Proposed Exemptions; Pacific Life Corporation (Pacific Life)

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Application No. D-10257, et al.]

Proposed Exemptions; Pacific Life Corporation (Pacific Life)

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of proposed exemptions.

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SUMMARY: This document contains notices of pendency before the

Department of Labor (the Department) of proposed exemptions from

certain of the prohibited transaction restrictions of the Employee

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

Revenue Code of 1986 (the Code).

Written Comments and Hearing Requests

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

[[Page 39533]]

with the Department for a complete statement of the facts and

representations.

Pacific Life Corporation (Pacific Life), Located in Newport Beach,

California

[Exemption Application No. D-10257]

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) If the exemption is granted, the restrictions of sections

406(a), 406(b)(1) and (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)(A)

through (E) of the Code, shall not apply:

(1) For the period from January 22, 1993 until August 12, 1998, to

the sale by Pacific Life of an ``actively-managed synthetic''

guaranteed investment contract (Actively-Managed Synthetic GIC) to an

employee benefit plan for which Pacific Life was a party in interest

with respect to such plan (Plan) in instances where Pacific Life or an

Affiliate manages the Plan's assets relating to the Synthetic GIC (an

Affiliated-Manager GIC); and

(2) As of January 22, 1993, to the purchase or retention of the

Affiliated-Manager GICs, described in section (a) (1) above, by the

Plans and the payments made by Pacific Life to the Plans pursuant to

the terms and conditions of the Affiliated-Manager GICs, provided that

the general conditions set forth in section II, the specific conditions

set forth in section III, the retroactive conditions set forth in

section IV, and the recordkeeping requirements set forth in section V

below are met.

(b) If the exemption is granted, the restrictions of sections

406(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:

(1) As of January 22, 1993, to the sale by Pacific Life of an

Actively-Managed Synthetic GIC to a Plan in instances where the Plan's

assets relating to the Actively-Managed Synthetic GIC are managed by an

investment manager who is unaffiliated with Pacific Life and its

Affiliates (an Unaffiliated-Manager GIC); and

(2) As of January 22, 1993, to the purchase or retention of the

Unaffiliated-Manager GICs, described in section (b) (1) above, by the

Plans and the payments made by Pacific Life to the Plans pursuant to

the terms and conditions of the Unaffiliated-Manager GICs, provided

that the general conditions set forth in section II and the

recordkeeping requirements set forth in section V below are met.

Section II--General Conditions

(a) Prior to the sale of an Actively-Managed Synthetic GIC, an

independent fiduciary of each Plan receives a full and detailed written

disclosure of all material features of the Actively-Managed Synthetic

GIC, including all applicable fees and charges;

(b) Following receipt of such disclosure, the Plan's independent

fiduciary approves in writing the purchase of the Actively-Managed

Synthetic GIC on behalf of the Plan;

(c) All fees and charges imposed under any such Actively-Managed

Synthetic GIC are not in excess of reasonable compensation within the

meaning of section 408(b)(2) of the Act;

(d) Each Actively-Managed Synthetic GIC will specifically provide

an objective means of determining the fair market value of the

securities owned by the Plan pursuant to the Actively-Managed Synthetic

GIC;

(e) Each Actively-Managed Synthetic GIC will specifically provide

an objective formula for determining the interest rates to be credited

periodically under the Actively-Managed Synthetic GIC;

(f) Pacific Life does not maintain custody of the assets which are

the subject of the Actively-Managed Synthetic GIC or commingle those

assets with any other funds under its management;

(g) The assets subject to the Actively-Managed Synthetic GIC are

invested only in high quality fixed income investments specified in the

investment guidelines agreed to, or provided by, the independent

fiduciary;

(h) The Plan may, at any time, terminate the Actively-Managed

Synthetic GIC;

(i) The fee charged under the arrangement is negotiated between

Pacific Life and a Plan fiduciary independent of Pacific Life;

(j) At all times during the term of each Actively-Managed Synthetic

GIC, a Plan may elect to receive such lump sum amount equal to the

Contract Value Record and shall be entitled to receive a lump sum

payment no more than 3 (three) years after making an election which

will establish a maturity date;

(k) The Plan may establish a maturity date by notifying Pacific

Life in writing of an intent to establish a maturity date. Each

Actively-Managed Synthetic GIC will mature within three (3) years after

the Plan notifies Pacific Life of its intent to establish a maturity

date; and

(l) Actively-Managed Synthetic GICs are sold only to Plans which

have at least $25 million in assets.

Section III--Specific Conditions

(a) With respect to any Affiliated-Manager GIC described in section

I (a), Pacific Life will notify a Plan's independent fiduciary, in

writing no later than 30 days prior to the date on which the Credited

Rate is to be reset, advising such fiduciary that the Plan may replace

Pacific Life or its affiliate as investment manager,1 at no

expense to the Plan, when the Credited Rate with respect to any

Affiliated-Manager GIC described in section I(a) is expected to be less

than three (3) percent at the next reset of the Credited Rate.

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\1\ Although Pacific Life must approve the new investment

manager selected by the Plan, Pacific Life represents that it will

not unreasonably withhold such approval.

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Section IV--Retroactive Conditions

(a) At no time between January 22, 1993 and August 12, 1998, was

the Credited Rate with respect to any Affiliated-Manager GIC described

in section I (a) less than 3% (three percent) per annum; and

(b) At no time between January 22, 1993 and August 12, 1998, did a

Plan elect to receive an amount equal to the Contract Value Record

pursuant to an Affiliated-Manager GIC described in section I (a).

Section V--Recordkeeping

(a) The Applicant maintains or causes to be maintained for a period

of six years from the date of the transaction such records as are

necessary to enable the persons described in paragraph (b) of this

section V of this proposed exemption, to determine whether the

conditions of this exemption have been met, except that: (1) A

prohibited transaction will not be deemed to have occurred if, due to

circumstances beyond the control of the Applicant or its affiliates,

such records are lost or destroyed prior to the end of such six year

period; and (2) no party in interest, other than the Applicant or an

affiliate, shall be subject to the civil penalty that may be accessed

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

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

not available for examination as required by paragraph (b) below.

(b)(1) Notwithstanding anything to the contrary in subsections

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

[[Page 39534]]

referred to in paragraph (a) of this section V are unconditionally

available at their customary location for examination during normal

business hours by:

(i) Any duly authorized employee or representative of the

Department of Labor or the Internal Revenue Service; (ii) any fiduciary

of the plan or any duly authorized employee or representative of such

fiduciary; (iii) any participant or beneficiary of the plan or duly

authorized representative of such participant or beneficiary; (iv) any

employer of plan participants and beneficiaries; and (v) any employee

organization any of whose members are covered by such plan; and

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

(v) shall be authorized to examine trade secrets of the applicant, or

commercial or financial information which is privileged or

confidential.

Section VI--Definitions

For purposes of this proposed exemption:

(A) ``Actively-Managed Synthetic GIC'' means: a synthetic

guaranteed investment contact, which under certain circumstances

provides a guarantee that a pool of underlying plan assets which may be

managed by Pacific Life, an affiliate of Pacific Life, or an unrelated

investment manager, will perform at a specified rate of return.

(B) ``Affiliated-Manager GIC'' means: an Actively-Managed Synthetic

GIC under which Pacific Life guarantees the performance of an related

investment manager.

(C) ``Unaffiliated-Manager GIC'' means: an Actively-Managed

Synthetic GIC under which Pacific Life guarantees the performance of an

unrelated investment manager.

(D) ``Contract Value Record'' means: a bookkeeping account

maintained by Pacific Life, pursuant to each Actively-Managed Synthetic

GIC. Initially, the Contract Value Record will be credited with the

value of the Investment Assets (defined in (F) below), and subsequently

with a credited rate of interest (Credited Rate, defined in (E) below),

which shall be reset periodically as agreed to at the inception of the

Actively-Managed Synthetic GIC.

(E) ``Credited Rate'' means: the interest rate credited to the

Contract Value Record. The Credited Rate is reset periodically, in

accordance with an objective formula established under the terms of the

Actively-Managed Synthetic GIC.

(F) ``Investment Assets'' means: the underlying portfolio of

investment assets, title to which remains with the Plan.

(G) ``Managed Portfolio'' means: the total of all Investment Assets

which comprise the portfolio which is managed by either an Affiliated-

Manager or an Unaffiliated-Manager.

(H) ``Withdrawals'' means: a participant initiated payment or

transfer to other investment options available under the Plan.

Effective Date: This proposed exemption, if granted, will be

effective for the period from January 22, 1993, until August 12, 1998,

for the transactions described in section I (a)(1). Section I (a)(2) of

the proposed exemption, if granted, will be effective for the retention

by the Plan of the Affiliated-Manager GICs until the maturity date of

such GICs. Lastly, the proposal will be effective as of January 22,

1993, for the transactions described in section I (b) (including the

continuing retention of any Unaffiliated-Manager GICs).

