Grant of Individual Exemptions; MICO, Inc. (MICO), et al.

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 99-38; Exemption Application No. D-

10621, et al.]

Grant of Individual Exemptions; MICO, Inc. (MICO), et al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of individual exemptions.

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SUMMARY: This document contains exemptions issued by the Department of

Labor (the Department) from certain of the prohibited transaction

restrictions of the Employee Retirement Income Security Act of 1974

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

Notices were published in the Federal Register of the pendency

before the Department of proposals to grant such exemptions. The

notices set forth a summary of facts and representations contained in

each application for exemption and referred interested persons to the

respective applications for a complete statement of the facts and

representations. The applications have been available for public

inspection at the Department in Washington, 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.

MICO, Inc. (MICO) Located in North Mankato, Minnesota

[Prohibited Transaction Exemption 99-38; Exemption Application Number

D-10621]

Exemption

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

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

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

not apply to the sale (the Sale) of a certain parcel of unimproved real

property (the Property) from the MICO, Inc. Profit Sharing Plan (the

Plan) to MICO, a party in interest and disqualified person with respect

to the Plan, provided that the following conditions are met:

(a) The terms and conditions of the Sale are at least as favorable

to the Plan as those obtainable in an arm's length transaction with an

unrelated party;

(b) MICO purchases the Property for $362,000, which represents the

Property's current fair market value as determined by a qualified,

independent appraiser;

(c) MICO additionally pays to the Plan a premium of $36,200, as

determined by a qualified, independent appraiser, due to MICO's

ownership of improved real property which is located adjacent to the

Property;

(d) The Sale is a one-time transaction for cash; and

(e) The Plan pays no fees or commissions in connection with the

Sale.

For a more complete statement of the facts and representations

supporting this exemption, refer to the notice of proposed exemption

published on May 27, 1999 at 64 FR 28835.

FOR FURTHER INFORMATION CONTACT: Mr. Christopher Motta of the

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

[[Page 53737]]

Fleet Bank (RI), National Association (Fleet)

Located in Providence, Rhode Island

[Prohibited Transaction Exemption 99-39;

Exemption Application No. D-10643]

Exemption

Section I--Transactions

A. Effective August 11, 1999, the restrictions of sections 406(a)

and 407(a) of the Act and the taxes imposed by section 4975(a) and (b)

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

Code, shall not apply to the following transactions involving trusts

and certificates evidencing interests therein:

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

certificates in the initial issuance of certificates between the trust,

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

the Act or section 4975 of the Code (a plan) when the sponsor,

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

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

party in interest with respect to such plan;

(2) The direct or indirect acquisition or disposition of

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

and

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

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

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

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

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

Excluded Plan, as defined in Section III.K. below, by any person who

has discretionary authority or renders investment advice with respect

to the assets of the Excluded Plan that are invested in

certificates.1

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

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

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

regulation 29 CFR 2510.3-21(c).

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B. Effective August 11, 1999, the restrictions of sections

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

4975(a) and (b) of the Code, by reason of section 4975(c)(1)(E) of the

Code, shall not apply to:

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

certificates in the initial issuance of certificates between the trust,

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

discretionary authority or renders investment advice with respect to

the investment of plan assets in the certificates is (a) an obligor

with respect to receivables contained in the trust constituting 0.5

percent or less of the fair market value of the aggregate undivided

interest in the trust allocated to the certificates of the relevant

series, or (b) an affiliate of a person described in (a); if

(i) The plan is not an Excluded Plan;

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

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

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

acquired by persons independent of the members of the Restricted Group,

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

undivided interest in the trust allocated to the certificates of a

series is acquired by persons independent of the Restricted Group;

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

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

outstanding at the time of the acquisition;

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

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

person has discretionary authority or renders investment advice is

invested in certificates representing the aggregate undivided interest

in a trust allocated to the certificates of a series and containing

receivables sold or serviced by the same entity; 2 and

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\2\ For purposes of this exemption, each plan participating in a

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

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

proportionate undivided interest in each asset of the commingled

fund as its proportionate interest in the total assets of the

commingled fund as calculated on the most recent preceding valuation

date of the fund.

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

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

person has discretionary authority or renders investment advice is

invested in certificates representing an interest in the trust, or

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

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

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

merely a subservicer of that trust;

(2) The direct or indirect acquisition or disposition of

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

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

through (v) are met; and

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

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

C. Effective August 11, 1999, the restrictions of sections 406(a),

406(b) and 407(a) of the Act and the taxes imposed by section 4975(a)

and (b) of the Code, by reason of section 4975(c) of the Code, shall

not apply to transactions in connection with the servicing, management

and operation of a trust, including reassigning receivables to the

sponsor, removing from the trust receivables in accounts previously

designated to the trust, changing the underlying terms of accounts

designated to the trust, adding new receivables to the trust,

designating new accounts to the trust, the retention of a retained

interest by the sponsor in the receivables, the exercise of the right

to cause the commencement of amortization of the principal amount of

the certificates, or the use of any eligible swap transactions,

provided that:

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

of a binding pooling and servicing agreement;

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

described in all material respects in the prospectus or private

placement memorandum provided to, investing plans before they purchase

certificates issued by the trust; 3

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\3\ In the case of a private placement memorandum, such

memorandum must contain substantially the same information that

would be disclosed in a prospectus if the offering of the

certificates were made in a registered public offering under the

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

placement memorandum must contain sufficient information to permit

plan fiduciaries to make informed investment decisions. For purposes

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

related supplement thereto, and any documents incorporated by

reference therein, pursuant to which certificates are offered to

investors.

