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EBSA Notices

[Prohibited Transaction Exemption 2002-31; (Exemption Application No. D-11002) et al.] Grant of Individual Exemptions; Deutsche Bank AG   [6/20/2002]
[PDF]
[Federal Register: June 20, 2002 (Volume 67, Number 119)]
[Notices]               
[Page 42072-42081]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20jn02-124]                         

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 2002-31; (Exemption Application No. 
D-11002) et al.]

 
Grant of Individual Exemptions; Deutsche Bank AG

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of individual exemption.

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SUMMARY: This document contains an exemption issued by the Department 
of Labor (the Department) from certain of he prohibited transaction 
restriction of the Employee Retirement Income Security Act of 1974 (the 
Act) and/or the Internal Revenue Code of 1986 (the Code).
    A notice was published in the Federal Register of the pendency 
before the Department of a proposal to grant such exemption. The notice 
set forth a summary of facts and representations contained in the 
application for exemption and referred interested persons to the 
application for a complete statement of the facts and representations. 
The application has been available for public inspection at the 
Department in Washington, DC. The notice also invited interested 
persons to submit comments on the requested exemption to the 
Department. In addition, the notice stated that any interested person 
might submit a written request that a public hearing be held (where 
appropriate). The applicant has represented that it has complied with 
the requirements of the notification to interested persons. No requests 
for a hearing were received by the Department. Public comments were 
received by the Department as described in the granted exemption.
    The notice of proposed exemption was issued and the exemption is 
being granted solely by the Department because, effective December 31, 
1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 
(1996), 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) the Act and/or section 4975(c)(2) 
of the Code an the procedures set forth in 29 CFR Part 2570, Subpart B 
(55 FR 32836, 32847, August 10, 1990) and based upon he entire record, 
the Department makes the following findings:
    (a) The exemption is administratively feasible;
    (b) The exemption is in the interests of the plan and its 
participants and beneficiaries; and
    (c) The exemption is protective of the rights of the participants 
and beneficiaries of the plan.

Deutsche Bank AG, Located in Frankfurt/Main, Germany

[Prohibited Transaction No. 2002-31; Exemption Application No: D-11002]

Exemption

I. General Exemption
    Effective for the period from June 12, 2001, through July 27, 2009, 
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 a 
transaction between a party in interest with respect to an employee 
benefit plan and an investment fund (as defined in section V(b)), in 
which the plan has an interest, and which is managed by Deutsche Bank 
AG (Deutsche Bank or the Applicant) (as defined in section V(a)), if 
the following conditions are satisfied:
    (a) At the time of the transaction (as defined in section V(i)), 
the part in interest, or its affiliate (as defined in section V(c)), 
does not have, and during the immediately preceding one (1) year has 
not exercised, the authority to--
    (1) Appoint or terminate Deutsche Bank as a manager of any of the 
plan's assets, or
    (2) Negotiate the terms fo the management agreement with Deutsche 
Bank (including renewals or modifications thereof) on behalf of such 
plan;
    (b) The transaction is not described in--
    Prohibited Transaction Class Exemption 81-6 (PTCE 81-6) \1\ 
(relating to securities lending arrangements);
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    \1\ 46 FR 7527, January 23, 1981.
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    (2) Prohibited Transaction Class Exemption 83-1 (PTCE 83-1) \2\ 
(relating to acquisitions by plans of interests in mortgage pools), or
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    \2\ 48 FR 895, January 7, 1983.
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    (3) Prohibited Transaciton Class Exemption 82-87 (PTCE 82-87) \3\

[[Page 42073]]

