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

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

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

09708, et al.]

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

al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of individual exemptions.

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SUMMARY: This document contains exemptions issued by the Department of

Labor (the Department) from certain of the prohibited transaction

restrictions of the Employee Retirement Income Security Act of 1974

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

Notices were published in the Federal Register of the pendency

before the Department of proposals to grant such exemptions. The

notices set forth a summary of facts and representations contained in

each application for exemption and referred interested persons to the

respective applications for a complete statement of the facts and

representations. The applications have been available for public

inspection at

[[Page 42718]]

the Department in Washington, D.C. The notices also invited interested

persons to submit comments on the requested exemptions to the

Department. In addition the notices stated that any interested person

might submit a written request that a public hearing be held (where

appropriate). The applicants have represented that they have complied

with the requirements of the notification to interested persons. No

public comments and no requests for a hearing, unless otherwise stated,

were received by the Department.

The notices of proposed exemption were issued and the exemptions

are being granted solely by the Department because, effective December

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

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

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

of Labor.

Statutory Findings

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

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

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

the entire record, the Department makes the following findings:

(a) The exemptions are administratively feasible;

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

and beneficiaries; and

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

beneficiaries of the plans.

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

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

09708]

Exemption

The Department is granting an exemption under the authority of

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

accordance with the procedures set forth in 29 CFR Part 2570, Subpart B

(55 FR 32836, 32847, August 10, 1990.)

Part I--Exemption for Payment of Certain Fees to RREEF

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

the taxes imposed by section 4975 of the Code, by reason of section

4975(c)(1)(E) of the Code, shall not apply, effective as of (i) May 16,

1994, with respect to a single client, separate account established on

behalf of the Shell Pension Trust (the Shell Account), and (ii) the

date this final exemption is published in the Federal Register, with

respect to any single client, separate account (Single Client Account)

or any multiple client account (Multiple Client Account) formed on, or

after, such a date, to the payment of certain initial investment fees

(the Investment Fee), annual management fees based upon net operating

income (the Asset Management Fee), and performance fees (the

Performance Fee) to RREEF by employee benefit plans for which RREEF

provides investment management services (the Client Plans) 1

pursuant to an investment management agreement (the Agreement) entered

into between RREEF and the Client Plans either individually, through an

establishment (or amendment) of a Single Client Account, or

collectively as participants in a newly established Multiple Client

Account (collectively, the Accounts), provided that the conditions set

forth below in Part III are satisfied.

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\1\ The Client Plans (including employee benefit plans that may

become Client Plans in the future) consist of various pension plans

as defined in section 3(2) of the Act and other plans as defined in

section 4975(e)(1) of the Code with respect to which RREEF serves as

a trustee or an investment manager.

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Part II--Exemption for Investments in a Multiple Client Account

The restrictions of section 406(a)(1)(A) through (D) of the Act and

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

shall not apply to any investment by a Client Plan in a Multiple Client

Account managed by RREEF formed on, or after, the date the final

exemption is published in the Federal Register, provided that the

conditions set forth below in Part III are satisfied.

Part III--General Conditions

(a)(1) The investment of plan assets in a Single or Multiple Client

Account, including the terms and payment of any Investment Fee, Asset

Management Fee and Performance Fee (collectively; the Fees), shall be

approved in writing by a fiduciary of a Client Plan which is

independent of RREEF and its affiliates (the Independent Fiduciary).

(2) For purposes of the Fees, the fair market value of the

Accounts' real property assets (other than in the case of actual sales)

will be based on appraisals prepared by independent qualified

appraisers that are Members of the Appraisal Institute (MAI

Appraisers). In this regard, every agreement by which an appraiser is

retained will include the appraiser's representation that: (1) Its

ultimate client is the Account and its underlying Client Plan (and non-

Plan) investors, and (2) it will perform its duties in the interest of

such Account (and investors). In addition, following the date this

final exemption is published in the Federal Register, every agreement

shall advise the appraiser that it owes a professional obligation to

the Account when making an appraisal for properties held by the

Account.

(b) The terms of any investment in an Account and of the Fees,

shall be at least as favorable to the Client Plans as those obtainable

in arm's-length transactions between unrelated parties.

(c) At the time any Account is established (or amended) and at the

time of any subsequent investment of assets (including the reinvestment

of assets) in such Account:

(1) Each Client Plan in a Single Client Account shall have total

net assets with a value in excess of $100 million, and each Client Plan

that is an investor in a Multiple Client Account shall have total net

assets with a value in excess of $50 million; and provided that

seventy-five percent (75%) or more of the units of beneficial interests

in a Multiple Client Account are held by Client Plans or other

investors having total assets of at least $100 million. In addition, 50

percent (50%) or more of the Client Plans investing in a Multiple

Client Account shall have assets of at least $100 million. A group of

Client Plans maintained by a single employer or controlled group of

employers, any of which individually has assets of less than $100

million, will be counted as a single Client Plan if the decision to

invest in the Account (or the decision to make investments in the

Account available as an option for an individually directed account) is

made by a fiduciary other than RREEF, who exercises such discretion

with respect to Client Plan assets in excess of $100 million.

(2) No Client Plan shall invest, in the aggregate, more than 5% of

its total assets in any Account or more than 10% of its total assets in

all Accounts established by RREEF.

(d) Prior to making an investment in any Account (or amending an

existing Account), the Independent Fiduciary of each Client Plan

investing in an Account shall have received offering materials from

RREEF which disclose all material facts concerning the purpose,

structure, and operation of the Account, including any Fee arrangements

(provided that, in the case of an amendment to the Fee arrangements,

such materials need address only the amended fees and any other

material change to the Account's original offering materials).

