Grant of Individual Exemptions; MS Commodity Investments Portfolio II

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 98-10; Exemption Application No. D-

10328, et al.]

Grant of Individual Exemptions; MS Commodity Investments

Portfolio II

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of Individual Exemptions.

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SUMMARY: This document contains exemptions issued by the Department of

Labor (the Department) from certain of the prohibited transaction

restrictions of the Employee Retirement Income Security Act of 1974

(the Act) and/or the Internal Revenue Code of 1986 (the Code).

Notices were published in the Federal Register of the pendency

before the Department of proposals to grant such exemptions. The

notices set forth a summary of facts and representations contained in

each application for exemption and referred interested persons to the

respective applications for a complete statement of the facts and

representations. The applications have been available for public

inspection at the Department in Washington, D.C. The notices also

invited interested persons to submit comments on the requested

exemptions to the Department. In addition the notices stated that any

interested person might submit a written request that a public hearing

be held (where appropriate). The applicants have represented that they

have complied with the requirements of the notification to interested

persons. No public comments and no requests for a hearing, unless

otherwise stated, were received by the Department.

The notices of proposed exemption were issued and the exemptions

are being granted solely by the Department because, effective December

31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR

47713, October 17, 1978) transferred the authority of the Secretary of

the Treasury to issue exemptions of the type proposed to the Secretary

of Labor.

Statutory Findings

In accordance with section 408(a) of the Act and/or section

4975(c)(2) of the Code and the procedures set forth in 29 CFR Part

2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon

the entire record, the Department makes the following findings:

(a) The exemptions are administratively feasible;

(b) They are in the interests of the plans and their participants

and beneficiaries; and

(c) They are protective of the rights of the participants and

beneficiaries of the plans.

MS Commodity Investments Portfolio II, L.P. (the Partnership) and

Morgan Stanley Commodities Management, Inc. (MSCM, collectively the

Applicants) Located in New York, NY

[Prohibited Transaction Exemption 98-10 Application Nos. D-10328 and D-

10329]

Exemption

Section I. Covered Transactions

The restrictions of section 406(a) of the Act and the sanctions

resulting from the application of section 4975 of the Code by reason of

section 4975(c)(1)(A) through (D) of the Code,1 shall not

apply, effective April 3, 1996, to the acquisition or redemption of

units (the Units or Unit) in the Partnership by certain plans (the

Plans or Plan) that invest in the Partnership, where MSCM, the general

partner of the Partnership, and/or its affiliates are parties in

interest and/or disqualified persons with respect to such Plans;

provided that the conditions, as set forth below in Section II are

satisfied as of the effective date of this exemption.

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\1\ For purposes of this exemption, references to specific

provisions of Title I of the Act, unless otherwise specified, refer

also to the corresponding provisions of the Code.

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Section II. General Conditions

This exemption will be subject to the express condition that the

material facts and representations contained in the applications are

true and complete, and that the applications accurately describe all

material terms of the transactions to be consummated pursuant to the

exemption.

(a) Prior to the investment of the assets of a Plan in the

Partnership, a fiduciary of such Plan (the Plan Fiduciary or Plan

Fiduciaries) who is/are independent of MSCM and its affiliates must

approve such investment.

(b) MSCM has determined and documented and will determine and

document, pursuant to a written procedure, that the decision of a Plan

to invest in the Partnership was and will be made by a Plan Fiduciary

who was and is independent of MSCM and its affiliates and who was and

is capable of making an informed investment decision about investing in

the Partnership.

(c) The independent Plan Fiduciary of each Plan investing in the

Partnership has retained and will retain complete discretion with

respect to transactions initiated by such Plan involving the

acquisition or redemption of Units in the Partnership.

(d) Neither MSCM nor its affiliates has any discretionary authority

or control with respect to the investment of assets by Plans in the

Partnership nor renders investment advice (within the meaning of 29 CFR

2510.3-21(c)) with respect to the investment of such assets.

(e) No Plan investing in the Partnership has acquired and held or

will acquire or hold Units in the Partnership that represent more than

20 percent (20%) of the assets of the Partnership.