(relating to certain mortgage financing arrangements);
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    \3\ 47 FR 21331, May 18, 1982.
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    (c) The terms of the transaction are negotiated on behalf of the 
investment fund by, or under the authority and general direction of 
Deutsche Bank, and either Deutsche Bank, or (so long as Deutsche Bank 
retains full fiduciary responsibility with respect to the transaction) 
a property manager acting in accordance with written guidelines 
established and administered by Deutsche Bank, makes the decision on 
behalf of the investment fund to enter into the transaction, provided 
that the transaction is not part of an agreement, arrangement, or 
understanding designed to benefit a party in interest;
    (d) The party in interest dealing with the investment fund is 
neither Deutsche Bank nor a person related to Deutsche Bank (within the 
meaning of section V(h));
    (e) The transaction is not entered into with a party in interest 
with respect to any plan whose assets managed by Deutsche Bank, when 
combined with the assets of other plans established or maintained by 
the same employer (or affiliate thereof described in section V(c)(1) of 
this exemption) or by the same employee organization, and managed by 
Deutsche Bank, represent more than 20 percent (20%) of the total client 
assets managed by Deutsche Bank at the time of the transaction;
    (f) At the time the transaction is entered into, and at the time of 
any subsequent renewal or modification thereof that requires the 
consent of Deutsche Bank, the terms of the transaction are at least as 
favorable to the investment fund as the terms generally available in 
arm's length transactions between unrelated parties;
    (g)(1) Neither Deutsche Bank nor any affiliate thereof (as defined 
in section V(d)), nor any owner, direct or indirect, of a 5 percent 
(5%) or more interest in Deutsche Bank is a person who, within the ten 
(10) years immediately preceding the transaction, has been either 
convicted or released from imprisonment, whichever is later, as a 
result of any felony involving abuse or misuse of such person's 
employee benefit plan position or employment, or position or employment 
with a labor organization; any felony arising out of the conduct of the 
business of a broker, dealer, investment adviser, bank, insurance 
company, or fiduciary; income tax evasion; any felony involving the 
larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent 
concealment, embezzlement, fraudulent conversion, or misappropriation 
of funds or securities; conspiracy or attempt to commit any such crimes 
or a crime in which any of the foregoing crimes is an element; or any 
other crime described in section 411 of the Act.
    (2) The relief provided by this exemption is available to Deutsche 
Bank (ad defined in section V(a)), notwithstanding the guilty plea on 
March 11, 1999, of Deutsche Bank's affiliate, Bankers Trust Company 
(Bankers Trust), to three counts of violations of 18 U.S.C. Sec. 1005, 
provided that neither Deutsche Bank nor any affiliate, nor any owner, 
direct or indirect of a 5 percent (5%) or more interest in Deutsche 
Bank is convicted of any of the crimes (described in section I(g)(1)), 
and provided that Bankers Trust is not subsequently convicted of any 
crimes (described in section I(g)(1)).
    (3) For purposes of this section I(g), a person shall be deemed to 
have been ``convicted'' from the date of the judgment of the trial 
court, regardless of whether that judgment remains under appeal.
    (h) Prior to entering into a transaction covered by this exemption 
Deutsche Bank must agree in writing with a plan:
    (1) That the transaction is governed by the laws of the United 
States and that Deutsche Bank is a fiduciary of the plan pursuant to 
the provisions of the Act;
    (2) To submit to the jurisdiction of the United States district 
courts;
    (3) To appoint an agent for service of process in the United 
States, which may be an affiliate (the Process Agent);
    (4) To consent to service of process on the Process Agent; and
    (5) To indemnify and hold harmless each plan affected by this 
exemption in the United States against any harm, damage, or injury 
(including interest and attorney's fees) arising from any fiduciary 
breach or other wrongdoing of Deutsche Bank in its capacity as an asset 
manager for such plan.
    (i) Upon request, Deutsche Bank provides to each plan affected by 
this exemption copies of the Notice of Proposed Exemption (the Notice) 
and the final exemption;
    (j) Deutsche Bank provides each plan affected by this exemption 
with a written consent to service of process in the United States and 
to the jurisdiction of the courts of the United States for any civil 
action or proceeding brought against Deutsche Bank with respect to the 
subject transactions, which consent provides that process may be served 
on Deutsche Bank through service on Deutsche Bank's New York branch (or 
any other branch or affiliate of Deutsche Bank that is domiciled in the 
United States);
    (k) Deutsche Bank and/or its affiliates (as defined in section 
V(c)(1)), maintains or causes to be maintained within the United States 
for a period of six (6) years from the date of each transaction covered 
by this exemption, in a manner that is convenient and accessible for 
audit and examination, such records as are necessary to enable persons 
(as described in section I(l)) 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 Deutsche Bank 
and/or its affiliates (as defined in section V(c)(1)), records are lost 
or destroyed prior to the end of the six (6) year period; and
    (2) No party in interest other than Deutsche Bank and/or its 
affiliates 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 are not maintained, or are 
not available for examination (as required by section I(l)(1));
    (l)(1) Except as provided in section I(l)(2) and notwithstanding 
any provisions of subsections (a)(2) and (b) of section 504 of the Act, 
the records referred to, above, in section I(k) are unconditionally 
available at their customary location during normal business hours to: 
(i) any duly authorized employee or representative of the Department, 
the Internal Revenue Service or the Securities and Exchange Commission; 
(ii) any fiduciary of a plan affected by this exemption or any duly 
authorized representative of such fiduciary; (iii) any contributing 
employer to any plan affected by this exemption or any duly authorized 
employee representative of such employer; and (iv) any participant or 
beneficiary of any plan affected by this exemption, or any duly 
authorized representative of such participant or beneficiary;
    (2) None of the persons described above in section I(l)(1)(ii)-(iv) 
are authorized to examine the trade secrets of Deutsche Bank or 
commercial or financial information which is privileged or 
confidential;
    (m) Upon request, Deutsche Bank discloses to the plan sponsor and/
or the named fiduciary of each plan affected by this exemption 
information concerning the nature and extent of Deutsche Bank's 
regulation by German governmental authorities.
II. Specific Exemptions for Employers
    Effective for the period from June 12, 2001, through July 27, 2009, 
the restrictions of sections 406(a), 406(b)(1)

[[Page 42074]]