[[Page 42719]]

(e) With respect to its ongoing participation in an Account, each

Client Plan shall receive the following written information from RREEF:

(1) Audited financial statements of the Account prepared by

independent public accountants selected by RREEF no later than 90 days

after the end of the fiscal year of the Account;

(2) Quarterly and annual reports prepared by RREEF relating to the

overall financial position and operating results of the Account and, in

the case of a Multiple Client Account, the value of each Client Plan's

interest in the Account. Each such report shall include a statement

regarding the amount of fees paid to RREEF during the period covered by

such report;

(3) Periodic appraisals (as agreed upon with the Client Plans)

indicating the fair market value of the Account's assets as established

by an MAI appraiser independent of RREEF and its affiliates. In the

case of any appraisal that will serve as the basis for any ``deemed

sale'' of such property for purposes of calculating the Performance Fee

payable to RREEF (as discussed in paragraph (j) below), then:

(i) In the case of any Single Client Account, such MAI appraiser

shall be either (A) selected by the Independent Fiduciary of the Client

Plan subject to the affirmative approval of RREEF, or (B) selected by

RREEF subject to approval by the Independent Fiduciary of the Client

Plan;

(ii) In the case of any Multiple Client Account, such MAI appraiser

shall be approved in advance by the Responsible Independent Fiduciaries

(as defined in Part IV(e) below) owning a majority of the interests in

the Accounts, determined according to the latest valuation of the

Account's assets performed no more than 12 months prior to such

appraisal, which approval may be by written notice and deemed consent

by such Fiduciaries' failure to object to the appraiser within 30 days

of such notice; and

(iii) In either case, the selected MAI appraiser shall acknowledge

in writing that the Client Plan(s) and other investors (in the case of

a Multiple Client Account), rather than RREEF, is (are) its clients,

and that in performing its services for the Account it shall act in the

sole interest of such Client Plan(s) and other investors. In addition,

following the date this final exemption is published in the Federal

Register, every appraiser selected shall acknowledge that it owes a

professional obligation to the Client Plan(s) and other investors in

the Account in performing its services as an appraiser for properties

in the Account. If an MAI appraiser selected by RREEF, or an appraisal

performed by a previously approved appraiser, is rejected by the

Independent Fiduciary for a Single Client Account or the Responsible

Independent Fiduciaries for the Multiple Client Account, determined

according to the latest valuation of the Account's assets performed no

more than 12 months prior to such appraisal, the fair market value of

the assets for any ``deemed sale'', relating to the payment of a

Performance Fee (as described in paragraphs (i) and (j) below) shall be

determined as follows: (A) the Client Plans shall appoint a second

appraiser and, if the value established for the property does not

deviate by more than 10% (or such lesser amount as may be agreed upon

between RREEF and the Client Plan(s)), then the two appraisals shall be

averaged; (B) if the values differ by more than 10%, then the two

appraisers shall select a third appraiser, that is independent of RREEF

and its affiliates, who will attempt to mediate the difference; (C) if

the third appraiser can cause the first two to reach an agreement on a

value, that figure shall be used; however, (D) if no agreement can be

reached, the third appraiser shall determine the value based on

procedures set out in the governing agreements of the Account or, if no

such procedures are established, shall conduct its own appraisal and

the two closest of the three shall be averaged;

(4) In the case of any Multiple Client Account, a list of all other

investors in the Account;

(5) Annual operating and capital budgets with respect to the

Account, to be distributed to a Client Plan within 60 days prior to the

beginning of the fiscal year to which such budgets relate; and

(6) An explanation of any material deviation from the budgets

previously provided to such Client Plan for the prior year.

(f) The total fees paid to RREEF shall constitute no more than

``reasonable compensation'' within the meaning of section 408(b)(2) of

the Act.

(g) The Investment Fee shall be equal to a specified percentage of

the net value of the Client Plan assets allocated to the Account which

shall be payable either:

(1) At the time assets are deposited (or deemed deposited in the

case of reinvestment of assets) in the Account; or

(2) In periodic installments, the amount (as a percentage of the

aggregate Investment Fee) and timing of which have been specified in

advance based on the percentage of the Client Plan's assets invested in

real property as of the payment date; provided that (i) the installment

period is no less than three months, and (ii) if the percentage of the

Client Plan assets which have actually been invested by a payment date

is less than the percentage required for the aggregate Investment Fee

to be paid in full through that date (both determined on a cumulative

basis), the Investment Fee paid on such a date shall be reduced by the

amount necessary to cause the percentage of the aggregate Investment

Fee paid to equal only the percentage of the Client Plan assets

actually invested by that date. The unpaid portion of such Investment

Fee shall be deferred to and payable on a cumulative basis on the next

scheduled payment date (subject to the percentage limitation described

in the preceding sentence).

(h) The Asset Management Fee shall be payable for each quarter from

the net operating income (NOI) of the Account. The amount of the Asset

Management Fee, expressed as a percentage of the NOI of the Account,

shall be established by the Agreement and agreed to by the Independent

Fiduciaries of the Client Plans:

(1) The Asset Management Fee for any Account will be calculated as

follows. The Asset Management Fee for a specific Account real property

will be based solely on items of operating income and expense that are

identified as line items on an operating budget for such property

disclosed to each Client Plan that participates in the Account. The

disclosures have to be made at least 30 days in advance of the fiscal

year to which the budget relates, and approved in the manner described

in (2) below;

(2) Each Client Plan must provide affirmative approval of the

operating budget. Specifically, when the proposed budget (or any

material deviation therefrom) is sent to a Client Plan, it will be

accompanied by a written notice that the Client Plan may object to the

budget or any specific line item therein, for purposes of calculating

the Asset Management Fees for the next fiscal year. The written notice

will contain a statement that affirmative approval of the budget is

required prior to the end of the 30-day period following such

disclosure. In the case of a Multiple Client Account, affirmative

approval by a majority of investors (by interest) will constitute

approval of the proposed budget (or deviation); and

(3) In the event of any subsequent decrease in previously approved

budgeted operating expenses for the fiscal year in excess of the limits

previously described (i.e., no more than 15% for any line item or 5%

overall), then the resulting increase in NOI (i.e., over and above the

allowable deviation)

[[Page 42720]]

will not be taken into account in calculating RREEF's management fee

unless affirmative approval for the payment of such fee is obtained in

writing from the Independent Fiduciary for the Client Plan in the

Single Client Account or the Responsible Independent Fiduciaries for

the Multiple Client Account.

