[Federal Register Volume 63, Number 227 (Wednesday, November 25, 1998)]
[Notices]
[Pages 65244-65249]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-31510]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 98-55; Exemption Application No. D-
10379, et al.]
Grant of Individual Exemptions; John Taylor Fertilizers Company
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.
John Taylor Fertilizers Company, Profit Sharing Plan (the Plan),
Sacramento, California
[Prohibited Transaction Exemption 98-55; Exemption Application No. D-
10379]
Exemption
The restrictions of sections 406(a), 406(b)(1), and 406(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, shall not apply to the proposed sale by the Plan of an undivided
16.28% interest (Leasehold Interest) in a certain leasehold of a
professional office complex located in Sacramento, California, to John
Taylor Fertilizers Company, a party in interest with respect to the
Plan, provided that the following conditions are satisfied:
(A) All terms of the transaction are at least as favorable to the
Plan as those which the Plan could obtain in an arm's-length
transaction with an unrelated party;
(B) The sale is a one-time transaction for cash;
(C) The Plan pays no commissions or other expenses relating to the
sale;
(D) The purchase price is the greater of: (1) the fair market value
of the Leasehold Interest as determined by a qualified, independent
appraiser, or (2) the original acquisition cost, plus all costs
attributable to holding the Leasehold Interest through the date of the
sale; and
(E) The Plan receives rental income due and owing to the Plan
through the date of the sale.
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 September 16, 1998 at 63
FR 49612.
FOR FURTHER INFORMATION CONTACT: Janet L. Schmidt of the Department,
telephone (202) 219-8883 (This is not a toll-free number.)
[[Page 65245]]
Toyota Motor Credit Corporation (TMCC) and certain of its
Affiliates, Located in Torrance, California
[Prohibited Transaction Exemption No. 98-56; Application No. D-10438]
Exemption
Section I--Transactions
A. The restrictions of sections 406(a) and 407(a) of the Act and
the taxes imposed by section 4975(a) and (b) of the Code, by reason of
section 4975(c)(1)(A) through (D) of the Code, shall not apply, as of
September 1, 1997, to the following transactions involving trusts and
certificates evidencing interests therein:
(1) The direct or indirect sale, exchange or transfer of
certificates in the initial issuance of certificates between the
sponsor or underwriter and an employee benefit plan when the sponsor,
servicer, trustee or insurer of a trust, the underwriter of the
certificates representing an interest in the trust, or an obligor is a
party in interest with respect to such plan;
(2) The direct or indirect acquisition or disposition of
certificates by a plan in the secondary market for such certificates;
and
(3) The continued holding of certificates acquired by a plan
pursuant to Section I.A.(1) or (2).
Notwithstanding the foregoing, Section I.A. does not provide an
exemption from the restrictions of sections 406(a)(1)(E), 406(a)(2) and
407 for the acquisition or holding of a certificate on behalf of an
Excluded Plan, as defined in Section III.K. below, by any person who
has discretionary authority or renders investment advice with respect
to the assets of that Excluded Plan.1
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\1\ Section I.A. provides no relief from sections 406(a)(1)(E),
406(a)(2) and 407 for any person rendering investment advice to an
Excluded Plan within the meaning of section 3(21)(A)(ii) and
regulation 29 CFR 2510.3-21(c).
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B. The restrictions of sections 406(b)(1) and 406(b)(2) of the Act
and the taxes imposed by section 4975(a) and (b) of the Code, by reason
of section 4975(c)(1)(E) of the Code, shall not apply, as of September
1, 1997, to:
(1) The direct or indirect sale, exchange or transfer of
certificates in the initial issuance of certificates between the
sponsor or underwriter and a plan when the person who has discretionary
authority or renders investment advice with respect to the investment
of plan assets in the certificates is (a) an obligor with respect to 5
percent or less of the fair market value of obligations or receivables
contained in the trust, or (b) an affiliate of a person described in
(a); if
(i) The plan is not an Excluded Plan;
(ii) Solely in the case of an acquisition of certificates in
connection with the initial issuance of the certificates, at least 50
percent of each class of certificates in which plans have invested is
acquired by persons independent of the members of the Restricted Group,
as defined in Section III.L., and at least 50 percent of the aggregate
interest in the trust is acquired by persons independent of the
Restricted Group;
(iii) A plan's investment in each class of certificates does not
exceed 25 percent of all of the certificates of that class outstanding
at the time of the acquisition; and
(iv) Immediately after the acquisition of the certificates, no more
than 25 percent of the assets of a plan with respect to which the
person has discretionary authority or renders investment advice are
invested in certificates representing an interest in a trust containing
assets sold or serviced by the same entity.2 For purposes of
this paragraph B.(1)(iv) only, an entity shall not be considered to
service assets contained in a trust if it is merely a subservicer of
that trust;
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\2\ For purposes of this exemption, each plan participating in a
commingled fund (such as a bank collective trust fund or insurance
company pooled separate account) shall be considered to own the same
proportionate undivided interest in each asset of the commingled
fund as its proportionate interest in the total assets of the
commingled fund as calculated on the most recent preceding valuation
date of the fund.