and 407(a) of the Act and the taxes imposed by section 4975(a) and (b) 
of the Code, by reason of Code section 4975(c)(1(A) through (E), shall 
not apply to:
    (a) The sale, leasing, or servicing of goods (as defined in section 
V(j)), or to the furnishing of services, to an investment fund managed 
by Deutsche Bank, by a party in interest with respect to a plan having 
an interest in the investment fund, if--
    (1) The party in interest is an employer any of whose employees are 
covered by the plan or is a person who is a party in interest by virtue 
of a relationship to such an employer described in section V(c).
    (2) The transaction is necessary for the administration or 
management of the investment fund,
    (3) The transaction takes place in the ordinary course of a 
business engaged in by the party in interest with the general public,
    (4) Effective for taxable years of the party in interest furnishing 
goods and services after the date this exemption is granted, the amount 
attributable in any taxable year of the party in interest to 
transaction engaged in with an investment fund pursuant to section 
II(a) of this exemption does not exceed one percent (1%) of the gross 
receipts derived from all sources for the prior taxable year of such 
party in interest, and
    (5) The requirements of sections I(c) through (n) are satisfied 
with respect to the transaction;
    (b) The leasing of office or commercial space by an investment fund 
managed by Deutsche Bank to a party in interest with respect to a plan 
having an interest in the investment fund, if--
    (1) The party in interest is an employer any of whose employees are 
covered by such plan or is a person who is a party in interest by 
virtue of a relationship to such an employer described in section V(c).
    (2) No commission or other fee is paid by the investment fund to 
Deutsche Bank or to the employer (as defined in section V(c)), in 
connection with the transaction,
    (3) Any unit of space leased to the party in interest by the 
investment fund is suitable (or adaptable without excessive cost) for 
use by different tenants;
    (4) The amount of space covered by the lease does not exceed 
fifteen (15) percent of the rentable space of the office building, 
integrated office park, or of the commercial center (if the lease does 
not pertain to office space),
    (5) In the case of a plan that is not an eligible individual 
account plan (as defined in section 407(d)(3) of the Act), immediately 
after the transaction is entered into, the aggregate fair market value 
of employer real property and employer securities held by investment 
funds of Deutsche Bank in which such plan has an interest does not 
exceed 10 percent (10%) of the fair market value of the assets of such 
plan held in those investment funds. In determining the aggregate fair 
market value of employer real property and employee securities as 
described herein, a plan shall be considered to own the same 
proportionate undivided interest in each asset of the investment fund 
or funds as its proportionate interest of the investment fund of funds 
as its proportionate interest in the total assets of the investment 
fund(s). For purposes of this requirement the term, ``employer real 
property,'' means real property leased to, the term, ``employer 
securities,'' means securities issued by, an employer any of whose 
employees are covered by such plan or a party in interest of the plan 
by reason of a relationship to the employer described in subparagraphs 
(E) or (G) of section 3(14) of the Act, and
    (6) The requirements of sections I(c) through (n) are satisfied 
with respect to the transaction.
III. Specific Lease exemption for Deutsche Bank
    Effective for the period from June 12, 2001, through July 27, 2009, 
the restrictions of sections 406(a)(1)(A) through (D) and 406(b)(1) and 
(2) of the Act and the taxes imposed by Code section 4975(a) and (b), 
by reason of Code section 4975(c)(1)(A) through (E), shall not apply to 
the leasing of office or commercial space by an investment fund managed 
by Deutsche Bank to Deutsche Bank, a person who is a party in interest 
of a plan by virtue of a relationship to Deutsche Bank described in 
subparagraphs (G), (H) or (I) of section 3(14) of the Act, or a person 
not eligible for the General Exception of Part I of this exemption by 
reason of section I(a), if--
    (a) The amount of space covered by the lease does not exceed the 
greater of 7500 square feet or one percent (1%) of the rentable space 
of the office building, integrated office park or of the commercial 
center in which the investment fund has the investment,
    (b) The unit of space subject to the lease is suitable (or 
adaptable without excessive cost) for use by different tenants,
    (c) At the time the transaction is entered into, and at the time of 
any subsequent renewal or modification thereof that requires the 
consent of Deutsche Bank, the terms of the transaction are not more 
favorable to the lessee than the terms generally available in arm's 
length transactions between unrelated parties, and
    (d) No commission or other fee is paid by the investment fund to 
Deutsche Bank, any person possessing the disqualifying powers described 
in section I(a), or any affiliate of such persons (as defined in 
section V(c)), in connection with transaction.
IV. Transactions Involving Places of Public Accommodation
    Effective for the period from June 12, 2001, through July 27, 2009, 
the restrictions of sections 406(a)(1)(A) through (D) and 406(b)(1) and 
(b)(2) of the Act and the taxes imposed by section 4975 (a) and (b) of 
the Code, by reason of section 4975(c)(1)(A) through (E) of the Code, 
shall not apply to the furnishing of services and facilities (and goods 
incidental thereto) by a place of public accommodation owned by an 
investment fund managed by Deutsche Bank to a party in interest with 
respect to a plan having an interest in the investment fund, if the 
services and facilities (and incidental goods) are furnished on a 
comparable basis to the general public.
V. Definitions
    For purposes of this exemption:
    (a) The term, ``Deutsche Bank'' means Deutsche Bank AG, provided 
that Deutsche Bank AG: (i) has the power to manage, acquire or dispose 
of assets of a plan affected by this exemption; (ii) has, as of the 
last day of its most recent fiscal year, equity capital (as defined in 
section V(k)) in excess of $10,000,000; (iii) has acknowledged in a 
written management agreement that it is a fiduciary with respect to 
each plan that has retained Deutsche Bank AG to manage the assets of 
the plan; and (iv) is subject to regulation by the German federal 
banking supervisory authority, known as the Bundesaufsichtsamt fuer das 
Kreditwesen (the BAK).
    (b) An ``investment fund'' includes individual trusts and common, 
collective or group trusts maintained by a bank, and any other account 
or fund to the extent that the disposition of its assets (whether or 
not in the custody of Deutsche Bank) is subject to the discretionary 
authority of Deutsche Bank.
    (c) For purposes of section I(a) section I(k), and Part II, an 
``affiliate'' of a person means--
    (1) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person,

[[Page 42075]]

    (2) Any corporation, partnership, trust, or unincorporated 
enterprise of which such person is an officer, director, 5 percent (5%) 
or more partner, or employee (but only if the employer of such employee 
is the plan sponsor), and
    (3) Any director of the person or any employee of the person who is 
a highly compensated employee, as defined in section 4975(e)(2)(H) of 
the Code, or who has direct or indirect authority, responsibility, or 
control regarding the custody, management, or disposition of plan 
assets. A named fiduciary (within the meaning of section 402(a)(2) of 
the Act) of a plan, and an employer any of whose employees are covered 
by such plan will also be considered affiliates with respect to each 
other for purposes of section I(a), if such employer or an affiliate of 
such employer has the authority, alone or shared with others, to 
appoint or terminate the named fiduciary or otherwise negotiate the 
terms of the named fiduciary's employment agreement.
    (d) For purposes of section I(g), an ``affiliate'' of a person 
means--
    (1) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person,
    (2) Any director of, relative of, or partner in, any such person,
    (3) Any corporation, partnership, trust, or unincorporated 
enterprise of which such person is an officer, director, or 5 percent 
(5%) or more partner, or owner, and
    (4) Any employee or officer of the person who--
    (A) Is a highly compensated employee (as described in section 
4975(e)(2)(H) of the Code) or officer (earning 10 percent (10%) or more 
of the yearly wages of such person), or
    (B) Has direct or indirect authority, responsibility, or control 
regarding the custody, management, or disposition of plan assets.
    (3) The term, ``control,'' means the power to exercise a 
controlling influence over the management or policies of a person other 
than an individual.
    (f) The term, ``party in interest,'' means a person described in 
section 3(14) of the Act and includes a ``disqualified person,'' as 
defined in section 4975(e)(2) of the Code.
    (g) The term, ``relative,'' means a relative as that term is 
defined in section 3(15) of the Act, or a brother, a sister, or a 
spouse of a brother or sister.
    (h) Deutsche Bank is ``related'' to a party in interest for 
purposes of section I(d) of this exemption, if the party in interest 
(or a person controlling, or controlled by, the party in interest) owns 
a 5 percent (5%) or more interest in Deutsche, Bank or if Deutsche Bank 
(or a person controlling, or controlled by, Deutsche Bank) owns a 5 
percent (5%) or more interest in the party in interest. For purposes of 
this definition:
    (1) The term, ``interest,'' means with respect to ownership of an 
entity--
    (A) The combined voting power of all classes of stock entitled to 
vote or the total value of the shares of all classes of stock of the 
entity if entity is a corporation,
    (B) The capital interest or the profits interest of the entity if 
the entity is a partnership; or
    (c) The beneficial interest of the entity if the entity is a trust 
or unincorporated enterprise; and
    (2) A person is considered to own an interest held in any capacity 
if the person has or shares the authority--
    (A) To exercise any voting rights, or to direct some other person 
to exercise the voting rights relating to such interest, or
    (B) To dispose or to direct the disposition of such interest.
    (i) The ``time'' as of which any transaction occurs is the date 
upon which the transaction is entered into. In addition, in the case of 
a transaction that is continuing, the transaction shall be deemed to 
occur until it is terminated. If any transaction is entered into on or 
after the effective date of this exemption, or a renewal that requires 
the consent of Deutsche Bank occurs on or after such effective date, 
and the requirements of this exemption are satisfied at the time the 
transaction is entered into or renewed, respectively, the requirements 
will continue to be satisfied thereafter with respect to the 
transaction. Notwithstanding the foregoing, this exemption shall cease 
to apply to a transaction exempt by virtue of Part I or Part II at such 
time as the percentage requirement contained in section I(e) is 
exceeded, unless no portion of such excess results from an increase in 
the assets transferred for discretionary management to Deutsche Bank. 
For this purpose, assets transferred do not include the reinvestment of 
earnings attributable to those plan assets already under the 
discretionary management of Deutsche Bank. Nothing in this paragraph 
shall be construed as exempting a transaction entered into by an 
investment fund which becomes a transaction described in section 406 of 
the Act or section 4975 of the code while the transaction is 
continuing, unless the conditions of this exemption were met either at 
the time the transaction was entered into or at the time the 
transaction would have become prohibited but for this exemption.
    (j) The term, ``goods'' includes all things which are movable or 
which are fixtures used by an investment fund but does not include 
securities, commodities, commodities futures, money, documents, 
instruments, accounts, chattel paper, contract rights, and any other 
property, tangible or intangible, which, under the relevant facts and 
circumstances, is held primarily for investment.
    (k) For purposes of section V(a) of this exemption, the term 
``equity capital'' means stock (common and preferred), surplus, 
undivided profits, contingency reserves and other capital reserves.

