36958 Federal Register / Vol. 63, No. 130 /Wednesday, July 8, 1998 / Notices

The Company stated that it would be in

the position to purchase the Property at

this price due to the fact that the

Company had recently sold another

piece of property for $150,000 with

respect to which the Company was

trying to complete a Code section 1031

like-kind exchange. The Company

further states that based upon the

section 1031 requirements, the like-kind

exchange had to be completed by April

15, 1998, and the Company determined

that due to the notice requirements of

the exemption process, the exemption

would not be granted before this date.

Accordingly, the Company purchased

the Property from the Plan on April 15,

1998. The applicant represents that the

Sale was in the interest of the Plan

because it permitted the Plan to fully

recover the money it invested in the

Property, and it appeared highly

unlikely that the Plan could sell the

Property to a third party in its current

condition at such a price. In addition,

the Plan incurred no expenses as a

result of the Sale.

5. In summary, the applicant

represents that the transaction satisfies

the statutory criteria of the section

408(a) of the Act and section 4975(c)(2)

of the Code because: (1) the Sale was a

one-time transaction for cash; (2) the

Plan paid no expenses associated with

the Sale; and (3) the Plan received the

greater of the fair market value as

determined by an independent,

qualified appraiser of the Property or

$134,600 which represents the Plan’s

total investment in the Property.

For Further Information Contact:

Allison Padams Lavigne of the

Department, telephone (202)219–8971.

(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

that each application accurately

describes all material terms of the

transaction which is the subject of the

exemption.

Signed at Washington, DC, this 1st day of

July, 1998.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

Department of Labor.

[FR Doc. 98–18012 Filed 7–7–98; 8:45 am]

BILLING CODE 4510–29–P

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

Prohibited Transaction Exemption 98–

32; Exemption Application No. D–

10459, et al.]; Grant of Individual

Exemptions; Union Bank of

Switzerland

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, 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.

Union Bank of Switzerland (UBS/Swiss)

and UBS Securities, LLC (UBS

Securities) Located in Zurich,

Switzerland and New York, New York,

Respectively

[Prohibited Transaction Exemption 98–32;

Exemption Application Nos. D–10459 and D–

10460]

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 (1) lending of

securities to UBS/Swiss, UBS Securities,

UBS Ltd. (UBS/UK), UBS Securities

Limited (UBS/Japan) and their

successors in interest, which are or will
Federal Register / Vol. 63, No. 130 /Wednesday, July 8, 1998 / Notices 36959

1For purposes of this exemption, UBS/Swiss,

UBS/UK, UBS/Japan and their successors in interest

are collectively referred to as the UBS Foreign

Borrowers. In addition, UBS Securities, including

its successor in interest, and the UBS Foreign

Borrowers are together referred to herein as the UBS

Borrowers or individually as a UBS Borrower.

2The Department, herein, is not providing

exemptive relief for securities lending transactions

engaged in by primary lending agents, other than

UBS NY, beyond that provided pursuant to

Prohibited Transaction Exemption (PTE) 81–6 (46

FR 7527, January 23, 1981, as amended at 52 FR

18754, May 19, 1987) and PTE 82–63 (47 FR 14804,

April 6, 1982).

be affiliated domestic or foreign brokerdealers of UBS Securities,1 by employee

benefit plans (the Client Plans or Plans),

including commingled investment

funds holding plan assets, for which

UBS/Swiss, acting through its New York

branch in connection with securities

lending activities (UBS NY), an affiliate

of the proposed UBS Borrowers, may

serve as a securities lending agent, subagent, or as a custodian or a directed

trustee to Client Plans under either of

two securities lending arrangements,

referred to herein as ‘‘Plan A’’ or ‘‘Plan

B’’; and (2) the receipt of compensation

by UBS NY in connection with these

transactions.

This exemption is subject to the

following conditions:

(a) For each Client Plan, neither UBS

NY, any of the UBS Borrowers nor any

affiliate of those entities 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 CFR 2510.3–21(c)] with

respect to those assets.

