SEC Division of Investment Management staff letter: Owens-Illinois, Inc.

JUN 2 4 \994

Our Ref. No. 93-723-CC

RESPONSE Owens-Illinois, Inc. DIVISION File No. 132 - 3 Your letter of November 4, 1993 requests our assurance that

we would not recommend that the Commission take enforcement

action if Owens-Illinois (1I0-III) establishes two Group Trusts as

described in your letter without registering the Trusts under the

Investment Company Act of 1940 (111940 Act
II ), in reliance on either section 3 (c) (11) or section 3 (c) (1) of the 1940 Act. 0- I operates two IIMaster Trusts II that are funding and investment vehicles for employee benefit plans sponsored by O-I

and its subsidiaries: the
Owens-Illinois Master Retirement Trust

(the IIRetirement Trust II) for involuntary, noncontributory defined benefit plans, and the Owens-Illinois Master Stock Purchase and

Savings Program Trust (the IISPASP Trustll) for participant-

directed defined contribution pension plans. i/ All plans participating in the Master Trusts are llqualifiedll plans within the meaning of section 401 (a) of the Internal Revenue Code.

In 1993, O-I spun off as an independent operating company

one of its subs idiaries , Libbey, Inc. 0 - I retained no equi ty

interest in Libbey. You state that 0- I also may spin off one or

more of its other subsidiaries and that, while it might retain

some equity interest in these companies (collectively with

Libbey, the IIFormer Subsidiariesii), it does not expect to retain

control. 0- I proposes to reorganize the two Master Trusts as

group trusts (the IIRetirement Group Trust II and the IISPASP Group

Trust, II and collectively, the IIGroup Trustsll) that would serve as

investment vehicles not only for employee plans sponsored by 0- I,

but also for plans sponsored by the Former Subsidiaries.

The first clause of section 3 (c) (11) excepts from the definition of investment company any employee's stock bonus, pension, or profit-sharing trust qualified under section 401 of the Internal Revenue Code. This II single trust II exception is available to a trust established by a single company or by a group of "related II companies. 'l/ You state that the Master Trusts currently qualify for the single trust exception because

i/ In a telephone conversation on May 10, 1994, Regina Joseph,

counsel to 0- I, represented that the defined benefit plans

investing in the Retirement Trust are involuntâry and

noncontributory; and that the plans investing in the SPASP

Trust are voluntary, contributory, participant-directed

plans.
'l/ See. e. g.. Sunkist Master Trust (pub. avail. June 5, 1992); ~ Eli Lilly and Company (pub. avail. Dec. 31, 1991) (IlEli Lillyll) .

• 2
  participating plans are sponsored by related companies, i.e.. O-I

and its controlled subsidiaries.

You contend that if the Master Trusts are reorganized into

the Group Trusts, they could continue to rely on the single trust

exception because 0- I and the Former Subsidiaries still would be

related companies for purposes of section 3 (c) (11). In support

of your contention, you note the past relationship between 0- I

and its Former Subsidiaries and that the plans would cover many

of the same employees and share the same investment obj ecti ves .
You also state that the plan sponsors may remain operationally related through a variety of contractual undertakings. In our view, these facts do not cause 0- I and the Former Subsidiaries to

be related companies for purposes of section 3 (c) (11) .
Generally, two companies are related for purposes of the

single trust exception when the companies are under common

control or one company has a majority equity interest in the

other. ~/ When a trust includes pension plan assets of a parent

company and its minority-owned subsidiaries, the applicability of

the single trust exception depends on all the facts and

circumstances, particularly whether the degree of the

relationship among them supports treating the arrangements as a

single trust. ~/ You state that 0- I in all likelihood would not

retain a controlling interest in the Former Subsidiaries.

Moreover, you do not indicate that any individuals would be

officers or directors of both 0- I and any of the Former

Subsidiaries, that 0- I and the Former Subsidiaries would be

operationally integrated to any significant degree, or present

other facts that would support treating the arrangement as a

single trust. 2/ Accordingly, we do not concur with your opinion

~/ See. e. g.. Eli Lilly; The E. W. Scripps Company (pub. avail.

Jan. 5, 1983).