Temporary Nature of Exemption

    The Department has determined that the relief provided by this 
exemption will be effective retroactively but will be temporary in 
nature. In this regard, Deutsche Bank, AG, among others, on July 27, 
1999, obtained Prohibited Transaction Exemption 99-29 (PTE 99-29) \4\ 
which provided that it would not be precluded from functioning as a 
``qualified professional asset manager'' (a QPAM), pursuant to 
Prohibited Transaction Class Exemption 84-14 (PTCE 84-14) \5\, solely 
because of a failure to satisfy section I(g) of PTCE 84-14, as a result 
of a guilty plea filed by an affiliate on March 11, 1999, to three 
counts of a felony. The relief provided by PTE 99-29 was limited to a 
period of ten (10) years from July 27, 1999, the date of the 
publication of the final exemption for PTE 99-29 in the Federal 
Register. The Department in proposing the subject exemption does not 
intend that, if granted, the relief, as described herein, be available 
beyond the time remaining in the ten (10) year period established by 
PTE 99-29. Accordingly, the relief provided by this exemption, if 
granted, will be retroactive, effective as of June 12, 2001, the date 
when the application for exemption was filed with the Department, and 
will continue to be available through July 27, 2009, the date that is 
ten (10) years from the publication in the Federal Register of the 
final exemption for PTE 99-29.
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    \4\ 64 FR 40623, July 27, 1999
    \5\ 49 FR 9494 (March 13, 1984), as corrected, 50 FR 41430 
(October 10, 1985).
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    In the case of a transaction that continues beyond July 27, 2009, 
the transaction shall be deemed to occur until it is terminated. 
Although the relief provided by this exemption will not be available 
after July 27, 2009, for any new, or other transactions that require 
the consent of Deutsche Bank, as described herein, such relief will

[[Page 42076]]

continue to apply beyond July 27, 2009, for continuing transactions 
entered into prior to that date, provided such transactions satisfied 
the conditions of this exemption. In this regard, see section V(i) 
regarding continuing transactions.
    Should the Applicant wish to extend, beyond July 27, 2009, the 
relief provided by this exemption to new or additional transactions, or 
should the Applicant wish for any reason to amend the conditions of 
this exemption, the Applicant may submit another application for 
exemption. In this regard, the Department expects that prior to filing 
another exemption application seeking relief for new or additional 
transactions or to amend this exemption, the Applicant should be 
prepared to demonstrate compliance with the conditions of this 
exemption.

