Grant of Individual Exemptions; World Omni Financial Corporation and Its Affiliates, et al.

DEPARTMENT OF LABOR

[Prohibited Transaction Exemption 96-12 ; Exemption Application No. D-

09840, et al.]

Grant of Individual Exemptions; World Omni Financial Corporation

and Its Affiliates, et al.

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, DC. 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.

World Omni Financial Corporation and Its Affiliates

Located in Deerfield Beach, Florida

[Prohibited Transaction Exemption 96-12; Application No. D-9840]

Section I--Transactions

A. Effective June 27, 1994, 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 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

[[Page 10026]]

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

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. Effective June 27, 1994, 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 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;

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. Effective June 27, 1994, 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 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

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. Effective June 27, 1994, 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 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 & Poors Rating Services,

Moody's Investor Service, Inc., Duff & Phelps Inc., or Fitch Investors

Service, Inc. (collectively, the Rating Agencies);

(4) The trustee is not an affiliate of any member of the Restricted

Group (other than BA Securities acting as a member, but not a manager,

of the underwriting syndicate for the certificates during the period

from October 19, 1995 until December 8, 1995, provided that BA

Securities did not sell any certificates to employee benefit plans

covered by this exemption during such period). However, the trustee

shall not be considered to be an affiliate of a servicer solely because

the trustee has succeeded to the rights and responsibilities of the

servicer pursuant to the terms of a 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

[[Page 10027]]

Regulation D of the Securities and Exchange Commission (SEC) 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 at the time of the issuance of

certificates by the trust, additional leases may be added to the

portfolio for 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) shall 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; and

(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.

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. World Omni 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 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

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

[[Page 10028]]

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.

5 For a current listing of the Underwriter Exemptions,

see Section V(h) of Prohibited Transaction Exemption (PTE) 95-60 (60

FR 35925, July 12, 1995).

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D. ``Sponsor'' means an entity, independent of World Omni or

affiliated with World Omni, that organizes a trust by depositing

obligations therein in exchange for certificates provided that, if such

entity is independent of World Omni, the servicer of the trust is an

affiliate of World Omni.

E. ``Master Servicer'' means World Omni or an entity affiliated

with World Omni 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 World Omni or an entity affiliated with

World Omni 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 World Omni or an entity affiliated with World

Omni which services leases contained in the trust, including the master

servicer and any subservicer.

H. ``Trustee'' means an entity that is independent of World Omni

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

(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 the agreement or

[[Page 10029]]

agreements among a sponsor, a servicer and the trustee establishing a

trust. 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.

The Department notes that this exemption will be 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 which occurred on or after June 27, 1994.

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 28, 1995, at 60

FR 58652.

WRITTEN COMMENTS AND MODIFICATIONS: The applicant submitted the

following comments and requests for modifications regarding the notice

of proposed exemption (the Proposal).

With respect to Section I.C.(1) of the Proposal, the applicant

suggests that the term ``Pooling and Servicing Agreement'', as defined

in Section III.U., be substituted for the words ``binding pooling and

servicing arrangement''. The Department concurs with the applicant's

requested clarification and has so modified the language of the

exemption.

With respect to Section II.A.(3) of the Proposal, the applicant

states that ``Standard & Poors Corporation'' has changed its name to

``Standard & Poors Rating Services''. The Department has made the

applicant's requested correction to the language of the exemption.

With respect to Section II.A.(4) of the Proposal, the applicant

states that in one of the offerings of certificates that would be

subject to this exemption, the trustee of the Securitization Trust--

Bank of America, Illinois (BAI)--was affiliated from October 19, 1995,

until December 8, 1995, with an entity--BA Securities--that was a

member (but not a manager) of the underwriting syndicate for the

certificates.6 As of December 8, 1995, BAI sold its trust business

to First Bank, N.A., an entity unaffiliated with BA Securities, which

became the new trustee of the Securitization Trust. In this regard, the

applicant represents that BA Securities did not sell any certificates

directly to employee benefit plans that would be covered by this

exemption during the period that it was affiliated with the trustee of

the trust.

6 World Omni notes that Section III of Prohibited

Transaction Exemption (PTE) 75-1 (40 FR 50845, 50848, October 31,

1975) permits the purchase or other acquisition of any securities by

an employee benefit plan during the existence of an underwriting or

selling syndicate for such securities, from any person other than a

fiduciary with respect to the plan, when such a fiduciary is a

member of the syndicate, provided that certain conditions are met.