(b) With regard to—

(1) Plan A, under which UBS NY

lends securities of a Client Plan to any

UBS Borrowers in either an agency or

sub-agency capacity, such arrangement

is approved in advance by a Plan

fiduciary who is independent of UBS

NY and the UBS Borrower and is

negotiated by UBS NY which acts as a

liaison between the lender and the

borrower to facilitate the securities

lending transaction.2

(2) Plan B, under which the UBS

Borrower directly negotiates the

agreement with the fiduciary of a Client

Plan, including a Plan for which UBS

NY provides services with respect to the

portfolio of securities to be loaned

pursuant to an exclusive borrowing

arrangement (the Exclusive Borrowing

Arrangement), such Client Plan

fiduciary is independent of both the

UBS Borrower and UBS NY, and UBS

NY does not participate in any such

negotiations.

(c) The independent fiduciary of a

Client Plan approves the general terms

of the securities loan agreement (the

Loan Agreement) between the Client

Plan and the UBS Borrower.

(d) The terms of each loan of

securities by a Client Plan to a UBS

Borrower are at least as favorable to

such Plan as those of a comparable

arm’s length transaction between

unrelated parties.

(e) A Client Plan may terminate the

agency or sub-agency arrangement

under Plan A or an Exclusive Borrowing

Agreement under Plan B at any time,

without penalty, on five business days

notice, whereupon the UBS Borrowers

will 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 Client Plan within—

(1) The customary delivery period for

such securities;

(2) Five business days; or

(3) The time negotiated for such

delivery by the Client Plan and the UBS

Borrowers, whichever is less.

(f) The Client Plan or its designee

receives from each UBS Borrower by

physical delivery or by book entry in a

securities depository located in the

United States, wire transfer or similar

means by the close of business on or

before the day the loaned securities are

delivered to the UBS Borrower,

collateral consisting of U.S. currency,

securities issued or guaranteed by the

United States Government or its

agencies or instrumentalities, or

irrevocable bank letters of credit issued

by a U.S. bank, other than UBS NY or

an affiliate thereof, or any combination

thereof, or other collateral permitted

under PTE 81–6 as it may be amended

or superseded.

(g) The market value (or in the case

of a letter of credit, a stated amount) of

the collateral on the close of business on

the day preceding the day of the loan is

initially at least 102 percent of the

market value of the loaned securities.

The applicable Loan Agreement gives

the Client Plan a continuing security

interest in and a lien on the collateral.

The level of collateral is monitored

daily (either by UBS NY under Plan A,

or by UBS NY or another designee of the

Client Plan under Plan B). 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

loaned securities at the close of business

on that day, the UBS Borrower is

required to deliver, by the close of

business on the next day, sufficient

additional collateral to bring the level to

at least 102 percent.

(h) Prior to entering into a Loan

Agreement, the applicable UBS

Borrower furnishes each Client Plan its

most recently available audited and

unaudited statements to UBS NY, and in

turn, such statements are provided to

the Client Plan before the Client Plan

approves the terms of the Loan

Agreement. The Loan Agreement

contains a requirement that the

applicable UBS Borrower must give

prompt notice at the time of a loan of

any material adverse changes in its

financial condition since the date of the

most recently furnished financial

statements. If any such changes have

taken place, UBS NY does not make any

further loans to the UBS Borrower

unless an independent fiduciary of the

Client Plan is provided notice of any

material change and approves the loan

in view of the changed financial

condition.

(i) In return for lending securities, the

Client Plan either—

(1) Receives a reasonable fee, which 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. (Under such

circumstances, the Client Plan may pay

a loan rebate or similar fee to UBS

Borrowers, if such fee is not greater than

the fee the Client Plan would pay in a

comparable arm’s length transaction

with an unrelated party.)

(j) All procedures regarding the

securities lending activities will, at a

minimum, conform to the applicable

provisions of PTEs 81–6 and 82–63 as

well as to applicable securities laws of

the United States, Switzerland, the

United Kingdom or Japan.

