Proposed Exemptions and Application Nos. Gastroenterology and Oncology Associates, P.A. Profit Sharing Plan and Trust (the Plan), D-11141; Wellington Management Company, LLP (Wellington Management), D-11343; GE Asset Management Incorporated, D-11389; Middleburg Trust Company (Middleburg), D-11405; and Citigroup, Inc. (Citigroup), D-11417, 60889-60908 [E7-20921]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 72, Number 207 (Friday, October 26, 2007)]
[Notices]
[Pages 60889-60908]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-20921]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration


Proposed Exemptions and Application Nos. Gastroenterology and 
Oncology Associates, P.A. Profit Sharing Plan and Trust (the Plan), D-
11141; Wellington Management Company, LLP (Wellington Management), D-
11343; GE Asset Management Incorporated, D-11389; Middleburg Trust 
Company (Middleburg), D-11405; and Citigroup, Inc. (Citigroup), D-11417

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of proposed exemptions.

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

SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemptions from 
certain of the prohibited transaction restrictions of the Employee 
Retirement Income Security Act of 1974 (ERISA or the Act) and/or the 
Internal Revenue Code of 1986 (the Code).

Written Comments and Hearing Requests

    All interested persons are invited to submit written comments or 
requests for a hearing on the pending exemptions, unless otherwise 
stated in the Notice of Proposed Exemption, within 45 days from the 
date of publication of this Federal Register Notice. Comments and 
requests for a hearing should state: (1) The name, address, and 
telephone number of the person making the comment or request, and (2) 
the nature of the person's interest in the exemption and the manner in 
which the person would be adversely affected by the exemption. A 
request for a hearing must also state the issues to be addressed and 
include a general description of the evidence to be presented at the 
hearing.

ADDRESSES: All written comments and requests for a hearing (at least 
three copies) should be sent to the Employee Benefits Security 
Administration (EBSA), Office of Exemption Determinations, Room N-5700, 
U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC 
20210. Attention: Application No. ----, stated in each Notice of 
Proposed Exemption. Interested persons are also invited to submit 
comments and/or hearing requests to EBSA via e-mail or FAX. Any such 
comments or requests should be sent either by e-mail to: 
moffitt.betty@dol.gov, or by FAX to (202) 219-0204 by the end of the 
scheduled comment period. The

[[Page 60890]]

applications for exemption and the comments received will be available 
for public inspection in the Public Documents Room of the Employee 
Benefits Security Administration, U.S. Department of Labor, Room N-
1513, 200 Constitution Avenue, NW., Washington, DC 20210.

Notice to Interested Persons

    Notice of the proposed exemptions will be provided to all 
interested persons in the manner agreed upon by the applicant and the 
Department within 15 days of the date of publication in the Federal 
Register. Such notice shall include a copy of the notice of proposed 
exemption as published in the Federal Register and shall inform 
interested persons of their right to comment and to request a hearing 
(where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in 
applications filed pursuant to section 408(a) of the Act and/or section 
4975(c)(2) of the Code, and in accordance with procedures set forth in 
29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990). 
Effective December 31, 1978, section 102 of Reorganization Plan No. 4 
of 1978, 5 U.S.C. App. 1 (1996), transferred the authority of the 
Secretary of the Treasury to issue exemptions of the type requested to 
the Secretary of Labor. Therefore, these notices of proposed exemption 
are issued solely by the Department.
    The applications contain representations with regard to the 
proposed exemptions which are summarized below. Interested persons are 
referred to the applications on file with the Department for a complete 
statement of the facts and representations.

Gastroenterology and Oncology Associates, P.A. Profit Sharing Plan and 
Trust (the Plan) Located in St. Petersburg, FL

[Application No. D-11141]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR Part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption 
is granted, the restrictions of sections 406(a), 406(b)(1) and (b)(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, will not apply to the proposed sale of certain shares of common 
stock (the Stock) issued by Alden Enterprises, Inc. (Alden), an 
unrelated party, by the individually directed account in the Plan (the 
Account) of Jayaprakash K. Kamath, M.D. (Dr. Kamath), to Geetha J. 
Kamath, M.D., (Mrs. Kamath), Dr. Kamath's spouse and a party in 
interest with respect to the Plan.
    This proposed exemption is subject to the following conditions:
    (a) The sale of the Stock by the Account to Mrs. Kamath is a one-
time transaction for cash.
    (b) The Stock is sold to Mrs. Kamath for a price that reflects the 
fair market value of the Stock, as determined by a qualified, 
independent appraiser (the Appraiser).
    (c) The closing of the sale (the Closing Date) occurs at a time 
that is mutually agreed upon by Mrs. Kamath and the Plan trustees (the 
Trustees) within 30 days of the Department's approval of the final 
exemption.
    (d) As of the Closing Date, the Appraiser reviews the assumptions 
previously made in determining the appraised value of the Stock to see 
whether there has been a 3% or more increase (Material Increase) in the 
fair market value of the Stock between December 31, 2006 (the Appraisal 
Date) and the Closing Date.
    (e) If the Appraiser determines that there has been no Material 
Increase in the fair market value of the Stock on the Closing Date, the 
Appraiser issues a letter to the parties to the sale to such effect and 
the sale price of the Stock remains at the value determined on the 
Appraisal Date.
    (f) If the Appraiser determines that there has been a Material 
Increase in the fair market value of the Stock, he advises the parties 
to the transaction, in writing, as to the increased value as of the 
Closing Date. Then, the sale price for the Stock is revised to reflect 
the increased value and the amount of such increase is paid to the 
Trustees by Mrs. Kamath following the receipt of the updated appraisal 
report from the Appraiser setting forth the increased value of the 
Stock.
    (g) The sale proceeds from the transaction are credited to Dr. 
Kamath's Account simultaneously with the transfer of the Stock's title 
to Mrs. Kamath.
    (h) The Account is not responsible for paying any fees, 
commissions, or other costs or expenses associated with the sale of the 
Stock.
    (i) The terms and conditions of the Stock sale remain at least as 
favorable to the Account as the terms and conditions obtainable under 
similar circumstances negotiated at arm's length with an unrelated 
party.