Summary of Facts and Representations

1. Pacific Life is a life insurance company incorporated under the

laws of the State of California.2 Pacific Life is also

registered as an investment adviser under the Investment Advisers Act

of 1940. Pacific Life is currently rated as follows: AM Best A+;

Standard & Poor's AA+; Duff & Phelps AA+; and Moody's Aa3. As of

December 31, 1998, Pacific Life had statutory assets of approximately

$37.8 billion and net policy reserves of approximately $18 billion. A

significant portion of Pacific Life's business consists of writing

insurance and annuity contracts, guaranteed investments contracts, and

funding agreements for numerous plans subject to the Act.

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\2\ Pacific Life was formerly known as Pacific Mutual Life

Insurance (Pacific Mutual) and sold some Actively Managed Synthetic

GICs under the name of Pacific Mutual. Pacific Life represents that

Pacific Mutual was converted from a mutual company to a stock

company and became a majority owned subsidiary of Pacific Mutual

Life Holding Company, a mutual company owned by the former

policyholders of Pacific Mutual. After the conversion, Pacific

Mutual was renamed Pacific Life.

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2. Pacific Life has requested an exemption with respect to two

different Actively-Managed Synthetic GIC products, each of which is a

form of traditional guaranteed investment contract (GIC). The first

form of Actively-Managed Synthetic GIC, for which relief is proposed in

section I(a) of this notice of proposed exemption, is an arrangement

under which Pacific Life, or an affiliate, acts as the investment

manager, and Pacific Life guarantees the performance of the assets

which it, or an affiliate, manages (Affiliated-Manager GIC). In some

cases, Pacific Life will appoint an independent sub-advisor to carry

out the investment management functions but Pacific Life will remain

fully responsible as investment manager of the assets comprising the

Actively-Managed Synthetic GIC. The second form of Actively-Managed

Synthetic GIC, for which relief is proposed in section I(b) of this

proposed exemption, is an arrangement under which Pacific Life

guarantees the performance of an unrelated investment manager

(Unaffiliated-Manager GIC). Pacific Life represents that it has not

sold Affiliated-Manager GICs to Plans after August 12, 1998. Since

January 23, 1993, Pacific Life sold both forms of the Actively-Managed

Synthetic GICs to defined contribution plans. Pacific Life represents

that it will continue selling the Unaffiliated-Manager GIC to defined

contribution plans.

3. Pacific Life's duties and obligations with respect to each

Actively-Managed Synthetic GIC are governed by terms of an insurance

contract or investment management agreement (the Contract) between the

Plan and Pacific Life. The principal difference between the two forms

of the Actively-Managed Synthetic GIC products is the nature of the

Contract. Under the Unaffiliated-Manager GIC, where Pacific Life is

guaranteeing the performance of an unrelated investment manager,

Pacific Life's obligations and the Plan's rights will be embodied in a

single contract of insurance. Under the Affiliated-Manager GIC, where

Pacific Life, or a related or unrelated sub-adviser appointed by

Pacific Life, is responsible for the investment management of the

Managed Portfolio, the rights and obligations of the parties will

derive primarily from the investment management agreement between

Pacific Life and the Plan. Secondarily, the rights and obligations of

the parties pursuant to the Affiliated-Manager GIC will be established

in a contract of insurance guaranteeing the performance of Pacific

Life, or the sub-adviser, in its capacity as Investment Manager.

4. Both forms of Pacific Life's Actively-Managed Synthetic GICs

provide that all employee initiated benefit payments and transfers to

other investment options (collectively, Withdrawals) will be paid at an

amount equal to the Contract Value Record (see paragraph 10 below for a

description of the Contract Value Record). Since such Withdrawals are

paid at the Contract Value Record, participants will not recognize a

loss when they initiate a Withdrawal at a time when the fair

[[Page 39535]]

market value of the Investment Assets comprising the Plan's Managed

Portfolio has declined to a level below the Contract Value Record.

Pacific Life represents that Plans will typically purchase the

Actively-Managed Synthetic GIC because it will allow the Plans to use

book value accounting and, thus, account for the value of the accounts

of participants without regard to fluctuations in the fair market value

of the Investment Assets which result from changes in interest rates.

5. Pacific Life represents that each Actively-Managed Synthetic GIC

provides purchasers with the advantages of a traditional GIC, while

providing greater security than a traditional GIC. Unlike a traditional

GIC, the title to the Investment Assets at all times remains with the

Plan. For this reason, it is represented that Synthetic GICs provide

greater security to Plans because the assets held in the Managed

Portfolio are not subject to the claims of an insurance company's

general creditors in the event that the insurance company fails.

Pacific Life represents that it will negotiate the terms of each

Actively-Managed Synthetic GIC with an independent fiduciary of a Plan,

which is generally expected to be the Plan's named fiduciary and not an

independent investment professional.

6. Both the Affiliated-Manager GIC and Unaffiliated-Manager GIC

provide the same economic benefits to a Plan. The mechanical operation

of Pacific Life's obligations (other than as an investment manager),

under each form of the Actively-Managed Synthetic GIC is the same. In

each case, the Contract is issued pursuant to applicable state law and

is subject to the jurisdiction of the appropriate State Department of

Insurance. The representations made by Pacific Life in respect of the

Actively-Managed Synthetic GIC herein apply equally to both the

Affiliated-Manager GIC and Unaffiliated-Manager GIC.

7. While certain terms and conditions of each Contract will be

negotiable by the Plan and Pacific Life, once the Contract has been

executed, Pacific Life will have no discretion over any of the terms.

Each Actively-Managed Synthetic GIC is issued by Pacific Life in the

ordinary course of its business. Pacific Life represents that it will

not sell Actively-Managed Synthetic GICs to Plans which do not have at

least $25 million in assets.

8. Each Actively-Managed Synthetic GIC will consist of two

components. One component is the underlying portfolio of Investment

Assets, title to which will remain with the Plan. The underlying

Investment Assets will be securities issued or guaranteed by the

Federal government or an instrumentality thereof, or other investment

grade debt securities whose value is readily determinable and which can

thus be objectively valued. The Investment Assets will not come under

Pacific Life's administration or control, unless the Plan chooses

Pacific Life as the investment manager of the Managed Portfolio by

purchasing an Affiliated-Manager GIC. Even where Pacific Life is the

investment manager, legal title to the Managed Portfolio, including all

principal, interest, dividends and distributions on the Investment

Assets in the Managed Portfolio, at all times remains with the Plan.

The performance of such Investment Assets will affect the second

component of each Contract.

The second component under each Actively-Managed Synthetic GIC will

be an accounting record established by Pacific Life to record the

Plan's interest under the Actively-Managed Synthetic GIC. This

accounting record is called the Contract Value Record and it is the

amount available to Plan participants in the event they elect to

withdraw funds pursuant to the provisions of the Plan.

9. Under the Actively-Managed Synthetic GIC, a named fiduciary

independent of Pacific Life will select an investment manager with

respect to that portion of the Managed Portfolio as is agreed upon by

that independent fiduciary and Pacific Life. On or before August 12,

1998, the named fiduciary independent of Pacific Life may have selected

Pacific Life or one of its affiliates as investment manager. The

investment manager will manage the Managed Portfolio in accordance with

investment objectives and guidelines established at the inception of

the Contract and described therein. It is represented that, among other

things, these guidelines are intended to assure that the Managed

Portfolio is invested prudently and requires that the Managed Portfolio

be adequately diversified among the class of investments available.

10. As discussed in paragraph 8 above, under each Contract, Pacific

Life will maintain a Contract Value Record for the Investment Assets in

the Managed Portfolio. The Contract Value Record will be initially

credited with an amount equal to the value of the Investment Assets at

the inception of the Contract. Thereafter, the Contract Value Record

will be credited with a rate of interest (i.e., the ``Credited Rate'')

that will be reset periodically, [e.g., quarterly, semi-annually, or

annually], in accordance with a formula established under the Contract

and agreed upon by an independent plan fiduciary. Once the Contract is

executed, no element of the formula which sets the Credited Rate, or

the intervals at which the Credited Rate is reset, is within Pacific

Life's discretion. All principal and interest payments from the

Investment Assets will be reinvested back into the Managed Portfolio

and stay within the Contract. The Credited Rate will take into account

these additional accruals. Also, the Credited Rate applied to the

Contract Value Record will be responsive to fluctuations in the Market

Value of the Managed Portfolio (see paragraph 21 for an explanation as

to the determination of Market Value).

11. Pacific Life represents that one of the attractive features of

the Actively-Managed Synthetic GIC to a Plan is that Pacific Life

assumes certain obligations with respect to the availability of funds

for benefit Withdrawals and the return on the Managed Portfolio.

Mechanically, this is accomplished through the establishment of, and

adjustments to, the Contract Value Record.

As discussed in paragraph 10 above, the Contract Value Record

reflects a guarantee of principal and the crediting of interest at

periodically determined Credited Rates, pursuant to the formula

established in the Contract. The Credited Rate of interest will equal

the rate necessary to assure that, if the Managed Portfolio earns the

rate of return anticipated, the value of the Managed Portfolio will

equal the Contract Value Record after a pre-determined amortization

period. The length of the amortization period will be negotiated at

arms length between Pacific Life and the Plan's independent fiduciary.

