[Federal Register Volume 63, Number 50 (Monday, March 16, 1998)]
[Notices]
[Pages 12839-12844]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-6613]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 98-10; Exemption Application No. D-
10328, et al.]
Grant of Individual Exemptions; MS Commodity Investments
Portfolio II
AGENCY: Pension and Welfare Benefits Administration, Labor.
ACTION: Grant of Individual Exemptions.
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SUMMARY: This document contains exemptions issued by the Department of
Labor (the Department) from certain of the prohibited transaction
restrictions of the Employee Retirement Income Security Act of 1974
(the Act) and/or the Internal Revenue Code of 1986 (the Code).
Notices were published in the Federal Register of the pendency
before the Department of proposals to grant such exemptions. The
notices set forth a summary of facts and representations contained in
each application for exemption and referred interested persons to the
respective applications for a complete statement of the facts and
representations. The applications have been available for public
inspection at the Department in Washington, D.C. The notices also
invited interested persons to submit comments on the requested
exemptions to the Department. In addition the notices stated that any
interested person might submit a written request that a public hearing
be held (where appropriate). The applicants have represented that they
have complied with the requirements of the notification to interested
persons. No public comments and no requests for a hearing, unless
otherwise stated, were received by the Department.
The notices of proposed exemption were issued and the exemptions
are being granted solely by the Department because, effective December
31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR
47713, October 17, 1978) transferred the authority of the Secretary of
the Treasury to issue exemptions of the type proposed to the Secretary
of Labor.
Statutory Findings
In accordance with section 408(a) of the Act and/or section
4975(c)(2) of the Code and the procedures set forth in 29 CFR Part
2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon
the entire record, the Department makes the following findings:
(a) The exemptions are administratively feasible;
(b) They are in the interests of the plans and their participants
and beneficiaries; and
(c) They are protective of the rights of the participants and
beneficiaries of the plans.
MS Commodity Investments Portfolio II, L.P. (the Partnership) and
Morgan Stanley Commodities Management, Inc. (MSCM, collectively the
Applicants) Located in New York, NY
[Prohibited Transaction Exemption 98-10 Application Nos. D-10328 and D-
10329]
Exemption
Section I. Covered Transactions
The restrictions of section 406(a) of the Act and the sanctions
resulting from the application of section 4975 of the Code by reason of
section 4975(c)(1)(A) through (D) of the Code,1 shall not
apply, effective April 3, 1996, to the acquisition or redemption of
units (the Units or Unit) in the Partnership by certain plans (the
Plans or Plan) that invest in the Partnership, where MSCM, the general
partner of the Partnership, and/or its affiliates are parties in
interest and/or disqualified persons with respect to such Plans;
provided that the conditions, as set forth below in Section II are
satisfied as of the effective date of this exemption.
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\1\ For purposes of this exemption, references to specific
provisions of Title I of the Act, unless otherwise specified, refer
also to the corresponding provisions of the Code.
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Section II. General Conditions
This exemption will be subject to the express condition that the
material facts and representations contained in the applications are
true and complete, and that the applications accurately describe all
material terms of the transactions to be consummated pursuant to the
exemption.
(a) Prior to the investment of the assets of a Plan in the
Partnership, a fiduciary of such Plan (the Plan Fiduciary or Plan
Fiduciaries) who is/are independent of MSCM and its affiliates must
approve such investment.
(b) MSCM has determined and documented and will determine and
document, pursuant to a written procedure, that the decision of a Plan
to invest in the Partnership was and will be made by a Plan Fiduciary
who was and is independent of MSCM and its affiliates and who was and
is capable of making an informed investment decision about investing in
the Partnership.
(c) The independent Plan Fiduciary of each Plan investing in the
Partnership has retained and will retain complete discretion with
respect to transactions initiated by such Plan involving the
acquisition or redemption of Units in the Partnership.
(d) Neither MSCM nor its affiliates has any discretionary authority
or control with respect to the investment of assets by Plans in the
Partnership nor renders investment advice (within the meaning of 29 CFR
2510.3-21(c)) with respect to the investment of such assets.