Summary of Facts and Representations

    1. Dr. Kamath is a gastroenterologist and oncologist and a 50% 
owner of Gastroenterology and Oncology Associates, P.A. (the Employer), 
the sponsor of the Plan. The Employer is a Florida corporation, which 
is located in St. Petersburg, Florida. The Employer is also owned 50% 
by Mrs. Kamath.
    2. The Plan is a profit-sharing plan that was established by the 
Employer and provides for participant-directed investments. Dr. and 
Mrs. Kamath are the Plan Trustees. In addition, Dr. Kamath serves as 
the Plan Administrator. As of December 31, 2006, which is the most 
recent date Plan information is available, the Plan had 42 
participants, one of whom included Dr. Kamath. Also as of December 31, 
2006, the Plan had net assets available for benefits totaling 
$3,312,699. Of those assets, approximately $2,058,927 was held in Dr. 
Kamath's Account in the Plan.
    3. Among the assets allocated to Dr. Kamath's Account are 42.84 
shares of common stock, which constitute 14% of the issued and 
outstanding shares of Alden, a closely-held Florida corporation. 
Alden's primary business is the ownership and operation of a resort 
hotel on Florida's Gulf Coast. The property underlying the Stock 
consists of a 4.84 acre tract of land improved with 10 buildings that 
comprise the 142-unit beachfront hotel known as the ``Alden Beach 
Resort.'' The property is located at 5900 Gulf Boulevard, in the city 
of St. Pete Beach, Pinellas County, Florida.
    None of the other shareholders of Alden are related to the Kamaths 
or the Employer. In addition, neither the Kamaths nor members of their 
family are officers or directors of Alden.
    4. The Account acquired the Stock from Margaret Bradford, a 
retired, former Alden employee and an unrelated party, on September 15, 
1983, for a cash purchase price of $150,000. The purchase price paid by 
the Account for the Stock was negotiated by the Trustees and Ms. 
Bradford. During its ownership of the Stock, the Account received 
$706,860 in dividends from 1983 until 2006. In addition, the Alden 
Beach Resort was refinanced in 1990, and the proceeds were distributed 
to the shareholders. The Account received $433,860 from the 
refinancing. The Account incurred no expenses or administrative costs 
in connection with its ownership of the Stock. As a result of the 
acquisition and holding of the Stock, the Account has experienced a

[[Page 60891]]

net gain of $990,720 [($706,860 + $433,860) - $150,000].
    5. An administrative exemption is requested from the Department to 
allow Dr. Kamath's Account to sell the Stock to Mrs. Kamath. Following 
the sale, Mrs. Kamath proposes to transfer the Stock to a revocable 
trust for estate planning purposes. The sale price for the Stock will 
be based upon its independently appraised fair market value. The 
consideration for the Stock will be paid by Mrs. Kamath in cash. The 
Account will pay no fees or commissions in connection with the 
transaction.
    6. The value of the Stock on December 31, 2006 was $899,640, 
according to a January 2, 2007 appraisal report that was prepared by 
Mr. James W. Brockardt, CBA, a qualified, independent appraiser. The 
Appraiser, who is the President of Brockardt Consulting Group, LLC, an 
independent appraisal firm located in Pennington, New Jersey, has 
worked in the area of securities valuation since 1975. The Appraiser 
represents that he is completely independent of the parties involved in 
the transaction and has no present or prospective interest in the 
Stock.
    The Appraiser initially valued the Stock under both the Cost 
Approach and the Income Approach to valuation. Then, he determined a 
``freely traded value'' based upon weighting 75% to the Cost Approach, 
and 25% to the Income Approach. This value was next discounted by 35% 
for lack of marketability. As a result of the calculation, the 
Appraiser determined that the Stock had an aggregate fair market value, 
on a minority interest basis, of $6,428,398, or a per share value, on a 
minority interest basis, of $21,000. Thus, the 42.84 shares of Stock 
held by Dr. Kamath's Account have a total fair market value of 
$899,640. In addition, the Stock represents approximately 25.74% of the 
Account's assets.
    7. The proposed transaction is contingent upon the Department's 
issuance of a final exemption, on or before December 31, 2007, 
authorizing such transaction in accordance with an Agreement for Sale 
of Stock (the Stock Sale Agreement), to be entered into between Mrs. 
Kamath and the Trustees. In this regard, the Stock Sale Agreement 
provides that if the Department grants a final exemption approving the 
transaction, the closing of the transaction will occur within 30 days 
of such approval.
    As of the Closing Date, the Appraiser will review the assumptions 
he previously made in determining the appraised value of the Stock to 
see whether there has been a 3% or more increase (i.e., a Material 
Increase) in the fair market value of the Stock between the Appraisal 
Date (i.e., December 31, 2006) and the Closing Date. If the Appraiser 
determines that there has been no Material Increase in the fair market 
value of the Stock on the Closing Date, he will issue a letter to Mrs. 
Kamath and the Trustees informing them that the sale price of the Stock 
will be the value determined on the Appraisal Date. On the other hand, 
if the Appraiser determines that there has been a Material Increase in 
the fair market value of the Stock, he will advise the parties to the 
transaction, in writing, as to the increased value as of the Closing 
Date. Then, the sale price for the Stock will be revised to reflect the 
increased value and the amount of such increase will be paid by Mrs. 
Kamath to the Trustees following the receipt of the updated appraisal 
report from the Appraiser. Mrs. Kamath will pay the Trustees for the 
Stock either in cash or by wire transfer.
    If the Department does not grant a final exemption authorizing the 
proposed transaction by December 31, 2007, the transaction will be 
automatically rescinded and it will become null and void.
    8. The Trustees represent that the transaction is in the best 
interest of the Account because the sale ensures that the Account will 
have greater liquidity and diversification since its assets will be 
invested in either marketable securities or assets that are traded on 
an established market. This will enable Dr. Kamath's interest to be 
rolled over to his individual retirement account upon his retirement. 
Also, given the lack of operating or financial control of a minority 
shareholder, such as the Account, the Trustees state that it would be 
difficult, if not impossible, to sell the Stock. Further, the Trustees 
explain that the transaction will enable Alden to make a Subchapter S 
corporation election.
    9. It is represented that the transaction is protective of the 
Account because the fair market value of the property underlying the 
Stock will be updated on the Closing Date by the Appraiser. Further, 
the Account has not been required, nor will it be required, to pay any 
fees, commissions or other expenses or costs in connection with the 
subject transaction.
    10. In summary, it is represented that the proposed transaction 
will satisfy the statutory requirements for an exemption under section 
408(a) of the Act because:
    (a) The sale of the Stock by the Account to Mrs. Kamath will be a 
one-time transaction for cash.
    (b) The Stock will be sold to Mrs. Kamath for a price that reflects 
the fair market value of the Stock, as determined by the Appraiser on 
the Closing Date.
    (c) The Closing Date of the transaction will occur at a time that 
is mutually agreed upon by Mrs. Kamath and the Trustees within 30 days 
of the Department's approval of the final exemption.
    (d) The Appraiser will determine whether there has been a Material 
Increase in the fair market value of the Stock between the Appraisal 
Date and the Closing Date, and if so, he will make appropriate 
adjustments to the sale price in an updated appraisal report.
    (e) Dr. Kamath's Account will not be responsible for paying any 
fees, commissions, or other costs or expenses associated with the sale 
of the Stock.
    (f) The terms and conditions of the Stock sale will remain at least 
as favorable to the Account as the terms and conditions obtainable 
under similar circumstances negotiated at arm's length with an 
unrelated party.