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(2) The direct or indirect acquisition or disposition of
certificates by a plan in the secondary market for such certificates,
provided that conditions set forth in paragraphs B.(1)(i), (iii), and
(iv) are met; and
(3) The continued holding of certificates acquired by a plan
pursuant to Section I.B.(1) or (2).
C. The restrictions of sections 406(a), (b) and 407(a) of the Act
and the taxes imposed by section 4975(a) and (b) of the Code, by reason
of section 4975(c) of the Code, shall not apply, as of September 1,
1997, 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 Pooling and Servicing Agreement; and
(2) The Pooling and Servicing Agreement is provided to, or
described in all material respects in the prospectus or private
placement memorandum provided to, investing plans before they purchase
certificates issued by the trust.3
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\3\ In the case of a private placement memorandum, such
memorandum must contain substantially the same information that
would be disclosed in a prospectus if the offering of the
certificates were made in a registered public offering under the
Securities Act of 1933. In the Department's view, the private
placement memorandum must contain sufficient information to permit
plan fiduciaries to make informed investment decisions.
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Notwithstanding the foregoing, Section I.C. does not provide an
exemption from the restrictions of section 406(b) of the Act, or from
the taxes imposed by reason of section 4975(c) of the Code, for the
receipt of a fee by the servicer of the trust from a person other than
the trustee or sponsor, unless such fee constitutes a ``qualified
administrative fee'' as defined in Section III.S. below.
D. The restrictions of sections 406(a) and 407(a) of the Act and
the taxes imposed by sections 4975(a) and (b) of the Code, by reason of
sections 4975(c)(1)(A) through (D) of the Code, shall not apply, as of
September 1, 1997, to any transaction to which those restrictions or
taxes would otherwise apply merely because a person is deemed to be a
party in interest or disqualified person (including a fiduciary) with
respect to a plan by virtue of providing services to the plan (or by
virtue of having a relationship to such service provider as described
in section 3(14)(F), (G), (H) or (I) of the Act or section
4975(e)(2)(F), (G), (H) or (I) of the Code), solely because of the
plan's ownership of certificates.
Section II--General Conditions
A. The relief provided under Section I is available only if the
following conditions are met:
(1) The acquisition of certificates by a plan is on terms
(including the certificate price) that are at least as favorable to the
plan as such terms would be in an arm's-length transaction with an
unrelated party;
(2) The rights and interests evidenced by the certificates are not
subordinated to the rights and interests evidenced by other
certificates of the same trust;
(3) The certificates acquired by the plan have received a rating at
the time of such acquisition that is in one of the three highest
generic rating categories from either Standard & Poor's Ratings
Services, Moody's Investor Service, Inc., Duff & Phelps, Inc., or Fitch
IBCA, Inc., or their successors (collectively, 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 a servicer
[[Page 65246]]
solely because the trustee has succeeded to the rights and
responsibilities of the servicer pursuant to the terms of the Pooling
and Servicing Agreement providing for such succession upon the
occurrence of one or more events of default by the servicer;
(5) The sum of all payments made to and retained by the
underwriters in connection with the distribution or placement of
certificates represents not more than reasonable compensation for
underwriting or placing the certificates; the sum of all payments made
to or retained by the sponsor pursuant to the assignment of obligations
(or interest therein) to the trust represents not more than the fair
market value of such obligation (or interest); and the sum of all
payments made to and retained by the servicer represents not more than
reasonable compensation for the servicer's services under the Pooling
and Servicing Agreement and reimbursement of the servicer's reasonable
expenses in connection therewith;
(6) The plan investing in such certificates is an ``accredited
investor'' as defined in Rule 501(a)(1) of Regulation D of the
Securities and Exchange Commission under the Securities Act of 1933;
(7) To the extent that the pool of leases used to create a
portfolio for a trust is not closed on the date of the issuance of
certificates by the trust, additional leases may be added during a
period of no more than 15 consecutive months from the closing date used
for the initial allocation of leases that was made to create such
portfolio, provided that:
(a) All such additional leases meet the same terms and conditions
for eligibility as the original leases used to create the portfolio (as
described in the prospectus or private placement memorandum for such
certificates), which terms and conditions have been approved by the
Rating Agencies. Notwithstanding the foregoing, the terms and