Thus, for any Actively-Managed Synthetic GIC, the initial Credited Rate

is equal to the expected rate of return on the Managed Portfolio. For

all purposes under the Contract, the expected return on the Managed

Portfolio is calculated by the Plan's trustee or another fiduciary

acting on behalf of the Plan with the concurrence of Pacific Life.

It is represented that a party independent of Pacific Life, which

will be the investment manager in circumstances where Pacific Life or

an affiliate is not the Manager, or the trustee of the Plan in

circumstances where Pacific Life is the investment manager, will

determine the expected future rate of return on the Investment Assets

assuming that those assets were held until maturity. Pacific Life

represents that it will accept the expected rate of return calculations

of the independent party, absent a mathematical error. It is

represented that Pacific Life will calculate the

[[Page 39536]]

Credited Rate pursuant to the formula agreed upon in the Contract, and

that the calculations will be based on the data received from the

independent party as to the expected rate of return and the actual rate

of return.

12. To achieve the intended effect of causing the Contract Value

Record balance and the value of the Managed Portfolio to be equal at

maturity, the formula for determining the Contract Value Credited Rate

of interest under each Contract resets periodically pursuant to the

terms of the Contract (see paragraph 10 above for the description of

the Credited Rate). At each reset period, the Credited Rate will be

adjusted, up or down, to reflect the difference between the actual

investment experience of the Managed Portfolio and the expected

investment experience of such assets. The Credited Rate, following the

reset, will equal the rate necessary to assure that, at the end of the

amortization period, the Contract Value Record will equal the value of

the Managed Portfolio, based on the assumed return for the Managed

Portfolio for the amortization period.3 In the event that

the Credited Rate for any period, as calculated by Pacific Life

pursuant to the fixed formula established under the Contract, would be

less than zero, the Contract Value Record's Credited Rate following

such reset will be zero.

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\3\ Pacific Life represents that the amortization period for

Contracts does not exceed three (3) years.

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13. Under each Actively-Managed Synthetic GIC, Pacific Life

guarantees the availability of funds for participant initiated benefit

Withdrawals up to the amount of the Contract Value Record balance as of

any date. After certain other specified sources of funds (such as net

contributions to the Actively-Managed Synthetic GIC, maturing proceeds,

and cash equivalents) have been exhausted, a Plan will have the right

to withdraw funds from the following sources in the order listed until

depleted:

(1) Available cash attributable to the Investment Assets in the

Managed Portfolio; and

(2) Cash realized from the sale of Investment Assets in the Managed

Portfolio.

All participant initiated benefit Withdrawals are guaranteed to be

paid at the Contract Value Record.

14. A Plan's fiduciary will have the option of purchasing an

Actively-Managed Synthetic GIC which is issued on either an experience-

rated or a non-experience rated basis.4 Under both the

experience-rated contract (Experience-Rated Contract) and the non-

experience rated contract (Non-Experience Rated Contract), all

participant initiated benefit Withdrawals will be paid at Contract

Value. However, under an Experience-Rated Contract, Pacific Life will

not compensate the Plan for any loss resulting from a benefit

responsive Withdrawal which is effected at a time when the Market Value

of the Investment Assets is less than the Contract Value. Pursuant to a

Non-Experience Rated Contract, if benefit responsive Withdrawals are

made when the Contract Value of the Investment Assets is greater than

the Market Value of the Investment Assets, a reserve account is

established (as discussed in paragraph 15 below) and Pacific Life will

compensate the Plan in the event that, at maturity, the Contract Value

plus the Reserve Account exceeds the Market Value of the Investment

Assets.

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\4\ The Department notes that the fiduciary responsibility

provisions of the Act will apply to any decision made by a plan

fiduciary to purchase an Actively-Managed Synthetic GIC as a part of

its investment program for a plan's participants and beneficiaries.

In this regard, section 404(a) of the Act requires that a fiduciary

discharges his or her duties with respect to a plan solely in the

interest of the participants and beneficiaries and with the care,

skill, prudence and diligence under the circumstances then

prevailing that a prudent person acting in a like capacity and

familiar with such matters would use in the conduct of an enterprise

of a like character and with like aims. Accordingly, the fiduciaries

of a plan must act ``prudently'' with respect to the selection of

investment products. This proposed exemption, if granted, should not

be viewed as an endorsement by the Department of the plan's use of

an Actively-Managed Synthetic GIC which is issued on either an

experience-rated or non-experience rated basis. Finally, the

Department notes that plan fiduciaries would be liable for any

losses to a plan resulting from a decision to select an experience-

rated or non-experience rated synthetic GIC, if such selection was

not prudent at the time the decision was made.

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Pacific Life represents that, when investing in synthetic GICs,

some Plans are less concerned about protection against market losses

due to benefit responsive Withdrawals, primarily because such Plans

will have sufficient cash flow, in the form of new additional cash

investments by participants on an ordinary basis to avoid the need to

liquidate Investment Assets to meet benefit responsive Withdrawals.

Pursuant to an Experience-Rated Contract, Withdrawals are paid from the

inflow of new contributions and other amounts received by the Plan

(Cash Resources). Pacific Life represents that typically very large

Plans, with more than sufficient Cash Resources to cover Withdrawals

without a need to sell any of the Investment Assets, are potential

purchasers of an Experience-Rated Contract. Since Pacific Life's risk

exposure is lower in the context of an Experienced-Rated Contract

because it will have no exposure related to benefit responsive

Withdrawals, the charges associated with such a contract will be less.

Accordingly, to reduce expenses for a Plan that has sufficient Cash

Resources, a Plan's fiduciary may select an Experience Rated

Contract.5

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\5\ The Department expects that plan fiduciaries, consistent

with their responsibilities under section 404(a) of the Act, will

determine that a plan has sufficient liquidity to meet benefit

responsive Withdrawals prior to investing in an Experience-Rated

Contract.

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Plans fiduciaries that do not believe they have sufficient Cash

Resources to cover participant Withdrawals may anticipate the need to

liquidate Investment Assets and, for this reason, such Plans would be

expected to purchase a Non-Experience Rated Contract. The Non-

Experience Rated Contract has higher charges associated with it,

because Pacific Life assumes a greater obligation to the Plan.

15. Plans purchasing the Contracts are advised that the calculation

of the future Credited Rates, and the benefit risk charge payable by

the Plan to Pacific Life, will differ between Experience and Non-

Experience Rated Contracts.

Under a Non-Experience Rated Contract, any benefit responsive

Withdrawal made under the Actively-Managed Synthetic GIC will have no

impact on the Credited Rate. After each Withdrawal, Pacific Life will

add to or subtract from the Managed Portfolio's market value record a

notional amount (the Reserve Account) to maintain, solely for

bookkeeping purposes, the percentage difference between the Market

Value and Contract Value Record at their pre-withdrawal levels. The

Reserve Account is ongoing and will be in effect until the Contract

terminates. Additions to the Reserve Account will be made when benefit

Withdrawals occur and the Market Value of the Managed Portfolio is less

than Contract Value Record. Alternatively, subtractions from the

Reserve Account will be made when benefit Withdrawals are made and the

Managed Portfolio's Market Value is greater than the Contract Value

Record.

If a Plan elects to receive a payment of the Contract Value Record

at contract maturity, any balance in the Reserve Account will earn the

market rate of return earned on the Managed Portfolio. A positive

balance credited to the Reserve Account when the Contract is terminated

will be paid to the Plan. (See paragraph 16 below for a more detailed

explanation). The Plan will not be obligated to pay Pacific Life any

debit in the Reserve Account. This is the benefit Withdrawal risk that

Pacific Life will be

[[Page 39537]]

assuming under a Non-Experience Rated Contract.

However, the benefit Withdrawal activity of an Experience-Rated

Contract will affect the future Credited Rate calculation and no

Reserve Account will be maintained for such Contracts. If a benefit

Withdrawal is made from the Contract at a time when the Market Value of

the Managed Portfolio is less than the Contract Value Record, the

Credited Rate at its next reset date will be lower to reflect the

effect of the Withdrawal. On the other hand, at the next following

reset date, the Credited Rate will be increased in the event that a

Withdrawal is made at a time at which the Market Value of the Managed

Portfolio exceeds the Contract Value Record. In this regard, in an

Experience-Rated Contract, the Credited Rate of interest from and after

such benefit responsive Withdrawals will be reset taking into account

the positive or negative effect of such Withdrawal on the value of the

Investment Assets. Thus, the Plan will assume the risk of loss on the

benefit responsive Withdrawals (and be benefitted by any gains related

thereto) by receiving a lower (or higher) Credited Rate on the Contract

Value Record on a going forward basis. This enables the Plan to still

receive the benefit of book value accounting, as all Withdrawals are

still effected at book value, but enables it to avoid the cost of

having Pacific Life assume the additional risk associated with such

Withdrawals.