(f) At the time of any acquisition of Units by a Plan, the

aggregate value of the Units acquired and held by such Plan does not

exceed 10 percent (10%) of the assets of such Plan.

(g) At the time transactions are entered into, the terms of such

transactions are at least as favorable to the Plans as those obtainable

in arm's length transactions with an unrelated party.

(h) No Plan has paid or will pay a fee or commission to MSCM or any

of its affiliates by reason of the acquisition or redemption of Units

in the Partnership.

(i) The total fees paid to MSCM have constituted and will

constitute no more than reasonable compensation, within the meaning of

sections 408(b)(2) and 408(c)(2) of the Act.

[[Page 12840]]

(j) Only Plans with assets having an aggregate market value of at

least $25 million have been and will be permitted to invest in the

Partnership, except that in the case of two or more Plans maintained by

a single employer or controlled group of employers, the $25 million

dollar requirement may be met by aggregating the assets of such Plans,

if the assets are commingled for investment purposes in a single master

trust.

(k) Prior to making an investment in the Partnership, the

independent Plan Fiduciary of each potential Plan investor, and/or such

Plan investor's authorized representative has been and will be provided

by MSCM or by an affiliate with a written copy of the following

offering materials:

(1) The Private Placement Memorandum of the Partnership (the

Memorandum) (which contains among other things, a description of the

offering of Units, all material facts concerning the purpose,

structure, and operation of the Partnership, as well as any associated

risk factors, and a description of the relationships existing between

MSCM, Morgan Stanley Asset Management Inc. (MSAM), Morgan Stanley & Co.

Incorporated (MS&Co), and Morgan Stanley Group Inc. (the MS Group));

(2) The then-current limited partnership agreement (the LP

Agreement) between MSCM and the investors in the Partnership; and

(3) The then-current subscription agreement (the Subscription

Agreement) (an executed copy of which is delivered to a subscriber and/

or its authorized representative as soon as practicable following such

subscriber's investment in the Partnership) and the Investor

Certification previously furnished by MSCM or its affiliates to the

independent Plan Fiduciaries for completion which contains information

about each potential Plan investor, specifies such Plan's proposed

investment in such Partnership, and documents the fact that the

investment decision is being made by an independent Plan Fiduciary who

is capable of making an informed investment decision about investing in

the Partnership.

(l) With respect to the ongoing participation in the Partnership,

the independent Plan Fiduciary of each Plan invested in the Partnership

has received and will receive within the time periods specified below,

the following additional written disclosures from MSCM or from its

affiliates:

(1) Within ninety (90) days after the close of each fiscal year,

audited financial statements of the Partnership, prepared annually by a

qualified, independent, public accountant including:

(i) A balance sheet; (ii) a statement of income or a statement of

loss; (iii) the net asset value of the Partnership, as of the end of

the two preceding fiscal years; (iv) either: (A) the net asset value

per outstanding Unit as of the end of the reporting period or (B) the

total value of each participant's interest in the Partnership as of the

end of such period; (v) a statement of changes in partner's capital;

and (vi) the amount of the total fees paid to MSCM or to its affiliates

by the Partnership during such period.

(2) Within thirty (30) days after the end of each calendar month, a

monthly statement of account prepared by MSCM or by its affiliates

containing the following unaudited financial information:

(i) The total amount of realized net gain or loss on commodity

interest positions liquidated during the reporting period; (ii) the

change in unrealized net gain or loss on commodity interest positions

during such reporting period; (iii) the total amount of net gain or

loss from all other transactions in which the Partnership engaged

during such reporting period; (iv) the total amount of management fees,

advisory fees, brokerage commissions, and other fees for commodity

interests and other investment transactions incurred or accrued by the

Partnership during such reporting period; (v) the net assets value of

the Partnership as of the beginning of such reporting period; (vi) the

total amount of additions to Partnership capital made during such

reporting period; (vii) the total amount of withdrawals from and

redemption of Units in the Partnership during such reporting period;

(viii) the total net income or loss of the Partnership during such

reporting period; (ix) the net assets value of the Partnership as of

the end of such reporting period; and (x) either (A) the net asset

value per outstanding Unit as of the end of such reporting period or

(B) the total value of each participant's interest in the Partnership

as of the end of such reporting period.