~/ Eli Lilly. See. e. q.. New England Electric System Companies

Pension Plan (pub. avail. May 7, 1979) (staff applied the

single trust exception to two companies that were part of

the same utility holding company system because several

employees of one company were officers or directors of the

other, and one company provided the other with support

services, including legal, financial, tax, office space, and

administration); Bell System Group Trust Fund (pub. avail.
Dec. 7,1978) (staff applied the single trust exception to a parent company and its minority (26.6% and 18.2%)

subsidiaries that II operate (dl together as parts of a unified

systemll and had strong operational and contractual ties).

2/ Although you represent that O-I provides Libbey with certain

management, administrative, and technical assistance

services, you do not indicate that the operations of the two

• 3
  that 0- I and the Former Subsidiaries would be sufficiently related so as to permit the Group Trusts to rely on the single

trust exception of section 3 (c) (11) .
You also are of the opinion that each Group Trust can rely on section 3 (c) (1). Section 3 (c) (1) excludes from the definition of investment company, and thus from regulation under the 1940

Act, an issuer that is not making and does not propose to make a

public offering of its securities and whose outstanding

securities are beneficially owned by not more than 100 persons.
The attribution provisions of section 3 (c) (1) (A) state that, with certain exceptions, beneficial ownership of an issuer's

securities by a company shall be deemed to be beneficial

ownership by one person unless the company owns 10% or more of

the outstanding voting securities of the issuer. You assert that

the Group Trusts can rely on the section 3 (c) (1) exclusion because (a) the Group Trusts will not make public offerings of

their securities, and no more than 100 plans will participate in

each Group Trust, and (b) the attribution provisions of section 3 (c) (1) (A) do not require us to IIlook throughll the plans to their beneficiaries for purposes of calculating the 100-investor limit

because the participating plans' interests in the Group Trusts

are not IIvoting securities. II Irrespective of whether the Group

Trusts issue voting securities, we conclude that the Retirement

Group Trust may rely, but the SPASP Group Trust may not rely, on

section 3 (c) (1) .
The pension plans investing in the Retirement Group Trust

are involuntary and noncontributory, and thus do not issue

securities. Q/ Beneficiaries of these plans, therefore, are not

security holders and do not count towards the 100-investor limit in section 3 (c) (1), regardless of each plan's percentage ownership in the Retirement Group Trust. 2/ If no more than 100

plans participate in the Retirement Group Trust, we would not

recommend enforcement action to the Commission if the Trust does

not register under the 1940 Act in reliance on section 3 (c) (1) .
We reach a different conclusion with respect to the SPASP Group Trust. For purposes of section 3 (c) (1), and independently of the attribution provisions, we consider a defined contribution

plan beneficiary who decides whether or how much to invest in an

issuer (such as the SPASP Group Trust) to be a beneficial owner

companies are significantly integrated.

Q/ See International Brotherhood of Teamsters v. Daniel, 439

U.S. 551, 559 (1979); Securities Act Release No. 6188 (Feb.
1, 1980) (Part II.A).
2/ Kodak Retirement Income Plan (pub. avail. Feb. 29, 1988).

• 4
  of the issuer's securities. ~/ We thus believe that, for

purposes of section 3 (c) (1), the SPASP Group Trust must count as

beneficial owners all beneficiaries of participant-directed plans

investing in the SPASP Group Trust. Consequently, with respect

to the SPASP Group Trust's status under the 1940 Act, we are

unable to assure you that we would not recommend enforcement

action if you proceed as described in your letter.
~'l; fl~c;,, Barrl A.\ Mendelson- ----.
Senior Counsel

~/ The PanAgora Group Trust (pub. avail. Apr. 29, 1994).

