Grant of Individual Exemptions; First Security Corporation (FSC), et al.

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 99-23; Exemption Application No. D-

10021, et al.]

Grant of Individual Exemptions; First Security Corporation (FSC),

et al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of Individual Exemptions.

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SUMMARY: This document contains exemptions issued by the Department of

Labor (the Department) from certain of the prohibited transaction

restrictions of the Employee Retirement Income Security Act of 1974

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

Notices were published in the Federal Register of the pendency

before the Department of proposals to grant such exemptions. The

notices set forth a summary of facts and representations contained in

each application for exemption and referred interested persons to the

respective applications for a complete statement of the facts and

representations. The applications have been available for public

inspection at the Department in Washington, DC The notices also invited

interested persons to submit comments on the requested exemptions to

the Department. In addition the notices stated that any interested

person might submit a written request that a public hearing be held

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

complied with the requirements of the notification to interested

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

otherwise stated, were received by the Department.

The notices of proposed exemption were issued and the exemptions

are being granted solely by the Department because, effective December

31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR

47713, October 17, 1978) transferred the authority of the Secretary of

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

of Labor.

Statutory Findings

In accordance with section 408(a) of the Act and/or section

4975(c)(2) of the Code and the procedures set forth in 29 CFR part

2570, subpart B (55 FR 32836, 32847, August 10, 1990) and based upon

the entire record, the Department makes the following findings:

(a) The exemptions are administratively feasible;

(b) They are in the interests of the plans and their participants

and beneficiaries; and

(c) They are protective of the rights of the participants and

beneficiaries of the plans.

First Security Corporation (FSC), Located in Salt Lake City, UT

[Prohibited Transaction Exemption 99-23; Exemption Application No. D-

10021]

Exemption

Section I. Exemption for the IN-KIND Transfer of Assets

The restrictions of section 406(a) and section 406(b) of the Act

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

Code by reason of

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section 4975(c)(1)(A) through (F) shall not apply to the in-kind

transfers, that occurred on December 28, 1994, to any open-end

investment company (the Fund or Funds) registered under the Investment

Company Act of 1940 (the Investment Company Act) to which FSC or any of

its affiliates (collectively, First Security) serves as investment

adviser and/or may provide other services, of the assets of various

employee benefit plans (the Plan or Plans) that are held in certain

collective investment funds (the CIF or CIFs) maintained by First

Security, in exchange for shares of such Funds, provided that the

following conditions were met:

(a) A fiduciary (the Second Fiduciary) which was acting on behalf

of each affected Plan and which was independent of and unrelated to

First Security, as defined in paragraph (g) of Section II below,

received advance written notice of the in-kind transfer of assets of

the CIFs in exchange for shares of the Funds, a full and detailed

written disclosure of information concerning any such Fund including,

but not limited to--

(1) A current prospectus for each of the Funds in which such Plan

considered investing;

(2) A statement describing the fees for investment management,

investment advisory, or other similar services, any fees for secondary

services (Secondary Services), as defined in paragraph (h) of Section

II below, and all other fees charged to or paid by the Plan and by the

Funds to First Security, including the nature and extent of any

differential between the rates of such fees;

(3) The reasons why First Security considered such investment to be

appropriate for the Plan;

(4) A statement describing whether there were any limitations

applicable to First Security with respect to which assets of a Plan may

be invested in the Funds, and, if so, the nature of such limitations;

and

(5) When available, upon request of the Second Fiduciary, a copy of

the proposed exemption and/or a copy of the final exemption.

(b) On the basis of the information described above in paragraph

(a) of this Section I, the Second Fiduciary authorized in writing--

(1) The investment of assets of the Plans in shares of the Fund, in

connection with the transactions set forth in Section I;

(2) The investment portfolios of the Funds in which the assets of

the Plans were invested; and

(3) The fees received by First Security in connection with its

services to the Funds. Such authorization by the Second Fiduciary was

consistent with the responsibilities, obligations and duties imposed on

fiduciaries by Part 4 of Title I of the Act.

(c) All transferred assets were securities for which market

quotations were readily available, or cash.

(d) No sales commissions or redemption fees, including fees that

are payable pursuant to Rule 12b-1 of the Investment Company Act, were

paid by the Plans in connection with the in-kind transfers of the

assets of the CIFs in exchange for shares of the Funds.