However, the Department is expressing no opinion in this exemption

as to whether the conditions of Section III of PTE 75-1 were met at

the time of the subject transactions.

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Therefore, the Department has modified the language of Section

II.A.(4) so that the conditions of the exemption will not fail to be

met merely because BA Securities acted as a member (but not a manager)

of the underwriting syndicate for the certificates from October 19,

1995 until December 8, 1995, while affiliated with BAI, provided that

BA Securities did not sell any certificates to employee benefit plans

covered by this exemption during such period.

Section II.A.(7) of the Proposal currently requires that the

fifteen (15) month maximum ``revolving period'' (as discussed in

Paragraph 4 of the Summary of Facts and Representations (the Summary)

in the Proposal) be measured from the cut-off date used for the initial

allocation of leases that was made to create a segregated portfolio.

The applicant has clarified earlier representations and now suggests

that the use of the actual closing date for the segregated portfolio

would be more appropriate than the ``cut-off'' date to measure the

beginning of this period. In this regard, the applicant believes that,

upon further review, the term ``cut-off'' date is vague and can lead to

unintended results in situations where the closing date is delayed

through no fault of the sponsor. The applicant notes that for federal

tax purposes the ``revolving period'' is measured from the closing

date. Therefore, the applicant requests that Section II.A.(7) be

modified by inserting ``closing date'' in place of ``cut-off'' date for

the beginning of the 15 month ``revolving period''.

The Department concurs with the applicant's requested clarification

and has so modified the language of the exemption.

Section II.A.(10) of the Proposal requires that for the duration of

the ``revolving period'', principal collections that are reinvested in

additional leases be first reinvested in the ``eligible lease

contract'' (as defined in Section III.X.) with the earliest origination

date 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 trust, but

excluding those specific lease contracts reserved for allocation to or

allocated to other pools of leases used to create other trusts. The

applicant states that the language which excludes lease contracts

reserved for lease pools ``used to create other trusts'' should be

clarified because such leases are actually reserved for other

``Separate Units of Beneficial Interests'' or ``SUBIs'' which are used

to create other trusts.7 The applicant explains that the SUBIs may

then either be sold or transferred to a trust or otherwise sold in a

private placement. Therefore, the applicant requests that the language

read ``* * * used to create other SUBIs''.

7 Paragraph 4 of the Summary notes that a segregated

portfolio of leases is used to create a SUBI which becomes the basis

for a securitization and the creation of a separate Securitization

Trust from which certificates are issued.

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The Department concurs with the applicant's requested clarification

and has modified the language of Section II.A.(10) by substituting the

word

[[Page 10030]]

``portfolio'' for the word ``trust'' in order to refer to the leases

used to create a SUBI.

Section II.A.(11) of the Proposal requires that the trustee be a

substantial financial institution. The applicant represents that the

trustee of the Origination Trust, who holds actual title to the leased

assets held therein (see discussion in Paragraph 4 of the Summary), may

not meet the requirement of this section. The applicant states that the

trustee of the Origination Trust needs to be the same entity throughout

every securitization deal which originates from the assets held by the

Origination Trust because such trustee actually holds title to all of

the leased vehicles held in the Origination Trust (see Paragraph 3 of

the Summary). The applicant states further that in order to achieve

this goal, the trustee of the Origination Trust subcontracts with an

established financial institution which is qualified to provide trust

services to the trust and acts as an agent of the trustee (i.e. the

Trust Agent). The Trust Agent is usually an affiliate of the trustee,

but is always unaffiliated with World Omni. Therefore, the applicant

requests that the language of Section II.A.(11) be modified as follows:

* * * The trustee of the trust (or the agent with which the

trustee contracts to provide trust services) is a substantial

financial institution * * *'' [emphasis added]

The Department concurs with the applicant's requested clarification

and has so modified the language of the exemption.

Section III.J. of the Proposal defines the term ``Obligor'' to

include the owner of the property subject to a lease. The applicant

states that since the owner of such property (i.e. the leased vehicle)

is the trustee of the Origination Trust, the language of the definition

should be modified to delete the reference to the ``obligor'' as the

``owner''.

The Department concurs with the applicant's requested clarification

and has modified the language of the exemption by deleting the sentence

in Section III.J. which refers to the ``obligor'' as the ``owner'' of

the leased vehicle.