ieA 1940 Act/§ 3(c)(1) lCA 1940 Act/§ 3(c)(1l) FULLER & HENRY AITORNEYS AT LAW :.. M. HAWKIS STPHEN B. MOSIER ONE SEAGATE, SUITE 1700 REGINA M. JOSEPH JOSEPH S. SIMPSON ..;iS L. DALRYMPLE THOMAS S. ZARMBA P.O. BOX 2088 DONNA B. WOOD SCOT G. DELLER JOHN F. McCARTH WILLIA L. PATBERG TOLEDO, OHIO 43603 CLA C. ARMBRUSTER JAMES B. YATE CHES R. LEECH, JR. JOHN 1- SICILIAO (4191247-2500 TBLBCOPIER 14191247-2665 DENNIS A. LYLE KURT 1- LlDOWER RAYMOND G. ESCH MARTI J. WITERELL MICHAEL E. BORN . PATRICK J. SACCOGNA JAMS M. MORTON, JR. JOHNW. HILBERT,II LOUIS E. TOSI DOUGLAS G. HAYNAM' GLENN L. RABO MAY AN WHIPPLE' 2790 HUNTINGTON CENTER 41 SOUTH HIGH STREET COLUMBUS, OHIO 43215 JOHN E. MAUNER ANDREW K. RAAZZI' DANIEL T. ELLIS M. CHERIE VERRLL NIRAV D. PAR CRAIG A STRTZ STBPHEN 1- STANFORD SUE A. SIKKMA (614) 228-6611 TELBCOFIER (614) 228-6623 LACE M. KEIFFBR KEITH H. RAR RAY A. FARRS DAVID R. BAIBRIDGE 125 JEFFERSON STREET NICHOLAS A. IAOCCI MARGAR A. GUSTAFSON THOMAS M. GEORGE CRAG J. VAN HORSTEN MARTIN D. CARIGAN PORT CLINTON, OHIO 43452 SUSAN A. SLAVIERO MICHELLE M. MORGAN MA A. SHAW TIMOTH A. DISMOND (419) 734-2153 TELECOFIER (419) 732.8246 JAMES S. DETING JOHN C. EVERHARDUS WRITER'S DIRECT DIAL NUMBER MICHAEL 1- O'CALLAGHAN LINDA S. WOGGON COUNSEL JAMES W. BAEHREN THEODORE R. VOGT' (419) 247-2528 AL C. BOYD DAVID W. KIENZLE FRED E. FULLER (1901-9811 DWIGHT H. MOREHEAD WARREN D. WOLFE' LESLIE HENRY 1190.19761 .ALS ADMmED IN MICHIGAN Thomas S. Harman, Esq.

Associate Director ACT ':ce-A

Office of Chief Counsel 3(c. )(1 ) SECTION
Division of Investment Management RULE
Securities and Exchange Commssion PUBLIC 450 Fifth Street, N.W. AVAILABILIT Jwe d.~ rn1 Washington, D.C. 20549

Re: . Owens-Ilinois, Inc. Master Retirement Trust/ Owens-llinois Stock Purchase and Savings Program Trust Dear Mr. Harman:
This is a request submitted on behalf of the Owens-Ilinois Master Retirement Trust (the "Retirement Trust") and the Owens-Illinois Master Stock Purchase and Savings Program Trust (the "SPASP Trust" and, together with the Retirement Trust, th~ "Master Trusts"), whose corporate sponsor is Owens-Illinois, Inc., a Delaware corporation ("0-1"). On behalf of the Master Trusts, we request that the staff of the Division of Investment Management take a no-action position as to the applicability of the attribution provision of § 3(c)(1) of the Investment Company Act of 1940 (the "Act") to participating plans in the Master Trusts if the Master Trusts are restated, as described below, to permt certain employee benefit plans sponsored by subsidiaries that were formerly controlled by 0-1 to remain a part of the Master Trusts and, further, as to whether any such former subsidiary would be a "r~lated company" for purposes of § 3(c)(1l) of the Act.

ieA 1940 Act! § 3(c)(1) .., ieA 1940 Act! § 3(c)(1l) ,.)
FULLER & HENRY
Thomas S. Hanan Esq.