Written Comments

    In the Notice of Proposed Exemption (the Notice), the Department of 
Labor (the Department) invited all interested persons to submit written 
comments and requests for a hearing on the proposed exemption within 
forty-five (45) days of the date of the publication of the Notice in 
the Federal Register on March 29, 2002. All comments and requests for a 
hearing were due by May 13, 2002.
    During the comment period, the Department received comment letters 
from three (3) commentators. At the close of the comment period, the 
Department forwarded copies of these comment letters to the applicant 
and requested that the applicant respond in writing to the issues 
raised by the commentators. The concerns expressed by these 
commentators and the applicant's response thereto are summarized below.
    Two commentators provided information on felony charges to which 
Bankers Trust Company (BT) plead guilty in March 1999. One of these 
commentators also provided background information on the applicant's 
acquisition of BT and its subsidiaries in June 1999. This commentator 
indicated that the applicant was aware of BT's actions before the 
acquisition. Further, this commentator objected to ``substitution of 
fiduciary'' proceedings in the New York State Supreme Court which 
permitted Bankers Trust Company of New York to assume the fiduciary 
responsibilities of BT. Further, this commentator objected to BT's name 
being legally changed to Deutsche Bank Trust Company Americas without a 
hearing.
    Two commentators questioned the ability of the applicant, a foreign 
bank, to do business in the United States. In this regard, one of these 
commentators objected to funds being invested abroad or co-mingled with 
Deutsche Bank managed international funds.
    An advocacy group for beneficiaries and prospective creators of 
irrevocable trusts, opposed the requested exemption in light of past 
actions by BT. In this regard, the commentator sought new and better 
standards to protect the interests of BT's clients, especially those 
beneficiaries of personal trusts who lack the power to change corporate 
trustees, or who for other reasons are denied the freedom to choose a 
different trustee to manage the assets of such trusts.
    One commentator, a member of a family trust, complained of the 
applicant's refusal to settle alleged violations of New York State 
banking laws regarding trusts and estates filed by his family's 
attorneys against BT and affiliates of the applicant. This commentator 
sought to delay a final determination on the exemption and an 
opportunity to include the facts of his case in the public record at a 
hearing.
    In response to the comments received by the Department in 
connection with the requested exemption, the applicant points out that 
none of the three comments appears to have been written by a 
participant in a plan covered by the Act for which Deutsche Bank has 
sought relief. In addition, the substance of each of the letters 
appears to relate, in substantial part, to actions by Bankers Trust 
Company or to Bankers Trust Company's personal trust business, neither 
of which is the subject of the exemption request. Further, the 
applicant points out that in 1999, Bankers Trust Company was granted 
relief similar to that requested by Deutsche Bank, the applicant in 
this case. In response to the allegation raised by several commentators 
that Deutsche Bank is not a U.S. Bank, the applicant maintains that 
while this allegation is true, the application for exemption set forth 
in significant detail the rigorous regulatory structure under which 
Deutsche Bank operates, which in the applicant's view, justifies 
granting the exemption.
    With regard to those commentators who requested a hearing, the 
Department, after reviewing the concerns of such commentators, does not 
believe that there are material issues relating to the subject 
exemption that were raised by commentators during the comment period 
which would require the convening of a hearing. Accordingly, the 
Department has determined not to delay consideration of the final 
exemption by holding a hearing on application D--11002.
    However, the Department has determined to clarify section I(h) of 
the exemption. In this regard, Section I(h) contains safeguards 
designed to ensure that plans engaging in the subject transactions are 
protected. Specifically, section I(h) provides:
    (h) Prior to entering into a transaction covered by this exemption 
Deutsche Bank must agree in writing with a plan:
    (1) That the transaction is governed by the laws of the United 
States and that Deutsche Bank is a fiduciary of the plan pursuant to 
the provisions of the Act;
    (2) To submit to the jurisdiction of the United States district 
courts;
    (3) To appoint an agent for service of process in the United 
States; which may be an affiliate (the Process Agent); and
    (4) To consent to service of process on the Process Agent.
    In addition, in the application for exemption, Deutsche Bank 
represented that it would provide to any plan affected by the exemption 
an indemnity against any harm, damage, or injury arising from any 
fiduciary breach or other wrongdoing by Deutsche Bank Acting as asset 
manager for such plan. Further, Deutsche Bank agreed that enforcement 
by a plan of such indemnity would occur in the United States district 
courts. These representations were summarized in paragraph 10 of the 
Summary of Facts and Representations in the Notice, 67 FR 15236, column 
2, lines 47-59. The Department has determined to incorporate the 
content of Deutsche Bank's representations into the language of section 
I(h). Accordingly, the Department has modified section I(h), as set 
forth in this exemption, to add a new sub-paragraph (5) as follows:

    To indemnify and hold harmless each plan affected by this 
exemption in the United States against any harm, damage, or injury 
(including interest and attorney's fees) arising from any fiduciary 
breach or other wrongdoing of Deutsche Bank in its capacity as an 
asset manager for such plan.

    After giving full consideration to the entire record, including the 
written comments from the commentators and the applicant's response to 
such comments, the Department has decided to grant the exemption, as 
described and amended, above. In this regard, the comment letters and 
the applicant's response thereto submitted to the Department have been 
included as part of the public record of the exemption application. The 
complete application file, including all supplemental submissions 
received by the Department, is made available for public inspection in 
the Public Documents

[[Page 42077]]

Room of the Pension Welfare Benefits Administration, Room N-1513, U.S. 
Department of Labor, 200 Constitution Avenue NW., Washington, DC 20210.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the Notice published on March 29, 2002, at 61 FR 15230.

FOR FURTHER INFORMATION CONTACT: Ms. Angelena C. Le Blanc of the 
Department, telephone (202) 693-8551 (this is not a toll-free number).

Northwoods Bank of Minnesota Employee Stock Ownership Plan (the Plan) 
Located in Park Rapids, Minnesota

[Prohibited Transaction Exemption 2002-32; Exemption Application No. D-
11031]

Exemption

    The restrictions of sections 406(a), 406(b)(1) and (b)(2) of the 
Act and the sanctions resulting from the application of section 4975 of 
the Code, by reason of section 4975(c)(1) (A) through (E) of the Code, 
shall not apply to the proposed sale by individual accounts (the Stock 
Accounts) within the Plan of Certain shares of common stock (the 
Shares) of Dorset Bancshares, Incorporated (the Holding Company) to the 
Holding Company, a party in interest with respect to the Plan; provided 
that the following conditions are satisfied:
    (a) The proposed sale is a one-time cash transaction;
    (b) The Stock Accounts receive the greater of: (i) $32,000 per 
Share, as currently appraised by an independent, qualified appraiser; 
or (ii) the current fair market value for the Shares established at the 
time of the sale by an independent qualified appraiser; and
    (c) The Stock Accounts pay no commission or other expenses 
associated with 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 April 26, 2002 at 67 FR 
20838.
    For Further Information Contact: Ekaterian A. Uzlyan of the 
Department at (202) 693-8540. (This is not a toll-free number.)

Morgan Stanley Dean Witter & Co. Located in New York, New York

[Prohibited Transaction Exemption No. 2002-33; Exemption Application 
No. D-11048]

Exemption

Section I--Transactions
    The restrictions of section 406(a)(1)(A) through (D) 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, shall 
not apply, effective November 11, 2001, to:
    (a) The lending of securities by an employee benefit plan, 
including a commingled investment fund holding assets of such plan (the 
Plan(s)) with respect to which Morgan Stanley Dean Witter & Co. (Morgan 
Stanley) or any of its affiliates is a party in interest, under certain 
exclusive borrowing arrangements with:
    (1) Morgan Stanley;
    (2) Morgan Stanley & Co. Incorporated (MS&Co); MS Securities 
Services Inc. (MSSSI); and any other affiliate of Morgan Stanley that, 
now or in the future, is a U.S. registered broker-dealer or a 
government securities broker or dealer (collectively, the MS US Broker-
Dealers);
    (3) Morgan Stanley & Co. International Limited (MSIL), which is 
subject to regulation by the Financial Services Authority (FSA) in the 
United Kingdom; \6\
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    \6\ As of December 1, 2001, the FSA replaced the United Kingdom 
Securities and Futures Authority.
---------------------------------------------------------------------------