16. A Plan's fiduciary may at any time elect to terminate the

arrangements pertaining to the Actively-Managed Synthetic GIC and

thereby cause the investment of the Managed Portfolio to be transferred

to the Plan's trustee or another investment manager, without

restriction. This election is called a market value payment (Market

Value Payment).6 The Plan would generally be expected to

elect such a Market Value Payment only in circumstances where the

Market Value of the Managed Portfolio exceeds the balance then credited

to the Contract Value Record. If a Plan were to elect a Market Value

Payment, Pacific Life will be relieved of any potential obligation to

make a payment in an amount equal to the amount of the Contract Value

Record. Such payment of the Contract Value Record is referred to as a

``Contract Value Payment,'' as described below. A Market Value Payment,

if elected, consists in essence of the total return of the Investment

Assets of the Managed Portfolio to the Plan. Any excess of the Market

Value of the Managed Portfolio over the balance in the Contract Value

Record belongs exclusively to the Plan. The only cost to a Plan

electing to receive a Market Value Payment would be an early

termination fee, which would be payable only if the Plan makes such

election prior to the end of the minimum term for which it agrees to

keep the agreement in effect. This termination fee and minimum term

will be negotiated by the Plan and Pacific Life at the inception of the

Contract. Pacific Life represents that the minimum term is typically

one (1) year and the termination fee generally equals Pacific Life's

cost of establishing the Actively-Managed GIC Contract. It is further

represented that for Contracts involving the investment of $50 million

or more, it will waive any such early termination fee. The purpose of

the early termination fee is to assure that Pacific Life recovers the

costs it will incur in implementing the Actively-Managed Synthetic GIC

for a Plan which elects the Market Value Payment.

---------------------------------------------------------------------------

\6\ However, a Market Value Payment will not be deemed to have

been requested if a Plan fiduciary, pursuant to the condition of the

exemption proposed herein for Affiliated-Manager GICs, elects to

replace Pacific Life or an affiliate of Pacific Life as investment

manager, when the Credited Rate under such Contract falls below

three (3) percent.

---------------------------------------------------------------------------

Alternatively, the Plan's fiduciary may at any time elect to

receive a Contract Value Payment, if it thinks such an election would

provide the Plan a better return. A Contract Value Payment takes the

form of a single payment to be made at a date at which the Contract

will mature following such an election (the Maturity Date), which date

will have been agreed to by Pacific Life and the Plan at the

commencement of the Contract. The time between the date the fiduciary

gives notice of its intent to terminate the Contract and the Maturity

Date is generally equal to the time of the amortization period assumed

in the Credited Rate calculation (see paragraph 12 above). It is

represented that the amortization period will not be more than three

years. As a result, following the provision of notice of an election to

terminate the contract and receive a Contract Value Payment, the

maximum period a Plan would have to wait for the Contract Value Payment

is three years. Any payment that Pacific Life will have to make to

support the Contract Value Payment will be in an amount equal to the

excess on the Maturity Date of (i) the balance in the Contract Value

Record plus the balance in the Reserve Account over (ii) the Market

Value of the Managed Portfolio.

17. If a Plan elects to receive a Contract Value Payment, new

restricted investment guidelines and objectives will be set, to be

effective for the remainder of the Contract term, under which either

(i) the average duration of the assets in the Managed Portfolio will

generally be six months less than the scheduled payment date until one

year prior to the payment date, and thereafter generally one-half of

the remaining period until the scheduled payment date, or (ii) the

Managed Portfolio will be required to be invested in Treasury Bonds

maturing on or before the scheduled payment date. To effect a Contract

Value Payment, Pacific Life must receive written notice, signed by the

Plan's independent fiduciary, of their acceptance of the revised

investment objectives and guidelines.

18. In making the choice as to which form of termination

distribution it wants upon the maturity of an Actively-Managed

Synthetic GIC, a Plan's fiduciary will compare the Market Value of the

Investment Assets as determined by its duly appointed custodian to the

dollar amount credited to the Contract Value Record. Pacific Life, as

issuer of the Contract, will have no involvement in valuing the Managed

Portfolio. Moreover, at any time after having given Pacific Life notice

of an election to receive a Contract Value Payment, the Plan may elect

to receive a Market Value Payment instead. Thus, if the Market Value of

the Managed Portfolio increases to the advantage of the Plan after the

Plan has made a Contract Value Payment election, the Plan has the right

to reverse such election and immediately terminate the

Contract.7 As with any election of a Market Value Payment,

Pacific Life will thereafter have no further obligation with respect to

any Contract Value Payment.

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\7\ Pacific Life acknowledges that circumstances which would

cause the recovery of the Market Value to the extent that it would

exceed the Contract Value Record, after a request for a Contract

Value Payment is made, would be unlikely to occur given the short

amortization period and the implementation of the restrictive

investment guidelines provided for under the Contract.

---------------------------------------------------------------------------

19. Pacific Life represents that it believes that each Actively-

Managed Synthetic GIC is superior to traditional GICs in that each

Actively-Managed Synthetic GIC serves the dual functions of: (a)

Affording a Plan substantially greater protection against the risk that

it will lose its principal investment; and (b) providing the Plan with

an opportunity for a greater rate of return than a traditional GIC.

In the case of an Actively-Managed Synthetic GIC, an investment

manager will invest the Managed Portfolio within the parameters of the

pre-established investment guidelines. The Plan's trustee holds title

to assets in the Managed Portfolio. Any appreciation in the value of

the Managed Portfolio

[[Page 39538]]

belongs to the Plan. The only risk in regard to the Managed Portfolio

arising from the financial condition of Pacific Life relates to the

amount representing the excess, if any, of the balance in the Contract

Value Record over the Market Value of the Managed Portfolio. Pacific

Life represents that the Actively-Managed Synthetic GIC provides

greater security to an investing Plan than a traditional GIC, while

also providing a guaranteed rate of return not generally available in

respect to a managed portfolio under a separate investment advisory

agreement.

20. Pacific Life will maintain full and complete records and books

reflecting the various accounts maintained in accordance with the

Actively-Managed Synthetic GICs. Pacific Life will furnish a Plan's

representatives with periodic statements regarding distributions,

Withdrawals and any other transaction pertaining to the Contract. Upon

written request from a Plan, Pacific Life will also make its records

pertaining to the Actively-Managed Synthetic GICs available during

normal business hours for audit by independent certified public

accountants hired by the Plan's fiduciary.

21. The applicant makes the following representation with respect

to the valuation of assets under the Actively-Managed Synthetic GIC.

The time at which the value of the Investment Assets is relevant to

Pacific Life's obligations is at the time of any Withdrawal, including

upon termination of the entire arrangement. At such time, the Market

Value of the Investment Assets will be based on the last quoted sales

price on the valuation date on a national securities exchange. With

regard to any other security or asset which is not listed on a national

securities exchange, its value will be determined by the Plan's

independent investment manager or another fiduciary acting on behalf of

the Plan, such as the Plan's trustee.

22. Pacific Life and the Plan's fiduciary will agree to an expense

charge, determined at the inception of the Contract, payable to Pacific

Life with respect to each Actively-Managed Synthetic GIC that will be

stated as a fixed percentage of the market value of the Managed

Portfolio. This charge covers four elements: (a) A benefit risk charge,

(b) a maturity risk charge, (c) an expense charge and (d) a profit

charge.

The benefit risk charge is the component of the fee attributable to

Pacific Life's risk of loss associated with payments Pacific Life will

be obligated to make as a result of the benefit responsive Withdrawal

feature provided for under the Contract. The benefit risk charge will

be developed on a Plan specific basis after a review of the Plan's

benefit payment cash flow history and the structure of the Plan

itself--that is, the frequency at which Withdrawals and investment

transfers are permitted, and the structure of alternate investment

opportunities. Since the Credited Rate for Non-Experience Rated

Synthetic GICs is not responsive to benefit Withdrawal activity, the

benefit risk that Pacific Life assumes from Non-Experience Rated

Contracts is higher than for Experience Rated Contracts. Consequently,

the benefit risk charge will be higher for Non-Experience Rated

Contracts based on an evaluation of the Plan's Withdrawal and transfer

possibilities.

The maturity risk charge component of the fee will be based on a

review of the potential volatility of the Managed Portfolio. This

assessment of the potential volatility will be based on a thorough

review of the investment guidelines which will be applied to the

Managed Portfolio. If Pacific Life feels that the potential volatility

is too high to properly manage the maturity risk, the portfolio will

not be approved for a Actively-Managed Synthetic GIC.

The expense and profit charges components of the fee will be

assessed based on the expected expenses related to the arrangement and

the payment to Pacific Life of a reasonable profit. The expense charge

will be based on an annual rate to be determined by negotiations

between Pacific Life and the Plan's fiduciary at the inception of the

Contract and stated as a fixed percentage and multiplied by the value

of the Managed Portfolio, determined pursuant to a fixed formula under

the Contract. Such negotiated charge would remain in effect for the

initial period until maturity agreed to by the Plan and Pacific Life,

subject to Pacific Life's ability to make changes to such charge upon

30 day's advance written notice if and solely to the extent that there

has been a material change to the provisions or administration of the

Plan which adversely affects deposits to or Withdrawals from the

Contract, or another action by the Plan's sponsor which results in

significant Withdrawals from the Contract, such as, but not limited to,

plant closing, divestitures, a partial plan termination, bankruptcy, or

early retirement incentive programs. Based on its review of competitive

practices, Pacific Life represents that the aggregate charges with

respect to each of the Actively-Managed Synthetic GICs are, and are

expected to continue to be, comparable to the charges made by other

Actively-Managed Synthetic GIC providers.