(e) No Plan investing in the Partnership has acquired and held or
will acquire or hold Units in the Partnership that represent more than
20 percent (20%) of the assets of the Partnership.
(f) At the time of any acquisition of Units by a Plan, the
aggregate value of the Units acquired and held by such Plan does not
exceed 10 percent (10%) of the assets of such Plan.
(g) At the time transactions are entered into, the terms of such
transactions are at least as favorable to the Plans as those obtainable
in arm's length transactions with an unrelated party.
(h) No Plan has paid or will pay a fee or commission to MSCM or any
of its affiliates by reason of the acquisition or redemption of Units
in the Partnership.
(i) The total fees paid to MSCM have constituted and will
constitute no more than reasonable compensation, within the meaning of
sections 408(b)(2) and 408(c)(2) of the Act.
[[Page 12840]]
(j) Only Plans with assets having an aggregate market value of at
least $25 million have been and will be permitted to invest in the
Partnership, except that in the case of two or more Plans maintained by
a single employer or controlled group of employers, the $25 million
dollar requirement may be met by aggregating the assets of such Plans,
if the assets are commingled for investment purposes in a single master
trust.
(k) Prior to making an investment in the Partnership, the
independent Plan Fiduciary of each potential Plan investor, and/or such
Plan investor's authorized representative has been and will be provided
by MSCM or by an affiliate with a written copy of the following
offering materials:
(1) The Private Placement Memorandum of the Partnership (the
Memorandum) (which contains among other things, a description of the
offering of Units, all material facts concerning the purpose,
structure, and operation of the Partnership, as well as any associated
risk factors, and a description of the relationships existing between
MSCM, Morgan Stanley Asset Management Inc. (MSAM), Morgan Stanley & Co.
Incorporated (MS&Co), and Morgan Stanley Group Inc. (the MS Group));
(2) The then-current limited partnership agreement (the LP
Agreement) between MSCM and the investors in the Partnership; and
(3) The then-current subscription agreement (the Subscription
Agreement) (an executed copy of which is delivered to a subscriber and/
or its authorized representative as soon as practicable following such
subscriber's investment in the Partnership) and the Investor
Certification previously furnished by MSCM or its affiliates to the
independent Plan Fiduciaries for completion which contains information
about each potential Plan investor, specifies such Plan's proposed
investment in such Partnership, and documents the fact that the
investment decision is being made by an independent Plan Fiduciary who
is capable of making an informed investment decision about investing in
the Partnership.
(l) With respect to the ongoing participation in the Partnership,
the independent Plan Fiduciary of each Plan invested in the Partnership
has received and will receive within the time periods specified below,
the following additional written disclosures from MSCM or from its
affiliates:
(1) Within ninety (90) days after the close of each fiscal year,
audited financial statements of the Partnership, prepared annually by a
qualified, independent, public accountant including:
(i) A balance sheet; (ii) a statement of income or a statement of
loss; (iii) the net asset value of the Partnership, as of the end of
the two preceding fiscal years; (iv) either: (A) the net asset value
per outstanding Unit as of the end of the reporting period or (B) the
total value of each participant's interest in the Partnership as of the
end of such period; (v) a statement of changes in partner's capital;
and (vi) the amount of the total fees paid to MSCM or to its affiliates
by the Partnership during such period.
(2) Within thirty (30) days after the end of each calendar month, a
monthly statement of account prepared by MSCM or by its affiliates
containing the following unaudited financial information:
(i) The total amount of realized net gain or loss on commodity
interest positions liquidated during the reporting period; (ii) the
change in unrealized net gain or loss on commodity interest positions
during such reporting period; (iii) the total amount of net gain or
loss from all other transactions in which the Partnership engaged
during such reporting period; (iv) the total amount of management fees,
advisory fees, brokerage commissions, and other fees for commodity
interests and other investment transactions incurred or accrued by the
Partnership during such reporting period; (v) the net assets value of
the Partnership as of the beginning of such reporting period; (vi) the
total amount of additions to Partnership capital made during such
reporting period; (vii) the total amount of withdrawals from and
redemption of Units in the Partnership during such reporting period;
(viii) the total net income or loss of the Partnership during such
reporting period; (ix) the net assets value of the Partnership as of
the end of such reporting period; and (x) either (A) the net asset
value per outstanding Unit as of the end of such reporting period or
(B) the total value of each participant's interest in the Partnership
as of the end of such reporting period.