With respect to the definition of the term ``Qualified Motor

Vehicle Lease'' in Section III.T., the applicant suggests that the

language used would be more accurate if modified by adding the words

``owns or'' to the description of the security interest in the lease in

subsections (1) and (2), and by deleting the reference to a

``security'' interest in subsection (3).

The Department concurs with the applicant's requested clarification

and has so modified the language of the exemption.

With respect to the information contained in the Summary, the

applicant has submitted comments which attempt to clarify certain facts

and representations.

First, the applicant states that Paragraph 6 of the Summary

describes the amount of certificates sold publicly, including plan

investors, and the amount of subordinated certificates sold privately

to other investors. The applicant wishes to clarify that the

percentages and other data used in this description relate only to the

first lease securitization conducted by World Omni. The applicant notes

that each lease securitization is slightly different.

In this regard, the Department acknowledges the applicant's

clarification. However, the Department notes that each lease

securitization involving sales of certificates to employee benefit

plans covered by the exemption must comply with all of the General

Conditions discussed in Section II. In particular, Section II.A.(2)

requires that the rights and interests evidenced by such certificates

must not be subordinated to the rights and interests evidenced by other

certificates of the same trust. The Department also notes that the

exemptive relief provided by PTE 95-60 will be available for

subordinated investments in a trust described herein by insurance

company general accounts as a result of this exemption being included

within the meaning of the term ``Underwriter Exemption'' as defined in

Section V(h) of PTE 95-60.

Second, with respect to the descriptions in the Summary regarding

the certificates paying a fixed rate of interest, the applicant wishes

the Department to clarify whether the exemption would permit a

Securitization Trust to issue certificates that pay floating interest

rates. The applicant states that although the Summary only discusses

fixed rate certificates (see, for example, Paragraph 6), to the extent

that a Securitization Trust issues floating rate certificates under

substantially similar circumstances as those presented with fixed rate

certificates, the exemption should be applicable.

In this regard, the Department does not believe that it has enough

information in the current exemption application file to determine

whether the conditions required under the Proposal could be met for the

issuance of floating rate certificates by a trust. For example, the

Department notes that Section II.A.(9) requires that the Average Lease

Rate for leases in the SUBI portfolio after the ``revolving period''

must not be more than 200 basis points greater than the Average Lease

Rate for the original pool of leases used to create the SUBI portfolio.

The Department would need more information than is currently available

in the exemption application file, including the applicant's comments,

regarding how a securitization would operate when floating rate

certificates are issued by a trust. For instance, the applicant has

provided no information regarding: (i) how the ``spread'' between the

certificate rate and the Average Lease Rate, required by the Rating

Agencies, would be maintained for floating rate certificates if the

leases allocated to the SUBI portfolio have fixed Lease Rates; (ii)

whether leases allocated to a SUBI would have floating Lease Rates;

(iii) whether floating Lease Rates would be consistent with the

definition of the term ``Lease Rate'' contained in Section III.V. of

the Proposal; (iv) what interest rate indices would be used to

establish the certificate rate; (v) how certain changes in interest

rates would affect the operation of the SUBI portfolio during the

``revolving period''; (v) whether, if Lease Rates for leases allocated

to the SUBI are fixed, interest rate swap transactions would be used to

pay floating rates on the certificates; and (vi) whether the

compensation provided by the trust to the Servicer and Sponsor would be

impacted in any way by significant changes in interest rates.

The Department is willing to consider the merits of amending the

exemption for securitizations involving floating rate certificates,

with conditions specifically addressing any issues relating thereto, at

a later date.

Third, the applicant wishes to clarify certain of the events

leading to the termination of a SUBI discussed in Paragraph 10. World

Omni states that if the remaining principal balance of the investor

certificates in any Securitization Trust drops to a level at or below

some specified percentage of the original balance, the Sponsor of that

trust may elect to repurchase all of the investor certificates for an

amount at least equal to the outstanding principal balance (plus

accrued interest) thereon. World Omni states further that once the

Sponsor repurchases the investor certificates, it may either retain

them, in which case the Securitization Trust continues to operate

unaffected by the repurchase, or transfer them to the holder of the

``Undivided Trust Interest'' (UTI) in the Origination Trust (i.e. World

Omni or an affiliate, as noted in

[[Page 10031]]

Paragraph 4), by sale or otherwise. In this latter event, World Omni

notes that the UTI holder may direct the trustee to cancel all SUBI

certificates in that Securitization Trust and reallocate to the UTI

interest all remaining assets in the Origination Trust supporting that

particular securitization.