Notice to Interested Persons

    Because Dr. Kamath is the only participant in the Plan, it has been 
determined that there is no need to distribute the notice of proposed 
exemption to interested persons. Accordingly, comments and requests for 
a public hearing are due within thirty (30) days after the publication 
of the notice of proposed exemption in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department, 
telephone (202) 693-8556. (This is not a toll-free number.)

Wellington Management Company, LLP (Wellington Management) and Its 
Subsidiaries (together, Wellington) Located in Boston, MA

[Application No. D-11343]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act (or ERISA) and section 
4975(c)(2) of the Code and in accordance with the procedures set forth 
in 29 CFR part 2570, subpart B (55 FR 32836, 32847, August 10, 
1990).\1\
---------------------------------------------------------------------------

    \1\ For purposes of this proposed exemption, references to 
provisions of Title I of the Act, unless otherwise specified, refer 
also to the corresponding provisions of the code.
---------------------------------------------------------------------------

Section I. Covered Transactions
    If the exemption is granted, the restrictions of section 
406(a)(1)(A) and (D) of the Act and the sanctions

[[Page 60892]]

resulting from the application of section 4975 of the Code, by reason 
of section 4975(c)(1)(A) and (D) of the Code, shall not apply (1) 
retroactively, from January 1, 2001 through December 31, 2003, and (2) 
prospectively, from the date the notice granting the final exemption is 
published in the Federal Register, to--
    (A) The acquisition, from an offshore corporation (the Offshore 
Corporation) of certain non-voting equity securities (Shares), which 
represent interests in the economic value of the Offshore Corporation 
by an ERISA-covered client plan (the Client Plan), where the Offshore 
Corporation is a party in interest with respect to the Client Plan, due 
to the ownership of all of the voting equity shares (Manager Shares) of 
the Offshore Corporation by Wellington Global Administrator, Ltd. 
(Wellington Global Administrator), a subsidiary of Wellington 
Management, which is (or may become) a fiduciary and a service provider 
with respect to the Client Plan; and
    (B) The redemption of the Client Plan's Shares by the Offshore 
Corporation either in cash or in kind.
Section II. Conditions
    This proposed exemption is conditioned upon adherence to the 
material facts and representations described herein and upon 
satisfaction of the following conditions, which apply both 
retroactively and prospectively, unless otherwise excepted:
    (a) All decisions to acquire or redeem Shares have been made or are 
made on behalf of the Client Plan by an authorized fiduciary, which is 
independent of Wellington and the applicable Offshore Corporation.
    (b) At the time of acquisition of Shares from an Offshore 
Corporation, each Client Plan either had or has assets at least equal 
to $100 million.
    (1) In the case of a master trust that holds assets of multiple 
related Client Plans maintained by a single employer or a controlled 
group of employers, as defined in section 407(d)(7) of the Act, this 
requirement is satisfied if the master trust has aggregate assets at 
least equal to $100 million (assuming the fiduciary responsible for 
making the investment decision is the Client Plan sponsor or an 
affiliate of the Client Plan sponsor).
    (2) In the case of a pooled fund (e.g., a group trust) whose assets 
are ``plan assets'' subject to the Act, this requirement is satisfied 
as long as either (i) the pooled fund has at least $100 million in 
aggregate assets and the fiduciary making the investment decision is 
unrelated to Wellington and manages at least $200 million in assets 
(exclusive of the aggregate assets invested in the Offshore 
Corporations); or (ii) at least 50 percent of the units of beneficial 
interest in the pooled fund are held by Client Plans, each of which has 
total net assets of at least $100 million.
    (c) Wellington has not provided and does not provide investment 
advice (within the meaning of 29 CFR 2510.3-21(c)), nor is it a 
fiduciary with respect to any Client Plan's investment in an Offshore 
Fund.
    (d) All acquisitions and redemptions of Shares by a Client Plan 
have been made or are made for fair market value, determined as 
follows:
    (1) Equity securities have been valued or are valued at their last 
sale price or official closing price on the market on which such 
securities primarily trade using sources independent of Wellington and 
the issuer. If no sales occurred on such day, equity securities are 
valued at the last reported independent ``bid'' price or, if sold 
short, at the last reported independent ``asked'' price.
    (2) Fixed income securities have been valued or are valued on 
either the basis of ``firm quotes'' obtained at the time of the 
acquisition or redemption of Shares from U.S.-registered or foreign 
broker-dealers, which are registered and subject to the laws of their 
respective jurisdiction, which quotes reflect the share volume involved 
in the transaction, or on the basis of prices provided by independent 
pricing services that determine valuations based on market transactions 
for comparable securities and various relationships between such 
securities that are generally recognized by institutional traders.
    (3) Options have been valued or are valued at the mean between the 
current independent ``bid'' price and the current independent ``asked'' 
price or, where such prices are not available are valued at their fair 
value in accordance with Fair Value Pricing Practices by Wellington 
Management's pricing committee, which utilizes a set of defined rules 
and an independent review process.
    (4) If current market quotations are not readily available for any 
investments, such investments have been valued or will be valued at 
their fair value by Wellington Management's pricing committee in 
accordance with Fair Value Pricing Practices.
    (e) A Client Plan's Shares have been redeemed or may be redeemed, 
in whole or in part, without the payment of any redemption fee or other 
penalty, on a pre-specified, periodic (not longer than semi-annual) 
basis, upon no more than 45 days' advance notice, except for a one-year 
lock-up period imposed on new investors.
    (f) Redemptions of Shares in an Offshore Corporation by a Client 
Plan have been made or are made in cash unless:
    (1) A Client Plan consents to such in kind redemption; or
    (2) Wellington requires that such redemption be made in kind on a 
pro rata basis to protect the best interests of the Offshore Fund and 
the remaining investors, including other Client Plan investors.
    (g) In advance of the initial investment by a Client Plan in an 
Offshore Corporation's Shares, the independent fiduciary of a Client 
Plan has received or receives--
    (1) A copy of the proposed exemption and the final exemption. (This 
disclosure provision applies to the prospective exemptive relief 
described herein.)
    (2) An offering memorandum describing the relevant Offshore 
Fund(s), as well as the relevant investment objectives, fees and 
expenses and redemption and valuation procedures; and
    (3) All reasonably available relevant information as such 
independent fiduciary may request.
    (h) On an ongoing basis, Wellington has provided or provides a 
Client Plan with the following information:
    (1) Unaudited performance reports at the end of each month;
    (2) Audited annual financial statements and access to a protected 
internet site; and
    (3) Client services group assistance for any investor inquiries.
    (i) No commission or sales charge has been assessed or is assessed 
against the Client Plan in connection with its acquisition of an 
Offshore Corporation's Shares.
    (j) Not more than 10% of the assets of the Client Plan has been 
invested or is invested, in the aggregate, in Shares of all Offshore 
Corporations (determined at the time of any acquisition of such Shares) 
and not more than 5% of the assets of the Client Plan has been 
indirectly invested or is invested, in the aggregate, in any one 
offshore fund (the Offshore Fund), a separate collective investment 
vehicle underlying an Offshore Corporation, (also determined at the 
time of any acquisition of an interest in such Offshore Fund by such 
Client Plan).
    (k) For prospective transactions only, each Offshore Corporation, 
each Offshore Fund, Wellington Management Investment, Inc. (Wellington