(m) The Partnership has not engaged and will not engage in swaps

transactions, as defined in Section III (d) below.

(n) The Partnership has not invested in and will not invest in any

entity in which the MS Group or any of its affiliates has an ownership

interest.

(o) Affiliates of MSCM have not invested in and will not invest in

the Partnership.

(p) The non-U.S. commodity trading activities of the Partnership

have been and will be limited to the London Metals Exchange (the LME).

(q) The Applicants have not accepted and will not accept

subscriptions from Plans which permit participants to exercise control

over the decision to acquire or redeem Units;

(r) MSCM has maintained and shall maintain, for a period of six

years, the records necessary to enable the persons described in

paragraph (s) of this Section II to determine whether the conditions of

this exemption have been met, except that (a) a prohibited transaction

will not be considered to have occurred if, due to circumstances beyond

the control of MSCM and/or its affiliates, the records are lost or

destroyed prior to the end of the six (6) year period, and (b) no party

in interest or disqualified person other than MSCM shall be subject to

the civil penalty that may be assessed under section 502(i) of the Act,

or to the taxes imposed by section 4975(a) and (b) of the Code, if the

records have not been maintained or are not maintained, or have not

been available or are not available for examination as required by

paragraph (s) of this Section II below.

(s)(1) Except as provided in subsection (2) of this paragraph (s)

and notwithstanding any provisions of subsections (a)(2) and (b) of

section 504 of the Act, the records referred to in paragraph (r) of

this Section II shall be unconditionally available at their customary

location during normal business hours by:

(a) any duly authorized employee or representative of the

Department or the Internal Revenue Service;

(b) any fiduciary of any Plan investing as a limited partner in the

Partnership or any duly authorized representative of such fiduciary;

(c) any contributing employer to any Plan investing as a limited

partner or any duly authorized employee representative of such

employer;

(d) any participant or beneficiary of any participating Plan

investing as a limited partner, or any duly authorized representative

of such participant or beneficiary; and

(e) any other limited partner.

(2) None of the persons described above in subparagraphs (b)-(e) of

paragraph (s)(1) of this Section II shall be authorized to examine the

trade secrets of MSCM or commercial or financial information which is

privileged or confidential.

Section III. Definitions

For purposes of this exemption:

(a) An ``affiliate'' of a person includes--

[[Page 12841]]

(1) any person directly or indirectly through one or more

intermediaries, controlling, controlled by, or under common control of

such person. (For purposes of this subsection, the term ``control''

means the power to exercise a controlling influence over the management

or policies of a person other than an individual.)

(2) any officer, director, or partner in such person, and

(3) any corporation or partnership of which such person is an

officer, director, or a 5 percent (5%) or more partner or owner.

(b) A ``Plan'' or the ``Plans'' has not included and will not

include any individual account plan(s) where participants have the

right to exercise control over the decision to acquire or redeem Units.

(c) A ``Plan Fiduciary'' or ``Plan Fiduciaries'' is defined as a

fiduciary or fiduciaries of a Plan who is/are independent of MSCM and

its affiliates.

(d) A ``swap transaction'' is defined as an individually

negotiated, non-standardized agreement between two parties to exchange

cash flows at specified intervals known as payment or settlement dates.

The cash flows of a swap are either fixed, or calculated for each

settlement date by multiplying the quantity of the underlying asset

(notional principal amount) by specified reference rates or prices.

Depending upon the type of underlying asset, the great majority of

these transactions are classified into interest rate, currency,

commodity, or equity swaps. Interim payments are generally netted, with

the difference being paid by one party to the other.

EFFECTIVE DATE: The exemption will be effective retroactively, as of

April 3, 1996.

For a complete statement of the facts and representations

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

the Notice published on November 24, 1997, 62 FR 62622.