(i) In the case of any Multiple Client Account, the Performance Fee

shall be payable after the Client Plan has received distributions from

the Account in excess of an amount equal to 100% of its invested

capital plus a pre-specified annual compounded cumulative rate of

return (the Threshold Amount or Hurdle Rate). However, in the case of

RREEF's removal or resignation, RREEF shall be entitled to receive a

Performance Fee payable either at the time of removal or, in the event

of RREEF's resignation, upon sale of the assets to which the

Performance Fee is allocable or upon termination of the Account as the

case may be, subject to the requirements of paragraph (l) below, as

determined by a deemed distribution of the assets of the Account based

on an assumed sale of such assets at their fair market value (in

accordance with independent appraisals), only to the extent that the

Client Plan would receive deemed distributions from the Account in

excess of an amount equal to the Threshold Amount at the time of

RREEF's removal or resignation. Both the Threshold Amount and the

amount of the Performance Fee, expressed as a percentage of the net

proceeds from a capital event distributed (or deemed distributed) from

the Account in excess of the Threshold Amount, shall be established by

the Agreement and agreed to by the Independent Fiduciaries of the

Client Plans.

(j) In the case of any Single Client Account, the Performance Fee

shall be determined and paid either: (1) in the same manner as in the

case of a Multiple Client Account, as described in paragraph (i) above;

or (2) at the end of any pre-specified period of not less than one

year, provided that such Fee is based upon the sum of all actual

distributions from the Account during such period, plus deemed

distributions of the assets of the Account based on an assumed sale of

all such assets at their fair market value as of the end of such period

(in accordance with independent appraisals performed within 12 months

of the calculation) which are calculated to be in excess of the

Threshold Amount or the Hurdle Rate through the end of such period. For

this purpose, the Performance Fee measuring period shall be established

by the Agreement and agreed to by the Independent Fiduciary of the

Client Plan, provided that such period is not less than one year. In

addition, RREEF shall provide notice to the Client Plan within 60 days

of each Performance Fee calculation for a Single Client Account that

the Independent Fiduciary of the Client Plan has the right to request

updated appraisals of the properties held by the Account if such

Fiduciary determines that the existing independent appraisals

(performed within 12 months of the calculation) are no longer

sufficient.

(k) The Threshold Amount for any Performance Fee shall include as

least a minimum rate of return to the Client Plan, as defined below in

Part IV, paragraph (f).

(l) In the event RREEF resigns as investment manager for an

Account, the Performance Fee shall be calculated at the time of

resignation as described above in paragraph (i) and allocated among

each property, based on the appraised value of such property in

relationship to the total appraised value of the Account. Each amount

arrived at through this calculation shall be multiplied by a fraction,

the numerator of which will be the actual sales price received by the

Account on subsequent disposition of the property (or in the case of a

property which has not been sold prior to the termination of a Multiple

Client Account, the appraised value of the property as of the

termination date), and the denominator of which will be the appraised

value of the property which was used in connection with determining the

Performance Fee at the time of resignation, provided that this fraction

shall never exceed 1.0. The resulting amount for each property shall be

the Performance Fee payable to RREEF upon the sale of such property or

termination of the Multiple Client Account, as the case may be.

(m) In cases where RREEF does have discretion to reinvest proceeds

from capital events, the reinvested amount shall not be treated as a

new contribution of capital by the Client Plan for purposes of the

Investment Fee, as described above in paragraph (g), or having been

distributed for purposes of the payment of Performance Fee as described

above in paragraphs (i) and (j);

(n) RREEF or its affiliates shall maintain, for a period of six

years, the records necessary to enable the persons described in

paragraph (o) of this Part III to determine whether the conditions of

this exemption have been met, except that: (1) a prohibited transaction

will not be considered to have occurred if, due to circumstances beyond

the control of RREEF or its affiliates, the records are lost or

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

interest, other than RREEF, shall be subject to the civil penalty that

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

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

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

below.

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

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

referred to in paragraph (n) of this Part III shall be unconditionally

available at their customary location for examination during normal

business hours by:

(i) Any duly authorized employee or representative of the

Department or the Internal Revenue Service;

(ii) Any fiduciary of a Client Plan or any duly authorized employee

or representative of such fiduciary;

(iii) Any contributing employer to a Client Plan or any duly

authorized employee or representative of such employer; and

(iv) Any participant or beneficiary of a Client Plan or any duly

authorized employee or representative of such participant or

beneficiary;

(2) None of the persons described above in paragraph (o)(1)(ii)-

(iv) shall be authorized to examine the trade secrets of RREEF and its

affiliates or any commercial or financial information which is

privileged or confidential.

(p) RREEF shall provide a copy of the proposed exemption and a copy

of the final exemption to all Client Plans that invest in any Single

Client Account or any Multiple Client Account formed on, or after, the

date the final exemption is published in the Federal Register.

Part IV--Definitions

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

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

intermediaries, controlling, controlled by, or under common control

with the person;

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

such person; and

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

officer, director, partner or employee.

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

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

individual.

(c) The term ``management services'' means:

(1) Development of an investment strategy for the Account and

identification of suitable real estate-related investments;

[[Page 42721]]

(2) Directing the investments of the assets of the Account,

including the determination of the structure of each investment, the

negotiation of its terms and conditions and the performance of all

requisite due diligence;

(3) Determination of the timing of, and directing, the disposition

of assets of the Account and directing the liquidation of the Account

upon termination;

(4) Administration of the overall operation of the investments of

the Account, including all applicable leasing, management, financing

and capital improvement decisions;

(5) Establishing and maintaining accounting records of the Account

and distributing reports to Client Plans as described in Part III; and

(6) Selecting and directing all service providers of ancillary

services as defined in this Part IV; provided, however, that some or

all of the foregoing management services may be subject to the final

discretion of the Independent Fiduciary(ies) for the Client Plan(s).

(d) The term ``ancillary services'' means:

(1) Legal services;

(2) Services of architects, designers, engineers, construction

managers, hazardous materials consultants, contractors, leasing agents,

real estate brokers, and others in connection with the acquisition,

construction, improvement, management and disposition of investments in

real property;

(3) Insurance brokerage and consultation services;

(4) Services of independent auditors and accountants in connection

with auditing the books and records of the Accounts and preparing tax

returns;

(5) Appraisal and mortgage brokerage services; and

(6) Services for the development of income-producing real property.