[[Page 60893]]

Management Investment), Wellington Global Holdings, Ltd. (Wellington 
Global Holdings), Wellington Hedge Management, LLC (Wellington Hedge 
Management), and Wellington Global Administrator--
    (1) Has agreed to submit to the jurisdiction of the federal and 
state courts located in the Commonwealth of Massachusetts;
    (2) Has agreed to appoint an agent for service of process in the 
United States, which may be an affiliate (the Process Agent);
    (3) Has consented to service of process on the Process Agent; and
    (4) Has agreed that any enforcement by a Plan of its rights 
pursuant to this exemption will, at the option of the Plan, occur 
exclusively in the United States courts.
    (l) For prospective transactions only, Wellington maintains in the 
United States for a period of six years from the date of the covered 
transactions, such records as are necessary to enable the persons 
described in paragraph (m) of this Section II to determine whether the 
conditions of this exemption were met, except that:
    (1) If the records necessary to enable the persons described in 
paragraph (m) to determine whether the conditions of the exemption have 
been met are lost or destroyed, due to circumstances beyond the control 
of Wellington, then no prohibited transaction will be considered to 
have occurred solely on the basis of the unavailability of those 
records; and
    (2) No party in interest other than Wellington shall be subject to 
the civil penalty that may be assessed under section 502(i) of the Act 
or to the taxes imposed by section 4975(a) and (b) of the Code if the 
records have not been maintained or are not available for examination 
as required by paragraph (m) below.
    (m)(1) Except as provided in paragraph (m)(2) of this Section II 
and notwithstanding the provisions of subsections (a)(2) and (b) of 
section 504 of the Act, the records referred to above in paragraph (l) 
of this Section II are unconditionally available for examination during 
normal business hours at their customary location to the following 
persons or an authorized representative thereof:
    (i) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service (the Service);
    (ii) Any fiduciary of a Client Plan; or
    (iii) Any participant or beneficiary of a Client Plan or any duly 
authorized employee or representative of such participant or 
beneficiary.
    (2) None of the persons described above in paragraphs (ii) and 
(iii) of this paragraph (m)(1)(ii) and (iii) of this Section II shall 
be authorized to examine trade secrets of Wellington, or any commercial 
or financial information, which is privileged or confidential.
Section III. Definitions
    (a) The term ``Wellington'' means Wellington Management Company, 
LLP and its subsidiaries.
    (b) An ``affiliate'' of Wellington means--
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person;
    (2) Any officer, director, employee, relative, or partner in any 
such person; and
    (3) Any corporation or partnership of which such person is an 
officer, director, partner, or employee.
    (c) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (d) The term ``Offshore Corporation'' means --
    (1) WMIB;
    (2) Any future expansion of WMIB that includes an additional class 
of securities or an additional Offshore Fund that is organized as a 
Bermuda limited partnership, which corresponds to the new WMIB class 
that is established by Wellington pursuant to the WMIB structure, and 
conforms to the same conditions, rules and regulations described in 
this exemption;
    (3) Archipelago; or
    (4) Any future ``fund of funds'' investment vehicle that is formed 
by Wellington under Bermuda law and is set up in substantially the same 
manner as Archipelago, with the same management structure, and conforms 
to the same conditions, rules and regulations described in this 
exemption.
    (e) The term ``Offshore Fund'' means a collective investment 
vehicle that is organized as a Bermuda limited partnership, which 
corresponds to each class of WMIB securities. Each Offshore Fund 
invests primarily in publicly-traded securities, although up to 15% of 
each Offshore Fund may be invested in securities that are not readily 
marketable.
    (f) The term ``U.S. broker-dealer'' means a broker-dealer 
registered in the United States under the Securities Exchange Act of 
1934 (the 1934 Act) or exempted from registration under section 
15(a)(1) of the 1934 Act as a dealer in exempted government securities 
(as defined in section 3(a)(12) of the 1934 Act).
    (g) The term ``foreign broker-dealer'' means a broker that has, as 
of the last day of its most recent fiscal year, equity capital that is 
the equivalent of not less than $200 million and is registered and 
regulated, under the relevant securities laws of a governmental entity 
of a country other than the United States, where such regulation and 
oversight by the governmental entities is comparable to regulatory 
regimes within the United States.
    (h) ``Manager Shares'' refer to the equity securities of an 
Offshore Corporation that have voting rights and control the election 
of the Board of Directors of an Offshore Corporation. Manager Shares do 
not participate in the economic performance of the Offshore Corporation 
and are owned 100% by Wellington Global Administrator.
    (i) ``Shares'' refer to the equity securities of an Offshore 
Corporation that do not have voting rights. Such shares represent 
substantially all of the economic value of the Offshore Corporation and 
are or will be directly linked either (i) by class to a corresponding 
Offshore Fund (in the case of WMIB) or (ii) to a mix of various WMIB 
classes (in the case of Archipelago or any other fund of funds entity).
    Effective Date: If granted, this proposed exemption will be 
effective retroactively for the transactions involving Wellington and 
two Client Plans that occurred from January 1, 2001 until December 31, 
2003. For prospective transactions involving Wellington and a Client 
Plan, this proposed exemption will be effective on the date the notice 
granting the final exemption is published in the Federal Register.

Summary of Facts and Representations

    1. Wellington, or the applicant (the Applicant), is a Massachusetts 
limited liability partnership that is a federally registered investment 
adviser and a financial services organization. Wellington manages the 
assets of many individual and institutional clients. As of September 
30, 2006, Wellington had over $544 billion in assets under management, 
including the assets of many ERISA-covered employee benefit plans.
    2. Wellington currently sponsors two offshore, open-end limited 
liability investment companies (i.e., the Offshore Corporations)--
Wellington Management Investors (Bermuda), Ltd. (WMIB) and Archipelago 
Holdings, Ltd. (Archipelago). Each Offshore Corporation was formed 
under the laws

[[Page 60894]]

of Bermuda. WMIB, which is a conduit vehicle and does not have an 
investment manager, is structured in a manner that is similar to a 
``series fund.'' It presently has outstanding nine classes of equity 
interests, each of which is linked to a separate collective investment 
vehicle that is organized as a Bermuda limited partnership (i.e., the 
Offshore Funds). There is a separate Bermuda limited partnership that 
corresponds to each class of WMIB securities.\2\ All amounts 
distributed to WMIB by a particular Offshore Fund are distributed to 
the holders of the corresponding class of WMIB securities. Each 
Offshore Fund invests primarily in publicly-traded securities, although 
up to 15% of such fund may be invested in securities that are not 
readily marketable.
---------------------------------------------------------------------------