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

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

National Rural Utilities Cooperative Finance Corporation (CFC), Located

in Washington, D.C. [Prohibited Transaction Exemption No. 98-11;

Application No. D-10394]

EXEMPTION

Section I--Transactions

A. Effective as of November 18, 1997, the restrictions of sections

406(a) of the Act and the taxes imposed by section 4975(a) and (b) of

the Code, by reason of section 4975(c)(1)(A) through (D) of the Code,

shall not apply to the following transactions relating to the

refinancing by CFC of certain rural utility cooperative loans made to

the Kansas Electric Power Cooperative, Inc. (KEPCO), and certain notes

issued by KEPCO in connection with such loans which are assigned to

trusts for which CFC acts as servicer, and certificates evidencing

interests in such trusts:

(1) The direct or indirect sale, exchange or transfer of

certificates in the initial issuance of certificates between CFC or an

underwriter and an employee benefit plan when CFC, the underwriter, or

the trustee is a party in interest with respect to such plan;

(2) The direct or indirect acquisition or disposition of

certificates by a plan in the secondary market for such certificates;

(3) The continued holding of certificates acquired by a plan

pursuant to subsection I.A.(1) or (2); and

(4) The purchase by CFC of existing notes issued by KEPCO from the

existing trusts and the contribution by CFC of new notes to new trusts

pursuant to the refinancing of KEPCO's existing loans on the scheduled

refinancing date (i.e. December 18, 1997).

B. Effective as of November 18, 1997, the restrictions of sections

406(a) and 406(b) of the Act and the taxes imposed by section 4975(a)

and (b) of the Code, by reason of section 4975(c) of the Code, shall

not apply to transactions in connection with the servicing, management

and operation of a trust, provided:

(1) Such transactions are carried out in accordance with the terms

of a binding trust agreement; and

(2) The trust agreement is provided to, or described in all

material respects in, the prospectus or private placement memorandum

provided to investing plans before they purchase certificates issued by

the trust.2

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\2\ In the case of a private placement memorandum, such

memorandum must contain substantially the same information that

would be disclosed in a prospectus if the offering of the

certificates were made in a registered public offering under the

Securities Act of 1933. In the Department's view, the private

placement memorandum must contain sufficient information to permit

plan fiduciaries to make informed investment decisions.

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C. Effective as of November 18, 1997, the restrictions of sections

406(a) of the Act and the taxes imposed by sections 4975(a) and (b) of

the Code, by reason of sections 4975(c)(1)(A) through (D) of the Code,

shall not apply to any transactions to which those restrictions or

taxes would otherwise apply merely because a person is deemed to be a

party in interest or disqualified person (including a fiduciary) with

respect to a plan by virtue of providing services to the plan (or by

virtue of having a relationship to such service provider described in

section 3(14)(F), (G), (H) or (I) of the Act or section 4975(e)(2)(F),

(G), (H) or (I) of the Code), solely because of the plan's ownership of

certificates issued pursuant to this exemption or issued pursuant to

Prohibited Transaction Exemption 89-93 (PTE 89-93, 54 FR 45816, October

31, 1989).3

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\3\ PTE 89-93 permits, as of July 22, 1987, certain transactions

between CFC and employee benefit plans where CFC may be deemed to be

a party in interest with respect to the plans as a result of

providing services to a trust in situations where the assets of the

trust are considered to be ``plan assets'' as a result of the plans

acquiring significant ownership interests in the trust in the form

of pass-through certificates.

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Section II--General Conditions

A. The relief described under Section I of this exemption will be

available only if the following conditions are met:

(1) The acquisition of certificates by a plan is on terms

(including the certificate price) that are at least as favorable to the

plan as they would be in an arm's-length transaction with an unrelated

party;

(2) The rights and interests evidenced by the certificates are not

subordinated to the rights and interests evidenced by other

certificates of the same trust;

(3) The certificates acquired by the plan have received a rating at

the time of such acquisition that is in one of the three highest

generic rating categories from either Standard & Poor's Ratings Service

(S&P's) or Moody's Investors Service, Inc. (Moody's; together, the

Rating Agencies);

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

Restricted Group. However, the trustee shall not be considered to be an

affiliate of CFC, as servicer, solely because the trustee has succeeded

to the rights and responsibilities of CFC pursuant to the terms of a

trust agreement providing for such succession upon the occurrence of

one or more events of default by CFC;