(e) The term ``Independent Fiduciary'' with respect to any Client

Plan means a fiduciary (including an in-house fiduciary) independent of

RREEF and its affiliates. With respect to a Multiple Client Account,

the terms ``Independent Fiduciary'' or ``Responsible Independent

Fiduciaries'' mean the Independent Fiduciaries of the Client Plans

invested in the Account and other authorized persons acting for

investors in the Account which are not employee benefit plans as

defined under section 3(3) of ERISA (such as governmental plans,

university endowment funds, etc.) that are independent of RREEF and its

affiliates, and that collectively hold more than 50% of the interests

in the Account.

(f) The terms ``Threshold Amount'' or ``Hurdle Rate'' mean, with

respect to any Performance Fee, an amount which equals all of a Client

Plan's capital invested in an Account plus a pre-specified annual

compounded cumulative rate of return that is at least a minimum rate of

return determined as follows:

(1) A ``floating'' or non-fixed rate which is at least equal to the

lesser of seven percent, or the rate of change in the consumer price

index (CPI), during the period from the deposit of the Client Plan's

assets into the Account until the determination date; or

(2) A fixed rate which is at least equal to the lesser of seven

percent or the average rate of change in the CPI over some period of

time specified in the Agreement, which shall not exceed 10 years.

(g) The terms ``Net Operating Income'' or ``NOI'' means all

operating income of the Account (i.e., rents, interest, and other

income from day-to-day investment activities of the Account) less

operating expenses, determined on an accrual basis in accordance with

generally accepted accounting principles, but without regard to

depreciation (or other non-cash) expense and capital expenditures and

without regard to payments of interest and principal with respect to

any acquisition indebtedness relating to the property.

(h) The term ``Net Proceeds of a Capital Event'' means all proceeds

from capital events of an Account (i.e., sales or non-recourse

refinances of real property investments owned by the Account) less

repayment of debt with respect to such property, closing expenses paid,

and reasonable reserves established in connection therewith, whether

such reserves are for repayment of existing or anticipated obligations

or for contingent liabilities.

EFFECTIVE DATE: This exemption is effective as of (i) May 16, 1994,

with respect to the Shell Account, and (ii) the date this final

exemption is published in the Federal Register, with respect to any

Single Client Account and any Multiple Client Account formed on, or

after, such date.

For a more complete statement of the facts and representations

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

the notice of proposed exemption (the Notice) published on June 3, 1999

at 64 FR 29896.

Written Comments

The Department received one written comment (the Comment) with

respect to the Notice and no requests for a public hearing. The Comment

was filed by RREEF and generally requests clarifications and

modifications to the Notice. Set forth below in section I is RREEF's

discussion concerning RREEF's notification of interested parties.

Section II discusses those aspects of the Comment which relate to the

language of the final exemption (the Exemption). In addition, section

III below discusses those aspects of the Comment which relate to the

Summary of Facts and Representations (the Summary) contained in the

Notice.

I. Discussion Concerning Notification of Interested Persons

RREEF represents that RREEF notified all interested parties of the

Notice by First Class Mail on June 8, 1999, and informed such persons

that they would have thirty-one (31) days from the date of mailing

(i.e., 36 days from the date of the Notice's publication in the Federal

Register) to file comments with the Department. Although the Notice

stated that the comment period would be sixty (60) days from the date

of publication in the Federal Register, it is RREEF's understanding

that the Department's purpose in establishing the 60-day period was to

give RREEF up to 30 days to mail the Notices and to give interested

parties at least thirty (30) days after such mailing to comment. RREEF,

however, did not require the initial 30-day period to mail the Notices

and, after discussion with the Department staff, shortened the overall

time period to reflect the actual date of mailing. All interested

parties retained the 30-day comment period and were advised by RREEF

that the correct comment deadline date would be July 9, 1999.

Notwithstanding the foregoing, RREEF also had an understanding with

the Department that if comments from the general public were received

within a reasonable time after July 9, 1999, the Department would

require RREEF to respond. However, no such comments were received.

The Department acknowledges RREEF's modification of the

notification of interested persons, and, based upon the representations

made by RREEF's counsel, has determined that the notice requirements

contained in the Department's exemption procedures (see 29 CFR 2570.43)

have been met.

II. Discussion Concerning the Exemption

1. Part I of the Exemption states, in relevant part, that the

restrictions of section 406(b)(1) and (b)(2) of the Act and the taxes

imposed by section 4975 of the Code, by reason of section

[[Page 42722]]

4975(c)(1)(E) of the Code, shall not apply, as of the date the final

exemption is published in the Federal Register, to the subject

transactions ``* * * with respect to any single client, separate

account (Single Client Account) or any multiple Client account

(Multiple Client Account) formed on, or after, such a date * * *'' (see

(ii) of Part I). RREEF wishes to confirm that the phrase ``* * * formed

on, or after, such a date * * *'' refers only to Multiple Client

Accounts.

The Department confirms RREEF's understanding of this phrase.

2. Under Part III(i) of the Exemption, a Performance Fee shall be

payable to RREEF after the Client Plan has received distributions from

the Account in excess of the applicable Threshold Amount. Part III(i)

also discusses the possible payment of a Performance Fee to RREEF in

the case of RREEF's removal or resignation, as determined by a deemed

distribution of the assets of the Account based on an assumed sale of

such assets at their market value, but only to the extent that the

Client Plan would receive distributions from the Account in excess of

an amount equal to the Threshold Amount at the time of RREEF's removal

or resignation. In this regard, the Comment relates to the phrase in

Part III(i) which states, in relevant part, that ``* * * the Client

Plan would receive distributions from the Account in excess of an

amount equal to the Threshold Amount at the time of RREEF's removal or

resignation.'' RREEF suggests adding the word ``deemed'' to this phrase

so that Part III(i) reads, in relevant part, ``* * * the Client Plan

would receive deemed distributions from the Account * * *'' [Emphasis

added].

The Department acknowledges RREEF's clarification, and has modified

the language of Part III(i) of the Exemption accordingly.