conditions for an ``eligible lease'' (as defined in Section III.X
below) may be changed if such changes receive prior approval either by
a majority vote of the outstanding certificateholders or by the Rating
Agencies; and
(b) Such additional leases do not result in the certificates
receiving a lower credit rating from the Rating Agencies, upon
termination of the period during which additional leases may be added
to the portfolio, than the rating that was obtained at the time of the
initial issuance of the certificates by the trust;
(8) Any additional period described in Section II.A.(7) must be
described in the prospectus or private placement memorandum provided to
investing plans;
(9) The average annual percentage lease rate (the Average Lease
Rate) for the pool of leases in the portfolio for the trust, after the
additional period described in Section II.A.(7), shall not be more than
200 basis points greater than the Average Lease Rate for the original
pool of leases that was used to create such portfolio for the trust;
(10) For the duration of the additional period described in Section
II.A.(7), principal collections that are reinvested in additional
leases are first reinvested in the ``eligible lease contract'' (as
defined in Section III.X. below) with the earliest origination date,
then in the ``eligible lease contract'' with the next earliest
origination date, and so forth, beginning with any lease contracts that
have been reserved specifically for such purposes at the time of the
initial allocation of leases to the pool of leases used to create the
particular portfolio, but excluding those specific lease contracts
reserved for allocation to or allocated to other pools of leases used
to create other portfolios;
(11) The trustee of the trust (or the agent with which the trustee
contracts to provide trust services) is a substantial financial
institution or trust company experienced in trust activities and is
familiar with its duties, responsibilities, and liabilities as a
fiduciary under the Act. The trustee, as the legal owner of the
obligations in the trust, enforces all the rights created in favor of
certificateholders of such trust, including employee benefit plans
subject to the Act;
(12) The Pooling and Servicing Agreement and other governing
documents require that funds collected by the servicer with respect to
trust assets be deposited on a monthly basis in a trust account, even
though distributions on the certificates may be scheduled to be made
less frequently than monthly, and invested in certain highly rated debt
instruments known as ``permitted investments''; and
(13) The Pooling and Servicing Agreement expressly provides that
funds collected by the servicer with respect to trust assets are
required to be deposited in a trust account within two business days
after such collection, if TMCC's short-term unsecured debt is no longer
rated P-1 by Moody's Investors Service and A-1 by Standard & Poor's
Ratings Services (or successors thereto), unless such Rating Agencies
accept an alternative arrangement.
B. Neither any underwriter, sponsor, trustee, servicer, insurer, or
any obligor, unless it or any of its affiliates has discretionary
authority or renders investment advice with respect to the plan assets
used by a plan to acquire certificates, shall be denied the relief
provided under Section I, if the provision in Section II.A.(6) above is
not satisfied for the acquisition or holding by a plan of such
certificates, provided that (1) such condition is disclosed in the
prospectus or private placement memorandum; and (2) in the case of a
private placement of certificates, the trustee obtains a representation
from each initial purchaser which is a plan that it is in compliance
with such condition, and obtains a covenant from each initial purchaser
to the effect that, so long as such initial purchaser (or any
transferee of such initial purchaser's certificates) is required to
obtain from its transferee a representation regarding compliance with
the Securities Act of 1933, any such transferees shall be required to
make a written representation regarding compliance with the condition
set forth in Section II.A.(6).
C. Toyota Motor Credit Corporation (TMCC) and its Affiliates abide
by all securities and other laws applicable to any offering of
interests in securitized assets, such as certificates in a trust as
described herein, including those laws relating to disclosure of
material litigation, investigations and contingent liabilities.
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
(except during the period described in Section II.A.(7), if any),
interest, and/or other payments made in connection with the assets of
such trust; or
(2) A certificate denominated as a debt instrument that is issued
by and is an obligation of a trust;
With respect to certificates defined in Section III.A.(1) and (2)
above, the underwriter shall be an entity which has received from the
Department an individual prohibited transaction exemption relating to
certificates which is substantially similar to this exemption (as noted
below in Section III.C.) and shall be either (i) the sole underwriter
or the manager or co-manager of the underwriting syndicate, or (ii) a
selling or placement agent.
