4810 Federal Register / Vol. 62, No. 21 / Friday, January 31, 1997 / Notices

had interests in Fund E during the

period covered by the proposed

exemption. Notice to interested persons

shall be provided by first class mail

and/or posting in the workplace within

sixty (60) days following the publication

of the proposed exemption in the

Federal Register. Such notice shall

include a copy of the notice of proposed

exemption as published in the Federal

Register and a supplemental statement

(see 29 CFR 2570.43(b)(2)) which

informs all interested persons of their

right to comment on and/or request a

hearing with respect to the proposed

exemption. Comments and requests for

a public hearing are due within ninety

(90) days following the publication of

the proposed exemption in the Federal

Register.

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 of

disqualified person from certain other

provisions of the Act and/or the Code,

including any prohibited transaction

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) Before an exemption may be

granted under section 408(a) of the Act

and/or section 4975(c)(2) of the Code,

the Department must find that the

exemption is administratively feasible,

in the interests of the plan and of its

participants and beneficiaries and

protective of the rights of participants

and beneficiaries of the plan;

(3) The proposed exemptions, if

granted, will be supplemental to, and

not in derogation of, any other

provisions of the Act and/or the Code,

including statutory or administrative

exemptions and transitional 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

(4) The proposed exemptions, if

granted, will be 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, DC, this 28th day of

January, 1997.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

U.S. Department of Labor.

[FR Doc. 97–2387 Filed 1–30–97; 8:45 am]

BILLING CODE 4510–29–P

[Prohibited Transaction Exemption 97–07;

Exemption Application Nos. D–10079

Through D–10082, et al.]

Grant of Individual Exemptions;

Pikeville National Bank & Trust

Company; Trust Company of

Kentucky; and First American Bank

(Collectively, the Banks), et al.

AGENCY: Pension and Welfare Benefits

Administration, Labor.

ACTION: Grant of individual exemptions.

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.

Pikeville National Bank & Trust

Company; Trust Company of Kentucky;

and First American Bank (Collectively,

the Banks) Located in Pikeville and

Ashland, Kentucky

[Prohibited Transaction Exemption 97–07;

Application Numbers D–10079 Through D–

10082]

Exemption

The restrictions of sections 406(a),

406(b)(1) and 406(b)(2) of the Act and

the sanctions resulting from the

application of section 4975 of the Code,

by reason of section 4975(c)(1)(A)

through (E) of the Code, shall not apply

to: (1) The cash sales on December 28,

1994 and January 13, 1995, of certain

collateralized mortgage obligations

(CMOs) and other mortgage-backed

securities (collectively, the Securities)

held by eighty-six (86) employee benefit

plans, Keogh plans and individual

retirement accounts (IRAs) for which

the Banks act as trustee (the Plans) to

Pikeville National Corporation (PKVL),

a party in interest with respect to the

Plans; (2) the ‘‘makewhole’’ payments

made by PKVL to the Plans on January

20, 1995, in connection with the sale of

certain Securities by the Plans on the

open market on November 2, 1994; and

(3) the proposed additional

‘‘makewhole’’ and interest payments to

be made by PKVL to the Plans, as of the
Federal Register / Vol. 62, No. 21 / Friday, January 31, 1997 / Notices 4811

date the exemption is granted, as a

result of: (i) The additional amounts

owed to such Plans based on the

amortized cost of the Securities at the

time of the transactions in situations

where the amortized cost exceeded the

outstanding principal balance of the

Securities (plus a reasonable rate of

interest on such amounts), and (ii) the

additional accrued but unpaid interest

on the Securities which was owed to the

Plans at the time of the sale to PKVL on

December 28, 1994 (plus a reasonable

rate of interest on such amounts);

provided that the following conditions

are met:

(a) Each sale was a one-time

transaction for cash;