Assate Director, Offce of Chef Counsel

Secrities and Exchane eommision

I. Background

The Retirement Trust is at present organized and operated as a commgled funding and investment vehicle for several defined benefit pension plans ("Retirement Plans") ., sponsored by 0-1 and/or certain subsidiaries in which 0-1 owns a 50% or more equity interest ("Subsidiaries"). Bankers Trust Company is the master trustee. The SP ASP Trust is at present organized and operated as a combined funding and investment vehicle for several defined contribution plans ("Savings Plans" and, together with the Retirement Plans, the "Plans"), including so-called 401(k) plans, sponsored by 0-1 and/ or certain of its Subsidiaries. The master trstee is State Street Bank and Trust Company. Both Master Trusts and their participating Plans are subject, inter alia, to the reportg and disclosure provisions and fiduciary responsibilty provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The participating Plans are all "qualified" plans, within the meaning of § 401(a) of the Internal Revenue Code, and benefits to employees (and their beneficiaries) at retiement. The master trustee of each Master Trust act as the custodian of trust assets, but is without investment management discretion (unless separately appointed as an investment manager). have as their stated objective the provision of

In the case of the Retirement Trust, the trust fund is subdivided into several investment accounts, each of which is managed 'by a registered investment advisor (or other qualified "investment manager" within the meaning of ERISA) appointed (and subject to replacement) by 0-1. Each investment account is subject to investment policy guidelines which include the designation of the asset category (~, international equities, domestic the account are to be invested and bonds, real estate, venture capital, etc.) in which funds of

a benchmark against which the investment performance of the account wil be evaluated. Consistent with ERISA's requirement that plans establish and implement a "funding policy", 0-1 also undertkes strategic planning on behalf of the Retirement Plans whereby, based

on actarial studies and investment risk/return analyses, investment objectives and an

optium asset mi for the Retirement Plans are established, reviewed, and periodically adjusted. In the aggregate, the investment accounts of the Retirement Trust cover a ~ide arry of investment categories and a very large portion of the investment risk/ return spectm. ._~)

'\
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~

lCA 1940 Act§ 3(c)(1) ieA 1940 Act § 3(c)(1l)
FULLER & HENRY
Thomas S. Hanan Esq.

Assate Direcor, Offce of Chef eounsel

Secunties and Exchange eommision

Historically, 0-1 has been responsible for the subdivision of the Retirement Trust into separate investment accounts, the appointment and removal of its investment managers, the establishment of investment policies (including benchmarks), and strategic planning for the Retirement Plans. Such servces have been performed by certin individuals who are ., officers or employees of 0-1 and/or of O-I's wholly-owned subsidiary Harbor Capital Advisors, Inc. ("HCA"), a registered investment advisor. It is anticipated that in the future all such personnel wil be officers or employees of HCA and that all such servces will be provided for the Retirement Plans by HCA. In the case of the SP ASP Trust, each participating Savings Plan specifies that its assets may be invested in one or more of seven investment portfolios of the Harbor Fund, a diversifed no-load, open-end registered investment company sponsored by HCA.i HCA is also the investment advisor to the Harbor Fund, although each of Harbor Fund's investment portfolios is directly managed by a sub advisor appointed by HCA. Each of the Harbor Fund portfolios has a counterpart investment account in the Retirement Trust with which it shares common investment objectives. The subadvisor for each Harbor Fund portfolio is also the investment manager of its counterpart investment account in the Retire￾ment Trust. 0-1 and HCA believe that ths commonality of investment objectves and management between the Retirement Trust and Harbor Fund -- and thus indirectly with the SPASP Trust -- provides Savings Plan participants with the benefits of the active planning, monitorig, and evaluation undertken with r~spect to the Retirement Trust and that it affords such participants the opportunity to establish and implement an asset mi strategy consistent with the Savings Plans' stated.objective of providing benefits at the conclusion of the participants' working careers. .

The Master Trusts have enjoyed favorable investment performance relative to the assumed actarial rate of return used in the funding policies of the Retirement Plans. Additionally, due to the substantial assets held in the Master Trusts, competitive fees with trustees, investment managers, and others have been negotiated, and the Plans have achieved certain other economies of scale. For example, the Retirement Trust as a whole has had sufficient assets to meet the minimum participation requirements of a number of private placement investments which by their nature contributed to the optimum asset mi ¡The Savigs Plan parcipatig in the SPASP Trust alo include as additional investment options company

stock funds and a qualed group trst invested in guaranteed income contracts issued by inurance companes.