3. Part IV(f) of the Exemption states, in relevant part, that ``the

terms ``Threshold Amount'' or ``Hurdle Rate'' mean, with respect to any

Performance Fee, an amount which equals all of a Client Plan's capital

invested in an Account plus a pre-specified annual compounded

cumulative rate of return * * *'' RREEF wishes to confirm that it may

use a Hurdle Rate that is compounded more frequently than annually,

e.g., quarterly or monthly, if so negotiated with the Client Plans.

2

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\2\ RREEF also notes references to annual compounding in

Paragraphs 5 and 12 of the Summary.

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The Department acknowledges RREEF's confirmation.

III. Discussion Concerning the Summary

In the Comment, RREEF wishes to clarify the description of the

Performance Fees in the Summary as applied to Single Client Accounts.

RREEF notes that there is a substantial difference between the proposed

Performance Fee calculation as applied to Multiple Client Accounts

(described in Part III(i) of the Notice) and the Fee calculation

applicable to Single Client Accounts (described in Part III(j) of the

Notice). RREEF states that Part III(i) clearly reflects that although

distributions from operations serve to reduce the Threshold Amount with

respect to Multiple Client Accounts, once the Threshold Amount is

reduced to zero the Performance Fee for Multiple Client Accounts is

payable only with respect to subsequent distributions from capital

events. However, Part III(j) of the Exemption provides that the

Performance Fee for Single Client Accounts may be paid ``* * * based on

the sum of all actual distributions from the Account during such

period, plus deemed distributions * * *.''

RREEF represents that the difference in the language was

intentional. In the case of a Multiple Client Account, since periodic

Performance Fees are not available under the Exemption, RREEF states

that it is highly unlikely that any Performance Fee will be calculated

and paid until the Account has reached the end of its term and is in

liquidation.

In contrast, RREEF states that distributions from any source,

including operating revenues, would continue to enter into the

Performance Fee calculation for Single Client Accounts even after the

Threshold Amount is reduced to zero (as reflected in the language of

Part III(j) of the Exemption).

Accordingly, RREEF wishes to make several clarifications to the

information contained in the Summary.

1. Paragraph 5(iii) of the Summary contains a description of the

Performance Fee. RREEF requests that the word ``certain'' be inserted

into Paragraph 5(iii) and that the words ``* * * of capital proceeds''

be deleted such that it reads, in relevant part, ``* * * the

Performance Fee, a fee charged upon certain actual or deemed

distributions from the Account in excess of a Client Plan's invested

capital * * *.'' [Emphasis added].

2. RREEF requests that the phrase ``* * * will not be payable

until'' be substituted for ``will be payable with respect to'' in the

third section of Paragraph 13 of the Notice, such that the sentence

reads, in relevant part, ``Because the Threshold Amount has been

reduced to $0 at year 6, an additional Performance Fee will not be

payable until any subsequent distribution of cash from a capital event

* * *.'' [Emphasis added].

3. RREEF requests that the word ``the'' be deleted in the last

sentence of Paragraph 14 of the Notice, and that the sentence should

read ``* * * Such proceeds, net of these expenses and reserves,

generally will be distributable net proceeds of capital events upon

which the Performance Fee may be payable.''

4. RREEF states it wishes to clarify for the record that because

the calculation of the Shell Account's Performance Fee will be done

retroactively, such Fee will be based solely on actual property sales.

Accordingly, all references in the Summary to appraisals and appraisers

with respect to the Shell Account are irrelevant.

5. RREEF notes that the second section of Paragraph 1 of the

Summary requires certain clarifications. RREEF wishes to clarify this

information as follows (RREEF's modifications are in italic):

``On January 27, 1998, substantially all of the assets of RREEF

America L.L.C. and its affiliate, RREEF Corporation (collectively,

RREEF), were acquired by RoProperty Services, B.V. (RoProperty), a

major Dutch investment advisory firm, now known as RoProperty

Investment Management, N.V. As a result, the assets of RREEF's advisory

entities were combined into a newly created Delaware limited liability

company, which continues to use the name ``RREEF America L.L.C.'' RREEF

operates as an autonomous entity which continues to provide investment

management services, and its affiliate, RREEF Management Company,

continues to provide property management services.'' [Emphasis added].

6. Paragraph 3 of the Summary contains footnote 2 which states:

``* * * The applicant represents that in some instances a Client

Plan's investment in a Multiple Client Account that is a common or

collective trust fund maintained by a bank would be exempt from the

restrictions of section 406(a) of the Act by reason of section

408(b)(8). The Department expresses no opinion herein whether all

the conditions of section 408(b)(8) will be satisfied in such

transactions.''

RREEF states that this footnote, while legally accurate, should be

deleted because it is inapplicable to RREEF since RREEF is not a bank.

7. RREEF requests that in paragraph 3(f) of the Summary, the phrase

``also has'' be changed to ``also may have'' such that the modified

paragraph 3(f) reads as follows:

[[Page 42723]]

``RREEF also may have complete discretion in the selection and

direction of the ancillary services (Ancillary Services) defined in

Part IV, paragraph (d) above.'' [Emphasis added].

8. RREEF wishes to clarify certain information contained in

Paragraph 7 of the Summary, which discusses the services for which

RREEF receives an Asset Management Fee. Specifically, RREEF makes the

following points:

(a) The Asset Management Fee is not intended to compensate RREEF

for selection of properties and other assets for acquisition by an

Account; this service is effectively covered by the Investment Fee.

(b) The Asset Management Fee does not compensate RREEF for

``performance'' (as stated therein) of property management and leasing

services, because such services are provided by separate parties for

separate compensation. However, this Fee does compensate RREEF for

``supervising and overseeing the performance'' of such services,

including the hiring of those separate parties.

(c) RREEF states that the phrase ``* * * and maintaining'' should

be added to section (v) of paragraph 7 so that the modified section

reads as follows: ``establishing and maintaining tax-exempt title-

holding corporations under section 501(a) of the Code for the

properties''. [Emphasis added].

(d) RREEF also states that the Asset Management Fee also covers

supervising the preparation and filing of tax (and other) reports.

9. RREEF also notes that paragraph 8 of the Summary states that

RREEF's current property management agreements permit no more than a

15% variance in individual budget line items and 5% overall. However,

RREEF states that these figures were used as an example and were not

intended to be fixed at such percentages for all property management

agreements. In this regard, it is possible that a Client Plan may

negotiate a lesser variance in the future, or a lesser variance for a

single line item.

