Proposed Exemptions; MBNA America Bank, National Association (MBNA)

SUMMARY: This document contains notices of pendency before the

Department of Labor (the Department) of proposed exemptions from

certain of the prohibited transaction restrictions of the Employee

Retirement Income Security Act of 1974 (the Act) and/or the Internal

Revenue Code of 1986 (the Code).

Written Comments and Hearing Requests

Unless otherwise stated in the Notice of Proposed Exemption, all

interested persons are invited to submit written comments, and with

respect to exemptions involving the fiduciary prohibitions of section

406(b) of the Act, requests for hearing within 45 days from the date of

publication of this Federal Register Notice. Comments and requests for

a hearing should state: (1) The name, address, and telephone number of

the person making the comment or request, and (2) the nature of the

person's interest in the exemption and the manner in which the person

would be adversely affected by the exemption. A request for a hearing

must also state the issues to be addressed and include a general

description of the evidence to be presented at the hearing.

ADDRESSES: All written comments and request for a hearing (at least

three copies) should be sent to the Pension and Welfare Benefits

Administration, Office of Exemption Determinations, Room N-5649, U.S.

Department of Labor, 200 Constitution Avenue, NW., Washington, DC

20210. Attention: Application No. stated in each Notice of Proposed

Exemption. The applications for exemption and the comments received

will be available for public inspection in the Public Documents Room of

Pension and Welfare Benefits Administration, U.S. Department of Labor,

Room N-5507, 200 Constitution Avenue, NW., Washington, DC 20210.

Notice to Interested Persons

Notice of the proposed exemptions will be provided to all

interested persons in the manner agreed upon by the applicant and the

Department within 15 days of the date of publication in the Federal

Register. Such notice shall include a copy of the notice of proposed

exemption as published in the Federal Register and shall inform

interested persons of their right to comment and to request a hearing

(where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in

applications filed pursuant to section 408(a) of the Act and/or section

4975(c)(2) of the Code, and in accordance with procedures set forth in

29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990).

Effective December 31, 1978, section 102 of Reorganization Plan No. 4

of 1978 (43 FR 47713, October 17, 1978) transferred the authority of

the Secretary of the Treasury to issue exemptions of the type requested

to the Secretary of Labor. Therefore, these notices of proposed

exemption are issued solely by the Department.

The applications contain representations with regard to the

proposed exemptions which are summarized below. Interested persons are

referred to the applications on file with the Department for a complete

statement of the facts and representations.

MBNA America Bank, National Association (MBNA), Located in Newark,

Delaware, (Application No. D-10304)

Proposed Exemption

The Department is considering granting an exemption under the

authority of section 408(a) of the Act and section 4975(c)(2) of the

Code and in accordance with the procedures set forth in 29 CFR part

2570, subpart B (55 FR 32836, 32847, August 10, 1990).

Section I--Transactions

A. Effective as of the date this proposed exemption is granted, 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 trust,

the sponsor or an underwriter and an employee benefit plan subject to

the Act or section 4975 of the Code (a 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 Section 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, as defined in Section III.K. below, by any person who

has discretionary authority or renders investment advice with respect

to the assets of the Excluded Plan that are invested in

certificates.1

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\1\ 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. Effective as of the date this proposed exemption is granted, 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 trust,

the sponsor or an 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 receivables contained in the trust constituting 0.5

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

receivables contained in the aggregate undivided interest in the trust

allocated to the certificates of the relevant series, 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,

as defined in Section III.L., and at least 50 percent of the aggregate

undivided interest in the trust allocated to the certificates of a

series is acquired by persons independent of the Restricted Group;

(iii) A plan's investment in each class of certificates of a series

does not exceed 25 percent of all of the certificates of that class

outstanding at the time of the acquisition;

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

than 25 percent of the assets of a plan with

[[Page 4039]]

respect to which the person has discretionary authority or renders

investment advice is invested in certificates representing the

aggregate undivided interest in a trust allocated to the certificates

of a series and containing receivables sold or serviced by the same

entity; 2 and

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\2\ For purposes of this proposed 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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(v) Immediately after the acquisition of the certificates, not more

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

person has discretionary authority or renders investment advice is

invested in certificates representing an interest in the trust, or

trusts containing receivables sold or serviced by the same entity. For

purposes of paragraphs B.(1)(iv) and B.(1)(v) only, an entity shall not

be considered to service receivables contained in a trust if it is

merely a subservicer of that trust;

(2) The direct or indirect acquisition or disposition of

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

provided that conditions set forth in Section I. B.(1)(i), (iii)

through (v) are met; and

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

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

C. Effective as of the date that the proposed exemption is granted,

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,

including reassigning receivables to the sponsor, removing from the

trust receivables in accounts previously designated to the trust,

changing the underlying terms of accounts designated to the trust,

adding new receivables to the trust, designating new accounts to the

trust, the retention of a retained interest by the sponsor in the

receivables, the exercise of the right to cause the commencement of

amortization of the principal amount of the certificates, or the use of

any eligible swap transactions, provided that:

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

of a binding pooling and servicing agreement;

(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; 3

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\3\ 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. For purposes

of this proposed exemption, all references to ``prospectus'' include

any related supplement thereto, and any documents incorporated by

reference therein, pursuant to which certificates are offered to

investors.

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(3) The addition of new receivables or designation of new accounts,

or the removal of receivables in previously-designated accounts, meets

the terms and conditions for such additions, designations or removals

as are described in the prospectus or private placement memorandum of

such certificates, which terms and conditions have been approved by

Standard & Poor's Ratings Services, Moody's Investors Service, Inc.,

Duff & Phelps Credit Rating Co., or Fitch Investors Service, L.P., or

their successors (collectively, the Rating Agencies), and does not

result in the certificates receiving a lower credit rating from the

Rating Agencies than the then current rating of the certificates; and

(4) The series of which the certificates are a part will be subject

to an ``Economic Pay Out Event'' (as defined in Section III.X.), which

is set forth in the pooling and servicing agreement and described in

the prospectus or private placement memorandum associated with the

series, the occurrence of which will cause any revolving period,

scheduled amortization period or scheduled accumulation period

applicable to the certificates to end, and principal collections to be

applied to monthly payments of principal to, or the accumulation of

principal for the benefit of, the certificateholders of such series

until the earlier of payment in full of the outstanding principal

amount of the certificates of such series or the series termination

date specified in the prospectus or private placement memorandum.

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 under section 4975(a) and (b) of the Code, by reason

of section 4975(c)(1)(E) or (F) of the Code, for the receipt of a fee

by the servicer of the trust, in connection with the servicing of the

receivables and the operation 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.U. below.

D. Effective as of the date that the proposed exemption is granted,

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

transaction 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 as 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.

Section II--General Conditions

A. The relief provided under Section 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 such terms 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 either: (i) in one of the two

highest generic rating categories from any one of the Rating Agencies;

or (ii) for certificates with a duration of one year or less, the

highest short-term generic rating category from any one of the Rating

Agencies; provided that, notwithstanding such ratings, this exemption

(if granted) shall apply to a particular class of certificates only if

such class (an Exempt Class) is part of a series in which credit

support is provided to the Exempt Class through a senior-subordinated

series structure or other form of third-party credit support which, at

a minimum, represents five (5) percent of the outstanding principal

balance of certificates issued for the Exempt Class, so that an

investor in the Exempt Class will not bear the initial risk of loss;

(4) The trustee is not an affiliate of any other 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

[[Page 4040]]

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 consideration received by

the sponsor as a consequence of the assignment of receivables (or

interests therein) to the trust, to the extent allocable to the series

of certificates purchased by a plan, represents not more than the fair

market value of such receivables (or interests); and the sum of all

payments made to and retained by the servicer, to the extent allocable

to the series of certificates purchased by a plan, 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;

(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 (SEC) under the Securities Act of

1933;

(7) The trustee of the trust is a substantial financial institution

or trust company experienced in trust activities and is familiar with

its duties, responsibilities, and liabilities as a fiduciary under the

Act (i.e. ERISA). The trustee, as the legal owner of, or holder of a

perfected security interest in, the receivables in the trust, enforces

all the rights created in favor of certificateholders of such trust,

including plans;

(8) Prior to the issuance by the trust of any new series,

confirmation is received from the Rating Agencies that such issuance

will not result in the reduction or withdrawal of the then current

rating of the certificates held by any plan pursuant to this exemption;

(9) To protect against fraud, chargebacks or other dilution of the

receivables in the trust, the pooling and servicing agreement and the

Rating Agencies require the sponsor to maintain a seller interest of

not less than 2 percent of the principal balance of the receivables

contained in the trust;

(10) Each receivable added to a trust is an eligible receivable,

based on criteria of the relevant Rating Agency(ies) and as specified

in the pooling and servicing agreement. The pooling and servicing

agreement requires that any change in the terms of the cardholder

agreements must be made applicable to the comparable segment of

accounts owned or serviced by the sponsor which are part of the same

program or have the same or substantially similar characteristics;

(11) The pooling and servicing agreement limits the number of the

sponsor's newly originated accounts to be designated to the trust,

unless the Rating Agencies otherwise consent in writing, to the

following: (i) With respect to any three-month period, 15 percent of

the number of existing accounts designated to the trust as of the first

day of such period, and (ii) with respect to any twelve-month period,

20 percent of the number of existing accounts designated to the trust

as of the first day of such twelve-month period;

(12) The pooling and servicing agreement requires the sponsor to

deliver an opinion of counsel semi-annually confirming the validity and

perfection of each transfer of newly originated accounts to the trust

if such opinion is not delivered with respect to each interim addition;

(13) The pooling and servicing agreement requires the sponsor and

the trustee to receive confirmation from a Rating Agency that no

Ratings Effect (i) will result from a proposed transfer of newly

originated accounts to the trust, or (ii) will have resulted from the

transfer of all newly originated accounts added to the trust during the

preceding three-month period (beginning at quarterly intervals

specified in the pooling and servicing agreement and ending in the

calendar month prior to the date such confirmation is issued), provided

that a Rating Agency confirmation shall not be required under clause

(ii) for any three-month period in which any additions of newly

originated accounts occurred only after receipt of prior Rating Agency

confirmation pursuant to clause (i);

(14) If a particular series of certificates held by any plan

involves a Ratings Dependent or Non-Ratings Dependent Swap entered into

by the trust, then each particular swap transaction relating to such

certificates:

(a) Shall be an Eligible Swap;

(b) Shall be with an Eligible Swap Counterparty;

(c) In the case of a Ratings Dependent Swap, shall include as an

early payout event, as specified in the pooling and servicing

agreement, the withdrawal or reduction by any Rating Agency of the swap

counterparty's credit rating below a level specified by the Rating

Agency where the servicer (as agent for the trustee) has failed, for a

specified period after such rating withdrawal or reduction, to meet its

obligation under the pooling and servicing agreement to:

(i) Obtain a replacement swap agreement with an Eligible Swap

Counterparty which is acceptable to the Rating Agency and the terms of

which are substantially the same as the current swap agreement (at

which time the earlier swap agreement shall terminate); or

(ii) Cause the swap counterparty to establish any collateralization

or other arrangement satisfactory to the Rating Agency such that the

then current rating by the Rating Agency of the particular series of

certificates will not be withdrawn or reduced;

(d) In the case of a Non-Ratings Dependent Swap, shall provide

that, if the credit rating of the swap counterparty is withdrawn or

reduced below the lowest level specified in Section III.II. hereof, the

servicer, as agent for the trustee, shall within a specified period

after such rating withdrawal or reduction:

(i) Obtain a replacement swap agreement with an Eligible Swap

Counterparty, the terms of which are substantially the same as the

current swap agreement (at which time the earlier swap agreement shall

terminate); or

(ii) Cause the swap counterparty to post collateral with the

trustee of the trust in an amount equal to all payments owed by the

counterparty if the swap transaction were terminated; or

(iii) Terminate the swap agreement in accordance with its terms;

and

(e) Shall not require the trust to make any termination payments to

the swap counterparty (other than a currently scheduled payment under

the swap agreement) except from ``Excess Finance Charge Collections''

(as defined below in Section III.LL.) or other amounts that would

otherwise be payable to the servicer or the seller; and

(15) Any series of certificates, to which one or more swap

agreements entered into by the trust applies, may be acquired or held

in reliance upon this proposed exemption only by Qualified Plan

Investors.

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 Section I, if the provision in Section II.A.(6) above is

not satisfied for the acquisition or holding by a plan of such

certificates, provided that:

(1) Such condition is disclosed in the prospectus or private

placement memorandum; and

[[Page 4041]]

(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 shall

be required to make a written representation regarding compliance with

the condition set forth in Section II.A.(6).

Section III--Definitions

For purposes of this proposed exemption:

A. Certificate means a certificate:

(1) That (i) represents a beneficial ownership interest in the

assets of a trust and entitles the holder to payments denominated as

principal, interest and/or other payments made as described in the

applicable prospectus or private placement memorandum and in accordance

with the pooling and servicing agreement in connection with the assets

of such trust, to the extent allocable to the series of certificates

purchased by a plan, either currently or after a revolving period

during which principal payments on assets of the trust are reinvested

in new assets, or (ii) is denominated as a debt instrument that

represents a regular interest in a financial asset securitization

investment trust (FASIT), within the meaning of section 860L(a) of the

Code, and is issued by and is an obligation of the trust.