    (4) Morgan Stanley Japan Limited (MSJL), which is subject to 
regulation by the Ministry of Finance, Financial Services Agency, the 
Tokyo Stock Exchange, and the Osaka Stock Exchange in Japan; and
    (5) Any broker-dealer that, now or in the future, is an affiliate 
of Morgan Stanley which is subject to regulation by the FSA in the 
United Kingdom or which is subject to regulation by the Ministry of 
Finance, the Financial Services Agency, the Tokyo Stock Exchange, and 
the Osaka Stock Exchange in Japan; \7\ and
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    \7\ Each affiliated foreign broker-dealer is referred to herein, 
individually, as a Foreign Borrower or collectively, as Foreign 
Borrowers. The Foreign Borrowers together with Morgan Stanley and 
the MS US Broker-Dealers are referred to, herein, collectively as 
Borrowers or Applicants, and individually, as the Borrower.
---------------------------------------------------------------------------

    (b) The receipt of compensation by Morgan Stanley or any of its 
affiliates in connection with securities lending transactions; provided 
that for the transactions, set forth in section I(a) and (b), above, 
the conditions set forth in section II, below, are satisfied.
Section II--Conditions
    (a) For each Plan, neither the Borrower nor any affiliate has or 
exercises discretionary authority or control over such Plan's 
investment in the securities available for loan, nor do they render 
investment advice (within the meaning of 29 CFR 2510.3-21(c)) with 
respect to those assets.
    (b) The party in interest dealing with the Plan is a party in 
interest with respect to such Plan (including a fiduciary) solely by 
reason of providing services to such Plan, or solely by reason of a 
relationship to a service provider described in section 3(14)(F), (G), 
(H), or (I) of the Act.
    (c) The Borrower directly negotiates an exclusive borrowing 
agreement (the Borrowing Agreement) with the Plan fiduciary which is 
independent of the Borrower and its affiliates.
    (d) The terms of each loan of securities by the Plan to the 
Borrower are at least as favorable to such Plan as those of a 
comparable arm's-length transaction between unrelated parties, taking 
into account the exclusive arrangement.
    (e) In exchange for granting the Borrower an exclusive right to 
borrow certain securities, the Plan receives from such Borrower either 
(i) a flat fee (which may be equal to a percentage of the value of the 
total securities subject to the Borrowing Agreement from time to time), 
(ii) a periodic payment that is equal to a percentage of the value of 
the total balance of outstanding borrowed securities, or (iii) any 
combination of (i) and (ii) (collectively, the Exclusive Fee). If the 
Borrower pledges cash collateral, all the earnings generated by such 
cash collateral shall be returned to such Borrower; provided that such 
Borrower may, but shall not be obligated to, agree with the independent 
fiduciary of the Plan that a percentage of the earnings on the 
collateral be retained by such Plan, and/or the Plan may agree to pay 
the Borrower a rebate fee and retain any earnings on the collateral 
(the Shared Earnings Compensation). If the Borrower pledges non-cash 
collateral, all earnings on the non-cash collateral shall be returned 
to such Borrower; provided that the Borrower may, but shall not be 
obligated to, agree to pay the Plan a lending fee (the Lending Fee, and 
together with the Shared Earnings Compensation, is referred to as the 
Transaction Lending Fee). The Transaction Lending Fee, if any, shall be 
either in addition to the Exclusive Fee or an offset against the 
Exclusive Fee. The Exclusive Fee and the Transaction Lending Fee may be 
determined in advance or pursuant to an objective

[[Page 42078]]

formula and may be different for different securities or different 
groups of securities subject to the Borrowing Agreement. Any change in 
the Exclusive Fee or the Transaction Lending Fee that the Borrower pays 
to the Plan with respect to any securities loan requires the prior 
written consent of the independent fiduciary of such Plan, except that 
consent is presumed where the Exclusive Fee or the Transaction Lending 
Fee changes pursuant to an objective formula. Where the Exclusive Fee 
or the Transaction Lending Fee changes pursuant to an objective 
formula, the independent fiduciary of the Plan must be notified at 
least 24 hours in advance of such change and such independent Plan 
fiduciary must not object in writing to such change, prior to the 
effective time of such change.
    (f) The Borrower may, but shall not be required to, agree to 
maintain a minimum balance of borrowed securities subject to the 
Borrowing Agreement. Such minimum balance may be a fixed U.S. dollar 
amount, a flat percentage or other percentage determined pursuant to an 
objective formula.
    (g) By the close of business on or before the day on which the 
loaned securities are delivered to the Borrower, the Plan receives from 
such Borrower (by physical delivery, book entry in a securities 
depository located in the United States, wire transfer, or similar 
means) collateral consisting of U.S. currency, securities issued or 
guaranteed by the U.S. Government or its agencies or instrumentalities, 
irrevocable bank letters of credit issued by a U.S. bank, other than 
the Borrower or any affiliate thereof, or any combination thereof, or 
other collateral permitted under Prohibited Transaction exemption 81-6 
(as amended or superseded) (PTE 81-6).\8\ Such collateral will be 
deposited and maintained in an account which is separate from the 
Borrower's accounts and will be maintained with an institution other 
than the Borrower. For this purpose, the collateral may be held on 
behalf of the Plan by an affiliate of the Borrower that is the trustee 
or custodian of the Plan.
---------------------------------------------------------------------------

    \8\ 46 FR 7527, Jan. 23, 1981, as amended at 52 FR 18754, May 
19, 1987). PTE 81-6 provides an exemption under certain conditions 
from section 406(a)(1)(A) through (D) of the Act and the 
corresponding provisions of section 4975(c) of the Code for the 
lending of securities that are assets of an employee benefit plan to 
a U.S. broker-dealer registered under the Securities Exchange Act of 
1934 (the 1934 Act) (or exempted from registration under the 1934 
Act as a dealer in exempt Government securities, as defined therein) 
or to a U.S. bank, that is a party in interest with respect to such 
plan.
---------------------------------------------------------------------------