(5) The sum of all payments made to and retained by the

underwriters in connection with the distribution or placement of

certificates represents not more than reasonable compensation for

underwriting or placing the certificates; the sum of all payments made

to and retained by CFC, as sponsor, pursuant to the assignment of

obligations (or interests therein) to the trust represents not more

than the fair market value of such obligations (or interests); and the

sum of all payments made to and retained by CFC, as servicer,

represents not more than reasonable compensation

[[Page 12842]]

for CFC's services under the trust agreement and reimbursement of CFC's

reasonable expenses in connection therewith;

(6) The plan investing in such certificates is an ``accredited

investor'' as defined in Rule 501(a)(1) of Regulation D of the

Securities and Exchange Commission (SEC) under the Securities Act of

1933;

(7) Any swap transaction entered into by KEPCO which is assigned to

a trust is entered into with a bank or other financial institution of

high credit standing, initially Morgan Guaranty Trust Company of New

York (Morgan), with a credit rating of at least AA or an equivalent

rating from the Rating Agencies;

(8) The bank or other financial institution acting as the swap

counterparty to the trust is required, if there is an adverse change in

such counterparty's credit rating, to either: (i) post collateral with

the trustee of the trust in an amount, determined daily, equal to all

payments owed by the counterparty if the swap transaction were

terminated; or (ii) find a replacement swap counterparty for the trust,

within a specified period under the terms of the swap agreement with

the trust, which has a credit rating of at least AA or an equivalent

rating from the Rating Agencies; provided that if the swap counterparty

fails to abide by its obligations under either (i) or (ii) above, the

swap agreement shall terminate in accordance with the rights and

obligations of each counterparty under the terms thereof, which shall

be enforced by the trustee to protect the rights of certificateholders

of such trust;

(9) Each swap transaction between a trust and Morgan, or other swap

counterparty, in connection with the refinancing of KEPCO's loans

requires payments to be made to the trust monthly (or at such other

times as required under the swap agreement) and requires payments to be

made by the trust no less frequently than semi-annually, but in no

event shall the trust be obligated to make payments to a swap

counterparty more frequently than those which it is entitled to receive

from a swap counterparty;

(10) The certificateholders have the right to exit the transaction

by tendering the certificates to an underwriter (initially, Alex. Brown

& Sons, Inc.) for purchase at par (plus accrued interest) on seven (7)

days' notice;

(11) The U.S. Government guarantees the payment of principal and

interest on the loans made by CFC to KEPCO;

(12) The purchase of notes issued by KEPCO from the existing trusts

is for a price which is at least equal to the outstanding principal

balance of such notes, plus accrued (but unpaid) interest, at the time

of the scheduled refinancing of the loans made by CFC to KEPCO (i.e.

December 18, 1997); and

(13) The certificates are not sold to any plans established and

maintained by KEPCO or CFC, or to plans for which any other member of

the Restricted Group (as defined in Section III.E. below) is an

investment fiduciary for the assets of the plan that are to be invested

in the certificates.

B. Neither CFC nor the trustee shall be denied the relief that

would be provided under Section I of this exemption if the provision of

Section II.A.(6) above is not satisfied with respect to acquisition or

holding by a plan of such certificates, provided that: (1) such

condition is disclosed in the prospectus or private placement

memorandum; and (2) in the case of a private placement of certificates,

the trustee obtains a representation from each initial purchaser which

is a plan that it is in compliance with such condition, and obtains a

covenant from each initial purchaser to the effect that, so long as

such initial purchaser (or any transferee of such initial purchaser's

certificates) is required to obtain from its transferee a

representation regarding compliance with the Securities Act of 1933,

any such transferees will be required to make a written representation

regarding compliance with the condition set forth in Section II.A.(6)

above.

Section III--Definitions

For purposes of this exemption:

A. ``Certificate'' means:

(1) A certificate--

(a) That represents a beneficial ownership interest in the assets

of a trust; and

(b) That entitles the holder to pass-through payments of principal,

interest, and/or other payments made with respect to the assets of such

trust.

For purposes of this exemption, references to ``certificates

representing an interest in a trust'' include certificates denominated

as debt which are issued by a trust.