(b) Each Plan has received or will

receive a total amount for the Securities

owned by the Plan, including the sale

proceeds and ‘‘makewhole’’ payments

for transactions that occurred either on

the open market or with PKVL, which

is equal to the greater of: (i) The

outstanding principal balance for each

Security owned by the Plan, plus

accrued but unpaid interest, at the time

of the sale; (ii) the amortized cost for

each Security owned by the Plan on the

date of the sale, plus accrued but unpaid

interest, as determined by the Banks; or

(iii) the fair market value of each

Security owned by the Plan as

determined by the Banks from brokerdealers or pricing services independent

of the Banks at the time of the sale;

(c) With respect to the ‘‘makewhole’’

payments made by PKVL to the Plans on

January 20, 1995, the Plans receive a

reasonable rate of interest for the period

from November 2, 1994 (the date of the

sale of certain Securities on the open

market) until January 20, 1995 (the date

such payments were made), to the

extent this amount is not already

accounted for under the additional

‘‘makewhole’’ payments which are due

for the Securities based on the amounts

referred to above in Item (3)(i);

(d) The Plans did not pay any

commissions or other expenses with

respect to the transactions;

(e) The Banks, as trustee of the Plans,

determined that the sale of the

Securities was in the best interests of

each of the Plans and their participants

and beneficiaries at the time of the

transaction;

(f) The Banks took all appropriate

actions necessary to safeguard the

interests of the Plans and their

participants and beneficiaries in

connection with the transactions; and

(g) Each Plan received a reasonable

rate of return on the Securities during

the period of time that it held the

Securities.

EFFECTIVE DATE: This exemption is

effective as of December 28, 1994, and

January 13, 1995, for the sales of the

Securities made to PKVL, and as of

January 20, 1995, for the ‘‘makewhole’’

payments made by PKVL in connection

with the sale of the Securities to an

unrelated party on November 2, 1994. In

addition, this exemption is effective for

the additional ‘‘makewhole’’ and

interest payments due to the Plans as of

the date such payments are made to the

affected Plans.

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 (the Proposal)

published on November 6, 1996 at 61

FR 57462.

WRITTEN COMMENTS AND MODIFICATIONS:

The applicant submitted a comment

letter on the Proposal which requested

that certain modifications be made by

the Department.

First, the Banks request that the

abbreviation ‘‘PNC’’, as used in the

Proposal to refer to the Pikeville

National Corporation, not be used in the

final exemption. The applicant notes

that the abbreviation ‘‘PNC’’ is used for

identification and promotion purposes

by Pittsburgh National Corporation, a

major bank holding company that was

not involved in any way with the

subject transactions. To avoid

unnecessary confusion or

misunderstandings by interested parties,

the Banks request that references to the

Pikeville National Corporation as

‘‘PNC’’ be changed to ‘‘PKVL’’.

In this regard, the Department has

deleted references to ‘‘PNC’’ and

substituted ‘‘PKVL’’.

Second, the Banks would like to

clarify that there are fewer than eightynine plans involved in the subject

transactions, as stated in the Proposal.

The Banks represent that after the

Proposal was published it was

discovered that several ‘‘plans’’ were

actually subaccounts to plans and not

separate plans. Thus, the Banks state

that the correct number of ‘‘plans’’

involved is eighty-six (86).

In this regard, the Department has

modified the language of the exemption

based on the applicant’s clarification.

Accordingly, the Department has

determined to grant the requested

exemption as modified herein.

FOR FURTHER INFORMATION CONTACT: Mr.

E. F. Williams of the Department,

telephone (202) 219–8194. (This is not

a toll-free number.)

Morgan Stanley & Co. Incorporated

Located in New York, New York

[Prohibited Transaction Exemption 97–08;

Exemption Application No. D–10108]

Exemption

Section I—Transactions

A. Effective August 25, 1995, the

restrictions of section 406(a)(1)(A)

through (D) of the Employee Retirement

Income Security Act of 1974 (the Act)

and the taxes imposed by section 4975

(a) and (b) of the Internal Revenue Code

of 1986 (the Code), by reason of section

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

shall not apply to any purchase or sale

of a security between an employee

benefit plan and a broker-dealer

affiliated with Morgan Stanley & Co.

and subject to British law (MSC/UK

Affiliate), if the following conditions,

and the conditions of Section II, are

satisfied:

(1) The MSC/UK Affiliate customarily

purchases and sells securities for its

own account in the ordinary course of

its business as a broker-dealer.