(e) Neither First Security nor its affiliates, including any

officers or directors, would be permitted to purchase from or sell to

any of the Plans shares of any of the Funds.

(f) The Plans were not sponsored or maintained by First Security.

(g) The transferred assets in exchange for shares of such Funds

constituted the Plan's pro rata portion of all assets that were held by

the CIFs prior to the transfer. A Plan not electing to invest in the

Fund received a cash payment representing a pro rata portion of the

assets of the terminating CIF before the final liquidation took place.

(h) The CIFs received shares of the Funds that had a total net

asset value equal to the value of the transferred assets of the CIFs

exchanged for such shares on the date of transfer.

(i) The current market value of the assets of the CIFs transferred

in-kind in exchange for shares of the Funds was determined in a single

valuation performed in the same manner and at the close of business on

the same day, using independent sources in accordance with the

procedures set forth in Rule 17a-7(b) (Rule 17a-7) under the Investment

Company Act, as amended from time to time or any successor rule,

regulation, or similar pronouncement and the procedures established

pursuant to Rule 17a-7 for the valuation of such assets. Such

procedures required that all securities for which a current market

price could not be obtained by reference to the last sale price for

transactions reported on a recognized securities exchange or NASDAQ

were to be valued based on an average of the highest current

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

of business on the last business day preceding the CIF transfers

determined on the basis of reasonable inquiry from at least three

sources that are broker-dealers or pricing services independent of

First Security.

(j) Not later than 30 days after completion of each in-kind

transfer of assets of the CIFs in exchange for shares of the Funds,

First Security sent by regular mail to the Second Fiduciary, which was

acting on behalf of each affected Plan and which was independent of and

unrelated to First Security, as defined in paragraph (g) of Section II

below, a written confirmation that contained the following information:

(1) The identity of each of the assets that was valued for purposes

of the transaction in accordance with Rule 17a-7(b)(4) under the

Investment Company Act;

(2) The current market price, as of the date of the transfer, of

each such security involved in the purchase of Fund shares; and

(3) The identity of each pricing service or market maker consulted

in determining the value of such assets.

(k) Not later than 90 days after completion of each in-kind

transfer of assets of the CIFs in exchange for shares of the Funds,

First Security sent by regular mail to the Second Fiduciary, which was

acting on behalf of each affected Plan and which was independent of and

unrelated to First Security, as defined in paragraph (g) of Section II

below, a written confirmation that contained the following information:

(1) The number of CIF units held by each affected Plan immediately

before the conversion (and the related per unit value and the aggregate

dollar value of the units transferred); and

(2) The number of shares in the Funds that were held by each

affected Plan following the conversion (and the related per share net

asset value and the aggregate dollar value of the shares received).

(l) As to each individual Plan, the combined total of all fees

received by First Security for the provision of services to the Plans,

and in connection with the provision of services to any of the Funds in

which the Plans hold shares acquired in connection with an in-kind

transfer transaction, was not in excess of ``reasonable compensation''

within the meaning of section 408(b)(2) of the Act.

(m) On an ongoing basis, First Security has provided and will

continue to provide a Plan investing in a Fund--

(1) At least annually with a copy of an updated prospectus of such

Fund; and

(2) At least annually with a report or statement (which may take

the form of the most recent financial report, the current statement of

additional information, or some other written statement) which contains

a description of all fees paid by the Fund to First Security, upon the

request of such Second Fiduciary.

[[Page 34295]]

(n) All dealings between the Plans and any of the Funds have been

and will remain on a basis no less favorable to such Plans than

dealings between the Funds and other shareholders holding the same

class of shares as the Plans.

(o) First Security has maintained and will maintain for a period of

6 years the records necessary to enable the persons, as described below

in paragraph (p)(1) of this Section I, to determine whether the

conditions of this exemption have been met, except that:

(1) A prohibited transaction will not be considered to have

occurred if, due to circumstances beyond the control of First Security,

the records are lost or destroyed prior to the end of the 6 year

period; and

(2) No party in interest, other than First Security, shall be

subject to the civil penalty that may be assessed under section 502(i)

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

Code, if the records are not maintained, or are not available for

examination as required below by paragraph (p) of this Section I.