For purposes of this proposed exemption, references to

``certificates representing an interest in a trust'' include

certificates denominated as debt which are issued by a trust; and

(2) With respect to which (a) MBNA or any of its affiliates is the

sponsor, and (b) MBNA, any of its affiliates, or an ``underwriter'' (as

defined in Section III.C.) is the sole underwriter or the manager or

co-manager of the underwriting syndicate or a selling or placement

agent.

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

trust and consists solely of:

(1) Either

(a) Receivables (as defined in Section III.V.); or

(b) Participations in a pool of receivables (as defined in Section

III.V.) where such beneficial ownership interests are not subordinated

to any other interest in the same pool of receivables; \4\

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\4\ The Department notes that no relief would be available under

the exemption if the participation interests held by the trust were

subordinated to the rights and interests evidenced by other

participation interests in the same pool of receivables.

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(2) Property which has secured any of the assets described in

Section III.B.(1); \5\

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\5\ MBNA states that it is possible for credit card receivables

to be secured by bank account balances or security interests in

merchandise purchased with credit cards. Thus, the proposed

exemption should permit foreclosed property to be an eligible trust

asset.

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(3) Undistributed cash or permitted investments made therewith

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

made to certificate holders, except during a Revolving Period (as

defined herein) when permitted investments are made until such cash can

be reinvested in additional receivables described in paragraph (a) of

this Section III.B.(1);

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

agreement, and rights under any cash collateral accounts, insurance

policies, third-party guarantees, contracts of suretyship and other

credit support arrangements for any certificates, swap transactions, or

under any yield supplement agreements,\6\ yield maintenance agreements

or similar arrangements; and

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\6\ In a series involving an accumulation period (as defined in

Section III.Z.), a yield supplement agreement may be used by the

Trust to make up the difference between (i) the reinvestment yield

on permitted investments, and (ii) the interest rate on the

certificates of that series.

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(5) Rights to receive interchange fees received by the sponsor as

partial compensation for the sponsor's taking credit risk, absorbing

fraud losses and funding receivables for a limited period prior to

initial billing with respect to accounts designated to the trust.

Notwithstanding the foregoing, the term trust does not include any

investment pool unless: (i) the investment pool consists only of

receivables 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 two highest generic rating

categories by at least one of the Rating Agencies for at least one year

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

exemption; and (iii) certificates evidencing an interest 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 an entity which has received from the

Department an individual prohibited transaction exemption which

provides relief for the operation of asset pool investment trusts that

issue asset-backed pass-through securities to plans that is similar in

format and substance to this proposed exemption (each, an Underwriter

Exemption); \7\ any person directly or indirectly, through one or more

intermediaries, controlling, controlled by or under common control with

such entity; and any member of an underwriting syndicate or selling

group of which such firm or affiliated person described above is a

manager or co-manager with respect to the certificates.

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\7\ For a listing of Underwriter Exemptions, see the description

provided in the text of the operative language of Prohibited

Transaction Exemption (PTE) 97-34 (62 FR 39021, July 21, 1997).

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D. Sponsor means MBNA, or an affiliate of MBNA that organizes a

trust by transferring credit card receivables or interests therein to

the trust in exchange for certificates.

E. Master Servicer means MBNA or an affiliate that is a party to

the pooling and servicing agreement relating to trust receivables and

is fully responsible for servicing, directly or through subservicers,

the receivables in the trust pursuant to the pooling and servicing

agreement.

F. Subservicer means MBNA or an affiliate of MBNA, or an entity

unaffiliated with MBNA which, under the supervision of and on behalf of

the master servicer, services receivables contained in the trust, but

is not a party to the pooling and servicing agreement.

G. Servicer means MBNA or an affiliate which services receivables

contained in the trust, including the master servicer and any

subservicer or their successors pursuant to the pooling and servicing

agreement.

H. Trustee means an entity which is independent of MBNA and its

affiliates and is the trustee of the trust. In the case of certificates

which are denominated as debt instruments, ``trustee'' also means the

trustee of the indenture trust.

I. Insurer means the insurer or guarantor of, provider of other

credit support for, or other contractual counterparty of, a trust.

Notwithstanding the foregoing, a swap counterparty is not an insurer,

and 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 receivable included in

the trust.

K. Excluded Plan means any plan with respect to which any member of

[[Page 4042]]

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) Each swap counterparty;

(7) Any obligor with respect to receivables contained in the trust

constituting more than 0.5 percent of the fair market value of the

aggregate undivided interest in the trust allocated to the certificates

of a series, determined on the date of the initial issuance of such

series of certificates by the trust; or

(8) Any affiliate of a person described in Section III.L.(1)-(7).

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 III.Q. below), provided that:

(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 section 2550.408c-2.

S. Pooling and Servicing Agreement means the agreement or

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

trust and any supplement thereto pertaining to a particular series of

certificates. 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.

T. Series means an issuance of a class or various classes of

certificates by the trust all on the same date pursuant to the same

pooling and servicing agreement, and any supplement thereto and

restrictions therein.

U. 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 with respect to

the receivables;

(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 or described in all

material respects in the prospectus or private placement memorandum

provided to the plan before it purchases certificates issued by the

trust; and

(4) The amount paid to investors in the trust is not reduced by the

amount of any such fee waived by the servicer.

V. Receivables means secured or unsecured obligations of credit

card holders which have arisen or arise in Accounts designated to a

trust. Such obligations represent amounts charged by cardholders for

merchandise and services and amounts advanced as cash advances, as well

as periodic finance charges, annual membership fees, cash advance fees,

late charges on amounts charged for merchandise and services and

certain other fees (such as bad check fees, cash advance fees, and

other fees specified in the cardholder agreements) designated by card

issuers (other than a qualified administrative fee as defined in

Section III.U.).

W. Accounts are revolving credit card accounts serviced by MBNA or

an affiliate, which were originated or purchased by MBNA or an

affiliate, and are designated to a trust such that receivables arising

in such accounts become assets of the trust.

X. Revolving Period means a period of time, as specified in the

pooling and servicing agreement, during which principal collections

allocated to a series are reinvested in newly generated receivables

arising in the accounts.

Y. Amortization Period means a period of time specified in the

pooling and servicing agreement during which a portion of the principal

collections allocated to a series will commence to be paid to the

certificateholders of such series in installments.

Z. Accumulation Period means a period of time specified in the

pooling and servicing agreement during which a portion of the principal

collections allocated to a series will be deposited in an account to be

distributed to certificateholders in a lump sum on the expected

maturity date.

AA. Pay Out Event means any of the events specified in the pooling

and servicing agreement or supplement thereto that results (in some

instances without further affirmative action by any party) in the early

commencement of either an amortization period or an accumulation

period, including (1) the failure of the sponsor or the servicer,

whichever is subject to the relevant obligation under the pooling and

servicing agreement, (i) to make any payment or deposit required under

the pooling and servicing agreement within five (5) business days after

such payment or deposit was required to be made, or (ii) to observe or

perform any of its other covenants or agreements set forth in the

pooling and servicing agreement, which failure has a material adverse

effect on holders of investor certificates of the relevant series and

continues unremedied for 60 days; (2) a breach of any representation or

warranty made by the sponsor or the servicer in the pooling and

servicing agreement that continues to be incorrect in any material

respect for 60 days; (3) the occurrence of certain bankruptcy events

relating to the sponsor or the servicer; (4) the failure by the sponsor

to convey to the trust additional receivables to maintain the minimum

seller interest that is required by the pooling and servicing agreement

and the Rating Agencies; (5) if a class of investor certificates is in

an Accumulation Period, the amount on deposit in the accumulation

account in any month is

[[Page 4043]]

less than the amount required to be on deposit therein; (6) the failure

to pay in full amounts owing to investors on the expected maturity

date; and (7) the Economic Pay Out Event.

BB. An Economic Pay Out Event occurs automatically when the

portfolio yield for any series of certificates, averaged over three

consecutive months (or such other period approved by one of the Rating

Agencies) is less than the base rate of the series averaged over the

same period. Portfolio yield for a series of certificates for any

period is equal to the sum of the finance charge collections and other

amounts treated as finance charge collections less total defaults for

the series divided by the outstanding principal balance of the investor

certificates of the series, or such other measure approved by one of

the Rating Agencies. The base rate for a series of certificates for any

period is the sum of (i) amounts payable to certificateholders of the

series with respect to interest, (ii) servicing fees allocable to the

series payable to the servicer, and (iii) any credit enhancement fee

allocable to the series payable to a third party credit enhancer,

divided by the outstanding principal balance of the investor

certificates of the series, or such other measure approved by one of

the Rating Agencies.

CC. CCA or Cash Collateral Account means that certain account

established in the name of the trustee that serves as credit

enhancement with respect to the investor certificates and holds cash

and/or permitted investments (as defined below in Section III.KK.)

which conform to applicable provisions of the pooling and servicing

agreement.

DD. Group means a group of any number of series offered by the

trust that share finance charge and/or principal collections in the

manner described in the applicable prospectus or private placement

memorandum.

EE. Ratings Effect means the reduction or withdrawal by a Rating

Agency of its then current rating of the certificates held by any plan

pursuant to this proposed exemption.

FF. Principal Receivables Discount means, with respect to any

account designated by the sponsor, the portion of the related principal

receivables that represents a discount from the face value thereof and

that is treated under the pooling and servicing agreement as finance

charge receivables.

GG. Ratings Dependent Swap means an interest rate swap, or (if

purchased by or on behalf of the trust) an interest rate cap contract,

that is part of the structure of a series of certificates where the

rating assigned by the Rating Agency to any series of certificates held

by any plan is dependent on the terms and conditions of the swap and

the rating of the swap counterparty, and if such certificate rating is

not dependent on the existence of the swap and rating of the swap

counterparty, such swap or cap shall be referred to as a ``Non-Ratings

Dependent Swap''. With respect to a Non-Ratings Dependent Swap, each

Rating Agency rating the certificates must confirm, as of the date of

issuance of the certificates by the trust, that entering into an

Eligible Swap with such counterparty will not affect the rating of the

certificates.

HH. Eligible Swap means a Ratings Dependent or Non-Ratings

Dependent Swap:

(1) Which is denominated in U.S. Dollars;

(2) Pursuant to which the trust pays or receives, on or immediately

prior to the respective payment or distribution date for the series of

certificates, a fixed rate of interest, or a floating rate of interest

based on a publicly available index (e.g. LIBOR or the U.S. Federal

Reserve's Cost of Funds Index (COFI)), with the trust receiving such

payments on at least a quarterly basis and obligated to make separate

payments no more frequently than the swap counterparty, with all

simultaneous payments being netted;

(3) Which has a notional amount that does not exceed either (i) the

certificate balance of the class of certificates to which the swap

relates, or (ii) the portion of the certificate balance of such class

represented by receivables;

(4) Which is not leveraged (i.e. payments are based on the

applicable notional amount, the day count fractions, the fixed or

floating rates designated in subparagraph (2) above, and the difference

between the products thereof, calculated on a one to one ratio and not

on a multiplier of such difference);

(5) Which has a final termination date that is the earlier of the

date on which the trust terminates or the related class of certificates

is fully repaid; and

(6) Which does not incorporate any provision which could cause a

unilateral alteration in any provision described in subparagraphs (1)

through (4) above without the consent of the trustee.

II. Eligible Swap Counterparty means a bank or other financial

institution which has a rating, at the date of issuance of the

certificates by the trust, which is in one of the three highest long-

term credit rating categories, or one of the two highest short-term

credit rating categories, utilized by at least one of the Rating

Agencies rating the certificates; provided that, if a swap counterparty

is relying on its short-term rating to establish eligibility hereunder,

such counterparty must either have a long-term rating in one of the

three highest long-term rating categories or not have a long-term

rating from the applicable Rating Agency, and provided further that if

the series of certificates with which the swap is associated has a

final maturity date of more than one year from the date of issuance of

the certificates, and such swap is a Ratings Dependent Swap, the swap

counterparty is required by the terms of the swap agreement to

establish any collateralization or other arrangement satisfactory to

the Rating Agencies in the event of a ratings downgrade of the swap

counterparty.

JJ. Qualified Plan Investor means a plan investor or group of plan

investors on whose behalf the decision to purchase certificates is made

by an appropriate independent fiduciary that is qualified to analyze

and understand the terms and conditions of any swap transaction used by

the trust and the effect such swap would have upon the credit ratings

of the certificates. For purposes of the proposed exemption, such a

fiduciary is either:

(1) a ``qualified professional asset manager'' (QPAM),8

as defined under Part V(a) of PTE 84-14 (49 FR 9494, 9506, March 13,

1984);

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\8\ PTE 84-14 provides a class exemption for transactions

between a party in interest with respect to an employee benefit plan

and an investment fund (including either a single customer or pooled

separate account) in which the plan has an interest, and which is

managed by a QPAM, provided certain conditions are met. QPAMs (e.g.

banks, insurance companies, registered investment advisers with

total client assets under management in excess of $50 million) are

considered to be experienced investment managers for plan investors

that are aware of their fiduciary duties under ERISA.