(2) Such transaction is on terms at

least as favorable to the plan as those

which the plan could obtain in an arm’s

length transaction with an unrelated

party.

(3) Neither the MSC/UK Affiliate nor

an affiliate thereof has discretionary

authority or control with respect to the

investment of the plan assets involved

in the transaction, or renders investment

advice (within the meaning of 29 C.F.R.

2510.3–21(c)) with respect to those

assets, and the MSC/UK Affiliate is a

party in interest or disqualified person

with respect to the plan assets involved

in the transaction solely by reason of

section 3(14)(B) of the Act or section

4975(e)(2)(B) of the Code, or by reason

of a relationship to a person described

in such sections. For purposes of this

paragraph, the MSC/UK Affiliate shall

not be deemed to be a fiduciary with

respect to a plan solely by reason of

providing securities custodial services

for a plan.

B. Effective August 25, 1995, the

restrictions of section 406(a)(1)(A)

through (D) 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 lending of

securities that are assets of an employee

benefit plan to an MSC/UK Affiliate if

the following conditions, and the

conditions of Section II, are satisfied:

(1) Neither the MSC/UK Affiliate (the

Borrower) nor an affiliate of the

Borrower has discretionary authority or

control with respect to the investment of

the plan assets involved in the
4812 Federal Register / Vol. 62, No. 21 / Friday, January 31, 1997 / Notices

transaction, or renders investment

advice (within the meaning of 29 C.F.R.

2510.3–21(c)) with respect to those

assets;

(2) The plan receives from the

Borrower, either by physical delivery or

by book entry in a securities depository

located in the United States, by the

close of business on the day on which

the securities lent are delivered to the

Borrower, collateral consisting of U.S.

currency, securities issued or

guaranteed by the United States

Government or its agencies or

instrumentalities, or irrevocable United

States bank letters of credit issued by a

person other than the Borrower or an

affiliate thereof, or any combination

thereof, having, as of the close of

business on the preceding business day,

a market value (or, in the case of letters

of credit, a stated amount) equal to not

less than 100 percent of the then market

value of the securities lent. The

collateral referred to in this Section

I(B)(2) must be held in the United

States;

(3) Prior to the making of any such

loan, the Borrower shall have furnished

the following items to the fiduciary for

the plan who is making decisions on

behalf of the plan with respect to the

lending of securities (the Lending

Fiduciary): (1) The most recent available

audited statement of the Borrower’s

financial condition, (2) the most recent

available unaudited statement of the

Borrower’s financial condition (if more

recent than such audited stated), and (3)

a representation that, at the time the

loan is negotiated, there has been no

material adverse change in the

Borrower’s financial condition since the

date of the most recent financial

statement furnished to the plan that has

not been disclosed to the Lending

Fiduciary. Such representation may be

made by the Borrower’s agreement that

each such loan shall constitute a

representation by the Borrower that

there has been no such material adverse

change;

(4) The loan is made pursuant to a

written loan agreement, the terms of

which are at least as favorable to the

plan as those which the plan could

obtain in an arm’s-length transaction

with an unrelated party. Such

agreement may be in the form of a

master agreement covering a series of

securities-lending transactions;

(5) The plan (1) receives a reasonable

fee that is related to the value of the

borrowed securities and the duration of

the loan, or (2) has the opportunity to

derive compensation through the

investment of cash collateral. Where the

plan has that opportunity, the plan may

pay a loan rebate or similar fee to the

Borrower, if such fee is not greater than

the plan would pay an unrelated party

in an arm’s-length transaction;

(6) The plan receives 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;

(7) If the market value of the collateral

on the close of trading on a business day

is less than 100 percent of the market

value of the borrowed securities at the

close of trading on that day, the

Borrower shall deliver, by the close of

business on the following business day,

an additional amount of collateral (as

described in paragraph (2)) the market

value of which, together with the market

value of all previously delivered

collateral, equals at least 100 percent of

the market value of all the borrowed

securities as of such preceding day.