For purposes of this exemption, references to ``certificates
representing an interest in a trust'' include
[[Page 65247]]
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) Either
(a) Qualified motor vehicle leases (as defined in Section III.T.);
or
(b) Fractional undivided interests in a trust containing assets
described in paragraph (a) of this Section III.B.(1), where such
fractional interest is not subordinated to any other interest in the
same pool of qualified motor vehicle leases held by such trust; \4\
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\4\ It is the Department's view that the definition of ``Trust''
contained in Section III.B. includes a two-tier trust structure
under which certificates issued by the first trust, which contains a
pool of receivables described above, are transferred to a second
trust which issues certificates that are sold to plans. However, the
Department is of the further view that, since the exemption provides
relief for the direct or indirect acquisition or disposition of
certificates that are not subordinated, no relief would be available
if the certificates held by the second trust were subordinated to
the rights and interests evidenced by other certificates issued by
the first trust.
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(2) Property which has secured any of the obligations described in
Section III.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, except during the period described in
Section II.A.(7) above when temporary investments are made until such
cash can be reinvested in additional leases described in paragraph (a)
of this Section III.B.(1); and
(4) Rights of the trustee under the Pooling and Servicing
Agreement, and rights under motor vehicle dealer agreements, any
insurance policies, third-party guarantees, contracts of suretyship and
other credit support arrangements for any obligations described in
Section III.B.(1).
Notwithstanding the foregoing, the term ``trust'' does not include
any investment pool unless: (i) the investment pool consists only of
assets of the type which have been included in other investment pools,
(ii) certificates evidencing interests in such other investment pools
have been rated in one of the three highest categories by the Rating
Agencies for at least one year prior to the plan's acquisition of
certificates pursuant to this exemption, and (iii) certificates
evidencing interests in such other investment pools have been purchased
by investors other than plans for at least one year prior to the plan's
acquisition of certificates pursuant to this exemption.
C. ``Underwriter'' means any investment banking firm that has
received an individual prohibited transaction exemption from the
Department that provides relief for so-called ``asset-backed''
securities that is substantially similar in format and structure to
this exemption (the Underwriter Exemptions); 5 or any person
directly or indirectly, through one or more intermediaries,
controlling, controlled by or under common control with such investment
banking firm; 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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\5\ 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. ``Sponsor'' means an entity affiliated with Toyota Motor
Corporation that organizes a trust by depositing obligations therein in
exchange for certificates.
E. ``Master Servicer'' means TMCC or an entity affiliated with TMCC
that is a party to the Pooling and Servicing Agreement relating to
trust assets and is fully responsible for servicing, directly or
through subservicers, the assets of the trust.
F. ``Subservicer'' means TMCC or an entity affiliated with TMCC
which, under the supervision of and on behalf of the master servicer,
services leases contained in the trust, but is not a party to the
Pooling and Servicing Agreement.
G. ``Servicer'' means TMCC or an entity affiliated with TMCC which
services leases contained in the trust, including the master servicer
and any subservicer.
H. ``Trustee'' means an entity that is independent of TMCC and its
Affiliates which is the trustee of the trust. In the case of
certificates which are denominated as debt instruments, ``trustee''
also means the trustee of the indenture trust.
I. ``Insurer'' means the insurer or guarantor of, or provider of
other credit support for, a trust. Notwithstanding the foregoing, a
person is not an insurer solely because it holds securities
representing an interest in a trust which are of a class subordinated
to certificates representing an interest in the same trust. In
addition, a person is not an insurer if such person merely provides:
(1) property damage or liability insurance to an Obligor with respect
to a lease or leased vehicle; or (2) property damage, excess liability
or contingent liability insurance to any lessor, sponsor or servicer,
if such entities are included in the same insurance policy, with
respect to a lease or leased vehicle.
J. ``Obligor'' means any person, other than the insurer, that is
obligated to make payments for a lease in the trust.
K. ``Excluded Plan'' means any plan with respect to which any
member of the Restricted Group is a ``plan sponsor'' within the meaning
of section 3(16)(B) of the Act.
