or

(2) a certificate denominated as a debt instrument--

(a) that represents an interest in a Real Estate Mortgage

Investment Conduit (REMIC) within the meaning of section 860D(a) of the

Internal Revenue Code of 1986; and

(b) that is issued by and is an obligation of a trust;

with respect to certificates defined in (1) and (2) above for which

HSBC is either (i) the sole underwriter or the manager or co-manager of

the underwriting syndicate, or (ii) a selling or placement agent.

For purposes of this exemption, references to ``certificates

representing an interest in a trust'' include certificates denominated

as debt which are issued by a trust.

B. ``Trust'' means an investment pool, the corpus of which is held

in trust and consists solely of:

(1) either

(a) secured consumer receivables that bear interest or are

purchased at a discount (including, but not limited to, home equity

loans and obligations secured by shares issued by a cooperative housing

association);

(b) secured credit instruments that bear interest or are purchased

at a discount in transactions by or between business entities

(including, but not limited to, qualified equipment notes secured by

leases, as defined in section III.T);

(c) obligations that bear interest or are purchased at a discount

and which are secured by single-family residential, multi-family

residential and commercial real property (including obligations secured

by leasehold interests on commercial real property);

(d) obligations that bear interest or are purchased at a discount

and which are secured by motor vehicles or equipment, or qualified

motor vehicle leases (as defined in section III.U);

(e) ``guaranteed governmental mortgage pool certificates,'' as

defined in 29 CFR 2510.3-101(i)(2);

(f) fractional undivided interests in any of the obligations

described in clauses (a)-(e) of this section B.(1);

(2) property which had secured any of the obligations described in

subsection B.(1);

(3) undistributed cash or temporary investments made therewith

maturing no later than the next date on which distributions are to made

to certificateholders; and

(4) rights of the trustee under the pooling and servicing

agreement, and rights under any insurance policies, third-party

guarantees, contracts of suretyship and other credit support

arrangements with respect to any obligations described in subsection

B.(1).

Notwithstanding the foregoing, the term ``trust'' does not include

any investment pool unless: (i) The investment pool consists only of

assets of the type which have been included in other investment pools,

(ii) certificates evidencing interests in such other investment pools

have been rated in one of the three highest generic rating categories

by S&P's, Moody's, D & P, or Fitch for at least one year prior to the

plan's acquisition of certificates pursuant to this exemption, and

(iii) certificates evidencing interests in such other investment pools

have been purchased by investors other than plans for at least one year

prior to the plan's acquisition of certificates pursuant to this

exemption.

C. ``Underwriter'' means:

(1) HSBC;

(2) any person directly or indirectly, through one or more

intermediaries, controlling, controlled by or under common control with

HSBC; or

(3) any member of an underwriting syndicate or selling group of

which HSBC or a person described in (2) is a manager or co-manager with

respect to the certificates.

D. ``Sponsor'' means the entity that organizes a trust by

depositing obligations therein in exchange for certificates.

E. ``Master Servicer'' means the entity that is a party to the

pooling and servicing agreement relating to trust assets and is fully

responsible for servicing, directly or through subservicers, the assets

of the trust.

F. ``Subservicer'' means an entity which, under the supervision of

and on behalf of the master servicer, services loans contained in the

trust, but is not a party to the pooling and servicing agreement.

G. ``Servicer'' means any entity which services loans contained in

the trust, including the master servicer and any subservicer.

H. ``Trustee'' means the trustee of the trust, and in the case of

certificates which are denominated as debt instruments, also means the

trustee of the indenture trust.

[[Page 58236]]

I. ``Insurer'' means the insurer or guarantor of, or provider of

other credit support for, a trust. Notwithstanding the foregoing, a

person is not an insurer solely because it holds securities

representing an interest in a trust which are of a class subordinated

to certificates representing an interest in the same trust.

J. ``Obligor'' means any person, other than the insurer, that is

obligated to make payments with respect to any obligation or receivable

included in the trust. Where a trust contains qualified motor vehicle

leases or qualified equipment notes secured by leases, ``obligor''

shall also include any owner of property subject to any lease included

in the trust, or subject to any lease securing an obligation included

in the trust.

K. ``Excluded Plan'' means any plan with respect to which any

member of the Restricted Group is a ``plan sponsor'' within the meaning

of section 3(16)(B) of the Act.

L. ``Restricted Group'' with respect to a class of certificates

means:

(1) each underwriter;

(2) each insurer;

(3) the sponsor;

(4) the trustee;

(5) each servicer;

(6) any obligor with respect to obligations or receivables included

in the trust constituting more than 5 percent of the aggregate

unamortized principal balance of the assets in the trust, determined on

the date of the initial issuance of certificates by the trust; or

(7) any affiliate of a person described in (1)-(6) above.