23. Pacific Life represents that to date, Actively-Managed

Synthetic GICs have been purchased by numerous Plans, with the first

such purchase occurring on January 22, 1993. Pacific Life has

accordingly requested that the exemption proposed herein be made

retroactive to that date. Pacific Life represents that it entered into

the previously issued Actively-Managed Synthetic GICs with the good

faith belief that the transactions involved therein were, to the extent

they constituted prohibited transactions, exempted by Prohibited

Transaction Exemption 84-24 (PTE 84-24, 49 FR13208, April 3,

1984).8 However, because Pacific Life is unable to conclude

affirmatively that the Actively-Managed Synthetic GICs constituted

insurance contracts within the meaning of PTE 84-24, Pacific Life has

requested the exemption proposed herein.

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\8\ In this proposed exemption, the Department expresses no

opinion as to whether the subject transaction would be exempt under

PTE 84-24.

---------------------------------------------------------------------------

24. In summary, the applicant represents that the subject

transactions satisfy the criteria contained in section 408(a) of the

Act because: (a) The decision to enter into an Actively-Managed

Synthetic GIC will be made on behalf of the Plan by a fiduciary of the

Plan who is independent of Pacific Life, after receipt of full and

detailed disclosure of all material features of the Contact, including

all applicable fees and charges; (b) following receipt of such

disclosure, the Plan's independent fiduciary approves in writing the

execution of the Actively-Managed Synthetic GIC on behalf of the Plan;

(c) all fees and charges under the Actively-Managed Synthetic GICs are

reasonable; (d) each Actively-Managed Synthetic GIC will specifically

provide for an objective means for determining the fair market value of

the securities owned by the Plan pursuant to the Actively-Managed

Synthetic GIC; (e) each Actively-Managed Synthetic GIC will

specifically provide for an objective means for determining the

Credited Rate under the Actively-Managed Synthetic GIC; (f) Pacific

Life does not take possession of the assets which are the subject of

the Actively-Managed Synthetic GIC or commingle those assets with any

other funds under its management; (g) the assets subject to the

Actively-Managed Synthetic GIC are invested only in high quality fixed

income instruments specified in the investment guidelines provided to

the independent fiduciary; (h) the Plan may choose at any time to

terminate the Actively-Managed Synthetic GIC and receive the Market

Value of the

[[Page 39539]]

Managed Portfolio; (i) An Affiliate-Manager GIC Contract provides that

a Plan may replace an Affiliated-Manager GIC with an Unaffiliated-

Manager GIC if the Credited Rate for the next reset will be three (3)

percent or less; (j) the Plan may receive a Contract Value Payment no

more than three (3) years after electing a Maturity Date; (k) the fee

charged for the combination of services is negotiated between Pacific

Life and a Plan fiduciary independent of Pacific Life; (l) Pacific Life

will maintain books and records of all transaction which will be the

subject to annual audit by independent certified public accountants

selected and responsible solely to the Plan; and (m) Affiliated-Manager

GICs were not sold to Plans by Pacific Life after August 12, 1998; and

(n) the Actively-Managed Synthetic GICs will only be marketed to Plans

---------------------------------------------------------------------------

which have at least $25 million in assets.

For Further Information Contact: Janet Schmidt of the Department,

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

The Manufacturers Life Insurance Company (Manulife), Located in

Toronto, Canada

[Application No. D-10738]

Proposed Exemption

Based on the facts and representations set forth in the

application, the Department is considering granting an exemption under

the authority of section 408(a) of the Act and in accordance with the

procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836,

32847, August 10, 1990). 9

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\9\ For purposes of this proposed exemption, reference to

provisions of Title I of the Act, unless otherwise specified, refer

also to the corresponding provisions of the Code.

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Section I. Covered Transactions

If the exemption is granted, the restrictions of section 406(a) of

the Act and the sanctions resulting from the application of section

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

Code, shall not apply, to (1) the receipt of common stock (the Common

Shares) of Manulife Financial Corporation, a newly-formed company that

will be the holding company (the Holding Company) for Manulife; or (2)

the receipt of cash or policy credits, by any plan policyholder (the

Eligible Policyholder that is an employee benefit plan (the Plan),

other than a policyholder which is a plan established by Manulife or an

affiliate for its own employees (the Manulife Plan), in exchange for

such Eligible Policyholder's membership interest in Manulife, in

accordance with a plan of reorganization (the Plan of Demutualization)

adopted by Manulife and implemented under the insurance laws of Canada

and the State of Michigan.

This proposed exemption is subject to the conditions set forth

below in Section II.

Section II. General Conditions

(a) The Plan of Demutualization is implemented in accordance with

procedural and substantive safeguards that are imposed under the

insurance laws of Canada and the State of Michigan and is subject to

review and/or approval in Canada by the Office of the Superintendent of

Financial Institutions (OSFI) and the Minister of Finance (the Canadian

Finance Minister) and, in the State of Michigan, by the Commissioner of

Insurance (the Michigan Insurance Commissioner).

(b) OSFI, the Canadian Finance Minister and the Michigan Insurance

Commissioner review the terms of the options that are provided to

Eligible Policyholders of Manulife as part of their separate reviews of

the Plan of Demutualization. In this regard,

(1) OSFI (i) authorizes the release of the Plan of Demutualization

and all information to be sent to Eligible Policyholders; (ii) oversees

each step of the demutualization process; and (iii) makes a final

recommendation to the Canadian Finance Minister on the Plan of

Demutualization.

(2) The Canadian Finance Minister considers such factors as whether

(i) the Plan of Demutualization is fair and equitable to Eligible

Policyholders; (ii) the Plan of Demutualization is in the best

interests of the financial system in Canada; and (iii) sufficient steps

had been taken to inform Eligible Policyholders of the Plan of

Demutualization and of the special meeting on demutualization.

(3) The Michigan Insurance Commissioner makes a determination that

the Plan of Demutualization is (i) fair and equitable to all Eligible

Policyholders and (ii) consistent with the requirements of Michigan

law.

(4) Both the Canadian Finance Minister and the Michigan Insurance

Commissioner concur on the terms of the Plan of Demutualization.

(c) Each Eligible Policyholder has an opportunity to vote to

approve the Plan of Demutualization after full written disclosure is

given to the Eligible Policyholder by Manulife.

(d) One or more independent fiduciaries of a Plan that is an

Eligible Policyholder receives Holding Company Common Shares, cash or

policy credits pursuant to the terms of the Plan of Demutualization and

neither Manulife nor any of its affiliates exercises any discretion or

provides investment advice with respect to such acquisition.

(e) After each Eligible Policyholder entitled to receive stock is

allocated at least 184 Common Shares, additional consideration is

allocated to Eligible Policyholders who own participating policies

based on actuarial formulas that take into account each participating

policy's contribution to the surplus of Manulife which formulas have

been reviewed by the Canadian Finance Minister and the Michigan

Insurance Commissioner.

(f) All Eligible Policyholders that are Plans participate in the

transactions on the same basis within their class groupings as other

Eligible Policyholders that are not Plans.

(g) No Eligible Policyholder pays any brokerage commissions or fees

in connection with the receipt of Common Shares.

(h) All of Manulife's policyholder obligations remain in force and

are not affected by the Plan of Demutualization.

Section III. Definitions

For purposes of this proposed exemption:

(a) The term ``Manulife'' means ``The Manufacturers Life Insurance

Company'' and any affiliate of Manulife as defined in paragraph (b) of

this Section III.

(b) An ``affiliate'' of Manulife includes--

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

intermediaries, controlling, controlled by, or under common control

with Manulife. (For purposes of this paragraph, the term ``control''

means the power to exercise a controlling influence over the management

or policies of a person other than an individual.)

(2) Any officer, director or partner in such person, and

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

officer, director or a 5 percent partner or owner.

(c) The term ``Eligible Policyholder'' means a policyholder who is

eligible to vote at annual meetings of the mutual insurer and to

receive consideration under Manulife's Plan of Demutualization. More

specifically, an Eligible Policyholder is a policyholder of the mutual

insurer that had a voting policy before Manulife announced its

intention to demutualize or any policyholder that applied for a voting

policy prior to that day. Policyholders will also be deemed Eligible

Policyholders if they are holders of a

[[Page 39540]]

voting policy that lapsed before the insurer's announcement date but

was reinstated on or before 90 days prior to the special meeting to

consider demutualization. These policyholders will be eligible to

receive benefits upon demutualization.