B. ``Trust'' means an investment pool, the corpus of which is held

in trust, and consists solely of:

(1) One or more notes issued by KEPCO which shall be guaranteed as

to payment of principal and interest by the U.S. Government, acting

through the U.S. Department of Agriculture's Administrator of the Rural

Utilities Service (RUS), including fractional undivided interests in

any such obligations;

(2) Property which has secured any of the obligations described in

subsection B.(1);

(3) Undistributed cash or temporary investments made therewith

maturing no later than the next date on which distributions are to be

made to certificateholders; and

(4) Rights of the trustee under the trust agreement, and rights

under any insurance policies, third-party guarantees, swap agreements,

contracts of suretyship and other credit support arrangements with

respect to any obligations described in subsection B.(1).

C. ``Underwriter'' means an entity which has received an individual

prohibited transaction exemption from the Department that provides

relief for the operation of asset pool investment trusts that issue

``asset-backed'' pass-through securities to plans, that is similar in

format and structure to this exemption (the Underwriter Exemptions);

4 any person directly or indirectly, through one or more

intermediaries, controlling, controlled by or under common control with

such entity; and any member of an underwriting syndicate or selling

group of which such firm or person described above is a manager or co-

manager with respect to the certificates.

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\4\ For a listing of the Underwriter Exemptions, see the

description provided in the text of the operative language of

Prohibited Transaction Exemption (PTE) 97-34 (62 FR 39021, July 21,

1997).

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D. ``Trustee'' means the trustee of the trust, and in the case of

certificates which are denominated as debt instruments, also means the

trustee of the indenture trust.

E. ``Restricted Group'' with respect to a class of certificates

means:

(1) Each underwriter/remarketing agent;

(2) The trustee;

(3) CFC;

(4) KEPCO;

(5) The swap counterparty/liquidity provider; or

(6) Any affiliate of a person described in subsection E.(1)-(5)

above.

F. ``Affiliate'' of another person includes:

(1) Any person directly or indirectly, through one or more

intermediaries, controlling, controlled by, or under common control

with such other person;

(2) Any officer, director, partner, employee, relative (as defined

in section 3(15) of the Act), a brother, a sister, or a spouse of a

brother or sister of such other person; and

(3) Any corporation or partnership of which such other person is an

officer, director or partner.

[[Page 12843]]

G. ``Control'' means the power to exercise a controlling influence

over the management or policies of a person other than an individual.

H. A person will be ``independent'' of another person only if:

(1) Such person is not an affiliate of that other person; and

(2) The other person, or an affiliate thereof, is not a fiduciary

who has investment management authority or renders investment advice

with respect to any assets of such person.

I. ``Sale'' includes the entrance into a forward delivery

commitment (as defined in subsection J. below), provided:

(1) The terms of the forward delivery commitment (including any fee

paid to the investing plan) are no less favorable to the plan than they

would be in an arm's-length transaction with an unrelated party;

(2) The prospectus or private placement memorandum is provided to

an investing plan prior to the time the plan enters into the forward

delivery commitment; and

(3) At the time of this delivery, all conditions of this exemption

applicable to sales are met.

J. ``Forward delivery commitment'' means a contract for the

purchase or sale of one or more certificates to be delivered at an

agreed future settlement date. The term includes both mandatory

contracts (which contemplate obligatory delivery and acceptance of the

certificates) and optional contracts (which give one party the right

but not the obligation to deliver certificates to, or demand delivery

of certificates from, the other party).

K. ``Reasonable compensation'' has the same meaning as that term is

defined in 29 CFR 2550.408c-2.

L. ``Trust Agreement'' means the agreement or agreements among

KEPCO, CFC and the trustee establishing a trust. In the case of

certificates which are denominated as debt instruments, ``Trust

Agreement'' also includes the indenture entered into by the trustee of

the trust issuing such certificates and the indenture trustee.

M. ``RUS'' means the U.S. Department of Agriculture, acting through

the Administrator of the Rural Utilities Service or any successor to

the guarantee obligations of such organization.