RREEF also notes that at the end of the second paragraph in

paragraph 8 of the Summary, the last two sentences should be deleted

and following two sentences substituted in their place:

``Property management agreements used by RREEF permit no more than

a 15% variance between any individual line item expense in the

operating budget and actual expenditures, without the Client's

approval. In addition, without the Client's approval, actual

expenditures for any year typically may not exceed budgeted expenses by

more than 5% in the aggregate.'' [Emphasis added].

In this regard, the Department has also modified the language of

paragraph (h)(3) of Part III as follows:

``* * * (3) In the event of any subsequent decrease in

previously approved budgeted operating expenses for the fiscal year

in excess of the limits previously described (i.e., no more than 15%

for any line item, or 5% overall), then the resulting increase in

NOI * * *.'' [Emphasis added].

10. RREEF also requests that in the last sentence of Paragraph 12

of the Summary, the word ``by'' be replaced by the word ``to'' so that

the sentence reads, in relevant part: * * * the Threshold Amount would

be increased to the full amount of the deemed distribution * * *''

[Emphasis added.]

11. RREEF also requests that the phrase ``* * * either the Client

Plan(s) or'' be added at the beginning of last sentence of paragraph 16

of the Summary to clarify that the discretion used by the appropriate

fiduciaries for an Account, as discussed therein, will be exercised by

someone other than RREEF. Therefore, the revised sentence should have

read as follows:

``Either the Client Plan(s) or the replacement investment

manager of the Account (unrelated to RREEF) will have discretion as

to when the property is sold or when the Account is terminated.''

[Emphasis added].

The Department acknowledges all of RREEF's clarifications to the

information contained in the Summary, as discussed above, as well as

certain other minor discussions and information contained in the

Comment.

Accordingly, after giving full consideration to the entire record,

including the Comment, the Department has decided to grant the

exemption subject as modified herein. The Comment has been included as

part of the public record of the exemption application.

Interested persons are invited to review the complete exemption

file, which is available for public inspection in the Public Disclosure

Room of the Pension and Benefits Administration, Room N-5638, U.S.

Department of Labor, 200 Constitution Avenue, NW., Washington DC 20210.

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

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

General Motors Hourly Rate Employees Pension Plan, General Motors

Retirement Program for Salaried Employees, Saturn Individual

Retirement Plan for Represented Team Members, Saturn Personal

Choices Retirement Plan for Non-Represented Team Members,

Employees' Retirement Plan for GMAC Mortgage Corporation, Delphi

Automotive Systems Hourly Rate Employees Pension Plan, Delphi

Automotive Systems Retirement Program for Salaried Employees

(collectively, the Plans) Located in New York, New York

[Prohibited Transaction Exemption 99-33; Exemption Application Nos. D-

10473 through D-10476]

Exemption

Part I--Covered Transactions

The restrictions of section 406(a)(1)(A) through (D) of the Act and

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

section 4975(c)(1)(A) through (D) of the Code, shall not apply

effective December 11, 1998, to a transaction between AEW Industrial,

L.L.C. (the LLC), an entity which currently holds ``plan assets'' of

the Plans, or any subsidiary of the LLC (as defined in Part IV(d)

below) which may hold ``plan assets'' of the Plans in the future, as a

result of investments made by the Plans in the LLC or any subsidiary

through the First Plaza Group Trust (the Trust), and a party in

interest with respect to any of the Plans, provided that the Specific

Conditions set forth below in Part II and the General Conditions set

forth in Part III are met:

Part II--Specific Conditions

(a) In the case of a transaction by the LLC or any subsidiary that

involves the acquisition, financing, or disposition of any real

property asset, the terms of the transaction are negotiated on behalf

of the Plan by AEW Capital Management, L.P. or a successor thereto

(AEW), under the authority and general direction of General Motors

Investment Management Corporation (GMIMCo), a wholly-owned subsidiary

of General Motors Corporation (GM), and GMIMCo makes the decision on

behalf of the Plan to enter into the transaction.

Notwithstanding the foregoing, a transaction involving an amount of

$5 million or more, which has been negotiated on behalf of the Plans by

AEW and approved by GMIMCo in the manner described above, will not fail

to meet the requirements of this Part II(a) solely because GM or its

designee retains the right to veto or approve such transaction;

[[Page 42724]]

(b) In the case of any transaction by the LLC or any subsidiary

that does not involve acquisitions, financings or dispositions of real

property assets, the terms of the transaction are negotiated on behalf

of the Plans by AEW, under the authority and general direction of

GMIMCo, and either AEW or a property manager acting in accordance with

written guidelines or business plans (including budgets), adopted with

the approval of GMIMCo, makes the decision on behalf of the Plans to

enter into the transaction. Notwithstanding the foregoing, a

transaction involving an amount of $5 million or more, which has been

negotiated on behalf of the Plans in accordance with the foregoing,

will not fail to meet the requirements of this Part II(b) solely

because GM or its designee retains the right to veto or approve such

transaction;

(c) The transaction is not described in--

(1) Prohibited Transaction Exemption 81-6 (46 FR 7527, January 23,

1981), relating to securities lending arrangements,

(2) Prohibited Transaction Exemption 83-1 (48 FR 895, January 7,

1983), relating to acquisitions by plans of interests in mortgage

pools, or

(3) Prohibited Transaction Exemption 88-59 (53 FR 24811; June 30,

1988), relating to certain mortgage financing arrangements;

(d) The transaction is not part of an agreement, arrangement or

understanding designed to benefit a party in interest with respect to

any of the Plans;

(e) At the time the transaction is entered into, and at the time of

any subsequent renewal or modification thereof that requires the

consent of GMIMCo, GM, or AEW the terms of the transaction are at least

as favorable to the Plans as the terms generally available in arm's-

length transactions between unrelated parties;

(f) The party in interest dealing with the LLC: (1) is a party in

interest with respect to a Plan (including a fiduciary) solely by

reason of providing services to the Plan, or solely by reason of a

relationship to a service provider described in section

3(14)(F),(G),(H) or (I) of the Act; and (2) does not have discretionary

authority or control with respect to the investment of the Plan's

assets in the Trust or the LLC, and does not render investment advice,

within the meaning of 29 CFR 2510.3-21(c), with respect to the

investment of those assets in the Trust or the LLC;

(g) The party in interest dealing with the LLC is neither GMIMCo or

AEW nor a person ``related'' to GMIMCo or AEW within the meaning of

Part IV(c) below;

(h) GMIMCo adopts written policies and procedures that are designed

to assure compliance with the conditions of this exemption; and

(i) An independent auditor, who has appropriate technical training

or experience and proficiency with the fiduciary responsibility

provisions of the Act, and who so represents in writing, conducts an

exemption audit, as defined in Part IV(f) below, on an annual basis.