(m) The Partnership has not engaged and will not engage in swaps
transactions, as defined in Section III (d) below.
(n) The Partnership has not invested in and will not invest in any
entity in which the MS Group or any of its affiliates has an ownership
interest.
(o) Affiliates of MSCM have not invested in and will not invest in
the Partnership.
(p) The non-U.S. commodity trading activities of the Partnership
have been and will be limited to the London Metals Exchange (the LME).
(q) The Applicants have not accepted and will not accept
subscriptions from Plans which permit participants to exercise control
over the decision to acquire or redeem Units;
(r) MSCM has maintained and shall maintain, for a period of six
years, the records necessary to enable the persons described in
paragraph (s) of this Section II to determine whether the conditions of
this exemption have been met, except that (a) a prohibited transaction
will not be considered to have occurred if, due to circumstances beyond
the control of MSCM and/or its affiliates, the records are lost or
destroyed prior to the end of the six (6) year period, and (b) no party
in interest or disqualified person other than MSCM 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 maintained, or have not
been available or are not available for examination as required by
paragraph (s) of this Section II below.
(s)(1) Except as provided in subsection (2) of this paragraph (s)
and notwithstanding any provisions of subsections (a)(2) and (b) of
section 504 of the Act, the records referred to in paragraph (r) of
this Section II shall be unconditionally available at their customary
location during normal business hours by:
(a) any duly authorized employee or representative of the
Department or the Internal Revenue Service;
(b) any fiduciary of any Plan investing as a limited partner in the
Partnership or any duly authorized representative of such fiduciary;
(c) any contributing employer to any Plan investing as a limited
partner or any duly authorized employee representative of such
employer;
(d) any participant or beneficiary of any participating Plan
investing as a limited partner, or any duly authorized representative
of such participant or beneficiary; and
(e) any other limited partner.
(2) None of the persons described above in subparagraphs (b)-(e) of
paragraph (s)(1) of this Section II shall be authorized to examine the
trade secrets of MSCM or commercial or financial information which is
privileged or confidential.
Section III. Definitions
For purposes of this exemption:
(a) An ``affiliate'' of a person includes--
[[Page 12841]]
(1) any person directly or indirectly through one or more
intermediaries, controlling, controlled by, or under common control of
such person. (For purposes of this subsection, the term ``control''
means the power to exercise a controlling influence over the management
or policies of a person other than an individual.)
(2) any officer, director, or partner in such person, and
(3) any corporation or partnership of which such person is an
officer, director, or a 5 percent (5%) or more partner or owner.
(b) A ``Plan'' or the ``Plans'' has not included and will not
include any individual account plan(s) where participants have the
right to exercise control over the decision to acquire or redeem Units.
(c) A ``Plan Fiduciary'' or ``Plan Fiduciaries'' is defined as a
fiduciary or fiduciaries of a Plan who is/are independent of MSCM and
its affiliates.
(d) A ``swap transaction'' is defined as an individually
negotiated, non-standardized agreement between two parties to exchange
cash flows at specified intervals known as payment or settlement dates.
The cash flows of a swap are either fixed, or calculated for each
settlement date by multiplying the quantity of the underlying asset
(notional principal amount) by specified reference rates or prices.
Depending upon the type of underlying asset, the great majority of
these transactions are classified into interest rate, currency,
commodity, or equity swaps. Interim payments are generally netted, with
the difference being paid by one party to the other.
EFFECTIVE DATE: The exemption will be effective retroactively, as of
April 3, 1996.
For a complete statement of the facts and representations
supporting the Department's decision to grant this exemption refer to
the Notice published on November 24, 1997, 62 FR 62622.
FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the
Department, telephone (202) 219-8883. (This is not a toll-free number.)
