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HORMEL HEIRS ASK FOR DIVERSIFICATION OF HORMEL FOUNDATION HOLDINGS

 HORMEL HEIRS ASK FOR DIVERSIFICATION OF HORMEL FOUNDATION HOLDINGS
 AUSTIN, Minn., April 14 /PRNewswire/ -- The three grandsons of the founder of George A. Hormel & Co., along with the wife of one of the grandsons, today filed legal objections and a cross petition in Mower County District Court in Austin, charging that The Hormel Foundation has deprived the Hormel heirs of income in its failure to diversify the security holdings of the foundation. The grandsons, George A. Hormel II, Thomas D. Hormel and James C. Hormel, are the only sons of Jay C. Hormel, the son of George A. Hormel, founder of George A. Hormel & Co. They are joined in the action by Jamie Renee Hormel, wife of George Hormel II.
 Both of the elder Hormels provided for the three brothers through a series of trusts created in 1934 and 1950. Under varying provisions of the trusts, income generated by the trusts is to be distributed to the three Hormel brothers and their families. The Hormel Foundation became trustee for the inheritance trusts following the death of Jay Hormel. The foundation will inherit all of the trust assets 21 years after the deaths of the brothers.
 According to details contained in the filing, George and Jay Hormel funded the trusts with securities which were or have since been converted into common stock of the Hormel company. The Hormel family members charge that the foundation has never sought to diversify the holdings of the trusts.
 As a result, the entire property of the trusts consists of 28,758,958 shares of common stock of the Hormel company. The papers filed today note that the trusts have a value in excess of $503 million, but have lost approximately $162 million in the last year.
 The heirs charge that because of the total lack of diversification by the foundation in the holdings of the trusts, the Hormel beneficiaries income is too dependent on the well-being of a single company. Furthermore, they contend that the income from the trusts, as derived from dividend yield of the Hormel stock of 1.3 percent to 2.1 percent, is far below what might otherwise be obtained for the beneficiaries of the trusts with even the safest of securities.
 In addition to the matter of diversification and income, the Hormels charge that The Hormel Foundation and certain individual directors of the foundation have "conflicts of interest which preclude them from acting in the interests of the beneficiaries." The legal documents assert that the Hormel Company's management and its agents have used their influence to cause the foundation to retain Hormel stock in the trusts as a means of preserving control over the company and its operations.
 As an example of such conflict of interest, the Hormels point out that Richard L. Knowlton, chairman, president and chief executive officer of George A. Hormel & Co., is also a member of the foundation's board. The filing notes that "other directors of the foundation and the organizations they represent" are dependent on Hormel Company management for continued economic benefits from the foundation.
 The Hormels ask the court to declare that the foundation has a fiduciary duty to the Hormel family to ensure a reasonable income. They seek a court order directing the foundation to diversify the principal of the trusts with holdings other than Hormel & Co.
 The Hormels assert damages in excess of $100 million and seek to surcharge the Hormel Foundation for their losses.
 In a prepared statement, attorneys for the Hormel family said that they suggested to the Hormel Foundation various ways in which the matter could have been resolved without litigation, but the foundation rejected the proposals. The family said it wants the Hormel Foundation to "treat the Hormel heirs in a fair and equitable manner as George A. and Jay C. Hormel clearly intended."
 The statement went on to note that the Hormels "want the people of Austin and the employees of Hormel & Company to understand that this action holds no threat to the community or the company. It is not intended to dissolve the foundation or change the company. It is exactly what it appears: an effort by the Hormel family to exercise rights they have always had to generate reasonable income. There is nothing in today's filing that need adversely affect the George A. Hormel & Co." The papers filed today are an answer and objection to court papers previously filed by the foundation asking that its administration of the trusts be approved.
 -0- 4/14/92
 /CONTACT: D.J. Leary of Media Services, 612-333-6203, for the Hormel heirs/ CO: George A. Hormel & Co. ST: Minnesota IN: SU:


AL -- MN010 -- 8308 04/14/92 13:11 EDT
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Publication:PR Newswire
Date:Apr 14, 1992
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