L. ``Restricted Group'' with respect to a class of certificates
means:
(1) Each Underwriter;
(2) Each Insurer;
(3) The Sponsor;
(4) The Trustee;
(5) Each Servicer;
(6) Any Obligor with respect to obligations or receivables included
in the trust constituting more than 5 percent of the aggregate
unamortized principal balance of the assets in the trust, determined on
the date of the initial issuance of certificates by the trust and at
the end of the period described in Section II.A.(7); or
(7) Any Affiliate of a person described in (1)-(6) above.
M. ``Affiliate'' of another person includes:
(1) Any person, directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with
such other person;
(2) Any officer, director, partner, employee, relative (as defined
in section 3(15) of the Act), a brother, a sister, or a spouse of a
brother or sister of such other person; and
(3) Any corporation or partnership of which such other person is an
officer, director or partner.
N. ``Control'' means the power to exercise a controlling influence
over the management or policies of a person other than an individual.
O. A person shall 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 assets of such person.
P. ``Sale'' includes the entrance into a forward delivery
commitment (as defined in Section III.Q. 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
[[Page 65248]]
(3) At the time of the delivery, all conditions of this exemption
applicable to sales are met.
Q. ``Forward Delivery Commitment'' means a contract for the
purchase or sale of one or more certificates to be delivered at an
agreed future settlement date. The term includes both mandatory
contracts (which contemplate obligatory delivery and acceptance of the
certificates) and optional contracts (which give one party the right
but not the obligation to deliver certificates to, or demand delivery
of certificates from, the other party).
R. ``Reasonable Compensation'' has the same meaning as that term is
defined in 29 CFR 2550.408c-2.
S. ``Qualified Administrative Fee'' means a fee which meets the
following criteria:
(1) The fee is triggered by an act or failure to act by the obligor
other than the normal timely payment of amounts owing for the
obligations;
(2) The servicer may not charge the fee absent the act or failure
to act referred to in (1);
(3) The ability to charge the fee, the circumstances in which the
fee may be charged, and an explanation of how the fee is calculated are
set forth in the Pooling and Servicing Agreement; and
(4) The amount paid to investors in the trust shall not be reduced
by the amount of any such fee waived by the servicer.
T. ``Qualified Motor Vehicle Lease'' means a lease of a motor
vehicle where:
(1) The trust owns or holds a security interest in the lease;
(2) The trust owns or holds a security interest in the leased motor
vehicle; and
(3) The trust's interest in the leased motor vehicle is at least as
protective of the trust's rights as the trust would receive under a
motor vehicle installment loan contract.
U. ``Pooling and Servicing Agreement'' means, collectively, (i) the
securitization trust agreement between a sponsor and the trustee
establishing a trust, (ii) the trust and servicing agreement relating
to an origination trust and the servicing supplement thereto, and (iii)
the supplemental agreement establishing a beneficial interest in
certain specified origination trust assets (referred to herein as a
``special unit of beneficial interest'' or ``SUBI''). In the case of
certificates which are denominated as debt instruments, ``Pooling and
Servicing Agreement'' also includes the indenture entered into by the
trustee of the trust issuing such certificates and the indenture
trustee.
V. ``Lease Rate'' means an implicit rate in each lease calculated
as an annual percentage rate on a constant yield basis, based on the
capitalized cost of the leased vehicle as determined under the
particular lease contract for the vehicle. With respect to the
determination of a ``Lease Rate'', each lease will provide for equal
monthly payments such that at the end of the lease contract term the
capitalized cost will have been amortized to an amount equal to the
residual value of the leased vehicle established at the time of
origination of such contract. The amount to which the capitalized cost
has been amortized at any point in time will be the outstanding
principal balance for the lease.
W. ``Average Lease Rate'' means the average annual percentage lease
rate, as defined in Section III.V. above, for all leases included at
any particular time in a portfolio used to create a trust from which
certificates are issued.
X. ``Eligible Lease'' or ``Eligible Lease Contract'' means a
Qualified Motor Vehicle Lease, as defined in Section III.T. above,
which meets the eligibility criteria established for, among other
things, the term of the lease, place of origination, date of
origination, and provisions for default, as described in the particular
prospectus or private placement memorandum for the certificates
provided to investors, if such terms and conditions have been approved
by the Rating Agencies prior to the issuance of such certificates.