ieA 1940 Act/§ 3(c)(1) .. lCA 1940 Act/§ 3(c)(1l) FULLER & HENRY '\ Thomas S. Haran Esq. 1 i Assacate Director, Offce of Chef eounsel Securities and Exchane eommision as determed for the Retirement Plans. An individual Retirement Plan of a Subsidiar might not be capable of partcipating in such private placements on its own, but as part of a Master Trust it can be allocated a share of such investment appropriate for its asset mi strategy. 0-1 and HCA believe that the favorable investment performance of the Master Trusts is in signifcant part attrbutable to their monitoring and evaluation - and occasional replacement - of investment managers and that this strategy, in turn, depends for its success on access to vially the entire market for investment management expertise and on the development and use of focused benchmarks for each manager. Given the large minimum account requirements of many investment managers, as well as the need for sophisticated systems and consulting techniques to establish and implement meaningful benchmarks, individual Plans would find it expensive and diffcult, if not impossible, to pursue a comparable strategy. In June 1993, one of O-I's wholly-owned Subsidiaries, Libbey Inc., was spun off from 0-1 in a public offering whereby 0-1 sold all of its equity interest in Libbey. In connection with that transaction, the employees of Libbey ceased their coverage under O-I's Retirement and Savings Plans, and separate Retirement and Savings Plans were established by Libbey to cover its employees. An appropriate portion of the assets of the Master Trusts has been earmarked for allocation to the new Libbey Plans. 0-1, HCA, and Libbey have agreed that if possible these assets should remain invested through the Master Trusts so that the new Libbey Plans can continue to benefit from the investment performance and other advantages, described above, associated with the Master Trusts. In additìon, 0-1 and Libbey have entered into a management servces agreement under which, if the Libbey Plans' assets remain in the Master Trusts, 0-1 or HCA wil continue to perform strategic planning and investment performance monitoring and evaluation for Libbey. 0-1 anticipates that if other Subsidiaries and/ or divisions (nFormer Subsidiaries") are sold in the future, they may desire to make similar arrangements with respect to their Retirement and Savings Plans. While 0-1 might retain some equity interest in one or more of such Former Subsidiaries, it is not anticipated that 0-'1 would retain control. In such future arrangements, Plan assets and liabilties mayor may not be transferred to newly￾formed Plans sponsored by the Former Subsidiaries, but it is expected that at a minimum such newly-formed Plans would assume responsibilty for benefits accruing after the sale and

ieA 1940 Act/§ 3(c)(1) ieA 1940 Act/§ 3(c)(1l) FULLER & HENRY Thomas S. Haran Esq.

Assocate Director, Offce of Chef eounsel
Secunties and Exchange eommision

that the Former Subsidiaries would assume responsibilty for funding such after-accrued benefits. Based on the foregoing, it has been proposed that each of the Master Trusts be

., reorganized to form a group trst in which the Libbey Plans and the Plans of other Former Subsidiaries could participate. As a part of such reorganization, HCA would replace 0-1 reorganized trusts and would undertake the strategic planning and investment management oversight activities heretofore penormedby 0-1. The reorganized as the sponsor of the

Retirement Trust would be renamed the Harbor Capital Group Trust for Defined Benefit Plans, and the reorganized SP ASP Trust would be renamed the Harbor Capital Croup Trust for Defined Contribution Plans (the "Group Trusts"). The only Plans that would be eligible to participate in the Group Trusts would be those sponsored by 0-1 and its Subsidiaries and Former Subsidiaries.
II. Issues Presented

Presently, each Master Trust is exempt from the Act pursuant to § 3(c)(11), as a qualified employee benefit trust of a single employer. We are of the opinion that each Group Trust will be exempt from the Act pursuant to § 3(c)(1) and/ or § 3(c)(11) of the Act~

Each Group Trust should continue to be exempt under the first clause of § 3(c)(11) because all participating Plans wil be sponsored by "related companies." Additionally, the exemption under § 3(c)(1) should be available because there wil be far fewer than 100 Plans

participating in each Group Trust. Although one or more of the participating Plans wil each own more than 10% of a Group Trust's, assets, and while each participating Plan wil have more than 10% of its assets invested in a Group Trust, we are nevertheless of the opinion that the attribution rules wil not be applicable because participation interests in each Group Trust wil not constitute ''voting securities." We request that the staff issue a no-action letter concurrng in either or both of the foregoing opinions.