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(2) an ``in-house asset manager'' (INHAM),9 as defined

under Part IV(a) of PTE 96-23 (61 FR 15975, 15982, April 10, 1996); or

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\9\ PTE 96-23 permits various transactions involving employee

benefit plans whose assets are managed by an INHAM, an entity which

is generally a subsidiary of an employer sponsoring the plan which

is a registered investment adviser with management and control of

total assets attributable to plans maintained by the employer and

its affiliates which are in excess of $50 million.

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(3) A plan fiduciary with total assets under management of at least

$100 million at the time of the acquisition of such certificates.

KK. Permitted Investments means investments that either (i) are

direct obligations of, or obligations fully guaranteed as to timely

payment of principal and interest by, the United States or any agency

or instrumentality thereof, provided that such obligation is backed by

the full faith and credit of the

[[Page 4044]]

United States, or (ii) have been rated (or the obligor thereof has been

rated) in one of the three highest generic rating categories by a

Rating Agency; are described in the pooling and servicing agreement;

and are permitted by the relevant Rating Agency(ies).

LL. Excess Finance Charge Collections means, as of any day funds

are distributed from the trust, the amount by which the finance charge

collections allocated to certificates of a series exceed the amount

necessary to pay certificate interest, servicing fees and expenses, to

satisfy cardholder defaults or charge-offs, and to reinstate credit

support.

The Department notes that this proposed exemption, if granted, will

be included within the meaning of the term ``Underwriter Exemption'' as

it is defined in Section V(h) of the Grant of the Class Exemption for

Certain Transactions Involving Insurance Company General Accounts,

which was published in the Federal Register on July 12, 1995 (see PTE

95-60, 60 FR 35925).

Summary of Facts and Representations

1. The applicant is MBNA America Bank, National Association (i.e.

MBNA), a national banking association located in Wilmington, Delaware.

MBNA conducts nationwide consumer lending programs principally

comprised of credit card related activities. MBNA is a wholly-owned

subsidiary of MBNA Corporation, a bank holding company organized under

the laws of Maryland in 1990.

2. The transactions for which an exemption is requested are

investments by employee benefit plans in certain certificates

(Certificates) representing the right to receive principal and interest

payments from the assets of various Trusts which hold credit card

receivables. Each Trust will issue, from time to time, a particular

series of Certificates (i.e. a Series) which will be secured by the

Trust's assets. A Series may include one or more classes of

Certificates, some of which may be subordinate to others. However, only

senior certificates issued by such Trusts, which meet the restrictive

criteria designed to ensure investor safety discussed herein would be

eligible for the exemptive relief to be provided under this proposed

exemption.

The Trusts

3. Each Trust is created under a Pooling and Servicing Agreement

(PSA) between MBNA, as Seller and Servicer, and an independent and

unaffiliated Trustee. Upon creation of a Trust, the Seller transfers to

the Trust a pool of interest-bearing credit card receivables which are

selected under strict criteria approved by one or more of certain

nationally recognized rating agencies,10 from the portfolio

of revolving credit card accounts owned by MBNA. The PSA establishes

the general parameters for the Trust, such as the requirements for

eligible receivables to be transferred to the Trust, the manner of

transferring and administering and servicing the receivables, Seller

representations and covenants as to receivable eligibility, Servicer

and Trustee duties and eligibility, and other matters.

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\10\ As noted in Section I.C.(3) above, these rating agencies

are: (i) Standard & Poors Ratings Services, a division of McGraw-

Hill Companies Inc.; (ii) Moody's Investors Service, Inc.; (iii)

Duff & Phelps Credit Rating Co.; and (iv) Fitch Investors Service,

L.P., or their successors (collectively, the Rating Agencies).

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The applicant represents that any Trust that issues a class of

Certificates to be covered by the proposed exemption would include the

following investor safeguards:

(a) Restricted selection of receivables;

(b) Periodic reporting and monitoring of accounts;

(c) Minimum receivable requirements;

(d) Restrictions regarding addition and removal of accounts;

(e) Servicer eligibility requirements;

(f) Servicer daily reports, duties and public accounting firm

review;

(g) Trustee eligibility and duties;

(h) Restrictions on investments;

(i) Protection from the consequences of unplanned events; and

(j) Limited discretion.

These investor safeguards are discussed in the following

paragraphs.

4. Restricted Selection of Receivables. In order for a receivable

to be eligible for transfer to the Trust, either on the initial closing

date or on any subsequent date, it must have arisen under an eligible

account. An eligible account is one that is in existence and owned by

and maintained with MBNA (as of the initial selection date or, with

respect to additional accounts, as of the relevant addition date), and

is payable in U.S. dollars. In addition, an eligible account must have

a United States address for its obligor, must not have been classified

as counterfeit, canceled, fraudulent, stolen or lost, and must not have

been charged off by MBNA under its customary and usual charge-off

procedures. The eligible receivable must have been created in

compliance with applicable law. All consents, licenses and other

approvals necessary for the creation of the receivable and the

execution of the credit card agreement must have been obtained and be

in full force and effect, and MBNA must have good title to the

receivable, free and clear of liens. Finally, an eligible receivable

must constitute the legal valid and binding payment obligation of the

obligor, and constitute an ``account'' under Article 9 of the Uniform

Commercial Code (the ``UCC''), as in effect in the State of Delaware,

so as to grant the Trust a first priority security interest in the

event of bankruptcy. Once the pool of eligible accounts has been

identified, accounts are selected at random for the transfer of their

receivables to the Trust so as to provide a combination of receivables

that is representative of the entire pool of eligible receivables.

MBNA represents and warrants that the receivables transferred to

the Trust, and the accounts related to those receivables, meet the

above-described standards for eligible receivables and accounts, and

that no selection procedures adverse to the Certificateholders have

been employed in selecting accounts. These restrictions on account

selection are in place to prevent the concentration of high risk

accounts. Each relevant Rating Agency requires that all of these

safeguards be in place before a superior rating is given.

5. Periodic Reporting and Monitoring of Accounts. In connection

with the transfer of the receivables to the Trust, MBNA must record and

file a UCC financing statement (including any continuation statements,

when applicable) in order to perfect the assignment of the receivables,

and must deliver a file-stamped copy of such financing or continuation

statement to the Trustee. MBNA must also indicate in its computer

system file of credit card accounts the receivables transferred to the

Trust by identifying the accounts with a unique designation, as

described in the PSA. MBNA must deliver a complete list of all accounts

in the Trust to the Trustee on or prior to the initial closing date and

thereafter on a periodic basis as required by the PSA.

The Trustee is able to continually monitor the Trust's assets by

reviewing the monthly reports regarding pool performance which are

prepared for the Trustee and investors by MBNA, as Servicer. In

addition, MBNA provides the Trustee with a complete list of accounts on

a periodic basis, as required by the PSA. Each relevant Rating Agency

requires significant monitoring procedures for the servicing of

receivables to ensure investor safety before a superior rating is

granted.

6. Minimum Receivable Requirements. The aggregate principal amount

of the receivables held by the Trust must be at least equal to the sum

of the principal amount of the

[[Page 4045]]

Certificates (prior to the commencement of any related amortization or

accumulation) for all Series then outstanding (other than a Series

which is backed in full by accumulated cash or permitted investments

(see Paragraph 11 below)). If, on the last business day of any month,

the aggregate amount of principal receivables is less than the required

minimum, MBNA must designate additional accounts (or may convey

participations in other credit card receivable pools sponsored by MBNA)

to be transferred to the Trust so that the aggregate principal

receivables will meet the minimum requirement.

Interests in the assets of each Trust are allocated among the

Certificate holders of each Series and the Seller (i.e., MBNA). The

interest in the Trust assets allocated to the Seller is referred to as

the ``Seller Interest.'' To protect against fraud, chargebacks or other

dilution of receivables in the Trust, the PSA and the Rating Agencies

will require MBNA, as the Trust's sponsor, to maintain a seller

interest of not less than 2 percent of the principal balance of the

receivables contained in the Trust (referred to as the ``Minimum Seller

Interest''). If, during any period of 30 consecutive days, the Seller

Interest averages less than the Minimum Seller Interest, MBNA must

designate additional accounts (or participations in other MBNA credit

card receivable pools) to be transferred by MBNA to the Trust in order

to satisfy the minimum requirement. When account payments exceed

account purchases, the total pool of receivables in the relevant Trust

contracts. As a result, the Seller Interest declines, thus providing a

buffer to prevent a decline in the principal balance of the

Certificates prior to the scheduled payment of principal. Thus, when

the receivable balances in the accounts that secure the Certificates

decline, the Seller Interest decreases, not the principal balance of

the Certificates. When the account balances again increase, the Seller

Interest is increased. The Seller Interest will also decline as a

result of dilution of the receivable portfolio resulting from noncash

reductions such as merchandise returns or servicer errors.

The minimum receivable requirement and Minimum Seller Interest

requirement imposed on MBNA by the PSA (as described above) cause the

Trustee, Servicer or Seller to have limited discretion regarding the

minimum size of the Trust. Each relevant Rating Agency gains comfort

from these minimum receivable levels that the Trust will be maintained

so as not to adversely affect the ability of the Trust assets to

support the promised interest and/or principal payments to Certificate

holders.

7. Restrictions Regarding Addition and Removal of Accounts. In

addition to the limitations discussed above regarding the selection of

accounts and minimum receivable requirements, the following

restrictions apply to the addition of accounts subsequent to the

initial transfer to the Trust. Any transfer of receivables from

additional accounts must be preceded by written notice to the Trustee,

each relevant Rating Agency and the Servicer specifying the approximate

aggregate amount of receivables to be transferred. In connection with

the transfer, MBNA will warrant that the additional accounts are

eligible accounts and that each receivable is an eligible receivable,

and that no selection procedures believed by MBNA to be materially

adverse to the interest of the Certificateholders were utilized in

selecting the accounts. MBNA must deliver an opinion of counsel with

respect to the added receivables to the Trustee, with a copy to each

relevant Rating Agency, that such addition is enforceable and that the

Trust has either a valid transfer of, or a grant of security interest

in, the additional accounts. The PSA requires that the Servicer and the

Trustee receive confirmation from a Rating Agency that no Ratings

Effect (i.e., a downgrade or withdrawal of the then current rating of

any outstanding Series of Certificates) either (i) will result from a

proposed transfer of receivables from additional accounts to the Trust,

or (ii) will have resulted from the transfer of all receivables from

additional accounts added to the Trust during the preceding three-month

period (beginning at quarterly intervals specified in the PSA and

ending in the calendar month prior to the date such confirmation is

issued). However, a Rating Agency confirmation will not be required for

any three-month period in which any additions of newly originated

accounts occurred only after receipt of a prior Rating Agency

confirmation.

MBNA may remove receivables, subject to the minimum receivable

requirements discussed above, not more than once in a monthly period.

MBNA must give the Trustee and the Servicer written notice stating the

approximate aggregate principal balance of the removal, and certifying

that such removal must not result in a Pay Out Event. MBNA must warrant

that no selection procedures believed by it to be materially adverse to

the Certificateholders were utilized in selecting the removed

receivables. Each relevant Rating Agency must have confirmed that such

proposed removal will not result in a Ratings Effect. MBNA states

further that the amount of any receivables that are removed must be

less than 5 percent of the aggregate amount of principal receivables

or, if any Series is paid in full, the amount of receivables removed

must approximate the initial investor interest of such Series.

Each Rating Agency has determined that the number of additional

accounts from which receivables may be added is generally limited to:

(i) with respect to any three-month period, 15 percent of the number of

existing accounts designated to the Trust as of the first day of such

period, and (ii) with respect to any twelve-month period, 20 percent of

the number of accounts designated to the Trust as of the first day of

such 12-month period. However, if this maximum amount is greater than a

similar test (specified in the PSA) based on the calendar year, then

the calendar year test serves as the maximum addition. MBNA may be able

to exceed the maximum addition amount if approval is received from each

relevant Rating Agency.

By informing the relevant Rating Agencies of all details regarding

additions and removals, the Trust is effectively reexamined each time

these events occur in order to assure that the changes to the Trust

assets will not adversely affect the rating of any outstanding Series.

Each relevant Rating Agency scrutinizes the receivables from the

additional accounts, or the relative strength of the pool of

receivables designated to the Trust both before and after the removal,

as the case may be, in making any such re-examinations.

8. Servicer Eligibility Requirements. The Servicer of the

receivables must be either the Seller (MBNA), an affiliate of MBNA, or

an entity unaffiliated with MBNA acting as a ``Subservicer'' which is

qualified to service a portfolio of consumer revolving credit card

accounts and meets certain requirements. Under such requirements, the

entity acting as either a Servicer or Subservicer must be legally

qualified and have the capacity to service the accounts, must be

qualified to use the software used to service the accounts, must have

demonstrated the ability to professionally and competently service a

portfolio of similar accounts in accordance with customary standards of

skill and care, and must have a certain net worth (e.g. at least

$50,000,000). These requirements are in line with the Rating Agencies'

standards for servicers.