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

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

the terms and conditions for such additions, designations or removals

as are described in the prospectus or private placement memorandum for

such certificates, which terms and conditions have been approved by

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

Duff & Phelps Credit Rating Co., or Fitch IBCA, Inc., or their

successors (collectively, the Rating Agencies), and does not result in

the certificates receiving a lower credit rating from the Rating

Agencies than the then current rating of the certificates; and

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

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

is set forth in

[[Page 53738]]

the pooling and servicing agreement and described in the prospectus or

private placement memorandum associated with the series, the occurrence

of which will cause any revolving period, scheduled amortization period

or scheduled accumulation period applicable to the certificates to end,

and principal collections to be applied to monthly payments of

principal to, or the accumulation of principal for the benefit of, the

certificateholders of such series until the earlier of payment in full

of the outstanding principal amount of the certificates of such series

or the series termination date specified in the prospectus or private

placement memorandum.

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

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

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

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

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

receivables and the operation of the trust, from a person other than

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

administrative fee'' as defined in Section III.U. below.

D. Effective August 11, 1999, the restrictions of sections 406(a)

and 407(a) of the Act and the taxes imposed by sections 4975(a) and (b)

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

Code, shall not apply to any transaction to which those restrictions or

taxes would otherwise apply merely because a person is deemed to be a

party in interest or disqualified person (including a fiduciary) with

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

virtue of having a relationship to such service provider as described

in section 3(14)(F), (G), (H) or (I) of the Act or section

4975(e)(2)(F), (G), (H) or (I) of the Code), solely because of the

plan's ownership of certificates.

Section II--General Conditions

A. The relief provided under Section I will be available only if

the following conditions are met:

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

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

plan as such terms would be in an arm's-length transaction with an

unrelated party;

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

subordinated to the rights and interests evidenced by other

certificates of the same trust;

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

the time of such acquisition that is either: (i) In one of the two

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

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

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

Agencies; provided that, notwithstanding such ratings, this exemption

shall apply to a particular class of certificates only if such class

(an Exempt Class) is at the time of such acquisition part of a series

in which credit support is provided to the Exempt Class through a

senior-subordinated series structure or other form of third-party

credit support which, at a minimum, represents five (5) percent of the

outstanding principal balance of certificates issued for the Exempt

Class, so that an investor in the Exempt Class will not bear the

initial risk of loss;

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

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

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

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

pooling and servicing agreement providing for such succession upon the

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

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

underwriters in connection with the distribution or placement of

certificates represents not more than reasonable compensation for

underwriting or placing the certificates; the consideration received by

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

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

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

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

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

to the class of certificates purchased by a plan, represents not more

than reasonable compensation for the servicer's services under the

pooling and servicing agreement and reimbursement of the servicer's

reasonable expenses in connection therewith;

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

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

Securities and Exchange Commission (SEC) under the Securities Act of

1933;

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

or trust company experienced in trust activities and is familiar with

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

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

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

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

including plans;

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

confirmation is received from the Rating Agencies that such issuance

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

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

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

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

Rating Agencies require the sponsor to maintain a seller interest of

not less than two (2) percent of the principal balance of the

receivables contained in the trust;

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

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

in the pooling and servicing agreement. The pooling and servicing

agreement requires that any change in the terms of the cardholder

agreements must be made applicable to the comparable segment of

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

program or have the same or substantially similar characteristics;

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

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

unless the Rating Agencies otherwise consent in writing, to the

following: (i) with respect to any consecutive three-month period

commencing in January, April, July and October of each calendar year,

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

as of the first day of the calendar year during which such monthly

period commenced, and (ii) with respect to any calendar year, 20

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

of the first day of such calendar year;

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

deliver an opinion of counsel confirming the validity and perfection of

each transfer of receivables in newly originated accounts to the trust

for each interim addition;

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

the trustee to receive confirmation from a Rating Agency that no

Ratings Effect will result from (i) a Required Addition (as defined in

Section III.MM.) in excess of the limits in paragraph B.(11) above, or

(ii) any Restricted Additions (as defined in Section III.NN.);

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

involves a Ratings

[[Page 53739]]

Dependent or Non-Ratings Dependent Swap entered into by the trust, then

each particular swap transaction relating to such certificates:

(a) shall be an Eligible Swap;

(b) shall be with an Eligible Swap Counterparty;

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

early payout event, as specified in the pooling and servicing

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

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

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

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

obligation under the pooling and servicing agreement to:

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

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

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

which time the earlier swap agreement shall terminate); or

(ii) cause the swap counterparty to establish any collateralization

or other arrangement satisfactory to the Rating Agency such that the

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

certificates will not be withdrawn or reduced;

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

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

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

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

after such rating withdrawal or reduction:

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

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

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

terminate); or

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

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

counterparty if the swap transaction were terminated; or

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

and

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

the swap counterparty (other than a currently scheduled payment under

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

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

otherwise be payable to the servicer or the sponsor;

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

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

in reliance upon this exemption only by Qualified Plan Investors.

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

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

authority or renders investment advice with respect to the plan assets

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

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

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

certificates, provided that:

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

placement memorandum; and

(2) In the case of a private placement of certificates, the trustee

obtains a representation from each initial purchaser which is a plan

that it is in compliance with such condition, and obtains a covenant

from each initial purchaser to the effect that, so long as such initial

purchaser (or any transferee of such initial purchaser's certificates)

is required to obtain from its transferee a representation regarding

compliance with the Securities Act of 1933, any such transferees shall

be required to make a written representation regarding compliance with

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

Section III--Definitions

For purposes of this exemption:

A. ``Certificate'' means a certificate:

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

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

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

applicable prospectus or private placement memorandum and in accordance

with the pooling and servicing agreement in connection with the assets

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

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

during which principal payments on assets of the trust are reinvested

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

represents a regular interest in a financial asset securitization

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

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

For purposes of this exemption, references to ``certificates

representing an interest in a trust'' include certificates denominated

as debt which are issued by a trust; and

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

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

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

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

agent.