(k) UBS NY agrees to indemnify and

hold harmless the Client Plan in the

United States (including the sponsor

and fiduciaries of such Client Plan) for

any transactions covered by this

exemption with a UBS Borrower so that

the Client Plan does not have to litigate,

in the case of a UBS Foreign Borrower,

in a foreign jurisdiction nor sue the UBS

Foreign Borrower to realize on the

indemnification. Such indemnification,

by UBS NY, is against any and all

reasonably foreseeable damages, losses,

liabilities, costs and expenses (including

attorney’s fees) which the Client Plan

may incur or suffer, arising from any

impermissible use by the UBS Borrower

of the loaned securities or from an event

of default arising from the UBS

Borrower’s failing to deliver loaned

securities in accordance with the

applicable Loan Agreement or to

otherwise comply with the terms of

such agreement, except to the extent

that such losses or damages are caused

by the Client Plan’s own negligence.
36960 Federal Register / Vol. 63, No. 130 /Wednesday, July 8, 1998 / Notices

(1) If any event of default occurs, UBS

NY, promptly and at its own expense

(subject to rights of subrogation in, to

the collateral and against such

borrower), purchases or causes to be

purchased, for the account of the Client

Plan, securities identical to the

borrowed securities (or their equivalent

as discussed above). If the collateral is

insufficient to accomplish such

purchase, UBS NY indemnifies the

Client Plan for any shortfall in the

collateral plus interest, if contractually

applicable, on such amount and any

transaction costs incurred (including

attorney’s fees of the Client Plan for

legal actions arising out of the default

on loans or failure to properly

indemnify under this provision).

Alternatively, if such replacement

securities cannot be obtained on the

open market, UBS NY pays the Client

Plan the difference in U.S. dollars

between the market value of the loaned

securities and the market value of the

related collateral on the date of the

borrower’s breach of its obligation to

return the loaned securities.

(2) If, however, the event of default is

caused by the UBS Borrower’s failure to

return the securities within the

designated time, the Client Plan has the

right to purchase securities identical to

the borrowed securities and apply the

collateral to payment of the purchase

price and any other expenses of the Plan

associated with the sale and/or

purchase.

(l) The Client Plan receives the

equivalent of all distributions made to

holders of the borrowed securities,

including all interest and dividends on

the loaned securities during the loan

period.

(m) Prior to any Client Plan’s approval

of the lending of its securities to any

UBS Borrower, copies of the notice of

proposed exemption (the Notice) and

the final exemption are provided to the

Client Plan.

(n) Each Client Plan receives monthly

reports with respect to securities

lending transactions, including, but not

limited to, the information described in

Representation 26 of the Summary of

Facts and Representations (the

Summary) of the Notice, so that an

independent fiduciary of a Client Plan

may monitor such transactions with the

UBS Borrower.

(o) Only Client Plans with total assets

having an aggregate market value of at

least $50 million are permitted to lend

securities to UBS Borrowers; provided,

however, that —

(1) In the case of two or more Client

Plans which are maintained by the same

employer, controlled group of

corporations or employee organization

(i.e., the Related Plans), whose assets are

commingled for investment purposes in

a single master trust or any other entity

the assets of which are ‘‘plan assets’’

under 29 CFR 2510.3–101 (the Plan

Asset Regulation), which entity is

engaged in securities lending

arrangements with UBS Borrowers, the

foregoing $50 million requirement is

deemed satisfied if such trust or other

entity has aggregate assets which are in

excess of $50 million; provided that, if

the fiduciary responsible for making the

investment decision on behalf of such

master trust or other entity is not the

employer or an affiliate of the employer,

such fiduciary has total assets under its

management and control, exclusive of

the $50 million threshold amount

attributable to Client Plan investment in

the commingled entity, which are in

excess of $100 million.

(2) In the case of two or more Client

Plans which are not maintained by the

same employer, controlled group of

corporations or employee organization

(i.e., the Unrelated Client Plans), whose

assets are commingled for investment

purposes in a group trust or any other

form of entity the assets of which are

‘‘plan assets’’ under the Plan Asset

Regulation, which entity is engaged in

securities lending arrangements with

UBS Borrowers, the foregoing $50

million requirement is deemed satisfied

if such trust or other entity has aggregate

assets which are in excess of $50

million (excluding the assets of any Plan

with respect to which the fiduciary

responsible for making the investment

decision on behalf of such group trust

or other entity or any member of the

controlled group of corporations

including such fiduciary is the

employer maintaining such Plan or an

employee organization whose members

are covered by such Plan). However, the

fiduciary responsible for making the

investment decision on behalf of such

group trust or other entity——

(A) Has full investment responsibility

with respect to Client Plan assets

invested therein; and

(B) Has total assets under its

management and control, exclusive of

the $50 million threshold amount

attributable to Client Plan investment in

the commingled entity, which are in

excess of $100 million.