    (h) The market value (or in the case of a letter of credit, the 
stated amount) of the collateral initially equals at least 102 percent 
(102%) of the market value of the loaned securities on the close of 
business on the day preceding the day of the loan and, if the market 
value of the collateral at any time falls below 100 percent (100%) (or 
such higher percentage as the Borrower and the independent fiduciary of 
the Plan may agree upon) of the market value of the loaned securities, 
the Borrower delivers additional collateral on the following day to 
bring the level of the collateral back to at least 102 percent (102%). 
The level of the collateral is monitored daily by the Plan or its 
designee, which may be Morgan Stanley or any of its affiliates which 
provides custodial or trustee services in respect of the securities 
covered by the Borrowing Agreement for the Plan. The applicable 
Borrowing Agreement shall give the Plan a continuing security interest 
in, title to, or the rights of a secured creditor with respect to the 
collateral and a lien on the collateral.
    (i) Before entering into a Borrowing agreement, the Borrower 
furnishes to the Plan the most recent publicly available audited and 
unaudited statements of its financial condition, as well as any 
publicly available information which it believes is necessary for the 
independent fiduciary to determine whether such Plan should enter into 
to renew the Borrowing Agreement.
    (j) The Borrowing Agreement contains a representation by the 
Borrower that, as of each time it borrows securities, there has been no 
material adverse change in its financial condition since the date of 
the most recently furnished statements of financial condition.
    (k) The Plan receives the equivalent of all distributions made 
during the loan period, including, but not limited to, cash dividends, 
interest payments, shares of stock as a result of stock splits, and 
rights to purchase additional securities, that such Plan would have 
received (net of tax withholdings) \9\ had it remained the record owner 
of the securities.
---------------------------------------------------------------------------

    \9\ The Department notes the Applicants' representation that 
dividends and other distributions on foreign securities payable to a 
lending Plan are subject to foreign tax withholdings and that the 
Borrower will always put the Plan back in at least as good a 
position as it would have been had it not loaned securities.
---------------------------------------------------------------------------

    (l) The Borrowing Agreement and/or any securities loan outstanding 
may be terminated by either party at any time without penalty (except 
for, if the Plan has terminated its Borrowing Agreement, the return to 
the Borrower of a pro-rata portion of the Exclusive Fee paid by the 
Borrower to the Plan) whereupon the Borrower delivers 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 the lesser of five (5) 
business days of written notice of termination or the customary 
settlement period for such securities.
    (m) In the event that the Borrower fails to return securities in 
accordance with the Borrowing Agreement, the Plan will have the right 
under the Borrowing Agreement to purchase securities identical to the 
borrowed securities and apply the collateral to payment of the purchase 
price. If the collateral is insufficient to satisfy the Borrower's 
obligation to return the Plan's securities, the Borrower will indemnify 
the Plan in the U.S. with respect to the difference between the 
replacement cost of securities and the market value of the collateral 
on the date the loan is declared in default, together with expenses 
incurred by the Plan plus applicable interest at a reasonable rate, 
including reasonable attorneys' fees incurred by the Plan for legal 
action arising out of default on the loans, or failure by the Borrower 
to properly indemnify the Plan.
    (n) Except as otherwise provided herein, all procedures regarding 
the securities lending activities, at a minimum, conform to the 
applicable provisions of PTE 81-6 (as amended or superseded), as well 
as to applicable securities laws of the United States, the United 
Kingdom and/or Japan, as appropriate.
    (o) Only Plans with total assets having an aggregate market value 
of at least $50 million are permitted to lend securities to the 
Borrowers; provided, however, that--
    (1) In the case of two or more Plans which are maintained by the 
same employer, controlled group of corporations or employee 
organization (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 the Borrowers, the foregoing $50 million requirement 
shall be 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

[[Page 42079]]

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 plan investment in the commingled entity, which are in 
excess of $100 million.
    (2) In the case of two or more Plans which are not maintained by 
the same employer, controlled group of corporations or employee 
organization (the Unrelated 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 the 
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--
    (i) Has full investment responsibility with respect to plan assets 
invested therein; and
    (ii) 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 
addition, none of the entities described above are formed for the sole 
purpose of making loans of securities.)
    (p) Prior to any Plan's approval of the lending of its securities 
to the Borrowers, a copy of the notice of proposed exemption, and a 
copy of the final exemption are provided to the Plan, and the Borrower 
informs the independent fiduciary that the Borrower is not acting as a 
fiduciary of the Plan in connection with its borrowing securities from 
the Plan.\10\
---------------------------------------------------------------------------

    \10\ The Department notes the Applicants' representation that, 
under the proposed exclusive borrowing arrangements, neither the 
Borrower nor any of its affiliates will perform the essential 
functions of a securities lending agent, i.e., the Applicants will 
not be the fiduciary who negotiates the terms of the Borrowing 
Agreement on behalf of the Plan, the fiduciary who identifies the 
appropriate borrowers of the securities or the fiduciary who decides 
to lend securities pursuant to an exclusive arrangement. However, 
the Applicants or their affiliates may monitor the level of 
collateral and the value of the loaned securities.
---------------------------------------------------------------------------