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

in trust and consists solely of:

(1) Either:

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

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

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

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

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

the exemption if the participation interests held by the trust were

subordinated to the rights and interests evidenced by other

participation interests in the same pool of receivables.

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

paragraph B.(1) above; \5\

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

to be secured by bank account balances or security interests in

merchandise purchased with credit cards. Thus, the exemption should

permit foreclosed property to be an eligible trust asset.

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(3) Undistributed cash or permitted investments made therewith

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

made to certificateholders, except during a Revolving Period (as

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

be reinvested in additional receivables described in paragraph B.(1)(a)

above;

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

agreement, and rights under any cash collateral accounts, insurance

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

credit support arrangements for any certificates, swap transactions, or

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

or similar arrangements; and

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

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

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

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

certificates of that series.

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

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

fraud losses and funding receivables for a limited period prior to

initial billing with respect to accounts designated to the trust.

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

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

receivables of the type which have been included in other investment

pools; (ii) certificates evidencing interests in such other investment

pools have been rated

[[Page 53740]]

in one of the two highest generic rating categories by at least one of

the Rating Agencies for at least one year prior to the plan's

acquisition of certificates pursuant to this exemption; and (iii)

certificates evidencing an interest in such other investment pools have

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

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

exemption.

C. ``Underwriter'' means an entity which has received from the

Department an individual prohibited transaction exemption which

provides relief for the operation of asset pool investment trusts that

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

format and substance to this exemption (each, an Underwriter

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

intermediaries, controlling, controlled by or under common control with

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

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

manager or co-manager with respect to the certificates.

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

provided in the text of the operative language of Prohibited

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

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D. ``Sponsor'' means Fleet, or an affiliate of Fleet that organizes

a trust by transferring credit card receivables or interests therein to

the trust in exchange for certificates.

E. ``Master Servicer'' means Fleet or an affiliate that is a party

to the pooling and servicing agreement relating to trust assets and is

fully responsible for servicing, directly or through subservicers, the

receivables in the trust pursuant to the pooling and servicing

agreement.

F. ``Subservicer'' means Fleet or an affiliate of Fleet, or an

entity unaffiliated with Fleet which, under the supervision of and on

behalf of the master servicer, services receivables contained in the

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

G. ``Servicer'' means Fleet or an affiliate which services

receivables contained in the trust, including the master servicer and

any subservicer or their successors pursuant to the pooling and

servicing agreement.

H. ``Trustee'' means an entity which is independent of Fleet and

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

certificates which are denominated as debt instruments, ``trustee''

also means the trustee of the indenture trust.

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

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

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

and a person is not an insurer solely because it holds securities

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

to certificates representing an interest in the same trust.

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

obligated to make payments with respect to any receivable included in

the trust.

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

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

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

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

means:

(1) Each underwriter;

(2) Each insurer;

(3) The sponsor;

(4) The trustee;

(5) Each servicer;

(6) Each swap counterparty;

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

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

aggregate undivided interest in the trust allocated to the certificates

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

series of certificates by the trust; or

(8) Any affiliate of a person described in paragraphs L.(1) through

(7) above.

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

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

intermediaries, controlling, controlled by, or under common control

with such other person;

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

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

brother or sister of such other person; and

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

officer, director or partner.

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

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

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

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

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

who has investment management authority or renders investment advice

with respect to any assets of such person.

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

commitment (as defined in Section III.Q. below), provided that:

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

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

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

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

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

delivery commitment; and

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

applicable to sales are met.

Q. ``Forward Delivery Commitment'' means a contract for the

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

agreed future settlement date. The term includes both mandatory

contracts (which contemplate obligatory delivery and acceptance of the

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

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

of certificates from, the other party).

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

defined in 29 CFR section 2550.408c-2.

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

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

trust and any supplement thereto pertaining to a particular series of

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

instruments, ``pooling and servicing agreement'' also includes the

indenture entered into by the trustee of the trust issuing such

certificates and the indenture trustee.

T. ``Series'' means an issuance of a class or various classes of

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

pooling and servicing agreement, and any supplement thereto and

restrictions therein.

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

following criteria:

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

other than the normal timely payment of amounts owing with respect to

the receivables;

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

to act referred to in paragraph U.(1) above;

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

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

set forth in the pooling and servicing agreement or described in all

material respects in the prospectus or private placement memorandum

provided to the plan before it purchases certificates issued by the

trust; and

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

amount of any such fee waived by the servicer.

[[Page 53741]]

V. ``Receivables'' means secured or unsecured obligations of credit

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

trust. Such obligations represent amounts charged by cardholders for

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

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

late charges on amounts charged for merchandise and services and

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

other fees specified in the cardholder agreements) designated by card

issuers (other than a qualified administrative fee as defined in

Section III.U.).

W. ``Accounts'' are revolving credit card accounts serviced by

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

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

arising in such accounts become assets of the trust.

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

pooling and servicing agreement, during which principal collections

allocated to a series are reinvested in newly generated receivables

arising in the accounts.

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

pooling and servicing agreement during which a portion of the principal

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

certificateholders of such series in installments.

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

pooling and servicing agreement during which a portion of the principal

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

distributed to certificateholders in a lump sum on the expected

maturity date.

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

pooling and servicing agreement or supplement thereto that results (in

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

early commencement of either an amortization period or an accumulation

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

whichever is subject to the relevant obligation under the pooling and

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

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

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

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

pooling and servicing agreement, which failure has a material adverse

effect on holders of investor certificates of the relevant series and

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

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

servicing agreement that continues to be incorrect in any material

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

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

to convey to the trust additional receivables to maintain the minimum

seller interest that is required by the pooling and servicing agreement

and the Rating Agencies; (5) the failure to pay in full amounts owing

to investors on the expected maturity date; and (6) the Economic Pay

Out Event.