Regardless of whether the Servicer is MBNA, an affiliate, or a

third party meeting the eligibility requirements discussed above, the

Servicer's duties

[[Page 4046]]

are largely ministerial and are provided in detail in the PSA. The

Servicer administers the receivables, collects payments due thereunder,

makes withdrawals from the various accounts created under the PSA which

are forwarded to the Trustee on the dates and in the manner provided

under the PSA, commences enforcement proceedings with respect to

delinquent receivables and makes filings and other necessary reports

with the SEC and any state securities authorities as necessary to

comply with the law. The Servicer must maintain fidelity bond coverage

insuring against losses through its own wrongdoing, and is entitled to

receive a reasonable servicing fee which is specifically enumerated in

each PSA supplement.

9. Servicer Daily Reports, Duties and Public Accounting Firm

Review. On each business day the Servicer must prepare and make

available to the Trustee a record of the collections processed on the

preceding day and the aggregate amount of receivables as of the close

of business on the preceding day. The Servicer must prepare monthly for

the Trustee, the paying agent, any credit enhancement provider, and

each relevant Rating Agency, a certificate setting forth the aggregate

collections processed during the preceding month with respect to each

Series outstanding, the aggregate amounts of the investor percentages

of collections of finance charge receivables and principal receivables

processed during the preceding month with respect to each Series

outstanding, the balances in the finance charge account, the principal

account or any Series account during the preceding month, and other

detailed information.

The Servicer will provide annually a certificate from an officer

indicating that the Servicer's activities over a 12-month period were

reviewed and the officer believed such obligations were fully performed

under the PSA. Every year, a nationally recognized firm of independent

certified public accountants will review the internal accounting

controls and their relation to the servicing of the receivables as well

as the mathematical accuracy of the Servicer's monthly reports, and the

results will be provided to the Trustee, any credit enhancement

provider, and each relevant Rating Agency. These additional reviews of

the Servicer are designed to prevent Servicer fraud and limit Servicer

discretion. These safeguards protect investors and are a positive

factor in a Rating Agency's evaluation.

10. Trustee Eligibility and Duties. The Trustee must be a financial

institution organized, doing business and regulated under the laws of

the United States, any State and/or the District of Columbia and have a

long-term unsecured debt rating as specified in the PSA. The Trustee

must be independent of MBNA and its affiliates and meet the same

requirements that would be necessary for an eligible Servicer (as

discussed under ``Servicer Eligibility Requirements'' above). Any

successor Trustee must also meet these requirements and be approved by

each relevant Rating Agency.

The Trustee is responsible for receiving collections from

receivables as provided in the PSA, investing any moneys as directed in

the PSA, and directing payments to Certificateholders according to the

plan of allocation and payment detailed in the PSA. In performing these

functions, the Trustee has little, if any, discretion. The Trustee is

also responsible for examining any resolutions, statements,

certificates, opinions, reports or other instruments in order to

determine whether they substantially conform to the requirements of the

PSA. The Trustee has no power to vary the corpus of the Trust and must

perform the duties of other parties should they fail to perform under

the PSA. Like the Servicer restrictions, the restrictions on the

Trustee limit discretion, enhance investor protection, and are a

positive influence on a Rating Agency's evaluation.

11. Restrictions on Investments. The collections of principal

receivables and finance charge receivables held in the Trust may be

invested by the Trustee only in ``permitted investments'' during the

interim periods between collection and payout to the

Certificateholders. Such permitted investments are detailed in the PSA

and represent what each relevant Rating Agency considers to be secure

investments that sufficiently protect investors. Under the proposed

exemption, permitted investments would be investments that either (i)

are direct obligations of, or obligations fully guaranteed as to timely

payment of principal and interest by, the United States or any agency

or instrumentality thereof, provided that such obligation is backed by

the full faith and credit of the United States, or (ii) have been rated

(or the obligor thereof has been rated) in one of the three highest

generic rating categories by a Rating Agency. In addition, all

permitted investments must be described in the PSA and permitted by the

relevant Rating Agencies.

12. Protection From the Consequences of Unplanned Events. If MBNA

should desire to merge or consolidate with, or assume the obligations

of, another entity, certain provisions of the PSA ensure that the Trust

assets remain secure. The new entity involved in the merger or

consolidation must be a national banking association, a state banking

corporation or another entity not subject to bankruptcy laws and must

be organized and regulated under the laws of the United States, any

State and/or the District of Columbia. The new entity must expressly

assume the performance of every covenant and obligation of MBNA, and

MBNA must provide the Trustee with an opinion of counsel that such

assumption is legal, valid and binding. Finally, each relevant Rating

Agency must be notified in advance of the change. Similarly, a merger,

consolidation or assumption of the obligations of the Servicer also

requires the same protections of a full assumption of liabilities, an

opinion of counsel and Rating Agency notification.

The Certificateholders of each Series receive protection from

certain unplanned events (called ``Pay Out Events''). If a ``Pay Out

Event'' occurs with respect to a Series, either (i) a rapid

amortization period will commence during which the Certificates of such

Series will be paid down periodically, as provided in the PSA

Supplement, with the principal collections allocable to such Series or

with principal collections allocable to other Series which are shared

within the same Group (as discussed in Paragraph 15 below), or (ii) a

rapid accumulation period will commence during which the Series'

principal collections will be accumulated until a designated payment

date. Pay Out Events include ``Trust Pay Out Events,'' which apply to

all Series, and ``Series Pay Out Events,'' which apply to particular

Series. ``Trust Pay Out Events'' include: (i) certain events of

insolvency, conservatorship or receivership relating to MBNA; (ii) the

Trust becomes an ``investment company'' within the meaning of the

Investment Company Act of 1940, as amended; and (iii) MBNA becomes

unable for any reason to transfer receivables to the Trust as required

by the PSA.

Series Pay Out Events generally include:

(a) Failure of MBNA to make required payments or observe its other

covenants to the extent there is a material adverse effect on the

Certificateholders of that Series;

(b) Breach by MBNA of its representations and warranties to the

extent there is a material adverse effect on the Certificateholders of

that Series;

[[Page 4047]]

(c) A default by the Servicer that would have a material adverse

effect on the Certificateholders of that Series; and

(d) The portfolio yield for any three consecutive monthly periods

is less than the average base rate for such period (an ``Economic Pay

Out Event'').

With respect to item (d) above, MBNA states that an ``Economic Pay

Out Event'' will occur automatically when the portfolio yield for any

series of certificates, averaged over three consecutive months (or such

other period approved by one of the Rating Agencies) is less than the

base rate of the series averaged over the same period. Portfolio yield

for a series of certificates for any period is equal to the sum of the

finance charge collections and other amounts treated as finance charge

collections less total defaults for the series divided by the

outstanding principal balance of the investor certificates of the

series, or such other measure approved by one of the Rating Agencies.

The base rate for a series of certificates for any period is the sum of

(i) amounts payable to certificateholders of the series with respect to

interest, (ii) servicing fees allocable to the series payable to the

servicer, and (iii) any credit enhancement fee allocable to the series

payable to a third party credit enhancer, divided by the outstanding

principal balance of the investor certificates of the series, or such

other measure approved by one of the Rating Agencies.

MBNA states that an ``Economic Pay Out Event'' should not occur

because the amount of receivables included within the Trust has been

designed to create ``excess spread'' between the yield on the

receivables and the certificate rates. Excess spread is the amount by

which the yield on the receivables held by the Trust exceeds, at any

point in time, the amounts necessary to pay certificate interest,

principal (if such payments are due to certificateholders), servicing

fees and expenses, and to satisfy cardholder defaults or charge-offs.

The Rating Agencies examine the expected amount of ``excess spread''

very closely before providing a high credit rating for the

certificates.

A ``Pay Out Event'' accelerates the scheduled payments or

accumulation of principal on the Certificates as specified within each

PSA Supplement, and eliminates shared allocations from such Series,

thus increasing the probability of full payment to senior

Certificateholders, including plan investors. During a rapid

amortization period, which is triggered by a ``Pay Out Event'', all

collections are distributed periodically (instead of being distributed

on the originally scheduled principal payment dates), as provided in

the PSA Supplement, until the senior Certificateholders are paid in

full. During a rapid accumulation period, also triggered by a ``Pay Out

Event'', all principal collections allocated to the senior Certificates

are accumulated and invested by the Trustee until the senior

Certificateholders' interest is backed in full by cash and/or permitted

investments which will be distributed on the originally scheduled

payment date. Payments or accumulations are then directed to the next

level of Certificates below the senior Certificates, until all

Certificates have been paid or accumulated, or the Trust terminates.

Because this accelerated pay out or accumulation schedule is triggered

as a result of poor performance, senior Certificateholders are

protected from a loss which might result from long-term yield

reduction, and are, to a level of certainty necessary to support a

rating of ``AA'' (or better), likely to receive their entire investment

return. The timing or amount of the payments or accumulations is

specifically defined in each PSA Supplement, further protecting

investors from mismanagement. This automatic pay out trigger is

important to each relevant Rating Agency as well, because it strictly

limits the potential losses to investors.

Investors are also protected from the negative consequences of an

event of Seller insolvency. If one or more of a number of indications

of insolvency are present, a ``Pay Out Event'' occurs and a rapid

amortization or a rapid accumulation period is triggered. As discussed

above, this event accelerates payments or accumulation of collections

to maximize the probability that senior Certificateholders will be paid

promptly and in full. In addition, the Trustee also liquidates the

receivables (unless otherwise instructed by Certificateholders

representing undivided interests aggregating more than 50 percent of

each outstanding Series) in order to further accelerate the pay out or

accumulation process. The proceeds of the liquidation are distributed

or accumulated in the tiered manner discussed above in the low-yield

scenario.

13. Limited Discretion. Inherent in all of the restrictions

surrounding creation and management of the Trust, discussed above, is

the limited ability of any party to the transaction to make

discretionary decisions that would have a major impact on the Trust

assets. The PSA addresses every possible important decision and

provides the exact course of action required. Each detail is designed

to ensure maximum investor security, and minimum Trustee and Servicer

discretion.

The Series

14. Once a Trust is established, a Series of Certificates may be

issued pursuant to a PSA Supplement. One Trust typically supports

multiple Series of Certificates over time. Each Series issued under a

Trust is secured, along with other outstanding Series, by the assets of

the issuing Trust. The PSA Supplement builds on the PSA by specifying

the parameters for the Series, such as the number and type of

Certificates, subordination and payment structuring, and other credit

enhancement features.

The life of a Series consists of a revolving period and an

amortization or accumulation period. During both periods, daily

collections are allocated to the Trust accounts in the manner specified

in the PSA Supplement. Interest payments are made periodically to the

Certificateholders as provided in the PSA Supplement, and principal is

paid in a lump sum on the date designated in the PSA Supplement (in the

case of an accumulation period), or periodically pursuant to a schedule

in the PSA Supplement (in the case of an amortization period), for each

class of Certificates. The allocation of collections and the priority

of payments differs slightly during the revolving period and the

amortization or accumulation period.

15. During a Series' revolving period, periodic interest payments

are made to Certificateholders. Principal payments, however, are not

made until the amortization period or at the end of the accumulation

period. Principal collections during the revolving period typically are

shared among the Series that are members of the same Group. If one

Series has principal receipts greater than needed to pay principal for

that period, the excess may be used to pay principal for another Series

in the Group which may have a need for such principal collections. In

such instances, the minimum principal receivable balances required by

the Rating Agencies for all Series must be maintained. The process of

sharing within the Group spreads payment risk over a broader base of

collections and effectively allows concentration of principal

collections supporting a particular Series, resulting in increased

reliability of the payment streams.

Principal collections received during the amortization or

accumulation period are also potentially shared, but are first applied

to the principal funding for the Series to which they relate. The

[[Page 4048]]

amortization or accumulation period ends on the earliest of: (i) when

the investors interests are paid in full; (ii) the Series termination

date provided in the PSA Supplement; or (iii) the commencement of a

rapid amortization or rapid accumulation period. Finance charges and

fees collected during the revolving period and the accumulation or

amortization period are applied to the related Series, and are not

generally shared within the Group.

16. Every Trust will have a variety of credit enhancement features,

as described in the PSA and specified in the applicable PSA Supplement.

In addition to the Group sharing of collections discussed above, other

credit enhancements may include subordination and letters of credit or

other third party arrangements. The type and value of credit

enhancement for a particular Series is designed to compliment the

underlying Trust receivables so that, as a whole, the Trust assets

satisfy the relevant Rating Agency's requirements for the superior

rating desired. In this regard, MBNA represents that the particular

class of certificates for each series to which this proposed exemption

would apply (an Exempt Class) will have credit support provided to the

Exempt Class through either a senior-subordinated series structure or

other form of third party credit support which, at a minimum, will

represent five (5) percent of the outstanding principal balance of

certificates issued for the Exempt Class, so that an investor in the

Exempt Class will not bear the initial risk of loss.

Each Series with an Exempt Class covered by the proposed exemption

will include one or more of the following credit enhancing investor

safeguards (as discussed further below): (i) Subordination; (ii) Third

Party Credit Enhancement; and (iii) Allocation of Collections and

Payments to Certificateholders Allows No Variation.