Fourth, with respect to the arrangements made by World Omni or an

affiliate for credit support discussed in Paragraphs 12 and 13 of the

Summary, the applicant states that the information contained therein

does not accurately describe the type of ``credit support'' World Omni

currently uses for its lease securitizations. Paragraphs 12 and 13

state that the Servicer may act as an insurer by advancing funds to a

trust to provide temporary or permanent credit support to cover any

defaulted payments on the leases in the trust. However, World Omni

wishes to clarify that the Servicer advances funds if an Obligor's

payments are delinquent to ``smooth the transaction's cash flow'', but

that the Servicer is not acting as an ``insurer'' in this role. World

Omni also notes that the description contained in Paragraph 13(d) of

the Summary regarding the credit support having ``floor'' dollar

amounts to protect investors against large losses is not reflective of

World Omni's current securitizations.\8\

\8\ The Department notes that if World Omni's future

securitizations involve an entity acting as an ``insurer'' of a

trust, as defined in Section III.I., such entity must be independent

of the Servicer and should provide credit support arrangements

consistent with the applicant's representations in Paragraph 13(d)

of the Summary.

---------------------------------------------------------------------------

World Omni represents that each lease securitization conducted to

date has only required the funding of a Reserve Fund, the retention by

the Sponsor of a subordinated interest in each Securitization Trust,

the issuance of subordinated ``B'' class certificates (which are not

held by plan investors), and approximately a 200 basis point ``spread''

between the Average Lease Rate for the leases held in the SUBI and the

certificate rate for certificates issued by the Securitization Trust.

These securitizations have obtained the desired high credit ratings

from the Rating Agencies for the certificates issued by the

Securitization Trust.

World Omni states that Paragraphs 12 and 13 in the Summary are

generally descriptive of credit support arrangements made in offerings

of asset-backed securities made by other trusts and could be used by

World Omni and its affiliates in the future. However, World Omni

represents that these arrangements are not currently used by World Omni

for payments made on certificates issued by its Securitization Trusts

and have not been necessary to achieve the credit ratings from the

Rating Agencies required under Section II.A.(3) and Section II.A.(7)(b)

of the Proposal.

Fifth, with respect to Paragraph 15 of the Summary regarding

periodic reports filed with the SEC, the applicant states that a

Securitization Trust and its Sponsor may, in some cases, discontinue

making filings under the Securities Exchange Act of 1934 (the '34 Act)

if permitted to do so under the provisions of that Act by exemptions

contained therein.

Sixth, the applicant notes that Paragraphs 16 and 18(f) of the

Summary state that the secondary market in these certificates makes the

certificates fairly liquid investments. However, the applicant states

that since in some instances the certificates may be held by fewer than

100 investors, World Omni does not believe that all of these

certificates should be characterized as fairly liquid investments.

Finally, the applicant has informed the Department that the

certificates issued by a Securitization Trust in the future may involve

multi-class certificates. Such multi-class certificates may be one of

two types: (i) ``strip'' certificates; and (ii) ``fast-pay/slow-pay''

certificates.

``Strip'' certificates are a type of security in which the stream

of interest payments on the underlying receivables is split from the

flow of principal payments and separate classes of certificates are

established, each representing rights to disproportionate payments of

principal and interest.

``Fast-pay/slow-pay'' certificates involve the issuance of classes

of certificates having different stated maturities or the same

maturities with different payment schedules. The only difference

between these multi-class certificates and the single-class

certificates is the order in which distributions are made to

certificateholders.

The applicant represents that any ``strip'' or ``fast-pay/slow-

pay'' certificates issued by a trust will be the same as the type

described in the Underwriter Exemptions previously granted by the

Department. The applicant emphasizes that the rights of a plan

purchasing such certificates will not be subordinated to the rights of

another certificateholder in the event of default on any payment

obligations for the certificates. With respect to ``fast-pay/slow-pay''

certificates, the applicant states that if the amount available for

distribution to certificateholders is less than the amount required to

be so distributed, all senior certificateholders then entitled to

receive distributions would share in the amount distributed on a pro

rata basis. Thus, if a trust issues subordinate certificates, holders

of such subordinate certificates would not be able to share in the

amount distributed on a pro rata basis.

