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Secretary of Labor Thomas E. Perez
Grant of Individual Exemptions; MS Commodity Investments Portfolio II [Notices] [03/16/1998]

EBSA (Formerly PWBA) Federal Register Notice

Grant of Individual Exemptions; MS Commodity Investments Portfolio II [03/16/1998]

[PDF Version]

Volume 63, Number 50, Page 12839-12844

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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,<SUP>1</SUP> 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.<SUP>2</SUP>
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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).<SUP>3</SUP>
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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); 
<SUP>4</SUP> 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