    \2\ WMIB actually has 11 classes of equity interests. However, 
two of these classes relate to funds that have different 
characteristics than those described herein, and such classes are 
not intended to be covered by this exemption. Therefore, the 
existence of these two classes (and the corresponding Offshore 
Funds) should be disregarded in this proposed exemption except for 
the fact that interests in these two classes are held by 
Archipelago.
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    Wellington Management Investment, a Delaware corporation, which is 
wholly owned by Wellington Management, does not have any contractual 
relationship with, or provide any services to, the Offshore 
Corporations or the Offshore Funds. Wellington Management Investment 
holds a 0.025% interest in Wellington Global Holdings, a 0.1% interest 
in Wellington Global Administrator and a 0.1% interest in Wellington 
Hedge Management. The remaining interests in each such entity are 
directly held by Wellington Management, so that all three entities are 
nearly 100% owned by Wellington Management.
    Wellington Global Holdings serves as the investment general partner 
of each WMIB Offshore Fund and, in such capacity, has hired Wellington 
Management as the investment sub-adviser of each WMIB Offshore Fund. 
Wellington Global Holdings also serves as the investment manager of 
Archipelago. Wellington Global Administrator serves as the 
administrative general partner of each WMIB Offshore Fund and also as 
the administrative manager of Archipelago. Wellington Hedge Management 
serves as the general partner of the Wellington-sponsored domestic 
``onshore'' hedge funds, but has no responsibility or relationship with 
respect to the Offshore Corporations or the Offshore Funds.
    In the future, WMIB may be expanded by Wellington to include 
additional classes of equity interests and additional Offshore Funds, 
corresponding in each case to the new WMIB class of equity interest. 
The future classes of equity interests and Offshore Funds will be 
established pursuant to the WMIB structure.
    3. Archipelago is a ``fund of funds'' in that all of its assets are 
invested in a mix of the WMIB classes and, as a result, indirectly in a 
mix of the Offshore Funds and other funds associated with those 
particular classes \3\. Archipelago operates as a conduit vehicle as 
well (in that the investments made by Archipelago (i.e., the WMIB asset 
classes) are, in most instances, pre-specified as are the specific 
percentages to be invested in each such class). Wellington Global 
Holdings serves as investment manager to Archipelago and has limited 
discretionary authority in that capacity.\4\
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    \3\ Archipelago initially invested in six WMIB classes. Over 
time, however, two of these original six WMIB classes have been 
closed to new investment by Archipelago and two different WMIB 
classes have been substituted for new investments. Although new 
investments into Archipelago are allocated among six WMIB classes, 
Archipelago's assets are still invested in eight WMIB classes. Two 
of these eight WMIB classes, including one to which new Archipelago 
investments are allocated, correspond with underlying Bermuda 
limited partnerships that are not ``Offshore Funds,'' as defined in 
this proposed exemption, due to the fact that each such limited 
partnership permits investment in illiquid private placements that 
are not readily marketable to exceed 15% and has certain 
restrictions on redemptions. Because these two WMIB classes are not 
Offshore Funds, as defined in this proposed exemption, no plans will 
be permitted to invest in these WMIB classes.
    \4\ For example, Wellington Global Holdings oversees annual 
rebalancings of the underlying WMIB classes held by Archipelago. In 
addition, Wellington Global Holdings may determine to direct 
Archipelago investments in different percentages among the six 
current WMIB classes or to different WMIB classes. However, in 
either event, notice of the proposed change would be given to all 
affected investors in advance of such change.
---------------------------------------------------------------------------

    4. The Applicant explains that a Client Plan may choose to invest 
in Archipelago, rather than directly in the various classes of WMIB 
shares, because the amount it is investing may be too small to enable 
it to achieve the degree of diversification it desires among the 
various Offshore Funds. In particular, the WMIB classes typically 
require a minimum investment of $1-$3 million per class. For a 
relatively small investment (Archipelago's minimum investment is 
approximately $1 million), Archipelago represents an opportunity for 
greater diversification according to the Applicant.\5\ On an annual 
basis, Archipelago automatically rebalances its investments in the 
underlying WMIB classes to maintain the pre-specified target 
allocations.
---------------------------------------------------------------------------

    \5\ The minimum investment can be waived by Wellington.
---------------------------------------------------------------------------

    Wellington represents that it may in the future establish 
additional Offshore Corporations that are substantially similar to 
Archipelago. However, these future ``fund of funds'' investment 
vehicles will invest in a different mix of WMIB classes than 
Archipelago.
    5. The Applicant explains that within the universe of hedge funds, 
WMIB and Archipelago are not considered highly leveraged, nor will any 
future Offshore Corporations be highly leveraged. The Applicant states 
that many other hedge funds are more highly leveraged than WMIB and 
Archipelago. The Applicant bases this opinion on the SEC's Staff 
Report, ``Implications of the Growth of Hedge Funds'' (September 2003), 
which noted that, if a leverage ratio is defined as the ratio of total 
absolute dollars invested to total dollars of equity, a leverage ratio 
of greater than 2 to 1 is considered ``high'' while a ratio of less 
than or equal to 2 to 1 is considered ``low.'' When applying this 
criterion to the Offshore Funds, the Applicant states that 
historically, in most instances, total leverage exposure of each 
Offshore Fund has been substantially less than 2 to 1, and is 
consistent with the SEC's view that the leverage ratio is low.
    Further, each Offshore Corporation margins its long securities only 
through its prime broker, which is subject to the terms of Regulation T 
issued by the Board of Governors of the Federal Reserve System pursuant 
to the Securities Exchange Act of 1934. The Offshore Corporations are 
limited to 100% leverage with respect to long securities,\6\ they may 
short sell

[[Page 60895]]

securities, and may engage in derivative transactions. The derivative 
transactions are tracked daily and are not a significant source of 
leverage.
---------------------------------------------------------------------------