In this regard, the Department notes that although it believes that

either the ``strip'' or the ``fast-pay/slow-pay'' certificates

described above are included within the scope of the final exemption,

it further notes that no relief is provided under the exemption for

plan investments in subordinate certificates (other than as permitted

herein for certain insurance company general accounts). In addition,

the Department notes that the conditions of the exemption would require

that any ``strip'' or ``fast-pay/slow-pay'' certificates receive one of

the three highest ratings available from the Rating Agencies and that

such certificates not receive a lower credit rating upon termination of

the period during which additional leases may be added to the SUBI

portfolio.\9\

\9\ The Department cautions plan fiduciaries to fully understand

the risks involved with either ``strip'' or ``fast-pay/slow-pay''

certificates prior to any acquisitions of such certificates, and to

make prudent determinations as to whether such certificates would

adequately meet the investment objectives and liquidity needs of the

plan.

---------------------------------------------------------------------------

The Department acknowledges all of the clarifications made by the

applicant to the information contained in the Summary. For further

information regarding the applicant's comments or other matters

discussed herein, interested persons are encouraged to obtain a copy of

the exemption application file [No. D-9840] which is available in the

Public Documents Room of the Pension and Welfare Benefits

Administration, U.S. Department of Labor, Room N-5638, 200 Constitution

Avenue, N.W., Washington, D.C. 20210.

Accordingly, based on all of the facts and representations made by

the applicant, the Department has determined to grant the proposed

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.)

Pediatric Dentistry Ltd. Profit Sharing Trust (the Plan) Located in

Fargo, North Dakota

[Prohibited Transaction Exemption 96-13; Exemption Application No. D-

09903]

Exemption

The restrictions of sections 406(a), 406(b)(1), and 406(b)(2) of

the Act and

[[Page 10032]]

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

10 shall not apply to the cash sale of a parcel of improved real

property (the Property) by the Plan to William Hunter, M.D. (Dr.

Hunter), a party in interest with respect to the Plan; provided that:

(1) The sale will be a one-time transaction for cash; (2) as a result

of the sale, the Plan will receive in cash the greater of the cost to

the Plan to acquire the Property or the fair market value of the

Property, as of the date of the sale, as determined by the same

independent, qualified appraiser who prepared the appraisal of the

Property submitted by Dr. Hunter in the application for exemption; (3)

the Plan will pay no commissions, fees, or other expenses as a result

of the transaction; and (4) the terms of the sale will be no less

favorable to the Plan than those it would have received in similar

circumstances when negotiated at arm's length with unrelated third

parties.

\10\ 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.

---------------------------------------------------------------------------

Written Comments

In the Notice of Proposed Exemption (the Notice), the Department

invited all interested persons to submit written comments and requests

for a hearing on the proposed exemption within forty-five (45) days of

the date of the publication of the Notice in the Federal Register on

May 10, 1995. All comments and requests for hearing were due by June

26, 1995.

During the comment period, the Department received no requests for

hearing. However, the Department did receive a comment letter from Dr.

Hunter, dated June 22, 1995. Dr. Hunter requested a modification of the

operant language of condition number two on page 24901 of the Notice.

In this regard, the proposed sale of the Property by the Plan to Dr.

Hunter was conditioned on the Plan receiving cash, as a result of the

sale, in the amount of the greater of $79,000 or the fair market value

of the Property, as determined by an independent, qualified appraiser,

as of the date of the sale.

Dr. Hunter believes that the appraisal prepared by Jerry Link (Mr.

Link) of Appraisal Services, Inc. in Fargo North, Dakota and submitted

by Dr. Hunter with the application did not accurately reflect the fair

market value of such Property. In this regard, Mr. Link determined that

the fair market value of the Property was $79,000, as of January 13,

1994. In his comment, Dr. Hunter points out that a previous attempt to

sell the Property in 1992 was unsuccessful at a purchase price of

$68,950. Further, Dr. Hunter indicates that the Property is located on

the corner of a busy commercial intersection; and therefore, is less

desirable than homes in the immediate area of quiet residential

neighborhoods which were used as market comparables in the preparation

of the previous appraisal. Dr. Hunter states that if the Property could

be sold net by the Plan to an unrelated third party for $79,000 or

greater, he would do so. However, if there are no buyers for the

Property at $79,000 or greater, Dr. Hunter proposes to purchase the

Property for cash at the fair market value of the Property, as

determined by an independent qualified appraiser, as of the date of the

sale.