17. Subordination. Typically, a Series will have some form of

subordination incorporated within the payment schedule detailed in the

PSA Supplement. Such a Series will consist of at least one class of

senior Certificates (typically designated as ``Class A Certificates'')

which will be allocated collections in a more favorable manner than,

and/or prior to, another class (or other classes) of Certificates

(i.e., the next lower level, typically designated as ``Class B

Certificates'') and often will include an uncertificated class

subordinate to the Class B Certificates (typically designated as the

``Collateral Interest'' or ``Class C Interest''). The subordination

process generally will involve both the receipt of collections and the

effect of losses. Thus, such collections will be applied to the senior

(or Class A) Certificates first and then the second tier (or Class B)

Certificates, and will be applied last to the lowest level class of

Certificates (or the Collateral Interest). Conversely, the losses will

first reduce the lowest class of Certificates (or the Collateral

Interest), only affecting the senior (or Class A) Certificates after

all other classes have been reduced to zero. The result of this tiered

structure is that the senior (or Class A) Certificates are protected

from nonpayment by the lower classes. If the certainty of payment

provided by the subordination or other credit support mechanism is

insufficient to allow each relevant Rating Agency to bestow one of its

two highest ratings on the senior Certificates, the senior Certificates

would not be eligible for the relief provided under the proposed

exemption.

18. Third Party Credit Enhancement. A Series may include a form of

credit enhancement provided by an outside party, such as a letter of

credit, a cash collateral account, insurance or a guaranty or other

extension of credit. This arrangement will be documented by a separate

contract outlining the terms of the enhancement. A holder of the

Collateral Interest (described in the preceding paragraph) or other

subordinate interest holder may be a loan provider or an investor in

the Class C Interest, and the PSA Supplement typically requires that a

minimum Collateral Interest (or subordinate interest) be a feature of

each Series. As with all the forms of credit enhancement, the terms and

the amount of the Collateral Interest will be dependent upon an

evaluation of the other Trust assets and the additional support needed

to satisfy each relevant Rating Agency that the Certificates are

sufficiently protected from default.

19. Allocation of Collections and Payments to Certificateholders

Allows No Variation. The PSA Supplement provides instructions to the

Servicer regarding each day's collections and the allocation of those

collections to the various accounts created by the PSA. These

instructions indicate how to make the payments and allocations during

the revolving period, the amortization or accumulation period and the

rapid amortization or rapid accumulation period, if any. The

instructions also cover the treatment of other moneys from loans or

other credit enhancement features, and carefully describe how to

accommodate any excess collections, or how to compensate for any

shortfalls. In following these detailed instructions, the Servicer does

not make any discretionary decisions. The tasks are predetermined and

largely ministerial. These explicit instructions, in concert with the

Servicer reporting and review requirements, are designed to permit each

relevant Rating Agency to conclude that mismanagement risks are

minimal.

The Certificates

20. Each Series may include a class or various classes of

Certificates, some of which may be subordinate to others.

Certificateholders will be entitled to receive periodic payments of

interest based upon a fixed or variable interest rate which is set

forth in the PSA Supplement and applied to the Certificateholder's

unpaid principal balance. Certificateholders will also be entitled to

receive a lump sum principal payment on the scheduled payment date, or

a series of periodic payments beginning on the scheduled payment

commencement date, as specified in the PSA Supplement, to the extent of

the Certificateholder's investor interest.

As noted earlier, only Certificates that are not subordinate to any

other class or classes of Certificates (the ``Senior Certificates'')

would be eligible for exemptive relief under the proposed exemption.

21. MBNA represents that a plan would invest in the Certificates

for the same reasons any investor would invest in a highly secure,

``AA'' (or better) rated investment with attractive yields. The Senior

Certificates represent an investment alternative which offers all the

benefits of a highly rated fixed-income security, such as fixed payment

streams, investment diversity and market rates of return. Permitting

plans to invest in Senior Certificates in reliance on the proposed

exemption would provide plans with additional and safe investment

opportunities.

22. With respect to the credit ratings of the Certificates, MBNA

states that the rating reflects a Rating Agency's opinion as to the

relative amount of protection that investors have against loss of

principal and interest during the life of the security. A high rating

comports with a low risk of loss. In order to achieve this rating, each

relevant Rating Agency requires the credit card securitizations

effected through the Trust to include a variety of safeguards--such as

subordination or other forms of credit enhancement, limitations on the

Seller's discretion, and Rating Agency approval of certain actions

taken with respect to the Trust or a Series of Certificates. Each

relevant Rating Agency typically requires legal opinions regarding the

credit card securitization's structure and performs

[[Page 4049]]

stress tests on the portfolio of selected receivables in order to

evaluate the securitization's anticipated performance within a range of

significant market fluctuations. In addition, each relevant Rating

Agency performs a comprehensive review of all documents related to the

credit card securitization before the formal rating is given. Each

relevant Rating Agency must provide confirmations that additions of

receivables from accounts to a Trust, or withdrawals of existing

accounts from a trust, will not result in a Ratings Effect on the

Certificates.

After its rating is assigned, the Rating Agency monitors the

performance of the credit card receivables included in a Trust in order

to assess whether the performance remains consistent with the rating.

Although variations in portfolio performance are expected during a

Certificate's duration and are factored into a Rating Agency's

analysis, extreme and unexpected performance results may result in a

revision of the rating. MBNA makes its Trust performance information

available to each relevant Rating Agency in a variety of ways, in order

to ensure that the Rating Agency receives all the information it deems

necessary to make its evaluation. For example, MBNA provides

information on portfolio performance broken down by account balance,

credit limit, account age, delinquency period and geographic

distribution.

MBNA states that the receipt of one of the two highest generic

ratings from a Rating Agency represents the result of an exhaustive

analysis of the many risk factors involved with a Series of

Certificates, and provides a comfort level to investors that the

potential reduction in yield as a result of credit losses is

minimal.\11\

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\11\ In this regard, the Department was advised by

representatives from two of the Rating Agencies (RA Reps) of certain

issues concerning the ratings of certificates issued by trusts

holding credit card receivables. The RA Reps discussed, among other

things, the fact that different banks use different underwriting

standards and may offer cardholders different terms on their

accounts. Some banks may be willing to accept cardholders with more

risky credit histories while other banks may not or may offer better

terms to cardholders with superior payment histories. The result may

be that some banks have a higher quality portfolio of receivables

than other banks. The RA Reps stated that if a bank securitizes a

portfolio of receivables which holds a number of riskier accounts,

the Rating Agencies will require more credit enhancement measures

because different assumptions will have to be made about the

performance of the portfolio--e.g. higher charge-off rates will be

assumed and greater ``excess spread'' will be necessary to avoid

losses--in order to achieve an ``AAA'' rating. Thus, for example,

Bank A's certificates may receive an ``AAA'' rating along with

MBNA's certificates even though Bank A may experience more charge-

offs on the credit card accounts and may have different payment

rates on the receivables associated with those accounts.

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23. MBNA represents that the statistics on Certificates backed by

credit card trusts indicate that they are sound investments. In this

regard, MBNA states that public credit card securitization transactions

have been in existence since 1987 and issuers have successfully sold

over $230 billion in Certificates backed by credit card receivables

since then with a zero investor loss rate. MBNA states further that

plans have invested during this time in such Certificates, despite the

prohibited transaction provisions of the Act, in reliance upon the

Department's regulation defining ``plan assets'' and, specifically, the

``100-Holder Exception'' for ``publicly-offered'' securities (see 29

CFR 2510.3-101).\12\

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\12\ The Department's regulation defining ``plan assets''

provides that, if a plan invests in a publicly-offered security, the

plan's assets will not include, solely by reason of such investment,

any of the underlying assets of the entity issuing the security

(i.e. the ``look-through rule'' will not apply and the operations of

the entity will not be subject to scrutiny under the prohibited

transaction provisions of the Act). The regulation defines a

``publicly-offered'' security as one that is freely transferable,

widely-held, and registered under the federal securities laws. A

class of securities is ``widely held'' if it is owned by 100 or more

investors who are independent of the issuer and of one another at

the conclusion of the offering (see 29 CFR 2510.3-101(b)(3)).

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MBNA maintains that the proposed exemption offers a number of

safeguards in the form of concentration restrictions that are designed

to provide additional protections for plan investors which are not

included in the typical 100-holder exception transactions. For example,

for purposes of the relief from the prohibitions of section 406(b) of

the Act \13\ provided under Section I.B. herein (relating to certain

obligors of the Trust who may have discretionary authority for a plan

investing in certificates of the Trust), the proposed exemption limits

such plan's investment in any class of Certificates of any Series to

not more than 25 percent of the principal amount of the Certificates of

that class outstanding at the time of acquisition. In addition,

immediately after the acquisition of the certificates, not more than 25

percent of the assets of such a plan may be invested in certificates

representing an interest in the trust, or trusts containing receivables

sold or serviced by the same entity. Further, the proposed exemption

requires that at least 50 percent of the outstanding principal amount

of each class of Certificates in which plans have invested, and at

least 50 percent of the outstanding aggregate interest of the Trust, in

connection with the initial issuance of the Certificates, must be

acquired by persons independent of the Sponsor, the Servicer and other

related parties. These restrictions are designed to protect plan

investors from the risks inherent in excessive ownership concentration

and related party transactions.

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\13\ Section 406(b) of the Act, in pertinent part, prohibits a

plan fiduciary from dealing with the assets of the plan in his own

interest or for his own account, or from acting on behalf of a party

(or representing a party) whose interests are adverse to the

interests of the plan and its participants and beneficiaries.

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24. MBNA represents that the requested exemption is similar to the

Underwriter Exemptions.\14\ The Underwriter Exemptions are a series of

exemptions granted by the Department to various underwriters or trust

sponsors for transactions relating to the acquisition by plans of

certificates representing interests in trusts holding various types of

assets (e.g. single and multi-family residential or commercial

mortgages, motor vehicle leases and related vehicles, equipment leases

or other secured obligations), as provided in Section III.B. of the

Underwriter Exemptions.

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\14\ As indicated in Footnote 7 above, PTE 97-34 (which granted

an amendment to the Underwriter Exemptions) contains the most

comprehensive listing of these exemptions.

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The Trusts described under the proposed exemption for Certificates

backed by credit card receivables differ from trusts holding secured

obligations in that the Trusts do not contain a fixed pool of assets

and the receivables are not secured by real or tangible personal

property. However, MBNA states that this difference in structure does

not represent a difference in the quality or safety of investments by

plans and other investors in the Certificates. Under the proposed

exemption, MBNA represents that the other forms of credit enhancement

provide at least the same level of security for investors in Trusts

holding credit card receivables as exists for investors in trusts

holding tangible or real property as collateral for the payment

obligations to Certificateholders. In addition, Trusts holding credit

card receivables do not involve the expense and administrative

complexities of foreclosure procedures relating to tangible and real

property.

25. Certificateholders are entitled to receive periodic payments of

interest based upon an interest rate, which may be variable or fixed.

This interest rate is specified or defined in the PSA Supplement for

the particular Series and is applied to the outstanding principal

balance of the Certificates. This outstanding balance (net of any

charge-offs) is known as the investor

[[Page 4050]]

interest for the senior class of Certificates. Certificateholders are

also entitled to receive principal payments on the scheduled payment

dates, or sooner or later under certain limited circumstances, pursuant

to the PSA Supplement to the extent of the Certificateholders' investor

interest. The payments are funded from collections on the related

receivables and allocated to the investor interests as provided in the

PSA Supplement.

MBNA states that a Series or class of Certificates may have the

benefit of an interest rate swap agreement entered into between the

Trustee for a Trust and a bank or other financial institution acting as

a swap counterparty. Pursuant to the swap agreement, the swap

counterparty would pay a certain rate of interest to the Trust in

return for a payment of a rate of interest by the Trust, from

collections allocable to the relevant Series or class of Certificates,

to the swap counterparty. MBNA represents that the credit rating

provided to a particular Series or class of Certificates by the

relevant Rating Agency may or may not be dependent upon the existence

of a swap agreement. Thus, in some instances, the terms and conditions

of the swap agreements will not effect the credit rating of the Series

or class of Certificates to which the swap relates (i.e. a ``Non-

Ratings Dependent Swap'').

MBNA states that whether or not the credit rating of a particular

Series or class of Certificates is dependent upon the terms and

conditions of one or more interest rate swap agreements entered into by

the Trust (i.e. a ``Ratings Dependent Swap'' or a ``Non-Ratings

Dependent Swap''), each particular swap transaction will be an

``Eligible Swap'' as defined in Section III.HH. above.