ieA 1940 Act/§ 3(c)(1) ieA 1940 Act/ § 3( c)
(11)
FULLER & HENRY
~
Thomas S. Hanan Esq. J
Assocate Director, Offce of Chef eounsel
Securities and Exchangeeommision

ILL Law
Secion 3 (c) (11)
The first clause of § 3(c)(11) of the Act exempts "(a)ny employee's stock bonus,

., pension, or profit-sharing trust which meets the requirements for qualification under section 401 of the Internal Revenue Code of 1986 . . .." In many no-action letters, commencing priarily with Bank-Tnistee Pension and Prdit-Shanng Plans, (avaiL. Apr. 18, 1974)(CCH

(1973-1974 Transfer Binder) Fed.Sec.L.Rptr. 179,768), the staff has taken the position that the initial clause of § 3(c)(11) applies only to a "single trust" or a group trust involving

pension plans for the employees of "related companies." Further, the staff indicated that whether or not companies are "related" would be determned on a case-by-case basis, in light

of all the relevant facts and circumstances. The relationship between a parent corporation

and its controlled subsidiaries, as is the present case under each Master Trust, has been

viewed as a single employer relationship exempt under the first clause of § 3(c)(1). (E¡;,

Lanehart Industri, Inc. (avaiL. Mar. 2, 1977) and McDonald's Coiporation (avaiL. Feb. 2,

1977).) Here, while the continuity of the corporate control relationship may be severed, there nevertheless remains a continuing relationship between and among the Plans grounded in their shared objectives and, in certain instances, shared coverage of the same employees with respect to pre- and post-sale accrued benefits. In addition, the Plans' objective of participating together in a shared investment fund is commensurate with their shared

investment risk/return tolerance and asset mi strategy.

Furthermore, relationships other than those established within an existing controlled group of corporations have also seived as the basis for a finding that companies were

suffciently related. (Eg., Haivard College (avaiL. July 20, 1977); Amencan Telephone &

Telegrph Co. (avaiL. Dec. 7, 1978); and Eli Lilly and Company (avail. Dec. 31, 1991).) The

circumstaces here are analogous to those presented to the staff in the letters just cited, and

are clearly distinguishable from situations in which an investment advisor has sought to market a pooled investment arrangement to plans sponsored by wholly-unrelated employers

who had never been affiliated. (Narrgansett Capital Coiporation (avaiL. May 3, 1978)(1978

WL 13289)(S.E.C.).) Here, in fact the initial investment decisions to invest Plan .assets through the Master Trusts occurred when the corporate sponsor of a participating Plan wås either 0-1 itself or a Subsidiary of 0-1 and the Master Trusts were, therefore, unques￾tionably exempt from the Act pursuant to § 3(c)(11). To our knowledge, this fact situation

has never been presented to the staff.

ieA 1940 Act/§ 3(c)(1) ieA 1940 Act/ § 3(c)(1l) FULLER & HENRY Thomas S. Haran Esq.

Assciate Director, Offce of Chef eounsel
Securities and Exchane Commission

Finally, the Plan sponsors here may, in large part also remain operationaly "related" through a variety of contractal undertkings. In the case of Libbey, for example, 0-1 has