(In addition, none of the entities

described above must be formed for the

sole purpose of making loans of

securities.)

(p) With respect to any calendar

quarter, at least 50 percent or more of

the outstanding dollar value of

securities loans negotiated on behalf of

Client Plans will be to unrelated

borrowers.

(q) In addition to the above, all loans

involving UBS Foreign Borrowers, have

the following requirements:

(1) Such Foreign Borrower is

registered as a broker-dealer with the

Securities and Futures Authority of the

United Kingdom in the case of UBS/UK,

the Swiss Federal Banking Commission

in the case of UBS/Swiss, and the

Ministry of Finance, in the case of UBS/

Japan;

(2) Such Foreign Borrower is in

compliance with all applicable

provisions of Rule 15a–6 (17 CFR

240.15a–6) under the Securities

Exchange Act of 1934 which provides

for foreign broker-dealers a limited

exemption from United States

registration requirements;

(3) All collateral is maintained in

United States dollars or U.S. dollardenominated securities or letters of

credit;

(4) All collateral is held in the United

States and the situs of the securities

lending agreements (either the Loan

Agreement under Plan A or the

Exclusive Borrowing Agreement under

Plan B) is maintained in the United

States under an arrangement that

complies with the indicia of ownership

requirements under section 404(b) of the

Act and the regulations promulgated

under 29 CFR 2550.404(b)–1; and

(5) Prior to a transaction involving a

UBS Foreign Borrower, the applicable

UBS Foreign Borrower—

(A) Agrees to submit to the

jurisdiction of the United States;

(B) Agrees to appoint an agent for

service of process in the United States,

which may be an affiliate (the Process

Agent);

(C) Consents to service of process on

the Process Agent; and

(D) Agrees that enforcement by a

Client Plan of the indemnity provided

by UBS New York will occur in the

United States courts.

(r) UBS NY and each UBS Foreign

Borrower maintain, or cause to maintain

within the United States for a period of

six years from the date of such

transaction, in a manner that is

convenient and accessible for audit and

examination, such records as are

necessary to enable the persons

described in paragraph (s)(1) to

determine whether the conditions of the

exemption have been met, except that—

(1) A prohibited transaction will not

be considered to have occurred if, due

to circumstances beyond the control of

UBS NY and/or its affiliates, the records

are lost or destroyed prior to the end of

the six year period; and

(2) No party in interest other than

UBS NY or its affiliates shall be subject

to the civil penalty that may be assessed
Federal Register / Vol. 63, No. 130 /Wednesday, July 8, 1998 / Notices 36961

under section 502(i) of the Act, or to the

taxes imposed by section 4975(a) and (b)

of the Code, if the records are not

maintained, or are not available for

examination as required below by

paragraph (s)(1).

(s)(1) Except as provided in

subparagraph (s)(2) of this paragraph

and notwithstanding any provisions of

subsections (a)(2) and (b) of section 504

of the Act, the records referred to in

paragraph (r) are unconditionally

available at their customary location

during normal business hours by —

(A) Any duly authorized employee or

representative of the Department, the

Internal Revenue Service or the

Securities and Exchange Commission;

(B) Any fiduciary of a participating

Client Plan or any duly authorized

representative of such fiduciary;

(C) Any contributing employer to any

participating Client Plan or any duly

authorized employee representative of

such employer; and

(D) Any participant or beneficiary of

any participating Client Plan, or any

duly authorized representative of such

participant or beneficiary.

(s)(2) None of the persons described

above in paragraphs (s)(1)(B)—(s)(1)(D)

of this paragraph (s)(1) are authorized to

examine the trade secrets of UBS NY or

its affiliates or commercial or financial

information which is privileged or

confidential.

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 March 31, 1998 at 63 FR 15452.

Written Comments

During the comment period, the

Department received one written

comment with respect to the Notice and

no requests for a public hearing. The

comment letter was submitted by UBS/

Swiss and UBS Securities (together, the

Applicants) and is intended to clarify

the operative language of the Notice and

the Summary. Presented below are a

discussion of the Applicants’ comments

and the Department’s responses.