In this regard, an Eligible Swap will be a swap transaction:

(a) Which is denominated in U.S. Dollars;

(b) Pursuant to which the Trust pays or receives, on or immediately

prior to the respective payment or distribution date for the applicable

senior class of Certificates, a fixed rate of interest, or a floating

rate of interest based on a publicly available index (e.g. LIBOR or the

U.S. Federal Reserve's Cost of Funds Index (COFI)), with the Trust

receiving such payments on at least a quarterly basis and obligated to

make separate payments no more frequently than the counterparty, with

all simultaneous payments being netted;

(c) Which has a notional amount that does not exceed either (i) the

certificate balance of the class of certificates to which the swap

relates, or (ii) the portion of the certificate balance of such class

represented by receivables;

(d) Which is not leveraged (i.e. payments are based on the

applicable notional amount, the day count fractions, the fixed or

floating rates designated in item (b) above, and the difference between

the products thereof, calculated on a one to one ratio and not on a

multiplier of such difference);

(e) Which has a final termination date that is the earlier of the

date on which the Trust terminates or the related class of Certificates

is fully repaid; and

(f) Which does not incorporate any provision which could cause a

unilateral alteration in any provision described in items (a) through

(e) above without the consent of the Trustee.

In addition, any Eligible Swap entered into by the Trust will be

with an ``Eligible Swap Counterparty'', which will be a bank or other

financial institution with a rating at the date of issuance of the

Certificates by the Trust which is in one of the three highest long-

term credit rating categories, or one of the two highest short-term

credit rating categories, utilized by at least one of the Rating

Agencies rating the Certificates (see Section III.II above). However,

if a swap counterparty is relying on its short-term rating to establish

its eligibility, such counterparty must either have a long-term rating

in one of the three highest long-term rating categories or not have a

long-term rating from the applicable Rating Agency.

With respect to a Ratings Dependent Swap, an Eligible Swap

Counterparty will be subject to certain collateralization or other

arrangements satisfactory to the Rating Agencies in the event of a

rating downgrade of such swap counterparty below a level specified by

the Rating Agency, which would be no lower than the level that would

make such counterparty ``eligible'' under this proposed exemption (see

Section III.II. above). If these arrangements are not established

within a specified period, as described in the PSA, there will be an

early payout event causing certificateholders to receive an earlier

than expected payout of principal on their certificates for the series

to which the swap relates. However, with respect to a Non-Ratings

Dependent Swap, the PSA will not specify that there be an early payout

event for the series to which the swap relates if the credit rating of

the swap counterparty falls below the level required for it to be

considered an Eligible Swap Counterparty (as described in Section

III.II. above). In such instances, in order to protect the interests of

the Trust as a swap counterparty, the servicer (as agent for the

trustee of the trust) will be required to either:

(i) Obtain a replacement swap agreement with an Eligible Swap

Counterparty, the terms of which are substantially the same as the

current swap agreement (at which time the earlier swap agreement will

terminate);

(ii) Cause the swap counterparty to post collateral with the

trustee of the trust in an amount equal to all payments owed by the

counterparty if the swap transaction were terminated; or

(iii) Terminate the swap agreement in accordance with its terms.

Under any termination of a swap, the Trust will not be required to

make any termination payments to the swap counterparty (other than a

currently scheduled payment under the swap agreement) except from

``excess finance charge collections'' or other amounts that would

otherwise be payable to the servicer or the seller (i.e. MBNA). In this

regard, ``excess finance charge collections'' will be, as of any day

funds are distributed from the Trust, the amounts by which the finance

charge collections allocated to certificates of a series exceed the

amounts necessary to pay certificate interest, servicing fees and

expenses, to satisfy cardholder defaults or charge-offs, and to

reinstate credit support.

With respect to Non-Ratings Dependent Swaps, each Rating Agency

rating the Certificates must confirm, as of the date of issuance of the

Certificates by the Trust, that entering into the swap transactions

with the Eligible Swap Counterparty will not effect the rating of the

Certificates, even if such counterparty is no longer an ``eligible''

counterparty and the swap is terminated.\15\

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\15\ RA Reps have indicated to the Department that certain

series of certificates issued by a trust holding credit card

receivables will have certificate ratings that are not dependent on

the existence of a swap transaction entered into by the trust.

Therefore, a downgrade in the swap counterparty's credit rating

would not cause a downgrade in the rating established by the Rating

Agency for the certificates. RA Reps state that in such instances

there will be more credit enhancements (e.g. ``excess spread'',

letters of credit, cash collateral accounts) for the series to

protect the certificateholders than there would be in a comparable

series where the trust enters into a so-called Ratings Dependent

Swap. Non-Ratings Dependent Swaps are generally used as a

convenience to enable the trust to pay certain fixed interest rates

on a series of certificates. However, the receipt of such fixed

rates by the trust from the counterparty is not a necessity for the

trust to be able to make its fixed rate payments to the

certificateholders.

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Any class of senior Certificates to which one or more swap

agreements entered into by the trust applies, will be acquired or held

only by Qualified Plan

[[Page 4051]]

Investors (as defined in Section III.JJ. above). Qualified Plan

Investors will be plan investors represented by an appropriate

independent fiduciary that is qualified to analyze and understand the

terms and conditions of any swap transaction relating to the class of

senior Certificates to be purchased and the effect such swap would have

upon the credit rating of the senior Certificates to which the swap

relates.

For purposes of the proposed exemption, such a qualified

independent fiduciary will be either:

(i) A ``qualified professional asset manager'' (i.e. QPAM), as

defined under Part V(a) of PTE 84-14; \16\

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\16\ See Footnote 8 above.

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(ii) an ``in-house asset manager'' (i.e. INHAM), as defined under

Part IV(a) of PTE 96-23; \17\ or

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\17\ See Footnote 9 above.

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(iii) A plan fiduciary with total assets under management of at

least $100 million at the time of the acquisition of such Certificates.

Disclosures Available to Investing Plans

26. In connection with the original issuance of certificates, the

prospectus or private offering memorandum will be furnished to

investing plans. The prospectus or private offering memorandum will

contain information pertinent to a plan's decision to invest in the

Certificates, such as:

(a) Information concerning the Certificates, including payment

terms, certain tax consequences of owning and selling Certificates, the

legal investment status and rating of the Certificates, and any special

considerations with respect to the Certificates;

(b) Information about the underlying receivables, including the

types of receivables, statistical information relating to the

receivables, their payment terms, and the legal aspects of the

receivables;

(c) Information about the servicing of the receivables, including

the identity of the servicer and servicing compensation;

(d) Information about the Sponsor of the Trust;

(e) A full description of the material terms of the Pooling and

Servicing Agreement; and

(f) Information about the scope and nature of the secondary market,

if any, for such Certificates.

Certificateholders will be provided with information concerning the

amount of principal and interest to be paid on Certificates in

connection with each distribution to Certificateholders.

Certificateholders will also be provided with periodic information

statements setting forth material information concerning the status of

the Trust.

In the case of a Trust that offers and sells Certificates in a

registered public offering, the Trustee, the Servicer or the Sponsor

will file such periodic reports as may be required to be filed under

the Securities Exchange Act of 1934 (the '34 Act). Although some Trusts

that offer Certificates in a public offering will file quarterly

reports on Form 10-Q and Annual Reports on Form 10-K, many Trusts (i)

obtain, by application to the SEC, a complete exemption from the

requirement to file quarterly reports on Form 10-Q and a modification

of the disclosure requirements for annual reports on Form 10-K; or (ii)

are not subject to such requirements for one or more Series of

Certificates issued by the Trust. If such an exemption is obtained,

these Trusts normally would continue to have the obligation to file

current reports on Form 8-K to report material developments concerning

the Trust and the Certificates. While the SEC's interpretation of the

periodic reporting requirement is subject to change, periodic reports

concerning a Trust will be filed to the extent required under the '34

Act.

MBNA states that at or about the time distributions are made to

Certificateholders, reports will be delivered to the Trustee as to the

status of the Trust and its assets, including underlying Receivables.

Such reports will typically contain information regarding the Trust's

assets, payments received or collected by the Servicer, the amount of

delinquencies and defaults, the amount of any payments made pursuant to

any credit support or credit enhancement feature, and the amount of

compensation payable to the Servicer. Such reports will also be

delivered or made available to the Rating Agency that currently rates

the Certificates. Such reports will be available to investors and its

availability will be made known to potential investors. In addition,

promptly after each distribution date, Certificateholders will receive

a statement summarizing information regarding the Trust and its assets

and the applicable Series, including underlying receivables.

28. In summary, MBNA represents that the proposed transactions will

meet the statutory criteria of section 408(a) of the Act because, among

other things:

(a) The acquisition of senior Certificates by a plan will be on

terms (including Certificate price) that are at least as favorable to

the plan as such terms would be in an arm's-length transaction with an

unrelated party;

(b) The rights and interests evidenced by the senior Certificates

will not be subordinated to the rights and interests evidenced by other

investor Certificates of the Trust;

(c) Any senior Certificates acquired by a plan will have received a

rating at the time of such acquisition that is in one of the two

highest generic rating categories from any one of the Rating Agencies

or, for certificates with a duration of one year or less, the highest

short-term generic rating category from any one of the Rating Agencies;

(d) The Trustee of the Trust will not be an affiliate of any other

member of the Restricted Group;

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

underwriters in connection with the distribution or placement of

Certificates will represent not more than reasonable compensation for

underwriting or placing the Certificates; the consideration received by

the Sponsor as a consequence of the assignment of receivables (or

interests therein) to the Trust will represent not more than the fair

market value of such receivables (or interests); and the sum of all

payments made to and retained by the Servicer, which are allocable to

the Series or class of certificates purchased by a plan, will represent

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;

(f) Any plan investing in such Certificates will be an ``accredited

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

under the Securities Act of 1933;

(g) The terms of each Series or class of Certificates, and the

conditions under which MBNA may designate additional accounts to, or

remove previously-designated accounts from, the Trust will be described

in the prospectus or private placement memorandum provided to investing

plans;

(h) The Trustee of the Trust will be a substantial financial

institution or trust company experienced in trust activities and would

be familiar with its duties, responsibilities and liabilities as a

fiduciary under the Act;

(i) The PSA will include ``Economic Pay Out Events'' triggered by a

decline in the performance of the receivables in the Trust;

(j) To protect against fraud, chargebacks or other dilution of the

receivables in the Trust, the PSA and the Rating Agencies will require

MBNA, as the Trust's sponsor, to maintain a seller interest of not less

than 2 percent

[[Page 4052]]

of the principal balance of the receivables contained in the Trust;

(k) Each receivable added to a Trust will be an eligible

receivable, based on criteria of the relevant Rating Agency(ies) and as

specified in the PSA;

(l) The PSA will require that any change in the terms of any

cardholder agreements also will be made applicable to the comparable

segment of accounts owned or serviced by MBNA which are part of the

same program or have the same or substantially similar characteristics;

(m) The addition of new receivables or designation of new accounts,

or removal of previously-designated accounts, will meet the terms and

conditions for such additions, designations, or removals as described

in the prospectus or private placement memorandum for such

Certificates, which terms and conditions will have been approved by

each relevant Rating Agency, and will not result in the Certificates

receiving a lower credit rating from the relevant Rating Agency than

the then current rating of the Certificates;

(n) Any swap transaction relating to senior Certificates that are

covered by the proposed exemption must satisfy the several investor-

protective conditions applicable to Eligible Swaps and must be entered

into by the Trust with an Eligible Swap Counterparty; and

(o) Any class of Certificates to which one or more swap agreements

entered into by the Trust applies may be acquired or held by plans in

reliance upon this proposed exemption only if such plans are

represented by ``Qualified Plan Investors.''

FOR FURTHER INFORMATION CONTACT: Mr. E.F. Williams of the Department,

telephone (202) 219-8194. (This is not a toll-free number.)

Citibank (South Dakota), N.A., Citibank (Nevada), N.A., and

Affiliates

Located in North Sioux Falls, South Dakota (Application No. D-10313)

Proposed Exemption

The Department is considering granting an exemption under the

authority of section 408(a) of the Act and section 4975(c)(2) of the

Code and in accordance with the procedures set forth in 29 CFR part

2570, subpart B (55 FR 32836, 32847, August 10, 1990).

Section I--Transactions

A. Effective as of the date this proposed exemption is granted, 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 trust,

the sponsor or an underwriter and an employee benefit plan subject to

the Act or section 4975 of the Code (a 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 Section 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, as defined in Section III.K. below, by any person who

has discretionary authority or renders investment advice with respect

to the assets of the Excluded Plan that are invested in

certificates.\18\

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\18\ 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. Effective as of the date this proposed exemption is granted, 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 trust,

the sponsor or an 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 receivables contained in the trust constituting 0.5

percent or less of the fair market value of the aggregate undivided

interest in the trust allocated to the certificates of a series, 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,

as defined in Section III.L., and at least 50 percent of the aggregate

undivided interest in the trust allocated to the certificates of a

series is acquired by persons independent of the Restricted Group;

(iii) A plan's investment in each class of certificates of a series

does not exceed 25 percent of all of the certificates of that class

outstanding at the time of the acquisition;

(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 is

invested in certificates representing the aggregate undivided interest

in a trust allocated to the certificates of a series and containing

receivables sold or serviced by the same entity; 19 and

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\19\ For purposes of this proposed 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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(v) Immediately after the acquisition of the certificates, not more

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

person has discretionary authority or renders investment advice is

invested in certificates representing an interest in the trust, or

trusts containing receivables sold or serviced by the same entity. For

purposes of paragraphs B.(1)(iv) and B.(1)(v) only, an entity shall not

be considered to service receivables contained in a trust if it is

merely a subservicer of that trust;

(2) The direct or indirect acquisition or disposition of

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

provided that conditions set forth in Section I. B.(1)(i), (iii)

through (v) are met; and

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

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

C. Effective as of the date that the proposed exemption is granted,

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,

including the reassignment to the sponsor of receivables, the removal

from the trust of accounts previously designated to the trust, the

changing of the underlying terms of accounts designated to the trust,

the adding of

[[Page 4053]]

new receivables to the trust, the designation of new accounts to the

trust, the retention of a retained interest by the sponsor in the

receivables, the exercise of the right to cause the commencement of

amortization of the principal amount of the certificates, or the use of

any eligible swap transactions, provided:

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

of a binding pooling and servicing agreement; 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; 20

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\20\ 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. For purposes

of this proposed exemption, all references to ``prospectus'' include

any related supplement thereto, and any documents incorporated by

reference therein, pursuant to which certificates are offered to

investors.