Following completion of the exemption audit, the auditor issues a

written report to each Plan representing its specific findings

regarding the level of compliance with the policies and procedure

adopted by GMIMCo in accordance with Part II(h) above.

Part III--General Conditions

(a) At all times during the term of this exemption (if granted),

GMIMCo shall be--

(1) A direct or indirect wholly owned subsidiary of GM, and

(2) An investment adviser registered under the Investment Advisers

Act of 1940 that, as of the last day of its most recent fiscal year,

has under its management and control total assets attributable to Plans

maintained by GM or its affiliates (as defined in Part IV(a) of this

exemption) in excess of $50 million. In addition, Plans maintained by

affiliates of GMIMCo must have, as of the last day of each plan's

reporting year, aggregate assets of at least $250 million;

(b) AEW or any successor, as investment manager for assets held by

the LLC, meets the conditions for a ``qualified professional asset

manager'' (QPAM) as set forth in section V(a) of Prohibited Transaction

Class Exemption 84-14 (49 FR 9494, March 13, 1984);

(c) AEW and GMIMCo, or their affiliates, shall maintain, for a

period of six years from the date of each transaction described above,

the records necessary to enable the persons described below in Part

III(d)(1) to determine whether the conditions of this exemption have

been met, except that (1) a prohibited transaction will not be deemed

to have occurred if, due to circumstances beyond the control of AEW or

GMIMCo, or their affiliates, the records are lost or destroyed prior to

the end of the six-year period, and (2) no party in interest, other

than AEW or GMIMCo, shall be subject to the civil penalty which may be

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

sections 4975 (a) and (b) of the Code, if the records are not available

for examination as required by section (d) below; and

(d)(1) Except as provided in subsection (2) of this section (d),

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

section 504 of the Act, the records referred to in section (c) of this

Part III shall be made unconditionally available by GMIMCo or AEW, at

the customary location for the maintenance and/or retention of such

records, for examination during normal business hours by:

(A) Any duly authorized employee or representative of the

Department of Labor or the Internal Revenue Service;

(B) The persons described in Part II(i) of this exemption (relating

to an independent audit of covered transactions as discussed therein);

and

(C) Any fiduciary of the Plans or the Trust;

(2) None of the persons described in subsections (1)(B) and (C) of

this section (d) shall be authorized to examine trade secrets of AEW or

GMIMCo, or commercial or financial information which is privileged or

confidential in nature.

Part IV--Definitions

For purposes of this exemption:

(a) ``Affiliate'' of GM means a member of either (1) a controlled

group of corporations (as defined in section 414(b) of the Code) of

which GM is a member, or (2) a group of trades or businesses under

common control (as defined in section 414(c) of the Code) of which GM

is a member; provided that ``50 percent'' shall be substituted for ``80

percent'' wherever ``80 percent'' appears in Code section 414(b) or

414(c) or the regulations thereunder.

(b) ``Party in interest'' means a person described in section 3(14)

of the Act and includes a ``disqualified person'' as defined in section

4975(e)(2) of the Code.

(c) GMIMCo or AEW are ``related'' to a party in interest with

respect to a Plan for purposes of this exemption if the party in

interest (or a person controlling or controlled by the party in

interest) owns a five percent (5%) or more interest in GMIMCo or AEW,

or if GMIMCo or AEW (or a person controlling or controlled by GMIMCo or

AEW) owns a five percent (5%) or more interest in the party in

interest. For purposes of this definition:

(1) ``Interest'' means with respect to ownership of an entity:

(A) The combined voting power of all classes of stock entitled to

vote, or the total value of the shares of all classes of stock of the

entity, if the entity is a corporation;

(B) The capital interest, or the profits interest of the entity, if

the entity is a partnership; or

[[Page 42725]]

(C) The beneficial interest of the entity, if the entity is a trust

or unincorporated enterprise;

(2) A person is considered to own an interest held in any capacity

if the person has or shares the authority--

(A) To exercise any voting rights or to direct some other person to

exercise the voting rights relating to such interest, or

(B) To dispose or to direct the disposition of such interest; and

(3) ``Control'' means the power to exercise a controlling influence

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

(d) ``Subsidiary'' means any limited liability company or other

entity organized by the LLC, through which it acquires and holds title

to its real property investments.

(e) An ``exemption audit'' of each Plan's interest in the LLC must

consist of the following:

(1) A review of the written policies and procedures adopted by

GMIMCo pursuant to Part II(h) for consistency with each of the

objective requirements of this exemption (as described herein);

(2) A test of a representative sample of the Plan's transactions

through investments made by the LLC, as described in Part I, in order

to make findings regarding whether GMIMCo is in compliance with both:

(i) the written policies and procedures adopted by GMIMCo pursuant to

Part II(i) of this exemption; and (ii) the objective requirements of

this exemption; and

(3) Issuance of a written report describing the steps performed by

the independent auditor during the course of its review and the

independent auditor's findings regarding the Plan's interest in the

LLC.

(f) For purposes of Part IV(e), the written policies and procedures

must describe the following objective requirements of Part II of the

exemption and the steps adopted by GMIMCo to assure compliance with

each of these requirements:

(1) The requirements of Part III;

(2) The requirements of sections (a) and (b) of Part II regarding

the discretionary authority or control of GMIMCo with respect to the

Plan assets involved in each transaction, in negotiating the terms of

the transaction, and with regard to the decision made on behalf of the

Plan, as an investor in the LLC, to enter into the transaction;

(3) The requirements of sections (a) and (b) of Part II with

respect to any procedure for approval or veto of the transaction;

(4) That:

(A) The transaction is not entered into with any person who is

excluded from relief under sections (f) or (g) of Part II; and

(B) The transaction is not described in any of the class exemptions

listed in section (c) of Part II.