Notwithstanding the foregoing, part of

the collateral may be returned to the

Borrower if the market value of the

collateral exceeds 100 percent of the

market value of the borrowed securities,

as long as the market value of the

remaining collateral equals at least 100

percent of the market value of the

borrowed securities;

(8) The loan may be terminated by the

plan at any time, whereupon the

Borrower shall deliver certificates for

securities identical to the borrowed

securities (or the equivalent thereof in

the event of reorganization,

recapitalization or merger of the issuer

of the borrowed securities) to the plan

within (1) the customary delivery period

for such securities, (2) three business

days, or (3) the time negotiated for such

delivery by the plan and the Borrower,

whichever is lesser; and

(9) In the event the loan is terminated

and the Borrower fails to return the

borrowed securities or the equivalent

thereof within the time described in

paragraph (8) above, then (i) the plan

may, under the terms of the loan

agreement, purchase securities identical

to the borrowed securities (or their

equivalent as described above) and may

apply the collateral to the payment of

the purchase price, any other

obligations of the Borrower under the

agreement, and any expenses associated

with the sale and/or purchase, and (ii)

the Borrower is obligated, under the

terms of the loan agreement, to pay, and

does pay to the plan, the amount of any

remaining obligations and expenses not

covered by the collateral plus interest at

a reasonable rate. Notwithstanding the

foregoing, the Borrower may, in the

event the Borrower fails to return

borrowed securities as described above,

replace non-cash collateral with an

amount of cash not less than the then

current market value of the collateral,

provided such replacement is approved

by the Lending Fiduciary.

(10) If the Borrower fails to comply

with any condition of this exemption, in

the course of engaging in a securitieslending transactions, the plan fiduciary

who caused the plan to engage in such

transaction shall not be deemed to have

caused the plan to engage in a

transaction prohibited by section

406(a)(1)(A) through (D) of the Act

solely by reason of the Borrower’s

failure to comply with the conditions of

the exemption.

C. Effective August 25, 1995, the

restrictions of sections 406(a)(1)(A)

through (D) and 406(b)(2) of the Act and

the taxes imposed by section 4975 (a)

and (b) of the Code shall not apply to

any extension of credit to an employee

benefit plan by an MSC/UK Affiliate to

permit the settlement of securities

transactions or in connection with the

writing of options contracts provided

that the following conditions are met:

(a) The MSC/UK Affiliate is not a

fiduciary with respect to any assets of

such plan, unless no interest or other

consideration is received by such

fiduciary or any affiliate thereof in

connection with such extension of

credit; and

(b) Such extension of credit would be

lawful under the Securities Exchange

Act of 1934 and any rules or regulations

thereunder if such act, rules or

regulations were applicable.

Section II—General Conditions

A. The MSC/UK Affiliate is registered

as a broker-dealer with the Securities

and Futures Authority of the United

Kingdom (the S.F.A.);

B. The MSC/UK Affiliate is in

compliance with all requirements of

Rule 15a–6 (17 CFR 240.15a–6) under

the Securities and Exchange Act of

1934, which provides for foreign brokerdealers a limited exemption from U.S.

registration requirements;

C. Prior to the transaction, the MSC/

UK Affiliate enters into a written

agreement with the plan in which the

MSC/UK Affiliate consents to the

jurisdiction of the courts of the United

States with respect to the transactions

covered by this exemption;

D. (1) The MSC/UK Affiliate

maintains or causes to be maintained

within the United States for a period of

six years from the date of such

transaction such records as are

necessary to enable the persons

described in this section to determine

whether the conditions of this
Federal Register / Vol. 62, No. 21 / Friday, January 31, 1997 / Notices 4813

exemption have been met; except that a

party in interest with respect to an

employee benefit plan, other than the

MSC/UK Affiliate, shall not be subject

to a civil penalty under section 502(i) of

the Act or the taxes imposed by section

4975(a) or (b) of the Code, if such

records are not maintained, or are not

available for examination as required by

this section, and a prohibited

transaction will not be deemed to have

occurred if, due to circumstances

beyond the control of the MSC/UK

Affiliate, such records are lost or

destroyed prior to the end of such six

year period;