agreed to provide for an indefinite period certain management, administrative, and techncal assistance servces to. Libbey, in addition to the Plan servces, referred to above, to be ., provided by HCA. Secion 3(c)(1)
Section 3(c)(l) of the Act exempts any issuer whose outstanding voting securities are
beneficially owned by not more than 100 persons. In calculating the number of such owners, ownership by a company or trust is deemed to be ownership by one person unless such company or trust owns 10% or more of the outstanding voting securities of the issuer. In such event, the owners are deemed to be all the holders of such company's or trust's voting securities, unless, as to such company or trust, an investment in the issuer, in combination with all of the entitys other investments in investment companies which are exempt from the Act solely under § 3(c)(1), constitute less than 10% of such entitys assets. Each Plan participating in a Group Trust wil do so through its own individual trust, and there will not be more than 100 Plans (and related individual trusts) participating in either Group Trust. However, each Plan is expected to invest all or a substantial portion (expected, in any event, to exceed 10%) of its assets through a Group Trust, and some Plans' holdings will constitute more than 10% of the Group Trust's assets. Consequently, the exemption afforded by Section 3( c)(l) would be applicable here only. if the participating Plans' interests in a Group Trust are not regarded as "voting securities" of the Group Trust. The term 'voting securities" is defined in § 2(a)( 42) of the Act to mean "any security presently entitling the owner or holder thereof to vote for the election of directors of a company." In applyig this definition to a trust, an "owner or holder" would be equivalent to a beneficiary of the trst and the "directors of a company" would be equivalent to the trstees and/ or investment managers of the trust. It is axomatic under the common law of trusts, and statutorily explicit under ERISA (§ 404(a)(1)(D)), that the wrtten term of a trust govern the rights and duties of the trstee and the beneficiaries unless such term contravene applicable law. (See, e.g., Scott, The Law of Trusts, §§ 107.3, 164 (3d ed. 1967 and Supp. 1984).) Here, under the governing documents of the Group Trusts, the participating Plans wil have no right to vote on any

ieA 1940 Act/§ 3(c)(1) ieA 1940 Act/§ 3(c)(1l) FULLER & HENRY Thomas S. Hanan Esq. Associate Director, Offce of Chef eounsel

Securities and Exchane eommission

matters whatsoever; no right to select remove or replace the. trustee or any investment agreement; and no right to participate or interfere in the administrative or investment management decisions of the Group Trust. manager; no right to amend or revise the trust

Consequently, whatever interests in the Group Trusts the participating Plans may "own" or ., "hold", they wil not be 'voting securities". Based on the above analysis, the SEC staff has given advice that it would not take any enforcement action if a trust did not register under the Act. (Moign Grenfell 10, 1985; Global Investment Trost, July 16, 1984; Sirch, Inc., October 17, 1984; Krhbiel & Hibbard, Inc., (November 18, 1981); FM .Investment Management Seivice, Inc., (November 28, 1979) 1979 WL 13178 (S.E.C.); YMC4 d Metropolitan Chicago, (September 15, 1979) 1979 WL 13210 (S.E.C.); and Wan Patteison, Investment Seivice Intemational Trost, April

McGrew &- Richards, Inc., (November 10, 1980) 1980 WL 17546 (S.E.C).)2 The facts set forth in the Kihbielletter are identical to the Group Trust with respect to whether the trust

beneficiaries hold 'voting securities."
In sum, based upon the language of each Group Trust agreement and the applicable law, we are of the opinion that the parcipating Plans wil not have any rights substantially voting rights of common stock so that their interests would not be consid~red to be 'voting securities" as defined by § 2(a)(42) of the Act. simiar to the

Additionally, we are of the opinion that there is no issue of "de facto control" of the Group Trusts, and that the Group Trusts wil be, therefore, distinguishable from the situations addressed in such no-action letters as The MA Hanna Co., 42 S.E.C. 477 (1964); Hawkeye Bancoiporation Govemment Securiies Pool No.1; Hawkeye Bancoiporation Tax No. 2, (CCH) (1971-1972 Transfer Binder) Fed. Sec. L. Rptr. , 78,409 Exempt Secriies Pool

(avaiL. June 16, 1971); Pieir Lewis & Dolan, (March 17, 1972)(1972 WL 12248 (S.E.C.)); Hidgins, Hiitey Capital Management Coip., (CCH) (1972-1973 Transfer Binder) Fed. Sec. 22, 1973)(1974 WL 7137 L. Rptr. , 79,176); Robeits, Scot and Company Incoiporated, (Feb.

2Te rits of trst beneficiares are governed by state law. (Burke v. Lasker. 441 U.s. 471 (1979).) :The

cited no-action letters thoroughy analyze the trust law of the eommonwealth of Massachusetts, which govern the SPASP Trust, and need not be repeated here. The applicable trust law of the State of New York, which govern the Retiement Trust, is the same as the law of Massachusetts in al material respects. (See e.g., Gilbert
v. Gilbert 385 N.Y.s.2d 278 (1976); Re Balsam's Trust, 2% N.Y.s.2d 969 (1968).)