BB. An ``Economic Pay Out Event'' occurs automatically when the

portfolio yield for any series of certificates, averaged over three

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

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

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

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

amounts treated as finance charge collections less total defaults for

the series divided by the outstanding principal balance of the investor

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

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

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

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

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

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

divided by the outstanding principal balance of the investor

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

the Rating Agencies.

CC. ``CCA'' or ``Cash Collateral Account'' means that certain

account established in the name of the trustee that serves as credit

enhancement with respect to the investor certificates and holds cash

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

which conform to applicable provisions of the pooling and servicing

agreement.

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

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

manner described in the applicable prospectus or private placement

memorandum.

EE. ``Ratings Effect'' means the reduction or withdrawal by a

Rating Agency of its then current rating of the certificates held by

any plan pursuant to this exemption.

FF. ``Principal Receivables Discount'' means, with respect to any

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

receivables that represents a discount from the face value thereof and

that is treated under the pooling and servicing agreement as finance

charge receivables.

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

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

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

rating assigned by the Rating Agency to any senior class of

certificates held by any plan is dependent on the terms and conditions

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

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

rating of the swap counterparty, such swap or cap shall be referred to

as a ``Non-Ratings Dependent Swap''. With respect to a Non-Ratings

Dependent Swap, each Rating Agency rating the certificates must

confirm, as of the date of issuance of the certificates by the trust,

that entering into an Eligible Swap with such counterparty will not

affect the rating of the certificates.

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

Dependent Swap:

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

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

prior to the respective payment or distribution date for the senior

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

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

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

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

separate payments no more frequently than the swap counterparty, with

all simultaneous payments being netted;

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

certificate balance of the class of certificates to which the swap

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

represented by receivables;

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

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

floating rates designated in paragraph HH.(2) above, and the difference

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

on a multiplier of such difference);

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

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

is fully repaid; and

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

unilateral alteration in any provision described in paragraphs HH.(1)

through

[[Page 53742]]

(4) above without the consent of the trustee.

II. ``Eligible Swap Counterparty'' means a bank or other financial

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

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

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

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

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

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

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

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

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

the senior class of certificates with which the swap is associated has

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

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

swap counterparty is required by the terms of the swap agreement to

establish any collateralization or other arrangement satisfactory to

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

counterparty.

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

plan investors on whose behalf the decision to purchase certificates is

made by an appropriate independent fiduciary that is qualified to

analyze and understand the terms and conditions of any swap transaction

used by the trust and the effect such swap would have upon the credit

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

fiduciary is either:

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

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

1984);

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

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

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

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

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

banks, insurance companies, registered investment advisers with

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

considered to be experienced investment managers for plan investors

that are aware of their fiduciary duties under ERISA.

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

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

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

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

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

is generally a subsidiary of an employer sponsoring the plan which

is a registered investment adviser with management and control of

total assets attributable to plans maintained by the employer and

its affiliates which are in excess of $50 million.

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

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

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

direct obligations of, or obligations fully guaranteed as to timely

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

or instrumentality thereof, provided that such obligation is backed by

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

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

generic rating categories by a Rating Agency; are described in the

pooling and servicing agreement; and are permitted by the relevant

Rating Agency(ies).

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

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

charge collections allocated to certificates of a series exceed the

amount necessary to pay certificate interest, servicing fees and

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

reinstate credit support.

MM. ``Required Additions'' means accounts which are required to be

added to the trust when either the seller amount is less than the

minimum required seller amount or the principal amount is less than the

required principal amount.

NN. ``Restricted Additions'' means accounts which may be added to

the trust at the discretion of the sponsor only upon confirmation from

a Rating Agency that no Ratings Effect will result from the addition.

The Department notes that this exemption is included within the

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

Section V(h) of the Grant of the Class Exemption for Certain

Transactions Involving Insurance Company General Accounts, which was

published in the Federal Register on July 12, 1995 (see PTE 95-60, 60

FR 35925).

For a more complete statement of the facts and representations

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

the notice of proposed exemption published on August 11, 1999 at 64 FR

43742.

Effective Date: This exemption is effective August 11, 1999.

For Further Information Contact: Mr. Gary H. Lefkowitz of the

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

UNOVA, Inc. (UNOVA), Located in Beverly Hills, California

[Prohibited Transaction Exemption No. 99-40; Exemption Application Nos.

D-10663 and D-10664]

Exemption

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

section 407(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 (E) of the Code, shall not apply, as of December

17, 1998, to: (1) the acquisition by the UNOVA, Inc. Pension Plan and

the Landis Tool Pension Plan (collectively, the Plans) of certain

improved real property (the Property) from an unrelated party for a

sales price of $15,250,000 (the Purchase); and (2) the leasing of a

portion of the Property (the Lease) by the Plans to UNOVA, a party in

interest with respect to the Plans, provided that the following

conditions are satisfied:

(a) The Plans paid an amount for the Property which was no more

than the fair market value of the Property at the time of the

transaction;

(b) The interest in the Property owned by each Plan represented no

more than 10% of the value of either Plan's total assets at the time of

the Purchase;

(c) The Property, including the amount of space in the Property

leased to UNOVA under the Lease (the Leased Space), represents no more

than 10% of the value of either Plan's total assets throughout the

duration of the Lease;

(d) The terms and conditions of the Lease are at least as favorable

to the Plans as those obtainable in an arm's-length transaction with an

unrelated party;

(e) The fair market rental value of the Leased Space has been, and

every three years during the Lease will continue to be, determined by a

qualified, independent appraiser;

(f) The amount of rent paid by UNOVA to the Plans for the Leased

Space throughout the duration of the Lease will be no less than the

greater of the initial rent paid by UNOVA or the current fair market

value of the Leased Space, as determined every three years by a

qualified independent appraiser;

(g) The Plans' independent fiduciary has determined that the

Purchase and Lease are appropriate for the Plans and in the best

interests of the Plans' participants and beneficiaries; and

(h) The Plans' independent fiduciary will monitor the Lease, as

well as the conditions of this exemption, and will take whatever

actions are necessary to safeguard the interests of the Plans

throughout the duration of the Lease.