(d) The term ``policy credit'' means whichever of the following is

applicable: (1) With respect to an individual life insurance policy, an

increase in the dividend accumulation amount; (2) with respect to an

individual deferred annuity policy where the owner has elected a

dividend accumulation option, an increase in the dividend accumulation

amount; (3) with respect to all other individual deferred annuity

policies, an increase in the dividend addition value; and (4) with

respect to a settlement annuity, an increase in the contract reserve

which shall provide for an increase in the monthly income payment equal

to the ratio of the reserve increase to the then current contract

reserve.

Summary of Facts and Representations

1. Manulife, which maintains its principal place of business at 200

Bloor Street East, Toronto, Ontario, Canada, is a mutual insurance

company originally incorporated on June 23, 1887 by a Special Act of

Parliament of the Dominion of Canada. Manulife currently has letters

patent (i.e., a corporate charter) issued under the Insurance Companies

Act of Canada (the ICA). Its port of entry into the United States is

the State of Michigan which is responsible for regulating its United

States operations.

Manulife provides a wide range of financial products and services,

including individual life insurance, group life and health insurance,

pensions, annuities and mutual funds to individuals and group

customers, including employers in Canada and other countries. Either

directly or through its subsidiaries, Manulife is authorized to conduct

business in 50 states of the United States as well as in the District

of Columbia. As of December 31, 1997, Manulife had total assets under

administration of Cdn$79.5 billion and it had more than Cdn$400 billion

of life insurance in force. In addition, during 1998, Manulife was

rated as follows by Duff & Phelps, A.M Best, Standard & Poor's and

Moody's:

----------------------------------------------------------------------------------------------------------------

Valuation

Rating agency date Rating

----------------------------------------------------------------------------------------------------------------

Duff & Phelps Claims Paying Ability........... 8/24/98 AAA (Highest).

A.M. Best Financial Strength.................. 1998 A++ (Superior).

Standard & Poor's Financial Strength.......... 11/4/98 AA+ (Very Strong).

Moody's Financial Strength.................... 3/98 Aa2 (Excellent).

----------------------------------------------------------------------------------------------------------------

As a mutual insurance company, Manulife has no shareholders.

Instead, its participating policyholders, which are members of the

company, are entitled to vote to elect all directors of Manulife. If

Manulife is liquidated, such policyholders would also be entitled to

share in the insurer's assets.

Manulife is the sole indirect shareholder of three United States-

domiciled stock insurance companies. The three companies are Manulife

Reinsurance Corporation (U.S.A.) (Reinsurance), a Michigan-domiciled

insurer incorporated in 1983; ManUSA, a Michigan-domiciled insurer

incorporated in 1955; and The Manufacturers Life Insurance Company of

America, a Michigan-domiciled insurer incorporated in 1977.

Additionally, Manulife indirectly owns approximately 85 percent of The

Manufacturers Life Insurance Company of North America, a Delaware-

domiciled insurer incorporated in 1979, which, in turn, owns The

Manufacturers Life Insurance Company of New York, a New York-domiciled

insurer incorporated in 1992.

Formerly, Manulife operated in the United States through a branch.

However, since 1997, its businesses in the United States have been

conducted through its subsidiaries. Prior to 1997, Manulife provided a

variety of insurance products to Plans covered under applicable

provisions of the Act and the Code.

2. ManUSA is a Michigan corporation which was incorporated in 1955

as a stock life insurance company. It is a wholly owned subsidiary of

Reinsurance and is located at 500 N. Woodward Ave., Bloomfield Hills,

Michigan. ManUSA is authorized to issue and reissue various forms of

life insurance, annuities and other insurance products to Plans and to

other policyholders. As of December 31, 1997, ManUSA had approximately

16,000 policies in force that were held on behalf of Plan policyholders

located in the United States.

3. Between December 31, 1993 and December 31, 1996, Manulife began

the process of transferring its operations from its U.S. branch to its

wholly owned U.S. subsidiaries. Thus, on December 31, 1993, under the

terms of an assumption reinsurance agreement, Manulife transferred to

ManUSA (a) certain nonparticipating life insurance policies and annuity

contracts written by Manulife in the United States through its U.S.

branch; and (b) investment assets with a value and tax basis equal to

or in excess of the tax reserves and other liabilities associated with

the transferred policies and contracts. At the time of the transfer,

Reinsurance was a wholly owned subsidiary of Manulife and ManUSA was a

wholly owned subsidiary of Reinsurance.

On December 31, 1996, under the terms of an assumption reinsurance

agreement, Manulife transferred to ManUSA (either directly or through

Reinsurance) (a) all of its life insurance policies, annuity contracts,

and other insurance contracts remaining in its U.S. branch (the U.S.

Policies), other than Manulife's obligations under certain reinsurance

contracts that it had previously written in its U.S. branch as the

assuming company; and (b) other assets and liabilities of its U.S.

branch (the 1996 Assumption Transaction). 10 The transferred

assets had a value and tax basis equal to or in excess of the tax

reserves and other liabilities assumed by ManUSA or associated with the

transferred U.S. policies and assets. The U.S. Policies were primarily

participating policies and included policies that qualified as tax-

sheltered annuities described in section 403(b) of the Code, policies

that qualified as individual retirement annuities within the meaning of

section 408(b) of the Code, and individual and group policies issued in

connection with Plans intending to qualify under section 401(a) or

403(a) of the Code (the Qualified Plan Contracts). Certain Qualified

Plan Contracts were held in trust or custodial accounts; others were

not.

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\10\ As an accommodation to Canadian tax law, a portion of the

assets were transferred from Manulife to Reinsurance and then from

Reinsurance to ManUSA. The remainder of the assets and all the

liabilities were transferred directly from Manulife to ManUSA.

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[[Page 39541]]

At the time of the 1996 Assumption Transaction, it is represented

that Manulife assured the holders of the U.S. Policies that were

participating policies (the Transferred U.S. Policies) that they would

retain their membership interests in Manulife and would not be

disadvantaged in a future demutualization of Manulife as a result of

their policies being transferred to ManUSA. Therefore, in accordance

with the approval granted by the Canadian regulatory authorities,

Manulife agreed that holders of the Transferred U.S. Policies would

retain their ``equity'' rights or membership interests in Manulife. In

addition, the membership interests retained by the holders of the

Transferred U.S. Policies were nontransferable and could be

extinguished at the time any related insurance or annuity contract was

canceled, matured, lapsed without reinstatement, or ceased to be a

ManUSA participating policy.

Second, ManUSA agreed to pay cash dividends on the Transferred U.S.

Policies by adopting a dividend policy consistent with its dividend

policy for participating policies. In addition, ManUSA agreed that in

no event would it pay dividends on the Transferred U.S. Policies on a

less favorable basis than the basis on which it paid dividends on its

own participating policies (assuming that ManUSA maintained a single

participating fund for all participating policies).

Third, Manulife agreed to satisfy any claims on the U.S. Policies

in the event of ManUSA's insolvency.

4. On January 20, 1998, Manulife's Board of Directors authorized

management to develop a plan of demutualization whereby Manulife would

be converted, in accordance with the provisions of the ICA, from a

mutual life insurance company into an insurance company with common

shares. The principal purposes of the demutualization are to (a)

enhance Manulife's strategic and financial flexibility by creating a

corporate structure that will make it potentially possible for the

insurer to obtain additional capital sources that are unavailable to

Manulife as a mutual insurer; (b) enable Manulife to use stock options

or other equity-based compensation arrangements in order to attract and

retain talented employees; and (c) provide Eligible Policyholders with

marketable securities, cash or policy credits. Moreover, the ultimate

result of the transaction will be a structure in which all of

Manulife's shares will be held by a holding company, which has applied

to be organized as an insurance company under the ICA for this purpose.

Eligible Policyholders, which will generally include holders of the

Transferred U.S. Policies will receive Common Shares of the Holding

Company, a publicly-traded company whose Common Shares will be listed

on the Montreal, Toronto or New York Stock Exchanges, or, in certain

cases (for legal or tax reasons), cash or policy credits, in exchange

for (and in extinguishment of) their membership interests and rights in

the surplus of Manulife. The demutualization will not, in any way,

change premiums or reduce policy benefits, values, guarantees or other

policy obligations of Manulife to its policyholders.

5. Therefore, Manulife requests an administrative exemption from

the Department that would cover the receipt of Common Shares of the

Holding Company, cash or policy credits by Eligible Policyholders that

are Plans in exchange for their existing membership interests in

Manulife. Neither Manulife nor ManUSA is a ``party in interest,'' with

respect to any of its Plan policyholders merely because such entity has

issued an insurance policy to the Plan. As noted above, ManUSA does

(and, prior to 1997, Manulife did), however, provide certain services

to Plan policyholders which would cause ManUSA and Manulife to be

considered parties in interest with respect to such Plans under section

3(14)(A) and (B) of the Act.11

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\11\ Manulife notes that even though the Holding Company may not

be subject to the provisions of the Act, there is no clear provision

that would except a non-U.S. person from the general definition of

the term ``party in interest'' with respect to a plan under section

3(14) of the Act. Thus, to remove any uncertainty that Manulife's

proposed demutualization will not constitute a prohibited

transaction, Manulife has requested an administrative exemption.