General Comments

The Applicants wish to make the

following general comments to reflect

changed circumstances since the

original filing of the exemption

application.

1. Successors in Interest. The

Applicants represent that there is

currently a pending merger between

UBS Swiss and Swiss Bank. The

transaction, which has not been

structured as an asset sale but rather as

a transfer of stock, would result in the

formation of a new entity that would be

named ‘‘UBS AG.’’ In effect, the

Applicants state that the shareholders of

UBS Swiss and Swiss Bank would

surrender shares of stock in their

respective entities in exchange for

shares of UBS AG. Following the

merger, UBS Securities would be

renamed ‘‘Warburg Dillon Read LLC.’’

The names of UBS/UK and UBS/Japan

would remain unchanged. The

Applicants state that they have obtained

final regulatory approval and anticipate

that the merger will be consummated by

the end of June 1998.

To ensure that the requested

exemption will still be effective

following the merger, the Applicants

have requested that it be revised, as

necessary, to extend to successors in

interest to the Applicants and their

affiliates. Therefore, the Department has

revised the operative language of the

exemption by making it applicable to

successors in interest to UBS Swiss,

UBS Securities and their affiliates,

including UBS NY and the UBS/UK and

UBS/Japan.

2. Representation 1(b) of the

Summary. The last sentence in the

second paragraph of Representation 1(b)

of the Summary states that ‘‘All

borrowings by UBS Securities must

conform to applicable provisions of the

Federal Reserve Board’s Regulation T.’’

The Applicants note that Regulation T

has been amended as of April 1, 1998

and therefore, believe that a

representation as to compliance with

Regulation T should be made only to the

extent it is applicable to the UBS

Borrower and the transaction.

Accordingly, the Applicants suggest that

the last sentence of Representation 1(b)

be revised to read as follows:

All borrowings by UBS Securities must

conform to applicable provisions of the

Federal Reserve Board’s Regulation T, to the

extent that such regulation is applicable to

UBS Securities and to the transaction.

In concurrence, the Department has

made the requested change in

Representation 1(b) of the Notice.

Specific Comments

1. Operative Language of the Notice

and Representation 8 of the Summary.

In the operative language of the Notice,

the introductory paragraph and

Representation 8 of the Summary briefly

state that UBS NY may serve as a

securities lending agent, a sub-agent or

as a custodian or a directed trustee to

Client Plans under either of two

securities lending arrangements, which

are referred to therein as ‘‘Plan A’’ and

‘‘Plan B.’’ To clarify the statements

made in these paragraphs, the

Applicants point out that when UBS NY

effects securities lending activities on

behalf of a Client Plan, it may be acting

as a lending agent or a sub-agent

pursuant to discrete agency

documentation or pursuant to authority

granted under a trust or custodial

agreement with the Client Plan which

expressly includes the securities

lending activity.

The Department has noted the

clarification offered by the Applicants.

2. Condition (k) of the Notice and

Representations 23 and 38 of the

Summary. The Applicants suggest that

the Department revise Condition (k) of

the Notice and Representation 23 and 38

of the Summary to reflect more

accurately the scope of the

indemnification given by UBS NY to a

Client Plan. In this regard, the

Applicants recommend that the second

sentence of Condition (k) and the

second sentence of Representation 38 be

modified by striking the phrase ‘‘the

failure of the UBS Borrower’’ and

inserting the phrase ‘‘from an event of

default arising from the UBS Borrower’s

failing * * *’’ after the word ‘‘or.’’

In response, the Department concurs

with the requested modifications and

has revised the Notice, accordingly.

Although Representation 23 of the

Summary contains language similar to

that of Condition (k) and Representation

38, the Department has not made a

corresponding change since the

language contained therein already

appears to embody the Applicants’

requested modification.

