[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