National Rural Utilities Cooperative Finance Corporation (CFC), Located
in Washington, D.C. [Prohibited Transaction Exemption No. 98-11;
Application No. D-10394]
EXEMPTION
Section I--Transactions
A. Effective as of November 18, 1997, the restrictions of sections
406(a) of the Act and the taxes imposed by section 4975(a) and (b) of
the Code, by reason of section 4975(c)(1)(A) through (D) of the Code,
shall not apply to the following transactions relating to the
refinancing by CFC of certain rural utility cooperative loans made to
the Kansas Electric Power Cooperative, Inc. (KEPCO), and certain notes
issued by KEPCO in connection with such loans which are assigned to
trusts for which CFC acts as servicer, and certificates evidencing
interests in such trusts:
(1) The direct or indirect sale, exchange or transfer of
certificates in the initial issuance of certificates between CFC or an
underwriter and an employee benefit plan when CFC, the underwriter, or
the trustee is a party in interest with respect to such plan;
(2) The direct or indirect acquisition or disposition of
certificates by a plan in the secondary market for such certificates;
(3) The continued holding of certificates acquired by a plan
pursuant to subsection I.A.(1) or (2); and
(4) The purchase by CFC of existing notes issued by KEPCO from the
existing trusts and the contribution by CFC of new notes to new trusts
pursuant to the refinancing of KEPCO's existing loans on the scheduled
refinancing date (i.e. December 18, 1997).
B. Effective as of November 18, 1997, the restrictions of sections
406(a) and 406(b) of the Act and the taxes imposed by section 4975(a)
and (b) of the Code, by reason of section 4975(c) of the Code, shall
not apply to transactions in connection with the servicing, management
and operation of a trust, provided:
(1) Such transactions are carried out in accordance with the terms
of a binding trust agreement; and
(2) The trust agreement is provided to, or described in all
material respects in, the prospectus or private placement memorandum
provided to investing plans before they purchase certificates issued by
the trust.2
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\2\ In the case of a private placement memorandum, such
memorandum must contain substantially the same information that
would be disclosed in a prospectus if the offering of the
certificates were made in a registered public offering under the
Securities Act of 1933. In the Department's view, the private
placement memorandum must contain sufficient information to permit
plan fiduciaries to make informed investment decisions.
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C. Effective as of November 18, 1997, the restrictions of sections
406(a) of the Act and the taxes imposed by sections 4975(a) and (b) of
the Code, by reason of sections 4975(c)(1)(A) through (D) of the Code,
shall not apply to any transactions to which those restrictions or
taxes would otherwise apply merely because a person is deemed to be a
party in interest or disqualified person (including a fiduciary) with
respect to a plan by virtue of providing services to the plan (or by
virtue of having a relationship to such service provider described in
section 3(14)(F), (G), (H) or (I) of the Act or section 4975(e)(2)(F),
(G), (H) or (I) of the Code), solely because of the plan's ownership of
certificates issued pursuant to this exemption or issued pursuant to
Prohibited Transaction Exemption 89-93 (PTE 89-93, 54 FR 45816, October
31, 1989).3
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\3\ PTE 89-93 permits, as of July 22, 1987, certain transactions
between CFC and employee benefit plans where CFC may be deemed to be
a party in interest with respect to the plans as a result of
providing services to a trust in situations where the assets of the
trust are considered to be ``plan assets'' as a result of the plans
acquiring significant ownership interests in the trust in the form
of pass-through certificates.