    \6\ The Applicant states that the reference to ``100% leverage'' 
with respect to its long securities is not inconsistent with its 
representation that the Offshore Funds are not highly leveraged. For 
one thing, the Applicant represents that this statement relates only 
to the limit imposed by Regulation T on an investor's ability to 
invest on margin (i.e., with funds borrowed from the relevant 
broker). The Applicant states that in fact, the Offshore Funds do 
not come close to approaching this limit. The Applicant further 
states that Regulation T would permit a maximum long exposure 
percentage of 200% (i.e. 100% leverage), whereas the long exposure 
number for the WMIB and Archipelago class funds never exceeds 150%.
    In addition, the Applicant states that ``100% leverage'' with 
respect to its long securities'' means that the Offshore Fund could 
utilize $100 of its own capital to purchase long securities and an 
additional $100 of borrowed funds to purchase long securities 
yielding a total long security position of $200 of which 50% would 
be attributable to debt and 50% would be attributable to the 
investment of its own equity. This would be analogous to an 
investment in real estate in which a property is bought for $200 
with a mortgage of $100 with the remaining $100 being derived from 
the investor's own capital.
    Moreover, the Applicant explains that since a Plan is likely to 
invest a small percentage of its assets in any particular Offshore 
Fund it may well be completely prudent and appropriate for some plan 
assets to be invested in an Offshore Fund that is more highly 
leveraged and therefore more risky, when such investment is viewed 
in the context of the Plan's overall portfolio and the other 
relevant facts and circumstances applicable to the particular plan 
that would affect its appetite for risk. The Applicant believes 
these are factors that must be taken into account by the independent 
Plan fiduciary prior to investing in a particular Offshore Fund.
---------------------------------------------------------------------------

    Moreover, the Applicant states that the Offshore Corporations are 
designed to provide absolute returns rather than to outperform a 
designated market.\7\ Therefore, the Offshore Corporations do not 
utilize tracking errors as risk management tools.
---------------------------------------------------------------------------

    \7\ Absolute return strategies are designed to move 
independently of the underlying markets and have lower correlations 
to the broader markets. During falling markets, the performance of a 
fund should stay independent from that of broader market movements, 
thus providing protection from those downward movements. In rising 
markets, funds employing absolute return strategies lag behind more 
traditional long-only investments. See ``Implications of the Growth 
of Hedge Funds,'' at 111.
---------------------------------------------------------------------------

    6. Each Offshore Corporation has (or will have) two broad classes 
of equity securities--Manager Shares and Shares. Manager Shares are 
voting shares and hence control the election of the Board of Directors 
of an Offshore Corporation, but do not participate in the economic 
performance of the Offshore Corporation. Manager Shares are owned 100% 
by Wellington Global Administrator. Shares are non-voting but represent 
substantially all of the economic value of the Offshore Corporation and 
are or will be directly linked either (a) by class to a corresponding 
Offshore Fund (in the case of WMIB) or (b) to a mix of various WMIB 
classes (in the case of Archipelago or any other fund of funds entity). 
Shares are presently owned by numerous investors, primarily unrelated 
non-U.S. individuals and institutions and unrelated U.S. non-taxable 
investors, but not by any Client Plans.
    In order to comply with National Association of Securities Dealers 
(NASD) rules (the ``new issues rules'') relating to the allocation of 
certain initial public offerings (IPOs), each Offshore Corporation 
offers three sub-classes of Shares: A Shares, which participate fully 
in initial public offering (IPO) allocations; C Shares, which 
participate only to a limited extent (i.e., only to the extent 
permitted by the applicable NASD rules) in IPO allocations; and E 
Shares, which do not participate to any extent in IPO allocations. In 
all other respects, these three sub-classes are identical. These NASD 
rules only impact investors that are professional money managers or 
broker-dealers as well as certain of their respective affiliates and 
related persons. All other investors would be required to invest in A 
Shares.\8\
---------------------------------------------------------------------------

    \8\ WMIB also offers S Shares with respect to classes that 
invest in underlying funds that are not intended to be covered by 
this exemption, except to the extent of Archipelago's interest 
therein.
---------------------------------------------------------------------------

    Client Plans that are not ``restricted'' (as defined in NASD Rule 
2790 \9\) would acquire Class A shares. Client Plans that are 
restricted would acquire Class C shares. Only Client Plans that are 
sponsored solely by a broker-dealer would be deemed to be 
``restricted.''
---------------------------------------------------------------------------

    \9\ On October 24, 2003, the SEC approved new Rule 2790 
(Restrictions on the purchase and sale of IPOs of equity 
securities), which replaces the Free-Riding and Withholding 
Interpretation (IM-2110-1). Rule 2790 prohibits a NASD member from 
selling a ``new issue'' to any account in which a ``restricted 
person'' has a beneficial interest. The term ``restricted person'' 
includes most associated persons of a member, most owners and 
affiliates of a broker-dealer, and certain other classes of persons. 
The Rule requires that a member, before selling a new issue to any 
account, meet certain ``preconditions for sale,'' which require the 
member to obtain a representation from the beneficial owner of the 
account that the account is eligible to purchase new issues in 
accordance with the Rule. The Rule also contains a series of general 
exemptions.
---------------------------------------------------------------------------

    In addition, each Share sub-class is further divided into a 
different series in order to account for different loss carryforwards 
associated with specific Shares held by investors depending upon their 
holding periods with respect to such Shares. According to the 
Applicant, the separate accounting and the resultant separate series 
are needed in order to reflect the correct incentive allocation amounts 
with respect to each investor. In this regard, the incentive allocation 
payable to Wellington Global Holdings, as the investment general 
partner, at the Offshore Fund level incorporates a ``high-water mark'' 
\10\ concept. Application of that concept requires that investments 
made at different times be accounted for separately. The various series 
provide a mechanism for such separate accounting.
---------------------------------------------------------------------------

    \10\ The Applicant states that Wellington Global Holdings is 
entitled to an incentive allocation equal to a specified percentage 
(typically 20 percent) of the net profits during each fiscal year. 
However, the Applicant notes that if there is a loss in any fiscal 
year, then no incentive allocation will be made with respect to 
subsequent net profits allocable to shareholders who incurred the 
loss until the cumulative net loss has been fully offset by 
subsequent net profits allocable to such shareholders. The Applicant 
states that although this structure is often referred to as a high-
water mark, it may be easier to understand as a loss carryforward.
---------------------------------------------------------------------------

    7. Each Offshore Corporation is exempt from registration under the 
Investment Company Act of 1940 (the 1940 Act) by reason of Section 
3(c)(7) of the 1940 Act (i.e., all U.S. investors in the Offshore 
Corporation must be ``qualified purchasers''). In addition, the assets 
of each Offshore Corporation are not currently, and are not expected to 
be, ``plan assets'' subject to the Act because the aggregate interests 
of each class of equity securities issued by the Offshore Corporation 
that are held by ``benefit plan investors'' are currently, and are 
expected to be, less than 25% of the aggregate outstanding interests of 
such class (determined in accordance with the plan assets 
regulation).\11\
---------------------------------------------------------------------------