(p)(1) Except as provided in paragraph (p)(2) of this Section I and

notwithstanding any provisions of subsection (a)(2) and (b) of section

504 of the Act, the records referred to in paragraph (o) of Section II

above are unconditionally available at their customary location for

examination during normal business hours by--

(A) Any duly authorized employee or representative of the

Department, the Internal Revenue Service or the Securities and Exchange

Commission;

(B) Any fiduciary of each of the Plans who has authority to acquire

or dispose of shares of any of the Funds owned by such a Plan, or any

duly authorized employee or representative of such fiduciary; and

(C) Any participant or beneficiary of the Plans or duly authorized

employee or representative of such participant or beneficiary.

(2) None of the persons described in paragraph (p)(1)(B) and

(p)(1)(C) of this Section I shall be authorized to examine trade

secrets of First Security, or commercial or financial information which

is privileged or confidential.

Section II. Definitions

For purposes of this exemption,

(a) The term ``First Security'' means FSC and any affiliate of FSC,

as defined in paragraph (b) of this Section II.

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

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

intermediaries, controlling, controlled by, or under common control

with the person;

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

such person; and

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

officer, director, partner, or employee.

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

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

individual.

(d) The term ``Fund,'' ``Funds'' or ``Affiliated Funds'' means any

open-end management investment company or companies registered under

the Investment Company Act for which First Security serves as

investment adviser and/or provides any Secondary Service as approved by

such Funds. As noted in the Preamble, the Funds are also referred to as

the ``Affiliated Funds'' to distinguish them from certain third party

funds for which First Security and its affiliates provide

subadministrative services and which are not involved in conversion

transactions that are described herein.

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

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

securities, determined by a method as set forth in a Fund's prospectus

and statement of additional information, and other assets belonging to

each of the portfolios in such Fund, less the liabilities charged to

each portfolio, by the number of outstanding shares.

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

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

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

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

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

is independent of and unrelated to First Security. For purposes of this

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

and unrelated to First Security if:

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

controlled by, or is under common control with First Security;

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

employee, or relative of such Second Fiduciary is an officer, director,

partner, or employee of First Security (or is a relative of such

persons); or

(3) Such Second Fiduciary directly or indirectly receives any

compensation or other consideration for his or her own personal account

in connection with the transactions described in this proposed

exemption.

If an officer, director, partner, or employee of First Security (or

a relative of such persons), is a director of such Second Fiduciary,

and if he or she abstains from participation in (A) the choice of the

Plan's investment manager/adviser or (B) the approval of any purchase

or sale by the Plan of shares of the Funds, in connection with the

transactions described in Section I, then paragraph (g)(2) of this

Section II, shall not apply.

(h) The term ``Secondary Service'' means a service, other than an

investment management, investment advisory, or similar service, which

is provided by First Security to the Funds, including but not limited

to custodial, accounting, brokerage, administrative, or any other

service.

EFFECTIVE DATE: This exemption is effective as of December 28, 1994.

For a more complete statement of the facts and representations

supporting this exemption, refer to the notice of proposed exemption

published on April 22, 1999 at 64 FR 19808.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department,

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

San Diego Electrical Pension Trust (the Pension Plan); and San

Diego Joint Apprenticeship and Training Trust (the Training Plan;

collectively, the Plans), Located in San Diego, California

[Prohibited Transaction Exemption 99-24; Exemption Application Nos. D-

10581 and L-10582]

Exemption

The restrictions of section 406(b)(2) of the Act shall not apply to

the proposed purchase by the Training Plan from the Pension Plan of a

minority interest (the Minority Interest) in certain improved real

property jointly owned by the Plans, provided that the following

conditions are satisfied:

(1) The purchase is a one-time transaction for cash;

(2) The terms and conditions of the transaction are not less

favorable to either Plan than those each could obtain in a comparable

arm's length transaction with an unrelated party;

(3) The Training Plan pays no more, and the Pension Plan receives

no less, than the fair market value of the Minority Interest, as of the

date of the transaction, as determined by a qualified, independent

appraiser;

(4) Neither the Pension Plan nor the Training Plan pays any

commissions or fees in connection with the transaction;

(5) The trustees of the Plans (other than their common trustees),

the Pension Plan's investment manager, and

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a qualified, independent fiduciary that has been retained to represent

the Training Plan, have reviewed the terms and conditions of the

transaction and determined that such terms and conditions are in the

best interests of, and appropriate for, their respective Plans; and

(6) The independent fiduciary for the Training Plan monitors the

proposed transaction and takes whatever actions necessary to safeguard

the interests of the Training Plan.