[[Page 53743]]

Effective Date: This exemption is effective as of December 17,

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 published on May 13, 1999 at 64 FR

25921.

Written Comments

The Department received approximately 69 comment letters from

interested persons regarding the notice of proposed exemption (the

Notice). The Department also received three comment letters from the

applicant (i.e., UNOVA), one letter in response to the 69 comments

submitted by interested persons, another letter requesting certain

clarifications and modifications to the Notice, and a final letter

which provides a further statement regarding an appropriate limitation

on the percentage of each Plan's assets that the Property may

represent.

With respect to the 69 comments received by the Department from

interested persons, approximately 58 of the letters were similar or

identical in nature. One such letter had 22 different signatures

endorsing the comments made therein. All of these letters expressed

general opposition ``* * * to any plan that would allow unova inc.

[sic] to use any funds that have been accumulated by its employees for

retirement, for company related expenditures.'' Some of these letters

also expressed concerns regarding ``* * * a potential conflict of

interest'' and that ``* * * any money set aside for future retirement

should only be used to enhance that retirement fund to the fullest

extent possible.'' The remaining comment letters were not similar or

identical in nature and raised more specific issues. For example, one

comment stated that ``* * * the purchase of land from `arms length'

parties is suspect and not in the best interest of plan participants *

* *'' and that ``* * * investment in real property in Los Angles [sic]

is speculative at best * * *'' Other comments suggested that it would

have been more appropriate for UNOVA to buy the Property rather than

the Plans. Some of these comments also suggested that the rent being

paid by UNOVA for the Leased Space, and UNOVA's reimbursement of

leasing expenses to the Plans, is inadequate. Finally, most of these

comments raised concerns about the ``* * * security of the retirement

funds'' and the need for adequate protections from any investment

losses.

In response to these comments, the applicant states that the

Investment Committee of the Plans (the Committee) determined in 1998

that real estate should be part of the investments in the Plans'

portfolios in order to diversify the assets of the Plans. The applicant

notes that asset diversity can reduce risk to an investment portfolio

and can contribute to the growth of the Plans' assets. With respect to

the Plans' investment in the Property, the applicant represents that

the Committee determined that the Property would be an appropriate real

estate investment for the Plans in meeting the stated goal of

diversifying the Plans' assets into real estate. The applicant states

that the Lease adds to the value of the Property because it adds to the

income enjoyed by the Plans from the investment. Further, the requested

exemption contains safeguards, such as independent fiduciary review of

the fair market rental value of the Leased Space every three years,

adjustment of the rent to reflect cost of living increases, and

continued monitoring of the Lease's terms to ensure that the Lease does

not become disadvantageous to the Plans.

The applicant notes that the safeguards agreed to by UNOVA for the

Lease are similar to those required in other lease transactions for

which the Department has granted an exemption. In this regard, UNOVA

hired an independent fiduciary for the Plans to review the terms of

proposed transactions and to take whatever actions may be necessary to

safeguard the best interests of the Plans and its participants and

beneficiaries. In addition, an independent qualified real estate

appraiser was hired to review and appraise the Property (the Appraisal)

to determine its fair market value prior to its acquisition by the

Plans. The appraiser that produced the Appraisal also analyzed the

rental rate to be paid by UNOVA for the Leased Space and concluded that

an initial rental rate of $25.20 per square foot annually represented

the current fair market value of the Leased Space. The Appraisal was

also reviewed by certified real estate appraisers (the Reviewers) who

were independent of the parties involved in the transactions. The

Reviewers determined that the rental rate to be paid by UNOVA for the

Leased Space was at the high end of the range of rents being paid for

similar properties in the local real estate market.

Therefore, the applicant believes that given the goal of

diversification of plan assets and the independent safeguards discussed

above, the transactions are in the best interests of the Plans and

their participants and beneficiaries.

The Department agrees with the applicant that the conditions of the

proposed exemption contain adequate independent safeguards to protect

the interests of the Plans. The Department notes further that the total

value of the Property allocated to each of the Plans represented less

than 5% of each Plan's total assets at the time of the Purchase.

Therefore, based on the current facts and representations, the

Department is satisfied that the Plans' purchase of the Property and

subsequent leasing of part of the Property to UNOVA was consistent with

the Plans' investment objectives, and that the terms and conditions of

the Lease (as agreed to by the parties and approved by an independent

fiduciary) are in the interests of the Plans. Upon consideration of the

concerns raised by the comments, the applicant has agreed by letter

dated September 21, 1999 to further limit the percentage of each Plan's

total assets that the Property will represent throughout the duration

of the Lease to no more than 10%. As noted below, the Department has

modified conditions (b) and (c) of the exemption accordingly. In

addition, the applicant has also represented that no major expenditures

or renovations are contemplated for the Property except for certain

expenses associated with tenant installation.10

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\10\ The Department notes that any expenses for tenant

installation, or other expenditures relating to the Property, made

by the Plans must be consistent with the fiduciary responsibility

provisions contained in Part 4 of Title I of the Act. In this

regard, the Department notes that section 404(a) of the Act

requires, among other things, that plan fiduciaries act prudently

and solely in the interest of the plan and its participants and

beneficiaries when making investment decisions for a plan, including

any decisions for reasonable expenditures that are necessary to

enhance the value of such investments.