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(3) The addition of new receivables or designation of new accounts,

or the removal of receivables or previously-designated accounts, meets

the terms and conditions for such additions, designations or removals

as are described in the prospectus or private placement memorandum for

such certificates, which terms and conditions have been approved by

Standard & Poor's Ratings Services, Moody's Investor Service, Inc.,

Duff & Phelps Credit Rating Co., or Fitch Investors Service, L.P., or

their successors (collectively, the Rating Agencies), and does not

result in the certificates receiving a lower credit rating from the

Rating Agencies than the then current rating for the Certificates; and

(4) The series of which the certificates are a part will be subject

to an Economic Early Amortization Event, which is set forth in the

pooling and servicing agreement and described in the prospectus or

private placement memorandum associated with the series, the occurrence

of which will cause any Revolving Period, Controlled Amortization

Period, or Accumulation Period applicable to the certificates to end,

and principal collections to be applied to monthly payments of

principal to, or accumulated for the account of, the certificateholders

of such series until the earlier of: (i) payment in full of the

outstanding principal amount of such certificates of such series, or

(ii) the series termination date specified in the prospectus or private

placement memorandum.

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 under section 4975(a) and (b) of the Code, by reason

of section 4975(c)(1)(E) or (F) of the Code, for the receipt of a fee

by the servicer of the trust, in connection with the servicing of the

receivables and the operation 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. below.

D. Effective as of the date that the proposed exemption is granted,

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

transaction 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 as 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.

Section II--General Conditions

A. The relief provided under Section 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 such terms 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 either: (i) in one of the two

highest generic rating categories from any one of the Rating Agencies;

or (ii) for certificates with a duration of one year or less, the

highest short-term generic rating category from any one of the Rating

Agencies; provided that, notwithstanding such ratings, this exemption

(if granted) shall apply to a particular class of certificates only if

such class (an Exempt Class) is part of a series in which credit

support is provided to the Exempt Class through a senior-subordinated

series structure or other form of third-party credit support which, at

a minimum, represents five (5) percent of the outstanding principal

balance of certificates issued for the Exempt Class, so that an

investor in the Exempt Class will not bear the initial risk of loss;

(4) The trustee is not an affiliate of any other 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 consideration received by

the sponsor as a consequence of the assignment of receivables (or

interests therein) to the trust represents not more than the fair

market value of such receivables (or interests); and the sum of all

payments made to and retained by the servicer, that are allocable to

the series of certificates purchased by a plan, 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;

(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 (SEC) under the Securities Act of

1933;

(7) The trustee of the trust is a substantial financial institution

or trust company experienced in trust activities and is familiar with

its duties, responsibilities, and liabilities as a fiduciary under the

Act (i.e. ERISA). The trustee, as the legal owner of the receivables in

the trust, enforces all the rights created in favor of

certificateholders of such trust, including employee benefit plans

subject to the Act;

(8) Prior to the issuance of any new series in the trust,

confirmation must be received from the Rating Agencies that such

issuance will not result in the reduction or withdrawal of the then

current rating or ratings of the certificates held by any plan pursuant

to this exemption;

(9) To protect against fraud, chargebacks or other dilution of

receivables in the trust, the pooling and

[[Page 4054]]

servicing agreement and the Rating Agencies require the sponsor to

maintain a seller interest of not less than the greater of (i) 2

percent of the initial aggregate principal balance of investor

certificates issued by the trust, or (ii) 7 percent of the outstanding

aggregate principal balance of investor certificates issued by the

trust;

(10) Each receivable added to the trust will be an eligible

receivable, based on criteria of the Rating Agency and as specified in

the pooling and servicing agreement. The pooling and servicing

agreement requires that any change in the terms of any cardholder

agreements also be made applicable to the comparable segment of

Accounts owned or serviced by the sponsor which are part of the same

program or have the same or substantially similar characteristics;

(11) The pooling and servicing agreement limits the number of the

sponsor's newly originated accounts to be added to the trust, unless

the Rating Agency otherwise affirmatively consents, to the following:

(i) with respect to any three month period, 15 percent of the number of

existing accounts designated to the trust as of the first day of such

period, and (ii) with respect to any calendar year, 20 percent of the

number of existing accounts designated to the trust as of the first day

of such calendar year;

(12) The pooling and servicing agreement requires the sponsor to

deliver an opinion of counsel semi-annually confirming the validity and

perfection of each transfer of newly originated accounts to the trust;

(13) The pooling and servicing agreement requires the sponsor and

the trustee to receive at specified quarterly intervals during the

year, confirmation from a Rating Agency that the addition of all newly

originated accounts added to the trust (during the three month period

ending in the calendar month prior to such confirmation) will not have

resulted in a Ratings Effect;

(14) If a particular series of certificates held by any plan

involves a Ratings Dependent or Non-Ratings Dependent Swap entered into

by the trust, then each particular swap transaction relating to such

certificates:

(a) Shall be an Eligible Swap;

(b) Shall be with an Eligible Swap Counterparty;

(c) In the case of a Ratings Dependent Swap, shall include as an

early amortization event, as specified in the pooling and servicing

agreement, the withdrawal or reduction by any Rating Agency of the swap

counterparty's credit rating below a level specified by the Rating

Agency where the servicer (as agent for the trustee) has failed, for a

specified period after such rating withdrawal or reduction, to meet its

obligation under the pooling and servicing agreement to:

(i) Obtain a replacement swap agreement with an Eligible Swap

Counterparty which is acceptable to the Rating Agency and the terms of

which are substantially the same as the current swap agreement (at

which time the earlier swap agreement shall terminate); or

(ii) Cause the swap counterparty to establish any collateralization

or other arrangement satisfactory to the Rating Agency such that the

then current rating by the Rating Agency of the particular series of

certificates will not be withdrawn or reduced;

(d) In the case of a Non-Ratings Dependent Swap, shall provide

that, if the credit rating of the swap counterparty is withdrawn or

reduced below the lowest level specified in Section III.II. hereof, the

servicer (as agent for the trustee) shall within a specified period

after such rating withdrawal or reduction:

(i) Obtain a replacement swap agreement with an Eligible Swap

Counterparty, the terms of which are substantially the same as the

current swap agreement (at which time the earlier swap agreement shall

terminate); or

(ii) Cause the swap counterparty to post collateral with the

trustee of the trust in an amount equal to all payments owed by the

counterparty if the swap transaction were terminated; or

(iii) Terminate the swap agreement in accordance with its terms;

and

(e) Shall not require the trust to make any termination payments to

the swap counterparty (other than a currently scheduled payment under

the swap agreement) except from ``Excess Finance Charge Collections''

(as defined below in Section III.LL.) or other amounts that would

otherwise be payable to the servicer or the seller; and

(15) Any Series of certificates which entails one or more swap

agreements entered into by the trust shall be sold only to Qualified

Plan Investors.

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

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 Section I, if the provision in Section II.A.(6) above is

not satisfied for the 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 shall

be required to make a written representation regarding compliance with

the condition set forth in Section II.A.(6).

Section III--Definitions

For purposes of this proposed exemption:

A. Certificate means

(1) A certificate:

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

of a trust;

(b) That entitles the holder to payments denominated as principal

and interest, and/or other payments made in connection with the assets

of such trust, either currently, or after a Revolving Period during

which principal payments on assets in the trust are reinvested in new

assets; or

(2) A certificate denominated as a debt instrument that represents

an interest in a financial asset securitization investment trust

(FASIT) within the meaning of section 860L of the Code, and that is

issued by and is an obligation of a trust;

which is sold upon initial issuance by an underwriter (as defined in

Section III.C.) in an underwriting or private placement.

For purposes of this proposed 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) Receivables (as defined in Section III.T.); or

(b) Participations in a pool of receivables (as defined in Section

III.T.) where such beneficial ownership interests are not subordinated

to any other interest in the same pool of receivables; 21

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\21\ The Department notes that no relief would be available

under the exemption if the participation interests held by the trust

were subordinated to the rights and interests evidenced by other

participation interests in the same pool of receivables.

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[[Page 4055]]

(2) Property which has secured any of the assets described in

Section III.B.(1); 22

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\22\ Citibank states that it is possible for credit card

receivables to be secured by bank account balances or security

interests in merchandise purchased with credit cards. Thus, the

proposed exemption should permit foreclosed property to be an

eligible trust asset.

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(3) Undistributed cash or permitted investments made therewith

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

made to certificate holders, except during a Revolving Period (as

defined herein) when permitted investments are made until such cash can

be reinvested in additional receivables described in paragraph (a) of

this Section III.B.(1);

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

agreement, and rights under any cash collateral accounts, insurance

policies, third-party guarantees, contracts of suretyship and other

credit support arrangements for any certificates, swap transactions, or

under any yield supplement agreements,23 yield maintenance

agreements or similar arrangements; and

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\23\ In a series involving an accumulation period (as defined in

Section III.AA), a yield supplement agreement may be used by the

Trust to make up the difference between (i) the reinvestment yield

on permitted investments, and (ii) the interest rate on the

certificates of that series.

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(5) Rights to receive interchange fees received by the sponsor as

partial compensation for the sponsor's taking credit risk, absorbing

fraud losses and funding receivables for a limited period prior to

initial billing with respect to accounts designated to the trust.

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

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

receivables 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 two highest generic rating

categories by at least one of the Rating Agencies for at least one year

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

exemption; and (iii) certificates evidencing an interest 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 an entity which has received an individual

prohibited transaction exemption from the Department that provides

relief for the operation of asset pool investment trusts that issue

``asset-backed'' pass-through securities to plans, that is similar in

format and structure to this proposed exemption (the Underwriter

Exemptions); 24 any person directly or indirectly, through

one or more intermediaries, controlling, controlled by or under common

control with such entity; and any member of an underwriting syndicate

or selling group of which such firm or affiliated person described

above is a manager or co-manager with respect to the certificates.

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\24\ For a listing of the Underwriter Exemptions, see the

description provided in the text of the operative language of

Prohibited Transaction Exemption (PTE) 97-34 (62 FR 39021, July 21,

1997).

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D. Sponsor means Citibank or an affiliate of Citibank that

organizes a trust by transferring credit card receivables or interests

therein to the trust in exchange for certificates.

E. Master Servicer means Citibank or an entity affiliated with

Citibank that is a party to the pooling and servicing agreement

relating to trust receivables and is fully responsible for servicing,

directly or through subservicers, the receivables in the trust pursuant

to the pooling and servicing agreement.

F. Subservicer means Citibank or an affiliate, or an entity

unaffiliated with Citibank, which, under the supervision of and on

behalf of the master servicer, services receivables contained in the

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

G. Servicer means Citibank or an affiliate which services

receivables contained in the trust, including the master servicer and

any subservicer or their successors pursuant to the pooling and

servicing agreement.

H. Trustee means an entity which is independent of Citibank and its

affiliates and is the trustee of the trust. In the case of certificates

which are denominated as debt instruments, ``trustee'' also means the

trustee of the indenture trust.

I. Insurer means the insurer or guarantor of, provider of other

credit support for, or other contractual counterparty of, a trust.

Notwithstanding the foregoing, a swap counterparty is not an insurer,

and 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 receivable 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) Each swap counterparty;

(7) Any obligor with respect to receivables contained in the trust

constituting more than 0.5 percent of the fair market value of the

aggregate undivided interest in the trust allocated to the certificates

of a series, determined on the date of the initial issuance of such

series of certificates by the trust; or

(8) Any affiliate of a person described in Section III.L.(1)-(7).

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 III.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

[[Page 4056]]

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 section 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 with respect to

the receivables;

(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 or described in all

material respects in the prospectus or private placement memorandum

provided to the plan before it purchases certificates issued by the

trust; and

(4) The amount paid to investors in the trust is not reduced by the

amount of any such fee waived by the servicer.

T. Receivables means secured or unsecured obligations of credit

card holders which have arisen or arise in Accounts designated to a

trust. Such obligations represent amounts charged by cardholders for

merchandise and services and amounts advanced as cash advances, as well

as periodic finance charges, annual membership fees, cash advance fees,

late charges on amounts charged for merchandise and services and over-

limit fees and fees of a similar nature designated by card issuers

(other than a qualified administrative fee as defined in Section III.S.

above).