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Manulife is not requesting that the exemption apply to

distributions of Common Shares to the Manulife Plans because it

believes the Common Shares received by such Plans would constitute

qualifying employer securities within the meaning of section 407(d)(5)

of the Act and that section 408(e) of the Act would apply to such

distributions.12

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\12\ The Department expresses no opinion herein on whether the

Holding Company Common Shares will constitute qualifying employer

securities and whether such distributions will satisfy the terms and

conditions of section 408(e) of the Act.

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The proposed exemption includes a requirement that distributions to

Plans pursuant to the exemption must be on terms no less favorable to

the Plans than in an arm's length transaction between unrelated parties

would be. In this regard, Plans for which Manulife and/or ManUSA are

parties in interest will not by reason of that relationship be treated

any differently from other Eligible Policyholders that are not Plans.

6. On May 19, 1999, Manulife's Board of Directors formally adopted

the Plan of Demutualization. On the effective date of the

demutualization, which is scheduled to occur during September 1999,

several steps will be deemed to occur simultaneously. In this regard,

Manulife will issue shares (Manulife Shares) to the Holding Company.

Then, all of the Holding Company's Common Shares held by Manulife

immediately prior to the effective date will be canceled. Finally, the

Holding Company will issue its Common Shares in book-entry form to

Eligible Policyholders who are entitled to receive Common Shares under

the Plan of Demutualization.

7. An initial public offering (the IPO) in which the Holding

Company's Common Shares will be sold for cash is expected to close 5

business days after the effective date of the demutualization. The

Holding Company intends to contribute a portion of the proceeds of the

IPO to Manulife in an amount at least equal to the amount required to

fund the mandatory cash payments and the mandatory crediting of policy

credits to Eligible Policyholders who are to receive such

consideration. As soon as reasonably practicable after the effective

date of the IPO, the Holding Company will pay, or cause Manulife to

pay, cash to Eligible Policyholders required under the Plan of

Demutualization to receive such consideration, and will transfer cash

to ManUSA to fund all policy credits due under the Plan of

Demutualization.

A portion of the proceeds from the IPO will also help to satisfy,

to the extent possible, elections by Canadian resident policyholders to

receive cash instead of Common Shares. If the proceeds from the IPO are

sufficient to satisfy cash elections in full, Canadian resident

policyholders will receive the full amount of their cash election as

promptly as possible after the closing of the IPO. If the proceeds from

the IPO are not sufficient to satisfy cash elections in full, Canadian

resident policyholders will receive Common Shares in book-entry form as

part of their compensation.

To avoid the potentiality of a double-tax that might otherwise be

imposed on non-Canadian policyholders who express a desire to receive

cash through a cash election, the Common Shares for which such cash

elections are made by non-Canadian policyholders will be sold in a

secondary offering by the Holding Company's underwriters as part of (or

simultaneously with) the IPO and subject to the approval of the Board

of Directors of the Holding Company.

[[Page 39542]]

Assuming the IPO generates sufficient cash to fund all cash elections,

an amount equal to the IPO price per share will be remitted to all

policyholders making such elections.13

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\13\ In this regard, Manulife has agreed that it or the Holding

Company will pay the underwriters' discount on the sale of such

shares. Because the payment of the underwriters' discount is treated

as dividend in Canada, a withholding tax of 15 percent of the amount

of the dividend will be imposed on Manulife and not on the Plans. It

is represented that Manulife will not seek reimbursement from any

Plan policyholder under such circumstances.

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8. Section 237 of the ICA and the regulations promulgated

thereunder (the Demutualization Law) establish an approval process for

the demutualization of a life insurance company organized under

Canadian law. The Demutualization Law prescribes the contents of the

Plan of Demutualization and also prescribes the information that must

be sent to Eligible Policyholders with the notice of the special

meeting which must be convened to vote on the Plan of Demutualization.

The information will be contained in an information circular which,

together with the notice of special meeting and the Plan of

Demutualization, must be sent to Eligible Policyholders at least 45

days prior to the special meeting. Manulife must first submit these

materials to OSFI, a Canadian agency established to supervise Canadian

financial institutions in order to determine whether they are in sound

financial condition and are complying with their governing statutory

law and supervisory requirements under that law. OSFI will oversee each

step of the demutualization process. Manulife must obtain the

authorization from OSFI's Superintendent to deliver the materials to

Eligible Policyholders.14 Before granting such

authorization, OSFI may require that the notice or the information

circular contain such additional information as it may determine.

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\14\ The Superintendent determined on May 21, 1999 that the

documentation submitted by Manulife's Board of Directors was

appropriate for mailing to Eligible Policyholders.

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The Plan of Demutualization must be approved by two-thirds of the

Eligible Policyholders voting in person or by proxy at the special

meeting. Within 3 months of the approval of the Plan of Demutualization

by Eligible Policyholders, Manulife must apply to the Canadian Finance

Minister for approval of the Plan of Demutualization and for the

issuance of the Letters Patent of Conversion.15 In deciding

whether to approve the Plan of Demutualization, the Canadian Finance

Minister may consider such factors as (a) whether the proposal is fair

and equitable to policyholders; (b) whether the proposal is in the best

interests of the financial system in Canada; and (c) whether sufficient

steps had been undertaken to inform policyholders of the Plan of

Demutualization and of the special meeting on

demutualization.16 The demutualization will be effective

upon the issuance of the Letters Patent of Conversion by the Canadian

Finance Minister.

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\15\ The Letters Patent of Conversion give legal effect to the

Plan of Demutualization and convert a mutual company into a company

with common shares.

\16\ The policyholder notice was mailed on or before May 31,

1999. It is anticipated that the policyholder meeting will take

place in Toronto on or about July 29, 1999. It is also expected that

the approval of the Demutualization Plan by the Canadian Finance

Minister will be obtained in late September 1999.

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9. The Plan of Demutualization must also be approved by the

Michigan Insurance Commissioner.17 To approve the Plan of

Demutualization, the Michigan Insurance Commissioner must determine

after a public hearing that the Plan of Demutualization does not

prejudice the interests of Eligible Policyholders, and is consistent

with the requirements of Michigan law. Manulife's directors, officers,

employees and policyholders have the right to appear and to be heard at

the public hearing.18

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\17\ Manulife does not believe that the demutualization can

proceed unless both the Michigan Insurance Commissioner and the

Canadian Finance Minister both approve the Demutualization Plan.

Therefore, the insurer is having simultaneous discussions with both

regulatory authorities and has been consulting with both regulators

on requested changes. The Michigan Insurance Commissioner's

statutory authority is limited to the approval or disapproval of the

Plan of Demutualization presented by Manulife and is precluded from

passing on the findings of the Canadian regulators.

\18\ It is anticipated that the Michigan Insurance

Commissioner's hearing will be conducted in Lansing, Michigan during

the month of July 1999. The hearing will be open to anyone who

wishes to participate, including Eligible Policyholders, regardless

of domicile.

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The Michigan Insurance Commissioner is required to give public

notice of the hearing not less than 10 days before the hearing. The

notice identifies the statutory authority under which the determination

is made, the time and place of the hearing, a statement of the manner

in which data, views and arguments may be submitted to the Michigan

Insurance Commissioner at time other than at the hearing, and a

description of the subjects and issues involved.

Any person who makes a written request to the Michigan Insurance

Commissioner for advanced notice of the proposed action that may affect

that person will receive copies of the notice. The notice also will be

published as a display advertisement in newspapers of general

circulation within Michigan.

The Michigan Insurance Commissioner may elect to conduct the

hearing in person or may designate this assignment to another person.

During the hearing, persons may give oral presentations to the hearing

officer. At the conclusion of the hearing, a report on the hearing will

be prepared for the Michigan Insurance Commissioner's use in reaching

the determinations required by law.

Under Section 5925 of the Michigan Insurance Code, any action

challenging the validity of the Michigan Insurance Commissioner's

decision approving or disapproving the Plan of Demutualization must be

commenced within 30 days after the Commissioner's decision.

10. Manulife's Plan of Demutualization provides for Eligible

Policyholders to receive Common Shares, cash or policy credits in

exchange for, and in extinguishment of, their membership

interests.19 For this

[[Page 39543]]

purpose, an Eligible Policyholder generally is any owner of one or more

voting policies in force (including the Transferred U.S. Policies

assumed by ManUSA) on January 20, 1998 (or in lapse status on that date

and reinstated at least 90 days prior to the special meeting of the

policyholders to vote on the Plan of Demutualization). It is

anticipated that 675,000 Eligible Policyholders will be entitled to

vote on the Plan of Demutualization following the receipt of full and

complete written disclosure of such Plan. Of these Eligible

Policyholders, approximately 2,100 are Plan policyholders. Each

Eligible Policyholder will be entitled to one vote regardless of the

number of policies held with Manulife and/or its affiliates.