(2) The records referred to in

subsection (1) above are unconditionally

available for examination during normal

business hours by duly authorized

employees of the Department of Labor,

the Internal Revenue Service, plan

participants and beneficiaries, any

employer of plan participants and

beneficiaries, and any employee

organization any of whose members are

covered by such plan; except that none

of the persons described in this

subsection shall be authorized to

examine trade secrets of Morgan Stanley

& Co. or the MSC/UK or any commercial

or financial information which is

privileged or confidential.

III—Definitions

‘‘Affiliate’’ of a person shall include:

(i) Any person directly or indirectly,

through one or more intermediaries,

controlling, controlled by, or under

common control with such other

person; (ii) any officer, director, or

partner, employee or relative (as defined

in section 3(15) of the Act) of such other

person; and (iii) any corporation or

partnership of which such other person

is an officer, director or partner. For

purposes of this definition, the term

‘‘control’’ means the power to exercise

a controlling influence over the

management or policies of a person

other than an individual.

‘‘Security’’ shall include equities,

fixed income securities, options on

equity and on fixed income securities,

government obligations, and any other

instrument that constitutes a security

under U.S. securities laws. The term

‘‘security’’ does not include swap

agreements or other notional principal

contracts.

For a more complete statement of the

facts and representations supporting

this exemption, refer to the notice of

proposed exemption published on

November 13, 1996 at 61 FR 58237.

FOR FURTHER INFORMATION CONTACT:

Mr. Ronald Willett of the Department,

telephone (202) 219–8881. (This is not

a toll-free number.)

Cassemco, Inc. Retirement Plan and

Trust Agreement (the Plan) Located In

Cookeville, Tennessee

[Prohibited Transaction Exemption 96–09;

Exemption Application No. D–10350]

Exemption

The restrictions of sections 406(a) and

406(b)(1) and (b)(2) of the Act and the

sanctions resulting from the application

of section 4975 of the Code, by reason

of section 4975(c)(1)(A) through (E) of

the Code, shall not apply to the cash

sale (the Sale) by the Plan of certain

securities (the Securities) to Cassemco,

Inc., the sponsoring employer and party

in interest with respect to the Plan;

provided (1) the Sale is a one-time

transaction for cash, (2) the Plan pays no

commissions nor incurs any expenses in

connection with the Sale, and (3) the

Plan receives as consideration for the

Sale no less than the fair market value

of the Securities as of the date of the

Sale.

For a more complete statement of the

facts and representations supporting the

Department’s decision to grant this

exemption, refer to the notice of

proposed exemption published on

December 3, 1996, at 61 FR 64160.

FOR FURTHER INFORMATION CONTACT: Mr.

C.E. Beaver of the Department,

telephone (202) 219–8881. (This is not

a toll-free number.)

PanAgora Asset Management, Inc.

(PanAgora) Located in Boston,

Massachusetts

[Prohibited Transaction Exemption 97–10;

Exemption Application No. D–10351]

Exemption

PanAgora shall not be precluded from

functioning as a ‘‘qualified professional

asset manager’’ pursuant to Prohibited

Transaction Exemption 84–14 (PTE 84–

14, 49 FR 9494, March 13, 1984) solely

because of a failure to satisfy Section

I(g) of PTE 84–14, as a result of

affiliation with E.F. Hutton & Company,

Inc. and Shearson Lehman Brothers,

Inc., formerly Shearson Lehman Hutton,

Inc.

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

December 3, 1996 at 61 FR 64161.

EFFECTIVE DATE: This exemption is

effective as of September 22, 1989, the

date on which PanAgora was formed.

FOR FURTHER INFORMATION CONTACT: Gary

Lefkowitz 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 a 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, DC, this 28th day of

January, 1997.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

U.S. Department of Labor.

[FR Doc. 97–2388 Filed 1–30–97; 8:45 am]

BILLING CODE 4510–29–P