    \11\ The Applicant states that its current intention is to keep 
investments by Client Plans, or ``benefit plan investors'' (as 
defined by section 3(42) of the Act), in each class of the Offshore 
Corporations' Shares below 25% and thereby avoid plan asset status. 
The Applicant represents that it monitors the level of investment by 
Client Plans each time there is any cash flow to make sure that the 
Offshore Corporations remain below the 25% threshold in each class. 
To the extent necessary, the Applicant explains that it may 
mandatorily redeem a Client Plan's Shares if necessary to remain 
below 25%. However, in the event benefit plan investors are allowed 
to exceed the 25% threshold and the underlying assets of the 
affected Offshore Corporations become plan assets, the Applicant 
states that it would comply with the applicable fiduciary 
obligations under the Act during any period that the assets being 
managed by Wellington include any plan assets. Under such 
circumstances, the Applicant states that it would provide advance 
notice to all investors in the affected entity and would not allow 
the 25% threshold to be exceeded until all such investors had an 
opportunity to redeem their Shares should they desire not to 
continue to invest in a plan assets vehicle.
---------------------------------------------------------------------------

    8. As an investment adviser registered under the Investment 
Advisers Act of 1940, Wellington Management is subject to the 
jurisdiction of the SEC. In this respect, the Applicant states that 
Wellington Management is subject to regulatory review and oversight by 
the SEC, which review encompasses all of Wellington Management's client 
relationships, including its relationships with the Offshore 
Corporations and the Offshore Funds. The sub-advisory agreement 
pursuant to which Wellington Management manages the assets of each 
Offshore Fund provides that such agreement is subject to the laws of 
Massachusetts (to the extent not preempted by applicable U.S. federal 
law). As a resident of Massachusetts, Wellington Management is subject 
to the jurisdiction of the state and federal courts in Massachusetts. 
Moreover, each Offshore Corporation, each Offshore Fund, Wellington 
Global Holdings and Wellington Global Administrator, will consent to 
the jurisdiction of such courts, and will appoint Wellington Management 
as its agent for service of process.
    9. Wellington's compensation is paid exclusively at the Offshore 
Fund-level. Thus, Wellington will receive no duplicate fees from a 
Client Plan. In this

[[Page 60896]]

regard, each Offshore Fund pays Wellington an aggregate annual 
management fee equal to one percent of the Offshore Fund's net assets. 
The management fee is paid quarterly in arrears and is calculated based 
on the value of the net assets of the Offshore Fund at the end of the 
quarter. Also, as discussed in Representation 6 and the footnote 
reference with respect thereto, each Offshore Fund allocates 20 percent 
of its net profits to Wellington Global Holdings on an annual basis or 
upon a full redemption by a Client Plan. There are no additional 
management fees incurred at the Offshore Corporation level.\12\
---------------------------------------------------------------------------

    \12\ Although the Applicant reserves the right to change its fee 
in the future, it states that in all cases, any such change would be 
fully disclosed to investors in advance. Any existing investors 
would then have an opportunity to withdraw from the affected 
Offshore Fund before the fee change became effective without 
penalty.
---------------------------------------------------------------------------

    Wellington believes its compensation with respect to these entities 
is reasonable, within the meaning of section 408(b)(2) of the Act and 
the regulations promulgated thereunder, and consistent with (and in 
many cases lower than) the levels of compensation charged by other 
managers of comparable entities. In addition, Wellington states that 
the reasonableness of its compensation is further evidenced by the fact 
that substantially all of the investors in these entities are 
independent of Wellington and all investors have made their decisions 
to invest in such entities after full disclosure of the level of 
compensation to be charged.
    10. The Applicant believes that certain of its clients may desire 
to invest in one or more Offshore Corporations. In particular, U.S. 
tax-exempt investors, including Client Plans, frequently invest in 
offshore funds structured as corporations (for U.S. tax purposes) in 
order to minimize the amount of unrelated business taxable income they 
incur as a result of certain investment strategies and activities. In 
effect, the Applicant states that the introduction of the Offshore 
Corporation shields the Client Plan from any unrelated business taxable 
income, thereby enhancing the after-tax investment return of the Client 
Plan. Because an investment in an Offshore Corporation would allow 
Client Plans to invest in these investment strategies and activities on 
the most tax efficient basis, the Applicant believes that it is in the 
best interest of Client Plans and their participants and beneficiaries, 
and also consistent with the requirements of section 408(a) of the Act, 
for the Department to grant an administrative exemption for the past 
and future acquisition and redemption of an Offshore Corporation's non-
voting Shares by a Client Plan.
    11. Accordingly, the Applicant requests an administrative exemption 
from the Department that would permit a Client Plan to acquire Shares 
from an Offshore Corporation. The exemption would also allow the Client 
Plan to redeem Shares from an Offshore Corporation, either in cash or 
in kind. An administrative exemption is required because Wellington 
Management is (or may become) a party in interest with respect to a 
Client Plan, as a fiduciary and a service provider under section 
3(14)(A) and (B) of the Act. Wellington Management would also be 
considered a party in interest with respect to a Client Plan under 
section 3(14)(H) of Act because it owns directly 10% or more of 
Wellington Global Administrator, a service provider to a Client Plan. 
In this respect, Wellington Management owns more than 99% of the common 
stock of Wellington Global Administrator and indirectly, more than 99% 
of Manager Shares.
    In addition, Wellington Global Administrator is a party in interest 
with respect to a Client Plan under section 3(14)(H) of the Act 
inasmuch as it is a 10% or more shareholder of an Offshore Corporation 
due to its ownership of 100% of Manager Shares.
    Further, an Offshore Corporation would be considered a party in 
interest with respect to a Client Plan because under section 3(14)(G) 
of the Act, it is a corporation in which 50% of the combined voting 
power of all stock entitled to vote is owned directly by Wellington 
Global Administrator, a service provider, and indirectly by Wellington 
Management, a fiduciary and a service provider.
    Therefore in the absence of an administrative exemption, the 
acquisition or redemption by a Client Plan of Shares from an Offshore 
Corporation would constitute a prohibited purchase and sale transaction 
between the Client Plan and a party in interest in violation of section 
406(a)(1)(A) and (D) of the Act.
    Because all decisions with respect to a Client Plan's acquisition 
or redemption of Shares would be (or have been made) by independent 
fiduciaries of Client Plans which are unrelated to Wellington, no 
exemption from section 406(b) of the Act is being requested by the 
Applicant.
    If granted, the exemption would provide retroactive relief, 
effective from January 1, 2001 until December 31, 2003 for transactions 
involving two Client Plans that formerly invested in the Offshore 
Corporations. The exemption would also provide prospective relief that 
would be effective on the date the grant notice is published in the 
Federal Register for future investments by Client Plans in the Offshore 
Corporations.
    The Applicant is aware that the prospective transactions described 
herein may be covered by the statutory exemption for service providers 
under section 408(b)(17) of the Act. Section 408(b)(17) of the Act 
requires that, in connection with transactions entered into pursuant to 
this statutory exemption, that a plan receive no less nor pay no more 
than ``adequate consideration.'' For purposes of the statutory 
exemption, the term ``adequate consideration'' means,
     In the case of a security for which there is a generally 
recognized market--
    [cir] The price of the security prevailing on a national securities 
exchange which is registered under section 6 of the Securities Exchange 
Act of 1934, taking into account factors such as the size of the 
transaction and marketability of the security, or
    [cir] If the security is not traded on a national securities 
exchange, a price not less favorable to the plan than the offering 
price for the security established by the current bid and asked prices 
quoted by persons independent of the issuer and of the party in 
interest, taking into account factors such as the size of the 
transaction and marketability of the security, and
     In the case of an asset other than a security for which 
there is a generally recognized market, the fair market value of the 
asset as determined in good faith by a fiduciary or fiduciaries in 
accordance with regulations prescribed by the Secretary of Labor.
    The Applicant is concerned about the requirement in section 
408(b)(17) that the plan ``receives no less, nor pays no more, than 
adequate consideration.'' In this context, the Applicant explains that 
this provision means fair market value as determined in good faith by 
the relevant plan fiduciary in accordance with regulations prescribed 
by the Department. In the absence of such regulations, the Applicant 
states that the determination of what constitutes adequate 
consideration is unclear, particularly if the underlying assets of an 
Offshore Fund are invested in securities and other investments that are 
not publicly-traded. But for this concern, the Applicant states that 
the statutory relief provided under section 408(b)(17) of the Act would 
be adequate for prospective transactions.
    12. The Applicant requests retroactive exemptive relief with 
respect to the