3. Condition (k)(1) of the Notice and

Representation 23 of the Summary. The

Applicants note that UBS NY will

perform its indemnity within one

business day of the insolvency event

(either by (1) paying the Client Plan the

difference in U.S. dollars between the

market value of the loaned securities

and the market value of the related

collateral on the date of the borrower’s

breach of its obligation to return the

loaned securities or (2) by purchasing

securities identical to the borrowed

securities and applying the collateral to

payment of the purchase price and any

other expenses of the Client Plan that

may be associated with the sale and/or

purchase. Because UBS NY generally

performs its indemnity by the next

business day, the Applicants represent

that UBS NY does not pay interest on

any shortfall in collateral arising from

other than reinvestment risk but it does

bear the transaction costs of performing

the indemnity. However, in the event

UBS NY is ever required to pay interest

to a Client Plan, the Applicants request

that the phrase ‘‘if contractually

applicable’’ be inserted following the

reference to ‘‘interest’’ in Condition
36962 Federal Register / Vol. 63, No. 130 /Wednesday, July 8, 1998 / Notices

(k)(1) and in the second sentence of the

second paragraph in Representation 23.

In response, the Department has made

the change requested by the Applicants.

4. Condition (o)(2)(A) of the Notice

and Representation 28(a) of the

Summary.

Condition (o)(2) of the Notice

provides that—

In the case of two or more Client

Plans which are not maintained by the

same employer, controlled group of

corporations or employee organization

(the Unrelated Client Plans), whose

assets are commingled for investment

purposes in a group trust or any other

form of entity the assets of which are

‘‘plan assets’’ under the Plan Asset

Regulation, which entity is engaged in

securities lending arrangements with

UBS Borrowers, the foregoing $50

million requirement is deemed satisfied

if such trust or other entity has aggregate

assets which are in excess of $50

million; provided that the fiduciary

responsible for making the investment

decision on behalf of such group trust

or other entity—

(A) Is neither the sponsoring

employer, a member of the controlled

group of corporations, the employee

organization, nor an affiliate;

(B) Has full investment responsibility

with respect to Client Plan assets

invested therein; and

(C) Has total assets under its

management and control, exclusive of

the $50 million threshold amount

attributable to Client Plan investment in

the commingled entity, which are in

excess of $100 million.

Representation 28 of the Summary

contains a similar provision. The

Department believes that subparagraph

(A) above and clause (a) of

Representation 28 unnecessarily limit

the ability of a Client Plan to effect

securities loans under the proposed

lending program, particularly in a

situation where the independent

investment manager’s own in-house

plan wishes to invest in the commingled

investment vehicle. Therefore, the

Department has modified the Condition

and Representation to read as follows:

In the case of two or more Client Plans

which are not maintained by the same

employer, controlled group of corporations or

employee organization (i.e., the Unrelated

Client Plans), whose assets are commingled

for investment purposes in a group trust or

any other form of entity the assets of which

are ‘‘plan assets’’ under the Plan Asset

Regulation, which entity is engaged in

securities lending arrangements with UBS

Borrowers, the foregoing $50 million

requirement is satisfied if such trust or other

entity has aggregate assets which are in

excess of $50 million (excluding the assets of

any Plan with respect to which the fiduciary

responsible for making the investment

decision on behalf of such group trust or

other entity or any member of the controlled

group of corporations including such

fiduciary is the employer maintaining such

Plan or an employee organization whose

members are covered by such Plan).

However, the fiduciary responsible for

making the investment decision on behalf of

such group trust or other entity—

(A) Has full investment responsibility

with respect to plan assets invested

therein; and

(B) Has total assets under its

management and control, exclusive of

the $50 million threshold amount

attributable to plan investment in the

commingled entity, which are in excess

of $100 million.

In effect, the independent investment

manager’s own plan may participate in

the commingled investment vehicle but

for purposes of determining whether the

$50 million aggregation requirement is

met, the assets of the Unrelated Plans

must be utilized.

5. Condition (q)(5)(D) of the Notice

and Representations 25(d) and 32(d) of

the Summary. Condition (q) of the

Notice sets forth certain supplemental

requirements for securities loans

involving UBS Foreign Borrowers.

Specifically, subparagraph 5 of

Condition (q) describes the limited form

of indemnity that is to be provided by

the UBS Foreign Borrower to a Client

Plan. For example, prior to a securities

lending transaction, the UBS Foreign

Borrower must (a) agree to submit to the

jurisdiction of the United States; (b)

agree to appoint an agent for service of

legal process; and (c) consent to service

of process on the Process Agent.