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Section II--General Conditions
A. The relief described under Section I of this exemption will be
available only if the following conditions are met:
(1) The acquisition of certificates by a plan is on terms
(including the certificate price) that are at least as favorable to the
plan as they would be in an arm's-length transaction with an unrelated
party;
(2) The rights and interests evidenced by the certificates are not
subordinated to the rights and interests evidenced by other
certificates of the same trust;
(3) The certificates acquired by the plan have received a rating at
the time of such acquisition that is in one of the three highest
generic rating categories from either Standard & Poor's Ratings Service
(S&P's) or Moody's Investors Service, Inc. (Moody's; together, the
Rating Agencies);
(4) The trustee is not an affiliate of any other member of the
Restricted Group. However, the trustee shall not be considered to be an
affiliate of CFC, as servicer, solely because the trustee has succeeded
to the rights and responsibilities of CFC pursuant to the terms of a
trust agreement providing for such succession upon the occurrence of
one or more events of default by CFC;
(5) The sum of all payments made to and retained by the
underwriters in connection with the distribution or placement of
certificates represents not more than reasonable compensation for
underwriting or placing the certificates; the sum of all payments made
to and retained by CFC, as sponsor, pursuant to the assignment of
obligations (or interests therein) to the trust represents not more
than the fair market value of such obligations (or interests); and the
sum of all payments made to and retained by CFC, as servicer,
represents not more than reasonable compensation
[[Page 12842]]
for CFC's services under the trust agreement and reimbursement of CFC's
reasonable expenses in connection therewith;
(6) The plan investing in such certificates is an ``accredited
investor'' as defined in Rule 501(a)(1) of Regulation D of the
Securities and Exchange Commission (SEC) under the Securities Act of
1933;
(7) Any swap transaction entered into by KEPCO which is assigned to
a trust is entered into with a bank or other financial institution of
high credit standing, initially Morgan Guaranty Trust Company of New
York (Morgan), with a credit rating of at least AA or an equivalent
rating from the Rating Agencies;
(8) The bank or other financial institution acting as the swap
counterparty to the trust is required, if there is an adverse change in
such counterparty's credit rating, to either: (i) post collateral with
the trustee of the trust in an amount, determined daily, equal to all
payments owed by the counterparty if the swap transaction were
terminated; or (ii) find a replacement swap counterparty for the trust,
within a specified period under the terms of the swap agreement with
the trust, which has a credit rating of at least AA or an equivalent
rating from the Rating Agencies; provided that if the swap counterparty
fails to abide by its obligations under either (i) or (ii) above, the
swap agreement shall terminate in accordance with the rights and
obligations of each counterparty under the terms thereof, which shall
be enforced by the trustee to protect the rights of certificateholders
of such trust;
(9) Each swap transaction between a trust and Morgan, or other swap
counterparty, in connection with the refinancing of KEPCO's loans
requires payments to be made to the trust monthly (or at such other
times as required under the swap agreement) and requires payments to be
made by the trust no less frequently than semi-annually, but in no
event shall the trust be obligated to make payments to a swap
counterparty more frequently than those which it is entitled to receive
from a swap counterparty;
(10) The certificateholders have the right to exit the transaction
by tendering the certificates to an underwriter (initially, Alex. Brown
& Sons, Inc.) for purchase at par (plus accrued interest) on seven (7)
days' notice;
(11) The U.S. Government guarantees the payment of principal and
interest on the loans made by CFC to KEPCO;
(12) The purchase of notes issued by KEPCO from the existing trusts
is for a price which is at least equal to the outstanding principal
balance of such notes, plus accrued (but unpaid) interest, at the time
of the scheduled refinancing of the loans made by CFC to KEPCO (i.e.
December 18, 1997); and
(13) The certificates are not sold to any plans established and
maintained by KEPCO or CFC, or to plans for which any other member of
the Restricted Group (as defined in Section III.E. below) is an
investment fiduciary for the assets of the plan that are to be invested
in the certificates.
B. Neither CFC nor the trustee shall be denied the relief that
would be provided under Section I of this exemption if the provision of
Section II.A.(6) above is not satisfied with respect to acquisition or
holding by a plan of such certificates, provided that: (1) such
condition is disclosed in the prospectus or private placement
memorandum; and (2) in the case of a private placement of certificates,
the trustee obtains a representation from each initial purchaser which
is a plan that it is in compliance with such condition, and obtains a
covenant from each initial purchaser to the effect that, so long as
such initial purchaser (or any transferee of such initial purchaser's
certificates) is required to obtain from its transferee a
representation regarding compliance with the Securities Act of 1933,
any such transferees will be required to make a written representation
regarding compliance with the condition set forth in Section II.A.(6)
above.