[[Page 60897]]

investment by two Client Plans in an Offshore Corporation. 
Specifically, the NCR Pension Plan (the NCR Plan) and the Lahey Clinic 
Pension Plan (the Lahey Plan) inadvertently acquired interests in an 
Offshore Corporation in January 1, 2001 and July 1, 2003, respectively. 
The NCR Plan invested $27,200,000 in the WMIB Offshore Corporation on 
January 1, 2001 in order to acquire Class A Shares. Based upon an 
available Form 5500, the NCR Plan had total assets of approximately $3 
billion on December 31, 2000. Therefore, the NCR Plan's investment in 
WMIB represented approximately 1% of that Client Plan's assets. In 
addition, WMIB made no interim distributions to the NCR Plan during the 
Client Plan's ownership of Shares. On December 31, 2003, the NCR Plan 
redeemed its interest in WMIB partially in cash and partially in kind. 
As the redemption amount, the NCR Plan received $31,052,990.
    The Lahey Plan invested $6 million in Archipelago on July 1, 2003 
to acquire Class A Shares. Based upon an available Form 5500, the Lahey 
Plan had total assets of approximately $150 million as of September 30, 
2003. Thus, the Lahey Plan's investment in Archipelago represented 
approximately 4% of that Client Plan's assets. During its ownership of 
the Class A Shares, Archipelago made no interim distributions to the 
Lahey Plan. On December 31, 2003, the Lahey Plan redeemed its interest 
in Archipelago in cash. The Lahey Plan received $6,712,168.
    It is represented that Wellington did not provide investment advice 
(within the meaning of 29 CFR 2510.3-21(c)), nor was it a fiduciary, 
with respect to either the Lahey Plan's or the NCR Plan's investments 
in the Class A Shares. Rather, in each case, the decision to acquire 
Class A Shares was made by an authorized fiduciary of the Client Plan 
who was independent of Wellington. Neither the independent fiduciary of 
the Client Plan nor Wellington had any knowledge that such acquisition 
would give rise to a prohibited transaction under section 406(a) of the 
Act. This was because the parties were not aware that Wellington 
Management's 95% indirect ownership of Manager Shares in WMIB and 
Archipelago resulted in either Offshore Corporation becoming a party in 
interest with respect to the applicable Client Plan. When the 
prohibited transaction concern was identified, the Applicant states 
that each Client Plan redeemed its interest in the Offshore Corporation 
in December 2003, within a reasonable period of time after such 
discovery. In the case of the Lahey Plan, the redemption was made 
entirely in cash, while the NCR Plan requested, and was given, a 
redemption that was partially in cash and partially in kind. The NCR 
Plan was permitted to receive an in-kind redemption in part because it 
intended to reinvest its redemption proceeds in a parallel domestic 
fund, also managed by Wellington.\13\ In view of this intent, the 
Applicant believes that it was more efficient and cost effective (i.e., 
by avoiding transaction costs) to effect a partial redemption in kind. 
Neither Client Plan incurred a loss as a result of its investment in 
the Offshore Corporation.
---------------------------------------------------------------------------

    \13\ The Applicant states that the redemption proceeds received 
by the NCR Plan were invested in Quisset Partners, L.P. (the 
Domestic Fund), a private investment fund organized as a Delaware 
limited partnership that is sponsored and managed by Wellington in a 
substantially similar manner to the Offshore Fund from which the NCR 
Plan was redeemed. The Applicant further states that the decision to 
invest in the Domestic Fund was made by an independent fiduciary of 
the NCR Plan without any fiduciary involvement by Wellington or any 
of its affiliates. The Applicant confirms that the assets of the 
Domestic Fund are not plan assets subject to the Act due to the fact 
that the holdings of equity interests in the Domestic Fund are such 
that ownership by benefit plan investors is not significant within 
the meaning of section 3(42) of the Act. Nevertheless, the 
Department is not proposing, nor is the Applicant requesting, 
exemptive relief with respect to the NCR Plan's investment in the 
Domestic Fund.
---------------------------------------------------------------------------

    During their investment in the Offshore Corporations, both the 
Lahey Plan and the NCR Plan were provided with the opportunity to 
access, among other things, monthly unaudited performance reports and 
audited annual financial statements. Both the Lahey Plan and the NCR 
Plan were also able to access this information online or through paper 
mailings that were initially given to the sponsor of the NCR Plan. In 
addition, during the entire duration of their respective investments, 
both Client Plans had telephone access to the Wellington's Hedge Fund 
Group for assistance with any questions they may have had.
    Neither the NCR Plan nor the Lahey Plan paid any sales or 
redemption fees or commissions in connection with their subscription 
and redemption of Class A Shares. Like all other investors, the Client 
Plans did indirectly bear the management fee and incentive allocation 
borne by the underlying partnerships to which their respective Class A 
Shares related.
    13. With respect to the determination of fair market value for 
purposes of the redemption transactions relating to the NCR Plan and 
the Lahey Plan, the Applicant states that to the extent that any of the 
assets of an Offshore Fund consisted of publicly-traded securities or 
other assets for which independent market prices were available, the 
public market prices or independent pricing sources were utilized. The 
Applicant further states that to the extent that any of the assets of 
an Offshore Fund were not capable of being valued in this manner, 
Wellington Management's pricing committee, which is comprised of senior 
Wellington investment professionals, determined the fair value of such 
assets pursuant to its Fair Value Pricing Practic