The Applicants note, however, that

the language of Condition (q)(5)(D) of

the Notice and Representations 25(d)

and 32(d) of the Summary appears to

have been added in error. These

paragraphs state that the applicable UBS

Foreign Borrower ‘‘agrees to be

indemnified in the United States for any

transaction covered by this exemption.’’

Because no UBS Borrower will be

indemnified under this exemption, the

Applicants suggest that the language be

clarified to state that the ‘‘UBS Foreign

Borrower agrees that enforcement by a

Client Plan of the indemnity provided

by UBS New York will occur in the

United States courts.’’

In response, the Department concurs

with the clarification made by the

Applicants and has made the requested

change.

6. Representation 11 of the Summary.

The Applicants request that the second

sentence in the second paragraph of

Representation 11 of the Summary be

modified by inserting the phrase ‘‘will

be the same as that approved by the

Client Plan fiduciary in the Primary

Lending Agreement.’’ Therefore, the

Department has revised the sentence to

read as follows:

Thus, for example, the form of Loan

Agreement will be the same as that approved

by the Client Plan fiduciary in the Primary

Lending Agreement.

7. Representation 27 of the Summary.

Representation 27 of the Summary

describes the contents of the monthly

report that will be given to the

independent fiduciary of a Client Plan

by UBS NY. Among other things, the

monthly report will enable the Client

Plan fiduciary to monitor securities

lending activity, rates on loans to UBS

Borrowers compared with loans to other

brokers and the level of collateral. The

Applicants wish to emphasize that

while they cannot be required to

divulge, in the monthly report,

confidential information regarding

securities loans made by outside

lenders, they will disclose all of a Client

Plan’s outstanding securities loans that

are made to UBS Borrowers. Therefore,

the Applicants request that

Representation 27 be revised, in part, as

follows:

In order to provide the means for

monitoring lending activity, rates on loans to

UBS Borrowers compared with loans to other

brokers and the level of collateral on the

loans, it is represented that the monthly

report will show, on a daily basis, the market

value of all of the Client Plan’s outstanding

securities loans to the UBS Borrower and to

other borrowers as compared to the total

collateral held for both categories of loans.

In response, the Department concurs

with the Applicants’ clarification of the

monthly report and has made the

requested change.

For further information regarding the

Applicants’ comments or other matters

discussed herein, interested persons are

encouraged to obtain copies of the

exemption application file (Exemption

Application Nos. D–10459 and D–

10460) the Department is maintaining in

this case. The complete application file,

as well as all supplemental submissions

received by the Department, are made

available for public inspection in the

Public Documents Room of the Pension

and Welfare Benefits Administration,

Room N–5638, U.S. Department of

Labor, 200 Constitution Avenue, NW,

Washington, DC 20210.

Accordingly, after giving full

consideration to the entire record,

including the written comment

provided by the Applicants, the

Department has made the

aforementioned changes to the Notice

and has decided to grant the exemption
Federal Register / Vol. 63, No. 130 /Wednesday, July 8, 1998 / Notices 36963

3Because Dr. Breland is the only participant in

the Plan, there is no jurisdiction under 29 CFR

2510.3–3(b). However, there is jurisdiction under

Title II of the Act pursuant to section 4975 of the

Code.

4Pursuant to CFR 2510.3–3(b) and (c), the

Department has no jurisdiction with respect to the

Plans under Title I of the Act. However, there is

jurisdiction under Title II of the Act pursuant to

section 4975 of the Code.

subject to the modifications or

clarifications described above.

For Further Information Contact: Ms.

Jan D. Broady of the Department,

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

a toll-free number.)

Breland Investments, Inc. Profit

Sharing Plan and Trust (the Plan)

Located in Phoenix, Arizona

[Prohibited Transaction Exemption 98–33;

Exemption Application No: D–10529]

Exemption

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 proposed loan (the Loan) by

the individually directed account (the

Account) in the Plan 3 of Dr. Albert E.