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

The following is a discussion of the applicant's additional

comments regarding the Notice. These comments requested that:

(1) relief from the restrictions of section 407(a) of the Act be

provided in the exemption;

(2) condition (c), which imposes a limitation on the total Plan

assets that can be represented by the Property, be clarified; and

(3) certain clarifications be made to the information contained in

Paragraph 3 of the Summary of Facts and Representations in the Notice

(the Summary).

With respect to item (1) above, the applicant states that relief

from section 407(a) of the Act is necessary because the Property

represents a single parcel of ``employer real property'' (as defined in

section 407(d)(2) of the Act) and would not be considered ``qualifying

employer real property'' within the meaning of section 407(d)(4) of the

Act, since such a property would not meet

[[Page 53744]]

the requirement contained therein that such properties be

``geographically dispersed.'' Thus, in order to ensure that adequate

relief is provided by the final exemption, the applicant requests that

the Department clarify that the exemption provides relief from section

407(a).

The Department agrees with the applicant's analysis and has

modified the exemption to provide relief from the restrictions of

section 407(a) of the Act.

With respect to item (2) above, the applicant states that condition

(c) of the Notice states that:

The Property, and the amount of space in the Property leased to

UNOVA under the Lease (the Leased Space), represents no more than

15% of the value of either Plans's total assets throughout the

duration of the Lease. [emphasis added]

In this regard, the applicant asks the Department to confirm that this

condition does not double count the value of the Property and the value

of the Leased Space, but merely looks to the value of the Property

(including the value of the Leased Space) when determining whether this

condition is met.

The Department acknowledges the applicant's comment and, in order

to clarify the meaning of this condition in the final exemption, has

deleted the word ``and'' and substituted the word ``including'' in the

reference to the Leased Space contained in condition (c). In addition,

as noted above, the Department has modified conditions (b) and (c) of

the exemption by reducing the percentage limitation required therein

from 15% to 10%.

With respect to item (3) above, the applicant notes that the first

sentence in Paragraph 3 of the Summary states that:

After the Purchase, the Plans leased a portion of the Property

to UNOVA, effective as of December 17, 1998 (i.e., the Lease).

[emphasis added]

The applicant states that this sentence should state that the Plans

leased a portion of the Property to UNOVA, effective as of February 1,

1999.

The Department acknowledges this clarification to the information

contained in the Summary.

Accordingly, based on the entire record, the Department has

determined to grant the proposed exemption as modified herein.

For Further Information Contact: Christopher J. Motta of the

Department, telephone (202) 219-8194. (This is not a toll-free number.)

The Manufacturers Life Insurance Company (Manulife) Located in

Toronto, Canada

[Prohibited Transaction Exemption 99-41; Exemption Application No. D-

10738]

Exemption

Section I. Covered Transactions

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, 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 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 may consider 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 Demuutualization

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 is allocated 186 Common

Shares, additional consideration is allocated to Eligible Policyholders

who own eligible policies based on an actuarial formula that takes into

account the cash value, the death benefit (in the case of life

insurance policies and certain annuity policies) and the duration of

each such eligible policy. The actuarial formula has 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 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

[[Page 53745]]

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 the special meeting on demutualization 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 on the day Manulife announced its

intention to prepare a plan of demutualization (the Eligibility Date)

or any policyholder that applied for a voting policy on or prior to

that day. Policyholders will also be deemed Eligible Policyholders if

they are holders of a voting policy that lapsed before the insurer's

Eligibility 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 or individual

deferred annuity policy, and for a group policy (other than a group

annuity), where the owner has elected a paid-up addition option, an

increase in the paid-up addition value; (2) with respect to all other

individual life or individual deferred annuity policies, and for all

other group policies (other than group annuities), an increase in the

dividend accumulation account; (3) with respect to a settlement

annuity, a vested annuity or a group annuity, an increase in the

periodic income payment.

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) that was published July

22, 1999 at 64 FR 39539.

Written Comments

The Department received two written comments with respect to the

Notice. One comment was submitted by a Manulife policyholder. The other

comment was submitted by Manulife. Following is a discussion of these

comments.

Policyholder's Comment

The commenter expressed concern over the tax implications of the

cash distribution that would be made by Manulife to the policyholder's

Plan account as a result of the demutualization. The commenter

explained that he had not sought the demutualization nor was he taking

the distribution in his own name. Rather, he said he would reinvest the

cash consideration received with other assets held by his Plan account.

The commenter argued that to tax him would be unfair since the money he

would be receiving as a result of Manulife's demutualization would not

be in his actual possession and the tax would have to be paid to the

taxing authorities from his present income. The commenter further

explained that while he fully expected to pay taxes on the cash

consideration when he took distributions from his Plan account, to tax

him prematurely would be unfair and constitute unjust enrichment to the

taxing authorities.

In response to the commenter, Manulife indicated that it was

unaware of how the commenter acquired erroneous information that the

payment of the demutualization benefits to the commenter's Plan account

would constitute a taxable event. Manulife explained that under current

U.S. tax law, the payment of the demutualization benefits to a

qualified plan would not result in current taxation to a Plan

participant, such as the commenter, nor of the Plan, itself. To

emphasize this point, Manulife indicated that in the Information

Circular it mailed to policyholders on or before May 31, 1999, pages 51

and 52 of the document specifically state that the ``[r]eceipt of

Common Shares or cash by a pension or profit sharing trust (a plan

covered by section 401(a) of the U.S. Tax Code) will be tax-free to the

trust (assuming the trust is not otherwise subject to tax).''