M. ``Affiliate'' of another person includes:

(1) Any person directly or indirectly, through one or more

intermediaries, controlling, controlled by, or under common control

with such other person;

(2) Any officer, director, partner, employee, relative (as defined

in section 3(15) of the Act), a brother, a sister, or a spouse of a

brother or sister of such other person; and

(3) Any corporation or partnership of which such other person is an

officer, director or partner.

N. ``Control'' means the power to exercise a controlling influence

over the management or policies of a person other than an individual.

O. A person will be ``independent'' of another person only if:

(1) such person is not an affiliate of that other person; and

(2) the other person, or an affiliate thereof, is not a fiduciary

who has investment management authority or renders investment advice

with respect to any assets of such person.

P. ``Sale'' includes the entrance into a forward delivery

commitment (as defined in section Q below), provided:

(1) The terms of the forward delivery commitment (including any fee

paid to the investing plan) are no less favorable to the plan than they

would be in an arm's-length transaction with an unrelated party;

(2) The prospectus or private placement memorandum is provided to

an investing plan prior to the time the plan enters into the forward

delivery commitment; and

(3) At the time of the delivery, all conditions of this exemption

applicable to sales are met.

Q. ``Forward delivery commitment'' means a contract for the

purchase or sale of one or more certificates to be delivered at an

agreed future settlement date. The term includes both mandatory

contracts (which contemplate obligatory delivery and acceptance of the

certificates) and optional contracts (which give one party the right

but not the obligation to deliver certificates to, or demand delivery

of certificates from, the other party).

R. ``Reasonable compensation'' has the same meaning as that term is

defined in 29 CFR 2550.408c-2.

S. ``Qualified Administrative Fee'' means a fee which meets the

following criteria:

(1) the fee is triggered by an act or failure to act by the obligor

other than the normal timely payment of amounts owing in respect of the

obligations;

(2) the servicer may not charge the fee absent the act or failure

to act referred to in (1);

(3) the ability to charge the fee, the circumstances in which the

fee may be charged, and an explanation of how the fee is calculated are

set forth in the pooling and servicing agreement; and

(4) the amount paid to investors in the trust will not be reduced

by the amount of any such fee waived by the servicer.

T. ``Qualified Equipment Note Secured By A Lease'' means an

equipment note:

(1) which is secured by equipment which is leased;

(2) which is secured by the obligation of the lessee to pay rent

under the equipment lease; and

(3) with respect to which the trust's security interest in the

equipment is at least as protective of the rights of the trust as would

be the case if the equipment note were secured only by the equipment

and not the lease.

U. ``Qualified Motor Vehicle Lease'' means a lease of a motor

vehicle where:

(1) the trust holds a security interest in the lease;

(2) the trust holds a security interest in the leased motor

vehicle; and

(3) the trust's security interest in the leased motor vehicle is at

least as protective of the trust's rights as would be the case if the

trust consisted of motor vehicle installment loan contracts.

V. ``Pooling and Servicing Agreement'' means the agreement or

agreements among a sponsor, a servicer and the trustee establishing a

trust. In the case of certificates which are denominated as debt

instruments, ``Pooling and Servicing Agreement'' also includes the

indenture entered into by the trustee of the trust issuing such

certificates and the indenture trustee.

The Department notes that this exemption is included within the

meaning of the term ``Underwriter Exemption'' as it is defined in

section V(h) of Prohibited Transaction Exemption 95-60 (60 FR 35925,

July 12, 1995), the Class Exemption for Certain Transactions Involving

Insurance Company General Accounts at 35932.

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 published on September 18, 1996 at 61

FR 49163.

FOR FURTHER INFORMATION CONTACT: Gary Lefkowitz of the Department,

telephone (202) 219-8881. (This is not a toll-free number.)

General Information

The attention of interested persons is directed to the following:

(1) The fact that a transaction is the subject of an exemption

under section 408(a) of the Act and/or section 4975(c)(2) of the Code

does not relieve a fiduciary or other party in interest or disqualified

person from certain other provisions to which the exemptions does not

apply and the general fiduciary responsibility provisions of section

404 of the Act, which among other things require a fiduciary to

discharge his duties respecting the plan solely in the interest of the

participants and beneficiaries of the plan and in a prudent fashion in

accordance with section 404(a)(1)(B) of the Act; nor does it affect the

requirement of section 401(a) of the Code that the plan must operate

for the exclusive benefit of the employees of the employer maintaining

the plan and their beneficiaries;

(2) These exemptions are supplemental to and not in derogation of,

any other provisions of the Act and/or the Code, including statutory or

administrative exemptions and transactional rules. Furthermore, the

fact that a transaction is subject to an

[[Page 58237]]

administrative or statutory exemption is not dispositive of whether the

transaction is in fact a prohibited transaction; and

(3) The availability of these exemptions is subject to the express

condition that the material facts and representations contained in each

application accurately describes all material terms of the transaction

which is the subject of the exemption.

Signed at Washington, D.C., this 7th day of November, 1996.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, U.S. Department of Labor.

[FR Doc. 96-29034 Filed 11-12-96; 8:45 am]

BILLING CODE 4510-29-P