Section III--Definitions
For purposes of this exemption:
A. ``Certificate'' means:
(1) A certificate--
(a) That represents a beneficial ownership interest in the assets
of a trust; and
(b) That entitles the holder to pass-through payments of principal,
interest, and/or other payments made with respect to the assets of such
trust.
For purposes of this exemption, references to ``certificates
representing an interest in a trust'' include certificates denominated
as debt which are issued by a trust.
B. ``Trust'' means an investment pool, the corpus of which is held
in trust, and consists solely of:
(1) One or more notes issued by KEPCO which shall be guaranteed as
to payment of principal and interest by the U.S. Government, acting
through the U.S. Department of Agriculture's Administrator of the Rural
Utilities Service (RUS), including fractional undivided interests in
any such obligations;
(2) Property which has secured any of the obligations described in
subsection B.(1);
(3) Undistributed cash or temporary investments made therewith
maturing no later than the next date on which distributions are to be
made to certificateholders; and
(4) Rights of the trustee under the trust agreement, and rights
under any insurance policies, third-party guarantees, swap agreements,
contracts of suretyship and other credit support arrangements with
respect to any obligations described in subsection B.(1).
C. ``Underwriter'' means an entity which has received an individual
prohibited transaction exemption from the Department that provides
relief for the operation of asset pool investment trusts that issue
``asset-backed'' pass-through securities to plans, that is similar in
format and structure to this exemption (the Underwriter Exemptions);
4 any person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with
such entity; and any member of an underwriting syndicate or selling
group of which such firm or person described above is a manager or co-
manager with respect to the certificates.
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\4\ For a listing of the Underwriter Exemptions, see the
description provided in the text of the operative language of
Prohibited Transaction Exemption (PTE) 97-34 (62 FR 39021, July 21,
1997).
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D. ``Trustee'' means the trustee of the trust, and in the case of
certificates which are denominated as debt instruments, also means the
trustee of the indenture trust.
E. ``Restricted Group'' with respect to a class of certificates
means:
(1) Each underwriter/remarketing agent;
(2) The trustee;
(3) CFC;
(4) KEPCO;
(5) The swap counterparty/liquidity provider; or
(6) Any affiliate of a person described in subsection E.(1)-(5)
above.
F. ``Affiliate'' of another person includes:
(1) Any person directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control
with such other person;
(2) Any officer, director, partner, employee, relative (as defined
in section 3(15) of the Act), a brother, a sister, or a spouse of a
brother or sister of such other person; and
(3) Any corporation or partnership of which such other person is an
officer, director or partner.
[[Page 12843]]
G. ``Control'' means the power to exercise a controlling influence
over the management or policies of a person other than an individual.
H. A person will be ``independent'' of another person only if:
(1) Such person is not an affiliate of that other person; and
(2) The other person, or an affiliate thereof, is not a fiduciary
who has investment management authority or renders investment advice
with respect to any assets of such person.
I. ``Sale'' includes the entrance into a forward delivery
commitment (as defined in subsection J. below), provided:
(1) The terms of the forward delivery commitment (including any fee
paid to the investing plan) are no less favorable to the plan than they
would be in an arm's-length transaction with an unrelated party;
(2) The prospectus or private placement memorandum is provided to
an investing plan prior to the time the plan enters into the forward
delivery commitment; and
(3) At the time of this delivery, all conditions of this exemption
applicable to sales are met.
J. ``Forward delivery commitment'' means a contract for the
purchase or sale of one or more certificates to be delivered at an
agreed future settlement date. The term includes both mandatory
contracts (which contemplate obligatory delivery and acceptance of the
certificates) and optional contracts (which give one party the right
but not the obligation to deliver certificates to, or demand delivery
of certificates from, the other party).
K. ``Reasonable compensation'' has the same meaning as that term is
defined in 29 CFR 2550.408c-2.
L. ``Trust Agreement'' means the agreement or agreements among
KEPCO, CFC and the trustee establishing a trust. In the case of
certificates which are denominated as debt instruments, ``Trust
Agreement'' also includes the indenture entered into by the trustee of
the trust issuing such certificates and the indenture trustee.
M. ``RUS'' means the U.S. Department of Agriculture, acting through
the Administrator of the Rural Utilities Service or any successor to
the guarantee obligations of such organization.