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\19\ Consistent with sections 1 and 4(1)(e)(i) of the Mutual

Company (Life Insurance) Conversion Regulations (Canada), the Plan

of Demutualization generally provides that the policyholder eligible

to participate in the distribution of Common Shares, cash or policy

credits resulting from the Plan of Demutualization is the ``owner''

of the policy, and that the ``owner'' of any policy shall generally

be determined on the basis of the records of Manulife. Manulife

further represents that an insurance or annuity policy that provides

benefits under an employee benefit plan, typically designates the

employer that sponsors the plan, or a trustee acting on behalf of

the plan, as the owner of the policy. In regard to insurance or

annuity policies that designate the employer or trustee as owner of

the policy, Manulife represents that it is required under the

foregoing provisions of Canadian Law and the Demutualization Plan to

make distributions resulting from such Plan to the employer or

trustee as owner of the policy, except as provided below.

Notwithstanding the foregoing, Manulife's Plan of

Demutualization provides a special rule applicable to an insurance

policy issued to a trust established by Manulife. This rule applies

whether or not the trust, or any arrangement established by any

employer participating in the trust, constitutes an employee benefit

plan subject to the Act. Under this special rule, the holder of each

individual ``certificate'' issued in connection with the insurance

policy is treated as the policyholder and owner for all purposes

under the Plan of Demutualization, including voting rights and the

distribution of consideration. The trustee of any such trust

established by Manulife for the benefit of Eligible Policyholders

that are Plans will be considered a policyholder or owner and will

be eligible to vote or receive consideration.

In general, it is the Department's view that, if an insurance

policy (including an annuity contract) is purchased with assets of

an employee benefit plan, including participant contributions, and

if there exist any participants covered under the plan (as defined

at 29 CFR 2510.3-3) at the time when Manulife incurs the obligation

to distribute Common Shares, cash or policy credits, then such

consideration would constitute an asset of such plan. Under these

circumstances, the appropriate plan fiduciaries must take all

necessary steps to safeguard the assets of the plan in order to

avoid engaging in a violation of the fiduciary responsibility

provisions of the Act.

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To determine the amount of consideration to which each Eligible

Policyholder is entitled, each Eligible Policyholder will be allocated

(but not necessarily issued) a number of Common Shares equal to the sum

of (a) a fixed component consisting of 184 Common Shares; 20

and (b) an additional number of Common Shares based on actuarial

formulas that take into account each participating policy's death

benefit, account value and time-in-force. For those Eligible

Policyholders who receive cash or policy credits due to legal or tax

reasons, the amount of cash or policy credits will be determined by

reference to the price per share at which the Common Shares are offered

to the public in the IPO.

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\20\ Approximately 125 million Common Shares, representing 25

percent of the aggregate demutualization benefit, are expected to be

allocated to Eligible Policyholders as the fixed allocation. On this

basis, each Eligible Policyholder will be allocated a fixed

component of 184 Common Shares.

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Although an Eligible Policyholder may receive Common Shares as a

result of Manulife's demutualization, another Eligible Policyholder (a)

whose jurisdiction of residence on the records of Manulife as of a

specified date is other than Canada, the United States, Hong Kong or

the Philippines; or (b) which is a government or government agency; or

(c) who holds a Canadian Pension Policy, will receive cash in lieu of

Common Shares in an amount equal to the number of shares such

policyholder would otherwise have received multiplied by the price at

which the Common Shares are offered to the public in the IPO.

In addition, an Eligible Policyholder who is entitled to receive

Common Shares will be permitted to make a cash election in accordance

with the terms of the Plan of Demutualization and will receive the

value of his or her Common Shares in cash in accordance with the same

formula. The cash election may be reduced if the Board of Directors of

the Holding Company determines that such a reduction is in Manulife's

best interests. In the event that the IPO fails to close, the Eligible

Policyholder will receive the number of Common Shares he or she was

originally allocated.

Other Eligible Policyholders, namely owners of individual

retirement annuities, tax sheltered annuities, certain other policies

issued directly to plan participants in qualified pension or profit

sharing plans, or group policies issued in connection with plans

intending to qualify under section 403(a) of the Code that are not held

in trust, will receive policy credits equal in value to the shares

allocated to such Eligible Policyholders.

In no event will Manulife nor ManUSA exercise any discretion with

respect to voting on the Plan of Demutualization or with respect to any

election made by any Eligible Policyholder which is a Plan, nor will

Manulife and ManUSA provide ``investment advice'' as that term is

defined in 29 CFR 2510.3-2(c) with respect to any election made by such

Plan policyholder. In addition, no Plan will be required to pay any

fees or commissions in connection with the receipt of Common Shares.

As stated above, under both Canadian and Michigan law, a plan of

conversion must specify the consideration given to policyholders and it

must be approved by the Canadian Finance Minister and the Michigan

Insurance Commissioner. The Michigan Insurance Commissioner must find

that the plan is fair and equitable to the U.S. policyholders.

Moreover, the Canadian Finance Minister and the Michigan Insurance

Commissioner must approve all forms of consideration.

11. It is anticipated that Manulife will establish a Share Sales

Program to provide a convenient way for those Eligible Policyholders

who choose to sell their Common Shares subsequent to the

demutualization without having to establish an independent relationship

with an investment dealer, stock broker or other qualified

professional. The Share Sales Program will involve Common Shares being

sold through one or more of the stock exchanges on which the Common

Shares are listed for market prices that prevail at the time of the

sale. Although Manulife will not subsidize the costs of the Common

Shares, it is expected that participants in the Share Sales Program

will benefit from the bulk commission rates which Manulife has

negotiated with the participating brokers.

12. In the event the exemption has not been granted before the

effective date of the demutualization, Manulife may delay payment of

the consideration to Eligible Policyholders that are Plans and place

such consideration in an escrow or similar arrangement subject to terms

and conditions approved by the Superintendent of OSFI. Any such escrow

or arrangement will provide for the payment to Eligible Policyholders

of the consideration not later than the third anniversary date of the

demutualization. All costs and expenses associated with the escrow

arrangement will be borne by Manulife.

13. In summary, it is represented that the proposed transactions

will satisfy the statutory criteria for an exemption under section

408(a) of the Act because:

(a) The Plan of Demutualization, which is being implemented

pursuant to stringent procedural and substantive safeguards imposed

under Canadian and Michigan law, will not require any ongoing

supervision by the Department.

(b) One or more independent Plan fiduciaries will have an

opportunity to determine whether to vote to approve the Plan of

Demutualization and will be responsible for all such decisions.

(c) The proposed exemption will allow Eligible Policyholders that

are Plans to acquire Common Shares, cash or policy credits in exchange

for, and in extinguishment of, their membership interests in Manulife

and neither Manulife nor its affiliates will be paid any brokerage

commissions or fees in connection with the receipt of Common Shares.

(d) Neither Manulife nor ManUSA will exercise any discretion with

respect to voting on the Plan of Demutualization or with respect to any

election to be made by any Eligible Policyholder which is a Plan, nor

will they provide ``investment advice'' as that term is defined in 29

CFR 2510.3-2(c) with respect to any election made by such Plan

policyholder.

(e) The Plan of Demutualization will not change premiums or reduce

policy benefits, values, guarantees or other policy obligations of

Manulife to its policyholders and contractholders.

Notice to Interested Persons

Manulife will provide a copy of the proposed exemption to Eligible

Policyholders that are Plans, within 14 days following the publication

of the notice of pendency in the Federal Register. Such notice will be

provided to interested persons by first class mail and will include a

copy of the notice of

[[Page 39544]]

proposed exemption as published in the Federal Register as well as a

supplemental statement, as required pursuant to 20 CFR 2570.43(b)(2),

which shall inform interested persons of their right to comment on the

proposed exemption. Comments with respect to the notice of proposed

exemption are due within 44 days of the publication of this pendency

notice in the Federal Register.

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

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

General Information

The attention of interested persons is directed to the following:

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

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

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

person from certain other provisions of the Act and/or the Code,

including any prohibited transaction provisions to which the exemption

does not apply and the general fiduciary responsibility provisions of

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

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

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

accordance with section 404(a)(1)(b) of the act; nor does it affect the

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

for the exclusive benefit of the employees of the employer maintaining

the plan and their beneficiaries;

(2) Before an exemption may be granted under section 408(a) of the

Act and/or section 4975(c)(2) of the Code, the Department must find

that the exemption is administratively feasible, in the interests of

the plan and of its participants and beneficiaries and protective of

the rights of participants and beneficiaries of the plan;

(3) The proposed exemptions, if granted, will be supplemental to,

and not in derogation of, any other provisions of the Act and/or the

Code, including statutory or administrative exemptions and transitional

rules. Furthermore, the fact that a transaction is subject to an

administrative or statutory exemption is not dispositive of whether the

transaction is in fact a prohibited transaction; and

(4) The proposed exemptions, if granted, will be subject to the

express condition that the material facts and representations contained

in each application are true and complete and 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, DC, this 16th day of July, 1999.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, U.S. Department of Labor.

[FR Doc. 99-18616 Filed 7-21-99; 8:45 am]

BILLING CODE 4510-29-P