The Department believes that it would be protective of the Plan and

in the interest of the participants and beneficiaries of the Plan to

sell the Property to Dr. Hunter for cash. However, it is the

Department's position that under no circumstances should the Plan

receive less than the Plan expended in acquiring the Property. In this

regard, the Department has determined to impose two (2) additional

safeguards on the transaction. First, the Department will require that,

as a result of the cash sale of the Property by the Plan to Dr. Hunter,

the Plan will receive the greater of the cost to the Plan to acquire

the Property or the fair market value of the Property as of the date of

the sale. Second, the Department will require that the fair market

value of the Property, as of the date of the sale, be determined by the

same independent, qualified appraiser who prepared the appraisal of the

Property in the amount of $79,000 submitted by Dr. Hunter in the

application for exemption.

Accordingly, the language in condition number two on page 24901 of

the Notice which states, ``as a result of the sale, the Plan will

receive in cash the greater of $79,000 or the fair market value of the

Property, as determined by an independent, qualified appraiser, as of

the date of the sale,'' has been altered. The amended language of

condition number two reads, ``as a result of the sale, the Plan will

receive in cash the greater of the cost to the Plan to acquire the

Property or the fair market value of the Property, as of the date of

the sale, as determined by the same independent, qualified appraiser

who prepared the appraisal of the Property submitted by Dr. Hunter in

the application for exemption.''

After giving full consideration to the entire record, including the

written comment from Dr. Hunter, the Department has decided to grant

the exemption, as described and amended above. In this regard, the

comment letter submitted by Dr. Hunter to the Department has been

included as part of the public record of the exemption application. The

complete application file, including all supplemental submissions

received by the Department, is made available for public inspection in

the Public Documents Room of the Pension Welfare Benefits

Administration, Room N-5638, U. S. Department of Labor, 200

Constitution Avenue, NW., Washington, DC 20210.

For a more complete statement of the facts and representations

supporting the Department's decision to grant this exemption refer to

the Notice published on May 10, 1995, at 60 FR 24901.

FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the

Department, telephone (202) 219-8883 (This is not a toll-free number.)

Morgan Stanley & Co. Incorporated (MS&Co) and Morgan Stanley Trust

Company (MSTC) Located in New York, New York

[Prohibited Transaction Exemption 96-14; Application No. D-09940]

Exemption

The restrictions of sections 406(a)(1) (A) through (D) and 406(b)

(1) and (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 lending of securities

to Morgan Stanley & Co., Incorporated (MS&Co) and to any other U.S.

registered broker-dealers affiliated with Morgan Stanley Trust Company

(the Affiliated Broker-Dealer, collectively, the MS Broker-Dealers) by

employee benefit plans with respect to which MS&Co is a party in

interest or for which Morgan Stanley Trust Company (MSTC) acts as

directed trustee or custodian and securities lending agent and to the

receipt of compensation by MSTC in connection with these transactions,

provided that the following conditions are met:

1. Neither MS&Co nor MSTC has discretionary authority or control

over a client-plan's assets involved in the transaction or renders

investment advice (within the meaning of 29 CFR 2510.3-21(c)) with

respect to those assets;

2. Any arrangement for MSTC to lend plan securities to the MS

Broker-Dealers will be approved in advance by a plan fiduciary who is

independent of MSTC and the MS Broker-Dealers;

3. A client-plan may terminate the arrangement at any time without

penalty on five business days notice;

[[Page 10033]]

4. The client-plans will receive collateral consisting of cash,

securities issued or guaranteed by the U.S. government or its agencies

or instrumentalities, bank letters of credit or other collateral

permitted under PTE 81-6 or any successor, from the MS Broker-Dealers

by physical delivery, book entry in a securities depository, wire

transfer or similar means by the close of business on or before the day

the loaned securities are delivered to the MS Broker-Dealers;

5. The market value of the collateral will initially equal at least

102 percent of the market value of the loaned securities and, if the

market value of the collateral falls below 100 percent, the MS Broker-

Dealers will deliver additional collateral on the following day such

that the market value of the collateral will again equal 102 percent;

6. All procedures regarding the securities lending activities will

at a minimum conform to the applicable provisions of Prohibited

Transaction Exemptions (PTEs) 81-6 and 82-63;