Y. ``Permitted Investments'' means investments which: (i) are
direct obligations of, or obligations fully guaranteed as to timely
payment of principal and interest by, the United States or any agency
or instrumentality thereof, provided that such obligations are backed
by the full faith and credit of the United States; or (ii) have been
rated (or the obligor has been rated) in one of the three highest
generic rating categories by a Rating Agency; or (iii) consist of
interests in money market mutual funds that are registered investment
companies under the Investment Company Act of 1940, which are managed
by parties independent of the Sponsor or Servicer, and which invest in
securities described in item (i) above or highly rated short-term
securities of the type described in item (ii) above, or which are of
comparable credit quality to securities having such ratings; are
described in the pooling and servicing agreement; and are permitted by
the Rating Agency.
The Department notes that this exemption is included within the
meaning of the term ``Underwriter Exemption'' as it is defined in
Section V(h) of the Grant of the Class Exemption for Certain
Transactions Involving Insurance Company General Accounts, which was
published in the Federal Register on July 12, 1995 (see PTE 95-60, 60
FR 35925).
EFFECTIVE DATE: This exemption is effective for all transactions
described herein occurring on or after September 1, 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 July 8, 1998, at 63 FR
36946.
WRITTEN COMMENTS: The applicant (i.e., TMCC) submitted a written
comment on the notice of proposed exemption (the Notice) relating to
the proposed definition of ``Permitted Investments'' contained in
Section III.Y.
``Permitted Investments'' were defined in the Notice as follows:
* * * investments which (i) are direct obligations of, or
obligations fully guaranteed as to timely payment of principal and
interest by, the United States or any agency or instrumentality
thereof, provided that such obligations are backed by the full faith
and credit of the United States, or (ii) have been rated (or the
obligor has been rated) in one of the three highest generic rating
categories by a Rating Agency; are described in the pooling and
servicing agreement; and are permitted by the Rating Agency.
TMCC's comment states that this definition requires that the
securitization trust invest directly in the described investments and
not through a mutual fund. TMCC states that it prefers to make such
investments through a money market mutual fund designed for
institutional investors. TMCC currently uses a mutual fund (Fund)
managed by Federated Investors which is called the Prime Obligations
Fund. The Fund invests in high quality money market instruments that
have an average maturity of 90 days or less and are either rated in the
highest short-term rating category by one or more of the Rating
Agencies or are of comparable quality to securities having such
ratings.
TMCC believes that a mutual fund investing in short-term high
quality money market investments should be specifically included as a
``permitted investment'' for purposes of the exemption. Therefore, TMCC
requests that the definition in Section III.Y. of the Notice be revised
as follows:
``Permitted Investments'' means investments which: (i) are
direct obligations of, or obligations fully guaranteed as to timely
payment of principal and interest by, the United States or any
agency or instrumentality thereof, provided that such obligations
are backed by the full faith and credit of the United States; or
(ii) have been rated (or the obligor has been rated) in one
[[Page 65249]]
of the three highest generic rating categories by a Rating Agency;
or (iii) consist of interests in money market mutual funds which are
registered investment companies under the Investment Company Act of
1940, which are managed by parties independent of the Sponsor or
Servicer, and which invest in securities described in item (i) above
or highly rated short-term securities of the type described in item
(ii) above, or which are of comparable credit quality to securities
having such ratings; are described in the pooling and servicing
agreement; and are permitted by the Rating Agency. [emphasis added]
The Department agrees with the proposed revision of the definition
and has so revised the language of Section III.Y. of the exemption.
The Department received no other written comments, nor any requests
for a hearing.
Accordingly, the Department has determined to grant the exemption
as modified.
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 exemptions does not
apply and the general fiduciary responsibility provisions of section
404 of the Act, which among other things require a fiduciary to
discharge his duties respecting the plan solely in the interest of the
participants and beneficiaries of the plan and in a prudent fashion in
accordance with section 404(a)(1)(B) of the Act; nor does it affect the
requirement of section 401(a) of the Code that the plan must operate
for the exclusive benefit of the employees of the employer maintaining
the plan and their beneficiaries;
(2) These exemptions are supplemental to and not in derogation of,
any other provisions of the Act and/or the Code, including statutory or
administrative exemptions and transactional rules. Furthermore, the
fact that a transaction is subject to an administrative or statutory
exemption is not dispositive of whether the transaction is in fact a
prohibited transaction; and
(3) The availability of these exemptions is subject to the express
condition that the material facts and representations contained in each
application accurately describes all material terms of the transaction
which is the subject of the exemption.
Signed at Washington, D.C., this 20th day of November, 1998.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 98-31510 Filed 11-24-98; 8:45 am]
BILLING CODE 4510-29-P