Manulife's Comment

In its comment, Manulife recommended modifications or

clarifications to the operative language and the Summary of Facts and

Representations (the Summary) of the Notice in a number of areas.

Manulife explained that its comment was generated primarily because the

exemption application reflected a draft version of the Plan of

Demutualization rather than the final version that was approved by OSFI

and the Michigan Insurance Commissioner.

Discussed below are Manulife's concerns and the Department's

responses with respect to these areas of concern. Also included is a

discussion of the Department's revisions of certain typographical

errors appearing in the Summary and the Notice to Interested Persons.

1. Canadian Finance Minister Considerations. On page 39539 of the

Notice, Section II(b)(2) describes the various factors the Canadian

Finance Minister may take into account in deciding whether to approve a

plan of demutualization. Manulife represents that the first subclause

of Section II(b)(2) should be revised to read ``The Canadian Finance

Minister may consider such factors as whether (i) the Plan of

Demutualization is fair and equitable to policyholders.'' As for

subclauses (ii) and (iii) of Section II(b)(2), Manulife states that no

changes should be made.

The Department concurs with this modification to Section II(b)(2)

of the Notice.

2. Fixed and Variable Allocations of Demutualization Benefits. On

page 39539 of the Notice, Section II(e) states that the fixed

allocation of demutualization benefits will equal 184 Common Shares.

However, Manulife wishes to clarify that the fixed allocation is

actually equal to 186 Common Shares and, in response to this comment,

the Department has made the requested change. The Department has also

made a corresponding revision on page 39543 of the Notice in the second

paragraph of Representation 10 of the Summary.

In addition, Section II(e) of the Notice describes the variable

component of the demutualization benefits, in part, as follows:

``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 * * *'' Manulife represents that while some other insurance

companies have calculated the variable component of their

demutualization benefit in this manner, Manulife's variable allocation

will be calculated on a different basis. In this regard, Manulife

explains that under its Plan of Demutualization, the variable

allocation to eligible policies that are life insurance policies will

be calculated on the basis of the cash value, the death benefit and the

duration of each such eligible policy. Manulife further explains that

the variable allocation to eligible policies that are annuities will be

calculated using the same formula that will be used for life insurance

policies, except that the share allocation with respect to the death

benefit will generally be zero. According to Manulife, these allocation

formulas have been reviewed by the Canadian Finance Minister and the

Michigan Insurance Commissioner. In

[[Page 53746]]

light of the above, Manulife suggests that Section II(e) be revised to

read as follows:

After each Eligible Policyholder is allocated 186 Common Shares,

additional consideration is allocated to Eligible Policyholders who

own eligible policies based on an actuarial formula that takes into

account the cash value, the death benefit (in the case of life

insurance policies and certain annuity policies) and the duration of

each such eligible policy. The actuarial formula has been reviewed

by the Canadian Finance Minister and the Michigan Insurance

Commissioner.

The Department acknowledges Manulife's requested change and has

modified Section II(e) of the Notice.

3. Eligible Policyholder Definition. On page 39539 of the Notice,

Section III(c) defines the term ``Eligible Policyholder'' as--

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

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.

To reflect current revisions in its Plan of Demutualization, Manulife

requests that the definition of ``Eligible Policyholder'' as set forth

in Section III(c) of the Notice be revised to read as follows:

The term ``Eligible Policyholder'' means a policyholder who is

eligible to vote at the special meeting on demutualization 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 on the day Manulife

announced its intention to prepare a plan of demutualization (the

Eligibility Date) or any policyholder that applied for a voting

policy on or prior to that day. Policyholders will also be deemed

Eligible Policyholders if they are holders of a voting policy that

lapsed before the insurer's Eligibility 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.

In response to this comment, the Department has made the requested

changes to Section III(c) of the Notice.

4. Policy Credit Definition. On page 39540 of the Notice Section

II(d) contains the following definition of the term ``policy credit'':

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.

To reflect current revisions to its Plan of Demutualization, Manulife

suggests that the definition of the term ``policy credit'' be revised

to read as follows:

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

applicable: (1) with respect to an individual life or individual

deferred annuity policy, and for a group policy (other than a group

annuity), where the owner has elected a paid-up addition option, an

increase in the paid-up addition value; (2) with respect to all

other individual life or individual deferred annuity policies, and

for all other group policies (other than group annuities), an

increase in the dividend accumulation account; (3) with respect to a

settlement annuity, a vested annuity or a group annuity, an increase

in the periodic income payment.

The Department concurs with this clarification and has modified

Section III(d) accordingly.

5. Subsidiary Ownership. On page 39540 of the Notice,

Representation 1 of the Summary states, in pertinent part, that

Manulife indirectly owns approximately 85 percent of The Manufacturers

Life Insurance Company of North America (Manulife/North America).

Manulife wishes to clarify however, that as a result of ManUSA's recent

acquisition of the 15 percent minority interest in Manulife/North

America, Manulife now indirectly owns 100 percent of that entity.

The Department notes this clarification to the Summary.

6. Stock Ownership Listings. On page 39541 of the Notice,

Representation 4 of the Summary states that Common Shares of the

Holding Company will be listed on the Montreal, Toronto or New York

Stock Exchanges. However, for purposes of clarification, Manulife

represents that Common Shares will be listed on each of the ``Montreal,

Toronto, Hong Kong, Philippines and New York Stock Exchanges.''

The Department acknowledges this clarification.