7. The MS Broker-Dealer will indemnify each lending client-plan

against any losses incurred by such plan in connection with the lending

of securities to the MS Broker-Dealers;

8. The client-plan will receive the equivalent of all distributions

made to holders of the borrowed securities during the term of the loan,

including, but not limited to, cash dividends, interest payments,

shares of stock as a result of stock splits and rights to purchase

additional securities, or other distributions;

9. Only plans whose total assets have a market value of at least

$50 million will be permitted to lend securities to the MS Broker-

Dealers. In the case of 2 or more plans maintained by a single employer

or controlled group of employers, the $50 million requirement may be

met by aggregating the assets of such plans if the assets are

commingled for investment purposes in a single master trust;

10. With regard to the ``exclusive borrowing'' agreement (as

described below), the MS Broker-Dealer will directly negotiate the

agreement with a plan fiduciary who is independent of the MS Broker-

Dealers and MSTC, and such agreement may be terminated by either party

to the agreement at any time; and

11. Prior to any plan's approval of the lending of its securities

to the MS Broker-Dealer, a copy of this exemption (and the notice of

pendency) will be provided to the plan.

WRITTEN COMMENTS: In the Notice of Proposed Exemption (the Notice), the

Department invited all interested persons to submit written comments on

the proposed exemption within 45 days from the date of publication of

the Notice in the Federal Register. All written comments were to have

been received by the Department by September 25, 1995. The Department

received one written comment. The comment was submitted on behalf of

MS&Co and MSTC (the Applicants). The issues addressed in the comment

and the Department's responses are summarized as follows:

1. In the introductory paragraph of the proposed exemption, MS&Co

and its affiliated broker-dealers are collectively defined as the `` MS

Group''. The Applicants believe that the use of the term ``MS Group''

will cause confusion because clients and internal personnel often refer

to Morgan Stanley Group Inc. (the parent entity of MS&Co and MSTC) as

the MS Group. Consequently, the Applicants request that all references

to the ``MS Group'' be replaced with ``MS Broker-Dealers''. The

Department does not object to this requested modification.

2. The first sentence of paragraph 5 of the Summary of Facts and

Representations (SFR) on page 41120 stated:

MSTC and MS&Co request an exemption for the lending of

securities owned by certain pension plans (client-plans) for which

MSTC will serve as directed trustee or custodian to the MS Group,

following disclosure of MSTC's affiliation with the MS Group, under

either of the two arrangements described as Plan A and Plan B and

for the receipt of compensation in connection with such

transactions.

The Applicants request that, to clarify that, under Plan B MSTC will

not always serve as directed trustee or custodian, the above quoted

sentence should read as follows:

MSTC and MS&Co request an exemption for the lending of

securities owned by certain pension plans (client-plans) with

respect to which MS&Co is a party in interest or for which MSTC

serves as directed trustee or custodian and securities lending

agent, under either of the two arrangements described as Plan A and

Plan B and for the receipt of compensation in connection with such

transactions. When MSTC serves as directed trustee or custodian for

the client-plans, MSTC will apprise the client-plans of its

affiliation with the MS Broker-Dealers.

The Department does not object to this requested revision.

3. The Applicants wish to clarify that under Plan B a client plan

may hire another custodian, instead of MSTC, to monitor the level of

collateral held by a client plan. Accordingly, the Applicants state

that clause (d) of paragraph 33 of the SFR should have read:

the collateral on each loan to the MS Broker-Dealers initially will

be at least 102 percent of the market value of the loaned

securities, which is in excess of the 100 percent collateral

required under PTE 81-6, and will be monitored daily by MSTC under

Plan A and by MSTC or another custodian under Plan B.

The Department concurs.

4. The applicants have requested that the following language be

added to condition (9) and also immediately after the first sentence of

paragraph 25 of the SFR.

In the case of 2 or more employee benefit plans maintained by a

single employer or controlled group of employers, the $50 million

requirement may be met by aggregating the assets of such plans if

the assets are commingled for investment purposes in a single master

trust.

The Department has no objection to the proposed additional language,

and, accordingly, has made the requested modification.

5. The Applicants have requested that the references to ``MS&Co''

in conditions (7) and (10) be replaced with ``MS Broker-Dealers'' to

correctly reflect the respective responsibilities of the parties. The

Department has made the requested modifications to the exemption.