Breland (Dr. Breland), to Mesa

Scholastic Enterprises, a disqualified

person with respect to the Plan, and (2)

the personal guarantee of the Loan by

Dr. Breland, a disqualified person with

respect to the Plan, provided the

following conditions are satisfied:

(a) the terms of the Loan are at least

as favorable to the Account as those

obtainable in an arm’s length

transaction with an unrelated party;

(b) the amount of the Loan does not

exceed 25% of the assets in the

Account;

(c) the Loan is secured by a first deed

of trust on the commercial real property,

which has been appraised by a qualified

independent appraiser to have a fair

market value not less than 150% of the

outstanding balance of the Loan

throughout its duration;

The Department received no

comments or requests for a hearing in

response to the Notice of Proposed

Exemption (the Notice) published on

Friday, May 29, 1998 at 63 FR 29458.

However, in the paragraph entitled

‘‘Notice to Interested Persons’’

contained in the Notice, the word

‘‘Overland’’ should be deleted and the

word ‘‘Breland’’ should be inserted in

lieu thereof.

For a more complete statement of the

summary of facts and representations

supporting the Department’s decision to

grant this exemption, refer to the Notice.

For Further Information Contact: Mr.

James Scott Frazier, telephone (202)

219–8881. (This is not a toll-free

number).

Karen J. Hartley Profit Sharing Plan (P/

S Plan) and Karen J. Hartley Money

Purchase Pension Plan and Trust

Agreement (M/P Plan, collectively; the

Plans) Located in Eugene, Oregon

[Prohibited Transaction Exemption 98–34;

Exemption Application Nos. D–10588 and D–

10589]

Exemption

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 loan (the Loan) by the Plans to

Karen J. Hartley, the trustee and sole

participant of the Plans and, a

disqualified person with respect to the

Plans; 4 provided that the following

conditions will be met:

1. The Loan will be structured such

that each Plan will lend up to 25% of

its assets. However, the aggregate

amount of the Loan will not exceed

$40,000 at any time;

2. The outstanding balance of the

Loan will at no time exceed 25% of the

Plans’ aggregate assets;

3. The Plans will bear no expenses

with respect to the proposed

transaction;

4. The terms and conditions of the

Loan will be at least as favorable to the

Plans as those obtainable in arm’slength transaction with an unrelated

party; and

5. The Loan will be adequately

secured by collateral, which at all times

will be equal to 100% of the outstanding

principal amount of the Loan plus 6

months interest at the Loan’s interest

rate of 8.2%. In the event the collateral

amount falls below this required

amount, this exemption will no longer

be available.

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 May

18, 1998 at 63 FR 27332.

For Further Information Contact:

Ekaterina A. Uzlyan of the Department

at (202) 219–8883. (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 do

not apply and the general fiduciary

responsibility provisions of section 404

of the Act, which among other things

require a fiduciary to discharge his

duties respecting the plan solely in the

interest of the participants and

beneficiaries of the plan and in a

prudent fashion in accordance with

section 404(a)(1)(B) of the Act; nor does

it affect the requirement of section

401(a) of the Code that the plan must

operate for the exclusive benefit of the

employees of the employer maintaining

the plan and their beneficiaries;

(2) These exemptions are

supplemental to and not in derogation

of, any other provisions of the Act and/

or the Code, including statutory or

administrative exemptions and

transactional rules. Furthermore, the

fact that a transaction is subject to an

administrative or statutory exemption is

not dispositive of whether the

transaction is in fact a prohibited

transaction; and

(3) The availability of these

exemptions is subject to the express

condition that the material facts and

representations contained in each

application accurately describes all

material terms of the transaction which

is the subject of the exemption.

Signed at Washington, DC, this 1st day of

July 1998.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

Department of Labor.

[FR Doc. 98–18010 Filed 7–7–98; 8:45 am]

BILLING CODE 4510–29–P

NATIONAL AERONAUTICS AND

SPACE ADMINISTRATION

[98–092]

Notice of Agency Reports Under OMB

Review

AGENCY: National Aeronautics and

Space Administration (NASA).

ACTION: Notice of agency report forms

under OMB review.

SUMMARY: The National Aeronautics and

Space Administration, as part of its

continuing effort to reduce paperwork

and respondent burden, invites the

general public and other Federal

agencies to take this opportunity to

comment on proposed and/or

continuing information collections, as

required by the Paperwork Reduction

Act of 1995 (Public Law 104–13, 44

U.S.C. 3506(c)(2)(A)).