7. Holding Company Shares. On page 39541 of the Notice,

Representation 6 of the Summary describes the steps that will occur in

connection with Manulife's demutualization. Specifically, the third

sentence of Representation 6 states the following: ``Then, all of the

Holding Company's Common Shares held by Manulife immediately prior to

the effective date will be canceled.'' Manulife requests that this

sentence be revised by deleting the reference to the term ``Common

Shares'' and replacing it with the term ``shares.'' Therefore, the

revised sentence would read as follows: ``Then, all of the Holding

Company's shares held by Manulife immediately prior to the effective

date will be canceled.'' The Department does not object to this change

and has made the requested revision.

8. Footnote 13. On page 39542 of the Notice, Footnote 13 of the

Summary describes the treatment of the underwriters' discount under

Canadian law if Common Shares are sold by non-Canadian policyholders of

Manulife in a secondary offering by the Holding Company's underwriters

as part of the initial public offering. To clarify the language of the

footnote, Manulife suggests that the second and third sentences be

deleted and replaced with the following language:

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. Manulife has concluded that there is

an applicable withholding tax exemption under the Canada/U.S. tax

treaty and, accordingly, it will not withhold any taxes from amounts

remitted to the Plans. Manulife has represented that even if its

conclusion is incorrect, it will not seek reimbursement from any

Plan policyholder under such circumstances.

The Department concurs with these revisions and has made the

requested changes.

9. Footnote 19. On page 39542 of the Notice, Footnote 19 of the

Summary discusses, in pertinent part, special rules applicable to an

insurance policy that is issued to a trust established by Manulife.

Because the last sentence of the second paragraph of Footnote 19 is in

error, Manulife suggests that the sentence be revised to read as

follows: ``The trustee of any such trust established by Manulife will

not be considered an Eligible Policyholder or owner and will not be

eligible to vote or receive consideration.''

The Department acknowledges this revision and has made the

requested change.

10. Eligible Policyholder. On page 39543 of the Notice,

Representation 10 of the Summary describes the criteria for an Eligible

Policyholder under Manulife's Plan of Demutualization. To

[[Page 53747]]

clarify the second parenthetical in the first paragraph of

Representation 10, which relates to certain status and time

requirements for the insurance policies, Manulife suggests that the

parenthetical be revised to read as follows:

(or applied for on or before that date or which are in lapse status

on that date and reinstated at least 90 days prior to the special

meeting of the Eligible Policyholders to vote on the Plan of

Demutualization).

The Department acknowledges this revision and has modified the

parenthetical.

11. Cash Elections/Non-Trusteed Policies. On page 39543 of the

Summary, the second sentence in the fourth paragraph of Representation

10 states that the cash election that is made by an Eligible

Policyholder who is entitled to receive Common Shares may be reduced if

the Board of Directors of the Holding Company determines that such

reduction is in Manulife's best interests. However, for purposes of

clarification, Manulife suggests that this sentence be deleted and the

following new sentence be inserted in lieu thereof:

If, in the judgment of the Board of Directors of the Holding

Company, it would not be in the best interests of Manulife to

conduct a public offering that fully funds cash elections, then the

Board of Directors shall determine the number of Common Shares by

which the aggregate cash elections shall be reduced, and such

reductions shall be pro-rated among all Eligible Policyholders who

have made a cash election.

In response to this comment, the Department has made the suggested

modification.

In addition, the fifth paragraph of Representation 10 refers to

Plans intending to qualify under section 403(a) of the Code as the

recipients of policy credits. Manulife requests that the sentence

should also make reference to Plans intending to qualify under section

401(a) of the Code. Accordingly, Manulife suggests that the sentence

should read as follows:

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 401(a) or 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.

The Department notes this change and has made the requested

revision.

12. Escrow Arrangement. On page 39543 of the Notice, Representation

12 of the Summary describes an escrow arrangement that Manulife will

implement in the event the exemption is not granted before the

effective date of the demutualization. Specifically, the first sentence

of Representation 12 provides that the escrow arrangement is subject to

terms and conditions approved by the Superintendent of OSFI. Manulife

wishes to clarify, however, that such terms and conditions will be

subject to approval by the Michigan Insurance Commissioner rather than

the Superintendent of OSFI.

In response, the Department notes this clarification and has made

the requested change.

Finally, the Department has revised certain typographical errors

appearing in the Summary and the Notice to Interested Persons. In this

regard, on page 39543 of the Notice, references to the citation ``29

CFR 2510.3-2(c)'' in the fifth paragraph of Representation 10 and in

paragraph (d) of Representation 12 should be revised to read ``29 CFR

2510.3-21(c).'' Also, the reference to ``20 CFR 2570.43(b)(2)'' in the

Notice to Interested Persons should be revised to read ``29 CFR

2570.43(b)(2).''

For further information regarding the comments or other matters

discussed herein, interested persons are encouraged to obtain copies of

the exemption application file (Exemption Application No. D-10738) the

Department is maintaining in this case. The complete application file,

as well as all supplemental submissions received by the Department, are

made available for public inspection in the Public Documents Room of

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

Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C.

20210.

Accordingly, after giving full consideration to the entire record,

including the written comments received, the Department has decided to

grant the exemption subject to the modifications and clarifications

described above.

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 or disqualified

person from certain other provisions to which the exemptions does not

apply and the general fiduciary responsibility provisions of section

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

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

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

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

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

for the exclusive benefit of the employees of the employer maintaining

the plan and their beneficiaries;

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

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

administrative exemptions and transactional rules. Furthermore, the

fact that a transaction is subject to an administrative or statutory

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

prohibited transaction; and

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

condition that the material facts and representations contained in each

application are true and complete and accurately describe all material

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

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

or representations described in the application change after the

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

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

exemption may be made to the Department.

Signed at Washington, DC, this 29th day of September, 1999.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

Department of Labor.

[FR Doc. 99-25709 Filed 10-1-99; 8:45 am]

BILLING CODE 4510-29-P