(g) ``Plan'' means an employee benefit plan established and

maintained by GM or an Affiliate, as well as the Delphi Automotive

Systems Hourly Rate Employees Pension Plan, and the Delphi Automotive

Systems Retirement Program for Salaried Employees.

EFFECTIVE DATE: This exemption is effective as of December 11, 1998.

For a more complete statement of the facts and representations

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

the notice of proposed exemption (the Notice) published on June 3, 1999

at 64 FR 29914.

Written Comments

The Department received one written comment (the Comment) with

respect to the Notice and no requests for a public hearing. The Comment

was filed by AEW and suggests that certain clarifications and

modifications be made to the Notice. Set forth below in section I is

AEW's discussion concerning the language of the final exemption (the

Exemption). Section II discusses those aspects of the Comment which

relate to the Summary of Facts and Representations (the Summary)

contained in the Notice.

I. Discussion of the Comment Regarding the Exemption

1. AEW states that Delphi Automotive Systems Corporation (Delphi)

was spun-off by General Motors on May 28, 1999. Delphi maintained two

plans, the Delphi Automotive Systems Hourly Rate Employees Pension Plan

and the Delphi Automotive Systems Retirement Program for Salaried

Employees. The assets of both of these plans are still held in the

First Plaza Group Trust and still managed by GMIMCo. Therefore, AEW

requests that the Delphi Automotive Systems Hourly Rate Employees

Pension Plan and the Delphi Automotive Systems Retirement Program for

Salaried Employees be added to the caption of the Exemption, so that

the revised caption reads as follows:

``General Motors Hourly Rate Employees Pension Plan, General

Motors Retirement Program for Salaried Employees, Saturn Individual

Retirement Plan for Represented Team Members, Saturn Personal

Choices Retirement Plan for Non-Represented Team Members, Employees'

Retirement Plan for GMAC Mortgage Corporation, Delphi Automotive

Systems Hourly Rate Employees Pension Plan, Delphi Automotive

Systems Retirement Program for Salaried Employees (collectively, the

Plans).'' [Emphasis added].

The Department acknowledges AEW's request and has modified the

caption of the Exemption accordingly. In addition, the Department has

modified the definition of the term ``Plan'' in Part IV(g) of the

Exemption to include the Delphi Automotive Systems Hourly Rate

Employees Pension Plan, and the Delphi Automotive Systems Retirement

Program for Salaried Employees.

2. AEW also notes that Part I of the Notice states, in relevant

part, that the restrictions of section 406(a)(1)(A) through (D) of the

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

shall not apply to ``* * * a transaction between AEW Industrial, L.L.C.

(the LLC), an entity which currently holds ``plan assets'' of the

Plans, or any subsidiary of the LLC (as defined in Part IV(d) below) *

* *'' Since Part I refers to transactions by the LLC or any subsidiary,

AEW requests that the phrase ``* * * or any subsidiary * * *'' also be

added immediately after the reference to the LLC in the first sentence

of Part II(a) of the Exemption and the first sentence of Part II(b) of

the Exemption in order to be consistent with Part I.

Thus, Part II(a) should read, in relevant part, ``In the case of

transaction by the LLC or any subsidiary * * *.'' [Emphasis added].

Furthermore, Part II(b) should read, in relevant part, ``In the case of

transaction by the LLC or any subsidiary * * *.'' [Emphasis added].

The Department acknowledges AEW's request and has modified the

language of Part II(a) and Part II(b) of the Exemption accordingly.

II. Discussion of the Comment Regarding the Summary

1. For the same reasons discussed in the Comment at Section I(1)

above, AEW states that the following sentence should be added after the

first sentence in paragraph 2 of the Summary, so that the paragraph

reads, in relevant part:

``For a portion of their assets, the Plans make investments

through an entity known as the First Plaza Group Trust (i.e., the

Trust), which is a group trust established pursuant to IRS Revenue

Ruling 81-100. In addition, the Delphi Automotive Systems Hourly

Rate Employees Pension Plan and the Delphi Automotive Systems

Retirement Program for Salaried Employees (hereinafter these two

plans are included in all references to the Plans), which are plans

sponsored by a former GM affiliate, make investments through the

Trust.'' [Emphasis added].

2. AEW requests that the word ``billion'' replace the word

``million'' in the last sentence of paragraph 1 of the Summary so that

the sentence reads, in

[[Page 42726]]

relevant part, ``* * * the Plans had total assets of approximately

$73.2 billion, of which approximately $4.39 billion were invested in

private real estate assets.'' [Emphasis added].

3. AEW also requests that the word ``billion'' replace the word

``million'' in the third sentence of paragraph 5 of the Summary so that

the sentence reads, in relevant part, ``* * * [New England Investment

Companies] NEIC is a publicly-traded holding company with approximately

$90 billion in assets under management * * *.'' [Emphasis added].

The Department acknowledges all of AEW's clarifications to the

information contained in the Summary.

Accordingly, after giving full consideration to the entire record,

including the Comment, the Department has decided to grant the

exemption subject as modified herein.

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

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

General Information

The attention of interested persons is directed to the following:

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

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

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

person from certain other provisions to which the exemption does not

apply and the general fiduciary responsibility provisions of section

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

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

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

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

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

for the exclusive benefit of the employees of the employer maintaining

the plan and their beneficiaries;

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

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

administrative exemptions and transactional rules. Furthermore, the

fact that a transaction is subject to an administrative or statutory

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

prohibited transaction; and

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

condition that the material facts and representations contained in each

application are true and complete and accurately describe all material

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

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

or representations described in the application change after the

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

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

exemption may be made to the Department.

Signed at Washington, D.C., this 2nd day of August, 1999.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, Department of Labor.

[FR Doc. 99-20191 Filed 8-4-99; 8:45 am]

BILLING CODE 4510-29-P