The Department notes that this exemption is included within the
meaning of the term ``Underwriter Exemption'' as that term is defined
in Section V(h) of the Grant of the Class Exemption for Certain
Transactions Involving Insurance Company General Accounts, which was
published in the Federal Register on July 12, 1995 (see PTE 95-60, 60
FR 35925).
EFFECTIVE DATE: This exemption is effective as of November 18, 1997.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption refer to
the notice of proposed exemption published on November 24, 1997 at 62
FR 62630.
FOR FURTHER INFORMATION CONTACT: Mr. E.F. Williams of the Department,
telephone (202) 219-8194. (This is not a toll-free number.)
Hawaii Laborers' Apprenticeship and Training Trust Fund (the Trust
Fund)
[Prohibited Transaction Exemption No. 98-12; Application No. L-10485]
Exemption
The restrictions of sections 406(a), 406(b)(1) and (b)(2) of the
Act shall not apply to the proposed purchase of a certain parcel of
unimproved real property (the Property) by the Trust Fund from the
Laborers International Union of North America, Local 368, AFL-CIO (a/k/
a the Hawaii Laborers Union), a party in interest with respect to the
Trust Fund, provided that the following conditions are met:
(a) The purchase of the Property by the Trust Fund is a one-time
transaction for cash;
(b) The Trust Fund pays no more than the lesser of: (i) $1,570,000;
or (ii) the fair market value of the Property as determined at the time
of the transaction;
(c) The fair market value of the Property is established by an
independent, qualified real estate appraiser that is unrelated to the
Hawaii Laborers Union or any other party in interest with respect to
the Trust Fund;
(d) The Trust Fund does not pay any commissions or other expenses
with respect to the transaction;
(e) The Hawaiian Trust Company, Ltd. (Hawaiian Trust), acting as an
independent, qualified fiduciary for the Trust Fund, determines that
the proposed transaction is in the best interest of the Trust Fund and
its participants and beneficiaries;
(f) Hawaiian Trust monitors various aspects of the purchase of the
Property until closing, including the environmental reports concerning
the Property, and takes whatever action is necessary to protect the
interests of the Trust Fund; and
(g) The purchase price paid by the Trust Fund for the Property
represents no more than 25 percent of the Trust Fund's total assets at
the time of the transaction.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption refer to
the notice of proposed exemption published on November 24, 1997, at 62
FR 62643.
WRITTEN COMMENTS: The Department received one written comment from an
interested person which did not raise any issues relating to the
proposed transaction by the Trust Fund. No other comments or hearing
requests were received by the Department. Therefore, the Department has
determined to grant the exemption as proposed.
FOR FURTHER INFORMATION CONTACT: Mr. E. F. Williams of the Department,
telephone (202) 219-8194. (This is not a toll-free number.)
General Information
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption
under section 408(a) of the Act and/or section 4975(c)(2) of the Code
does not relieve a fiduciary or other party in interest or disqualified
person from certain other provisions to which the exemption does not
apply and the general fiduciary responsibility provisions of section
404 of the Act, which among other things require a fiduciary to
discharge his duties respecting the plan solely in the interest of the
participants and beneficiaries of the plan and in a prudent fashion in
accordance with section 404(a)(1)(B) of the Act; nor does it affect the
requirement of section 401(a) of the Code that the plan must operate
for the exclusive benefit of the employees of the employer maintaining
the plan and their beneficiaries;
(2) These exemptions are supplemental to and not in derogation of,
any other provisions of the Act and/or the Code, including statutory or
administrative exemptions and transactional rules. Furthermore, the
fact that a transaction is subject to an administrative or statutory
exemption is not dispositive of whether the transaction is in fact a
prohibited transaction; and
(3) The availability of these exemptions is subject to the express
condition that the material facts and representations contained in each
application accurately describes all material terms of the transaction
which is the subject of the exemption.
[[Page 12844]]
Signed at Washington, D.C., this 10th day of March, 1998.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 98-6613 Filed 3-13-98; 8:45 am]
BILLING CODE 4510-29-P