6. The Applicants state that the reference to the ``Basic Loan

Agreement'' and the ``agreement'' in paragraph 11 are incorrect and

should be replaced with references to the ``Authorization'' because the

agreement by MSTC to provide securities lending services to a client-

plan will be included in the securities lending authorization (the

Authorization), not the Basic Loan Agreement.

7. The Applicants note that paragraph 21 of the proposed exemption,

which concerns Plan A, refers to the types of non-cash collateral

permitted under ``PTE 81-6 or any successor'' while paragraph 28, which

relates to Plan B, refers to ``other non-cash collateral permitted

under PTE 81-6.'' The Applicants request that the reference in

paragraph 28 be modified to clarify that the permissible collateral

under Plan B includes non-cash collateral permitted under any successor

to PTE 81-6. The Department concurs.

The changes described above are hereby incorporated into the

exemption as granted. Accordingly, after giving full consideration to

the record, the Department has determined to grant the exemption, as

described herein. In this regard, the Applicants' comments have been

included as part of the public record of the exemption application. The

complete application file is made available for public inspection in

the

[[Page 10034]]

Public Documents Room of the Pension and Welfare Benefits

Administration, room N-5638, U.S. Department of Labor, 200 Constitution

Avenue N.W., Washington, D.C. 20210.

For a more complete statement of the facts and representations

supporting the Department's decision to grant this exemption refer to

the Notice published on August 11, 1995 at 60 FR 41119.

FOR FURTHER INFORMATION CONTACT: Virginia J. Miller of the Department,

telephone (202) 219-8971. (This is not a toll-free number.)

Life Insurance Corporation Retirement Savings Plan (the Plan) Located

in Dallas, Texas

[Prohibited Transaction Exemption 96-15, Exemption Application No. D-

10048]

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 11 shall not apply to the cash sale of 16 residential

mortgage loans (the Loans) by the Life Insurance Company of the

Southwest Holding Corporation Retirement Savings Plan (the Plan) to the

Life Insurance Company of the Southwest (the Employer), a party in

interest with respect to the Plan; provided that the following

conditions are satisfied:

\11\ 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.

---------------------------------------------------------------------------

(a) as of the date of sale, the Employer will pay the greater of:

(1) the outstanding principal balance plus any accrued, unpaid interest

on each of the individual Loans, or (2) the fair market value of each

of the individual Loans, as determined by a contemporaneous independent

appraisal;

(b) the sale will be a one-time cash transaction; and

(c) the Plan will pay no costs or commissions as a result 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 28, 1995 at 60

FR 58667.

FOR FURTHER INFORMATION CONTACT: Janet L. Schmidt of the Department,

telephone (202) 219-8883 (This is not a toll-free number.)

LEGENT Retirement Security Plan (the Plan) Located in Pittsburgh,

PA

[Prohibited Transaction Exemption 96-16; Exemption Application No. D-

10113]

Exemption

The restrictions of sections 406(a), 406 (b)(1) and (b)(2) of the

Act and the sanctions resulting from the application of section 4975 of

the Code, by reasons of section 4975(c)(1)(A) through (E) of the Code,

shall not apply to the cash sale by the Plan of a limited partnership

interest (the Interest) in Consolidated Capital Institutional

Properties Two Limited Partnership (CCIP/2) to LEGENT Corporation, a

party in interest with respect to the Plan.

This transaction is conditioned upon the following requirements:

(1) all terms and conditions of the sale are at least as favorable to

the Plan as those obtainable in an arm's length transaction with an

unrelated party; (2) the sale is a one-time transaction for cash; (3)

the Plan is not required to pay any commissions, costs or other

expenses in connection with the sale; and (4) the Plan receives a sales

price which is not less than the greater of: (a) the fair market value

of the CCIP/2 Interest as determined by a qualified, independent

appraiser, or (b) the total acquisition cost plus opportunity costs

attributable to the CCIP/2 Interest.

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 28, 1995 at 60

FR 58679.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department,

telephone (202) 219-8881. (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 are true and complete and accurately describe all material

terms of the transaction which is the subject of the exemption. In the

case of continuing exemption transactions, if any of the material facts

or representations described in the application change after the

exemption is granted, the exemption will cease to apply as of the date

of such change. In the event of any such change, application for a new

exemption may be made to the Department.

Signed at Washington, D.C., this 6th day of March, 1996.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, U.S. Department of Labor.

[FR Doc. 96-5745 Filed 3-11-96; 8:45 am]

BILLING CODE 4510-29-P