The Department notes that this exemption is included within the

meaning of the term ``Underwriter Exemption'' as that term is defined

in Section V(h) of the Grant of the Class Exemption for Certain

Transactions Involving Insurance Company General Accounts, which was

published in the Federal Register on July 12, 1995 (see PTE 95-60, 60

FR 35925).

EFFECTIVE DATE: This exemption is effective as of November 18, 1997.

For a more complete statement of the facts and representations

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

the notice of proposed exemption published on November 24, 1997 at 62

FR 62630.

FOR FURTHER INFORMATION CONTACT: Mr. E.F. Williams of the Department,

telephone (202) 219-8194. (This is not a toll-free number.)

Hawaii Laborers' Apprenticeship and Training Trust Fund (the Trust

Fund)

[Prohibited Transaction Exemption No. 98-12; Application No. L-10485]

Exemption

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

Act shall not apply to the proposed purchase of a certain parcel of

unimproved real property (the Property) by the Trust Fund from the

Laborers International Union of North America, Local 368, AFL-CIO (a/k/

a the Hawaii Laborers Union), a party in interest with respect to the

Trust Fund, provided that the following conditions are met:

(a) The purchase of the Property by the Trust Fund is a one-time

transaction for cash;

(b) The Trust Fund pays no more than the lesser of: (i) $1,570,000;

or (ii) the fair market value of the Property as determined at the time

of the transaction;

(c) The fair market value of the Property is established by an

independent, qualified real estate appraiser that is unrelated to the

Hawaii Laborers Union or any other party in interest with respect to

the Trust Fund;

(d) The Trust Fund does not pay any commissions or other expenses

with respect to the transaction;

(e) The Hawaiian Trust Company, Ltd. (Hawaiian Trust), acting as an

independent, qualified fiduciary for the Trust Fund, determines that

the proposed transaction is in the best interest of the Trust Fund and

its participants and beneficiaries;

(f) Hawaiian Trust monitors various aspects of the purchase of the

Property until closing, including the environmental reports concerning

the Property, and takes whatever action is necessary to protect the

interests of the Trust Fund; and

(g) The purchase price paid by the Trust Fund for the Property

represents no more than 25 percent of the Trust Fund's total assets at

the time of the transaction.

For a more complete statement of the facts and representations

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

the notice of proposed exemption published on November 24, 1997, at 62

FR 62643.

WRITTEN COMMENTS: The Department received one written comment from an

interested person which did not raise any issues relating to the

proposed transaction by the Trust Fund. No other comments or hearing

requests were received by the Department. Therefore, the Department has

determined to grant the exemption as proposed.

FOR FURTHER INFORMATION CONTACT: Mr. E. F. Williams of the Department,

telephone (202) 219-8194. (This is not a toll-free number.)

General Information

The attention of interested persons is directed to the following:

(1) The fact that a transaction is the subject of an exemption

under section 408(a) of the Act and/or section 4975(c)(2) of the Code

does not relieve a fiduciary or other party in interest or disqualified

person from certain other provisions to which the exemption does not

apply and the general fiduciary responsibility provisions of section

404 of the Act, which among other things require a fiduciary to

discharge his duties respecting the plan solely in the interest of the

participants and beneficiaries of the plan and in a prudent fashion in

accordance with section 404(a)(1)(B) of the Act; nor does it affect the

requirement of section 401(a) of the Code that the plan must operate

for the exclusive benefit of the employees of the employer maintaining

the plan and their beneficiaries;

(2) These exemptions are supplemental to and not in derogation of,

any other provisions of the Act and/or the Code, including statutory or

administrative exemptions and transactional rules. Furthermore, the

fact that a transaction is subject to an administrative or statutory

exemption is not dispositive of whether the transaction is in fact a

prohibited transaction; and

(3) The availability of these exemptions is subject to the express

condition that the material facts and representations contained in each

application accurately describes all material terms of the transaction

which is the subject of the exemption.

[[Page 12844]]

Signed at Washington, D.C., this 10th day of March, 1998.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, U.S. Department of Labor.

[FR Doc. 98-6613 Filed 3-13-98; 8:45 am]

BILLING CODE 4510-29-P