For a more complete statement of the facts and representations

supporting the Department's decision to grant this exemption, refer to

the notice of proposed exemption published on April 22, 1999 at 64 FR

19813.

Written Comments

The Department received no written comments or requests for a

public hearing with respect to the notice of proposed exemption (the

Notice). However, in a letter dated April 19, 1999, the Department was

informed that Washington Capital Management (WCM), an investment

management firm located in San Diego, California, has purchased the

business of AMRESCO Advisors, Inc. (AMRESCO) and succceeded to all of

AMRESCO's rights and obligations under its client contracts. Like

AMRESCO, WCM is a registered investment adviser and ``qualified

professional asset manager'', as defined in Prohibited Transaction

Class Exemption 84-14 (49 FR 9494, March 13, 1984). Therefore, all

duties and responsibilities of AMRESCO as the independent fiduciary for

the Training Plan, which are described in the Summary of Facts and

Representations in the Notice, shall now apply to WCM.

Accordingly, based upon the information contained in the entire

record, the Department has determined to grant the proposed exemption.

FOR FURTHER INFORMATION CONTACT: Ms. Karin Weng of the Department,

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

Daniel N. Cunningham IRA (the Cunningham IRA); Sidney B. Cox IRA

(the Cox IRA) (collectively, the IRAs), Located in Fresno,

California

[Prohibited Transaction Exemption 99-25; Exemption Application Numbers:

D-10723 and D-10724]

Exemption

The sanctions resulting from the application of section 4975 of the

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

not apply to the purchase (the Purchase) by each IRA 1 of

certain shares of Clovis Community Bank common stock (the Stock) from

Mr. Daniel N. Cunningham and Mr. Sidney B. Cox (the Account Holders),

disqualified persons with respect to the IRAs, provided that the

following conditions are met:

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\1\ Because each IRA has only one participant, there is no

jurisdiction under 29 CFR 2510.3-3(b). However, there is

jurisdiction under Title II of the Act pursuant to section 4975 of

the Code.

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(a) The Purchase of the Stock by each IRA is a one-time transaction

for cash;

(b) Each IRA purchases the Stock for a price not exceeding the fair

market value of the Stock at the time of each Purchase;

(c) The terms and conditions of each Purchase are at least as

favorable as those available in an arm's length transaction with an

unrelated third party;

(d) Each IRA does not pay any commissions or other expenses in

connection with each Purchase;

(e) The IRA assets invested in the Stock do not exceed 25% of the

total assets of each IRA at the time of the transaction; and

(f) Each IRA, at all times, will hold less than one percent (1%) of

the outstanding shares of the Stock.

For a more complete statement of the facts and representations

supporting the Department's decision to grant this exemption, please

refer to the proposed exemption published on Thursday, May 13, 1999 at

64 FR 25924 (the Prior Notice).

Correction: The Prior Notice was published with an effective date.

Because the applicants represent that each Purchase will take place

only after the grant of this exemption, the effective date has been

removed.

FOR FURTHER INFORMATION CONTACT: Mr. James Scott Frazier, telephone

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

General Information

The attention of interested persons is directed to the following:

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

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

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

person from certain other provisions to which the exemptions does not

apply and the general fiduciary responsibility provisions of section

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

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

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

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

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

for the exclusive benefit of the employees of the employer maintaining

the plan and their beneficiaries;

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

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

administrative exemptions and transactional rules. Furthermore, the

fact that a transaction is subject to an administrative or statutory

exemption is not dispositive of whether the transaction is in fact a

prohibited transaction; and

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

condition that the material facts and representations contained in each

application are true and complete and accurately describe all material

terms of the transaction which is the subject of the exemption. In the

case of continuing exemption transactions, if any of the material facts

or representations described in the application change after the

exemption is granted, the exemption will cease to apply as of the date

of such change. In the event of any such change, application for a new

exemption may be made to the Department.

Signed at Washington, D.C., this 22nd day of June, 1999.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, Department of Labor.

[FR Doc. 99-16214 Filed 6-24-99; 8:45 pm]

BILLING CODE 4510-29-P