U. Accounts are revolving credit card accounts serviced by Citibank

or an affiliate, which were originated or purchased by Citibank or an

affiliate, and are designated to a trust such that receivables arising

in such accounts become assets of the trust.

V. Pooling and Servicing Agreement means the agreement or

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

trust and any supplement thereto pertaining to a particular series of

certificates. 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.

W. Early Amortization Event means the events specified in the

pooling and servicing agreement that result (in some instances without

further affirmative action by any party) in an early amortization of

the certificates, including: (1) the failure of the sponsor or the

servicer (i) to make any payment or deposit required under the pooling

and servicing agreement or supplement thereto within five (5) business

days after such payment or deposit was required to be made, or (ii) to

observe or perform any of its other covenants or agreements set forth

in the pooling and servicing agreement or supplement thereto, which

failure has a material adverse effect on investors and continues

unremedied for 60 days; (2) a breach of any representation or warranty

made by the sponsor or the servicer in the pooling and servicing

agreement or supplement thereto that continues to be incorrect in any

material respect for 60 days; (3) the occurrence of certain bankruptcy

events relating to the sponsor or the servicer; (4) the failure by the

sponsor to convey to the trust additional receivables to maintain the

minimum seller interest that is required by the pooling and servicing

agreement and the Rating Agencies; (5) if a class of investor

certificates is in an Accumulation Period, the amount on deposit in the

accumulation account in any month is less than the amount required to

be on deposit therein; (6) the failure to pay in full amounts owing to

investors on the expected maturity date; and (7) the Economic Early

Amortization Event.

X. Series means an issuance of a class or various classes of

certificates by the trust all on the same date pursuant to the same

pooling and servicing agreement and any supplement thereto and

restrictions therein.

Y. Revolving Period means a period of time, as specified in the

pooling and servicing agreement, during which principal collections

allocated to a series are reinvested in newly generated receivables.

Z. Controlled Amortization Period means a period of time specified

in the pooling and servicing agreement during which a portion of the

principal collections allocated to a series will commence to be paid to

the certificateholders of such series in installments.

AA. Accumulation Period means a period of time specified in the

pooling and servicing agreement during which a portion of the principal

collections allocated to a series will be deposited in an account to be

distributed to certificateholders in a lump sum on the expected

maturity date.

BB. CCA or Cash Collateral Account means that certain account,

established by the trustee, that serves as credit enhancement with

respect to the investor certificates and consists of cash deposits and

the proceeds of investments thereon, which investments are permitted

investments, as defined below.

CC. Permitted Investments means investments which: (1) are direct

obligations of, or obligations fully guaranteed as to timely payment of

principal and interest by, the United States or any agency or

instrumentality thereof, provided that such obligation is backed by the

full faith and credit of the United States, or (2) have been rated (or

the obligor has been rated) in one of the three highest generic rating

categories by a Rating Agency; are described in the pooling and

servicing agreement; and are permitted by the Rating Agency.

DD. Group means a group of any number of series offered by the

trust that share finance charge and/or principal collections in the

manner described in the prospectus.

EE. An Economic Early Amortization Event occurs automatically when

finance charge collections averaged over three consecutive months are

less than the total amount payable on the investor certificates,

including (i) amounts payable to, or on behalf of, certificateholders,

with respect to interest, defaults, and chargeoffs, (ii) servicing fees

payable to the servicer, and (iii) any credit enhancement fee payable

to the third-party credit enhancer and allocable to the

certificateholders. With respect to a series to which an Accumulation

Period (as defined above in Section III.AA.) applies, an additional

Economic Early Amortization Event occurs when, for any time during the

Accumulation Period, the yield on the receivables in the Trust is less

than the weighted average of the certificate rates of all series

included in a particular Group within the Trust.

FF. Ratings Effect means the reduction or withdrawal by a Rating

Agency of its then current rating of the investor certificates of any

outstanding series.

GG. Principal Receivables Discount means, with respect to any

account designated by the sponsor, the portion of the related principal

receivables that represents a discount from the face value thereof and

that is treated under the pooling and servicing agreement as finance

charge receivables.

HH. Eligible Swap means an interest rate swap, or (if purchased by

or on behalf of the trust) an interest rate cap, that is part of the

structure of a Series of certificates:

[[Page 4057]]

(1) Which is denominated in U.S. Dollars;

(2) Pursuant to which the trust pays or receives on or immediately

prior to the respective payment or distribution date for the series of

certificates, a fixed rate of interest, or a floating rate of interest

based on a publicly available index (e.g. LIBOR or the U.S. Federal

Reserve's Cost of Funds Index (COFI)), with the trust receiving such

payments on at least a quarterly basis and obligated to make separate

payments no more frequently than the swap counterparty, with all

simultaneous payments being netted;

(3) Which has a notional amount that does not exceed either (i) the

certificate balance of the class of certificates to which the swap

relates, or (ii) the portion of the certificate balance of such class

represented by receivables;

(4) Which is not leveraged, (i.e. payments are based on the

applicable notional amount, the day count fractions, the fixed or

floating rates designated in (2) above, and the difference between the

products thereof, calculated on a one to one ratio and not on a

multiplier of such difference);

(5) Which has a termination date that is the earlier of the date on

which the trust terminates or the related Series of certificates is

fully repaid; and

(6) Which does not incorporate any provision which could cause a

unilateral alteration in a provision described in clauses (1) through

(4) hereof without the consent of the trustee.

II. Eligible Swap Counterparty means a bank or other financial

institution with a rating at the date of issuance of the certificates

by the trust which is in one of the three highest long-term credit

rating categories, or one of the two highest short-term credit rating

categories, utilized by at least one of the Rating Agencies rating the

certificates; provided that, if a swap counterparty is relying on its

short-term rating to establish eligibility hereunder, such counterparty

must either have a long-term rating in one of the three highest long-

term rating categories or not have a long-term rating from the

applicable Rating Agency, and provided further that if the series of

certificates with which the swap is associated has a final maturity

date of more than one year from the date of issuance of the

certificates, and such swap is a Ratings Dependent Swap, the swap

counterparty is required by the terms of the swap to establish any

collateralization or other arrangement satisfactory to the Rating

Agency in the event of a ratings downgrade of the swap counterparty.

JJ. Qualified Plan Investor means a plan investor or group of plan

investors on whose behalf the decision to purchase certificates is made

by an appropriate independent fiduciary that is qualified to analyze

and understand the terms and conditions of any swap transaction used by

the trust and the effect such swap would have upon the credit ratings

of the certificates. For purposes of the proposed exemption, such a

fiduciary is either:

(1) A ``qualified professional asset manager'' (QPAM), as defined

under Part V(a) of PTE 84-14 (49 FR 9494, 9506, March 13, 1984);\25\

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\25\ PTE 84-14 provides a class exemption for transactions

between a party in interest with respect to an employee benefit plan

and an investment fund (including either a single customer or pooled

separate account) in which the plan has an interest, and which is

managed by a QPAM, provided certain conditions are met. QPAMs (e.g.

banks, insurance companies, registered investment advisers with

total client assets under management in excess of $50 million) are

considered to be experienced investment managers for plan investors

that are aware of their fiduciary duties under ERISA.

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(2) An ``in-house asset manager'' (INHAM), as defined under Part

IV(a) of PTE 96-23 (61 FR 15975, 15982, April 10, 1996);\26\ or

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\26\ PTE 96-23 permits various transactions involving employee

benefit plans whose assets are managed by an INHAM, an entity which

is generally a subsidiary of an employer sponsoring the plan which

is a registered investment adviser with management and control of

total assets attributable to plans maintained by the employer and

its affiliates which are in excess of $50 million.

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(3) A plan fiduciary with total assets under management of at least

$100 million at the time of the acquisition of such certificates.

KK. Ratings Dependent Swap means an interest rate swap, or (if

purchased by or on behalf of the trust) an interest rate cap contract,

that is part of the structure of a series of certificates where the

rating assigned by the Rating Agency to any series of certificates held

by any plan is dependent on the terms and conditions of the swap and

the rating of the swap counterparty, and if such certificate rating is

not dependent on the existence of such swap and rating of the swap

counterparty, such swap or cap shall be referred to as a ``Non-Ratings

Dependent Swap''. With respect to a Non-Ratings Dependent Swap, each

Rating Agency rating the certificates must confirm, as of the date of

issuance of the certificates by the trust, that entering into an

Eligible Swap with such counterparty will not affect the rating of the

certificates.

LL. Excess Finance Charge Collections means, as of any day funds

are distributed from the trust, the amount by which the finance charge

collections allocated to certificates of a series exceed the amount

necessary to pay certificate interest, servicing fees and expenses, to

satisfy cardholder defaults or charge-offs, and to reinstate credit

support.

The Department notes that this proposed exemption, if granted, will

be included within the meaning of the term ``Underwriter Exemption'' as

it is defined in Section V(h) of the Grant of the Class Exemption for

Certain Transactions Involving Insurance Company General Accounts,

which was published in the Federal Register on July 12, 1995 (see PTE

95-60, 60 FR 35925).

Summary of Facts and Representations

1. The applicants are Citibank (South Dakota), N.A., Citibank

(Nevada), N.A. (together referred to herein as either ``the Banks'' or

``Citibank''), and their Affiliates (collectively, the Applicants).

Each of the Banks is a national banking association and an indirect

wholly-owned subsidiary of Citicorp.

2. The Banks are, collectively, through their securitization trust

vehicles, the largest issuers of credit card receivable asset-backed

securities (ABS) in the United States. As of May 26, 1996, such

vehicles had issued over $46 billion of credit card receivable ABS. The

Banks created Citibank Credit Card Master Trust I (the Trust), formerly

known as Standard Credit Card Master Trust I, in May 1991 by entering

into a pooling and servicing agreement (a Pooling Agreement) with

Yasuda Bank and Trust Company (U.S.A.), as trustee (the Trustee), for

the purpose of securitizing a portion of each Bank's portfolio of

credit card receivables.

Although the Banks, the Trust and the Pooling Agreement are

described herein, the Applicants request an exemption for any master

trust similar to the Trust (a Similar Master Trust) \27\ established by

either of the Banks or an Affiliate pursuant to a pooling and servicing

agreement or other contractual arrangement similar to the Pooling

[[Page 4058]]

Agreement and satisfying the conditions set forth in this proposed

exemption. In addition, although Citibank (South Dakota) is described

as the owner of Accounts and the servicer and a seller with respect to

the Trust, the Applicants request an exemption for any Similar Master

Trust established by the Banks or one or more Affiliates of the Banks,

regardless of the identity or affiliation of the servicer, for which

Citibank or an Affiliate acts as the Master Servicer.

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\27\ With respect to such Similar Master Trusts, Citibank states

that the Small Business Act of 1996 created a new form of statutory

entity called a ``financial asset securitization investment trust''

(FASIT) which may be used to securitize debt obligations such as

credit card receivables, home equity loans, and automobile loans.

The Applicants state that a FASIT is equitably owned by a single

taxable corporation and issues asset-backed securities that are

treated as debt for Federal Income Tax purposes. Activities of a

FASIT are generally limited to holding a portfolio of qualified

loans. For local law purposes, a FASIT might be a trust, a

corporation, or a designated subset of the assets of a trust or a

corporation. The Applicants represent that some certificates covered

by the proposed exemption may be issued by a FASIT, assuming all of

the conditions of the exemption are met including the requirement

that the certificates be issued by a Trust (as defined herein).

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The Series

3. The Pooling Agreement allows the Trust to issue multiple series

of investor certificates (each, a Series) with different coupons,

interest payment dates, maturities and other terms. The assets of the

Trust consist primarily of receivables (the Receivables) from a

portfolio of revolving credit card accounts (the Accounts) and

collections thereon. The Banks are required to provide sufficient

Receivables to allow the reinvestment of principal collections during

the Revolving Period (as discussed below) for a Series. The Banks

retain an ownership interest in the Trust in the form of a seller

certificate. By maintaining this interest, the Banks share with the

certificateholders of each Series a pro rata mutual interest in the

overall credit quality of the Receivables in the Trust.

Investor certificates of a Series may be sold by the Banks directly

to purchasers, through underwriting syndicates led by one or more

managing underwriters, through an underwriter acting alone or through

agents designated from time to time. As of June 25, 1997, investors in

the Trust owned approximately $24.5 billion in certificates issued by

the Trust, comprising 33 outstanding Series. The Banks expect to issue

additional Series evidencing interests in the Trust from time to time.

The Banks may offer additional Series with terms similar to or

significantly different from an outstanding Series. Before issuance of

any new Series, the Banks must receive confirmation from Standard &

Poor's Ratings Group, Moody's Investors Service, Inc., Duff & Phelps

Credit Rating Co., or Fitch Investors Service, L.P. (a Rating Agency)

that the ratings on any outstanding Series will not be reduced or

withdrawn (a Ratings Effect) as a result of such new issuance. The

particular terms of each Series are determined at the time of sale and

are contained in a supplement

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