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ieA 1940 Act/§ 3(c)(1) ieA 1940 Act/§ 3(c)(1l) FULLER & HENRY Thomas S. Hanan Esq. Associate Director, Offce of Chef eounsel

Securities and Exchane eommIssion

(S.E.C.)); L. MalVin Moorehead, (Jan. 30, 1975) (1975 WL 10946 (S.E.C.)); and Deonshir Capital Corp., (Feb. 15, 1976).

in the Group Trusts wil have no abilty to replace the trustee , or the investment managers; these duties are exclusively within the power of HCA. In this The Plans participating

respect the circumstances here would be similar to those in Cigna Corporation (avaiL. 1984) and KohIbig Krvis Robeits & 'Co. (avail. Sept. 9, 1985). In Cigna and KohIbig Krvis, Robeits & Co., the staff recommended that the beneficial owners of a limited partner which owned 10% or more of the total interest in the limited partnership not be counted as beneficial owners of the limited partnership itself, so long as the limited partners had no right to remove or replace the general partner of the limited partnership. (Similarly, Goiron & Hemeld (avaiL. Nov. 30, 1987) and Hoisley Keough Venture Fund (avaiL. Apr. 27, 1988)(1988 WL 234249)(S.E.C.)). In Hoisley, it was represented that, if the general partner withdrew, became bankrpt, or similar events occurred, the limited partners would only have a right to elect a liquidator, but they would have no right to elect to replace the general partner. The participating Plans do not have the right to seek to amend or renew the Group Trust agreements at regular intervals. (ROgeis, Casey & Associates, (Cæ) (1989-1990 Transfer Binder) Fed. Sec. L. Rptr. , 79,320). The Plans' only decision is whether or not to participate in each Group Trust. Nor is there "economic power" outside of the Group Trust agreements which wil be controlling on HCA in discharging its duties with respect to each Group Trust. The Plans' corporate sponsors wil not be legally ~pable of exercising economic power outside the governing Plan and Group Trust documents. Although, as a matter of corporate structure, HCA is a wholly-owned subsidiary of 0-1, under ERISA each Plan is a distinct legal entity whose sponsor, administrators, and other fiduciaries are each bound to act in accordance with the strict principles of fiduciary duty embodied in ERISA and applicable trust law. Each fiduciary must act solely in the interests of the Plan and its participants and strictly in accordance with governing Plan documents and must avoid self￾dealing and conflct of interest. (See §§ 404(a)(1) and 406(b) of ERISA.)

The applicability of ERISA's fiduciary responsibilty provisions here makes the Group Trusts distinguishable from the limited partnership at issue in Clemente Global Growth Fund, Inc. v. T. Bone Pickens, IlL, et aI, 705F. Supp. 958 (S.D.N.Y. 1989), appeal withdrawn on consent, in which the protections of the Act were being avoided by the layering of control.

lCA 1940 Act!§ 3(c)(1) ieA 1940 Act! § 3(c)(1l) FULLER & HENRY ") Thomas S. Haran Esq.

Asste Director, Offce of Chef Counsel
Securities and Exchane Commiion

The Group Trusts, on the other hand, do not seek to circumvent the Act but seek only to afford a mechanism whereby the Plans and/ or Plan assets of a Subsidiary wil not need to

be divested in the event of a sale. As noted above, such divestiture of Plan assets ca

produce an unfavorable result to the Plan through the loss of participation in favorable ,private placements, the unavailabilty of favorable fees, and the other reasons set forth above. If the SEC staff issues a favorable no-action letter in response to this request, 0-1

and HCA will proceed with the reorganization of the Master Trusts and seek a determna￾tion from the Internal Revenue Servce that each resulting Group Trust is qualifed pursuant

to § 401(a)of the Internal Revenue Code.

Accordingly, we respectfully request that the staff advise us that it would not

recommend any enforcement action to the Commssion if the Group Trusts do not register 1; under the Act provided that each Group Trust receives a favorable determnation letter from the Internal Revenue Servce that it remains qualified under § 401(a) of the Internal Revenue Code. If you. have any questions, please call the undersigned at the direct dial number shown above. Thank you for your cooperation on this important matter. Very truly yours, FULLER & HENRY' ../7 L V1J-~d~ Regina M. Joseph