    (q) The independent fiduciary of the Plan receives monthly reports 
with respect to the securities lending transactions, including but not 
limited to the information set forth in this paragraph, so that an 
independent Plan fiduciary may monitor such transactions with the 
Borrowers. The monthly report will list for a specified period all 
outstanding or closed securities lending transactions. The report will 
identify for each open loan position, the securities involved, the 
value of the security for collateralization purposes, the current value 
of the collateral, the rebate or premium (if applicable) at which the 
security is loaned, and the number of days the security has been on 
loan. At the request of the Plan, such a report will be provided on a 
daily or weekly basis, rather than a monthly basis. Also, upon request 
of the Plan, the Borrower will provide the Plan with daily 
confirmations of securities lending transactions.
    (r) In addition to the above conditions, all loans involving 
Foreign Borrowers must satisfy the following supplemental requirements:
    (1) Such Foreign Borrower is a registered broker-dealer subject to 
regulation by the FSA in the United Kingdom or is subject to regulation 
in Japan by the Ministry of Finance, the Financial Services Agency, the 
Tokyo Stock Exchange, and the Osaka Stock Exchange;
    (2) Such Foreign Borrower is in compliance with all applicable 
provisions of Rule 15a-6 (17 CFR 240.15a-6) under the 1934 Act which 
provides foreign broker-dealers a limited exception from United States 
registration requirements;
    (3) All collateral is maintained in United States dollars or in 
U.S. dollar-dominated securities or letters of credit or such other 
collateral as may be permitted under PTE 81-6 (as amended or 
superseded) from time to time;
    (4) All collateral is held in the United States and the situs of 
the Borrowing Agreement 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 C.F.R. 2550.404(b)-1; and
    (5) Prior to entering into a transaction involving a Foreign 
Borrower, the Foreign Borrower must:
    (i) Agree to submit to the jurisdiction of the United States;
    (ii) Agree to appoint an agent for service of process in the United 
States, which may be an affiliate (the Process Agent);
    (iii) Consent to the service of process on the Process Agent; and
    (iv) Agree that enforcement by a Plan of the indemnity provided by 
the Foreign Borrower will occur in the United States courts.
    (s) The Borrower maintains, or causes to be maintained, within the 
United States for a period of six (6) years from the date of each 
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 (t)(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 the circumstances beyond the control of Morgan 
Stanley and/or its affiliates, the records are lost or destroyed prior 
to the end of the six (6) year period; and
    (2) No party in interest other than the Borrower 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 are not maintained, or are not available for examination as 
required below by paragraph (t)(1).
    (t)(1) Except as provided in subparagraph (t)(2) of this paragraph 
and notwithstanding any provision of subsections (a)(2) and (b) of 
section 504 of the Act, the records referred to the paragraph (s) are 
unconditionally available at their customary location for examination 
during normal business hours by--
    (i) Any duly authorized employee or representative of the 
Department, the Interests Revenue Service or the Securities and 
Exchange Commission (SEC);
    (ii) Any fiduciary of a participating Plan or any duly authorized 
representative of such fiduciary;
    (iii) Any contributing employer to any participating Plan or any 
duly authorized employee representative of such employee; and
    (iv) Any participant or beneficiary of any participating Plan, or 
any duly authorized representative of such participant or beneficiary.
    (2) None of the persons described above in subparagraphs 
(t)(1)(ii)-(t)(1)(iv) are authorized in examine to trade secrets of 
Morgan Stanley or its affiliates or commercial or financial information 
which is privileged or confidential.
Section III--Definitions
    (a) An ``affiliate'' of a person means:
    (i) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person. (For purposes of this paragraph, the term

[[Page 42080]]

``control'' means the power to exercise a controlling influence over 
the management or policies of a person other than an individual);
    (ii) Any officer, director, employee or relative (as defined in 
section 3(15) of the Act) of any such other person or any partner in 
any such person; and
    (iii) Any corporation or partnership of which any person is an 
officer, director of employee, or in which such person is a partner.
    (b) The terms, ``Foreign Borrower'' or ``Foreign Borrowers,'' 
includes MSIL and any broker-dealer that, now or in the future, is an 
affiliate of Morgan Stanley which is subject to regulation by the FSA 
in the United Kingdom, and MSJL, and any broker-dealer that, now or in 
the future, is an affiliate of Morgan Stanley which is subject to 
regulation by the Ministry of Finance, Financial Services Agency, the 
Tokyo Stock Exchange, and the Osaka Stock Exchange in Japan.
    (c) The term ``Borrower,'' includes Morgan Stanley, MS&Co, MSSSI, 
the Foreign Borrowers, and any other affiliate of Morgan Stanley that, 
now or in the future, is a U.S. registered broker-dealer or a 
government securities broker or dealer.
    Effective Date: This exemption is effective as of November 11, 
2001, the date of the application was received by the Department.

Written Comments

    In the Notice of Proposed Exemption (the Notice), the Department of 
Labor (the Department) invited all interested persons to submit written 
comments and requests for a hearing on the proposed exemption within 
forty-five (45) days of the date of the publication of the Notice in 
the Federal Register on March 29, 2002. All comments and requests for a 
hearing were due by May 13, 2002.
    During the comment period, the Department received no requests for 
a hearing. However, the Department did receive a comment letter from 
the Applicants. In this regard, in a letter dated May 13, 2002, the 
Applicants requested certain amendments to the operant language of the 
exemption and the representations which were set forth in the Summary 
of Facts and Representations (the SFR) published in the Notice.
    A discussion of the Applicants' comments and the Department's 
responses, thereto, are set forth in the numbered paragraphs below. In 
the language below, words that have been stricken from the text of 
Notice appear in the closed brackets, and additions to the text of the 
Notice appear in bold.
    1. The Applicants request that the effective date of the exemption, 
referred to in the first paragraph of section I of the Notice be 
changed to November 11, 2001, in order to conform to the date set forth 
at the end of section III of the Notice. In this regard, the Applicants 
request the language of section I should read as follows:

    The restrictions of section 406(a)(1)(A) through (D) 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, shall not apply, effective November 11 [13], 2001, to:

    The Department concurs and has amended the language, as set forth 
in the Notice at 67 FR at 15241, column 1, line 20.
    2. The Applicants request that the second sentence of section II(e) 
be clarified such that the independent fiduciary can agree that the 
Plan retain a percentage of the earnings and/or pay a rebate fee and 
retain any earnings. In this regard the Applicants propose that the 
second sentence in section II(e) should read as follows:

    If the Borrower pledges cash collateral, all the earnings 
generated by such cash collateral shall be returned to such 
Borrower; provided that such Borrower may, but shall not be 
obligated to, agree with the independent fiduciary of the Plan that 
a percentage of the earnings on the collateral [may] be retained by 
such Plan, and/or the Plan may agree to pay the Borrower a rebate 
fee and retain [the] any earnings on the collateral (the Shared 
Earnings Compensation).

    The Department concurs and has amended the language, as set forth 
in the Notice at 67 FR at 15241, column 3, lines 23-34.
    3. The Applicants requests that the second paragraph of 
Representation 2 of the SFR as published in the Notice be modified to 
conform to the comparable language contained in the second paragraph of 
Representation 2 of the SFR of the proposed exemption for Barclays Bank 
PLC, which was published in the Federal Register on June 28, 2001\11\ 
and later published in final form on October 22, 2001 as Prohibited 
Transaction Exemption 2001-41.\12\ In this regard, the Applicants 
propose that the second paragraph of Representation 2, as set forth in 
the Notice at 67 FR at 15244, column 2, lines 13 through 25, should 
have read as follows:

    \11\ 66 FR 34475.
    \12\ 66 FR 53449.
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    The Applicants wish to enter into exclusive borrowing 
arrangements with Plans for which Morgan Stanley or any affiliate of 
Morgan Stanley may be [an investment manager] a party in interest 
[for the assets of such Plans that are unrelated to the assets 
involved in the transaction]. For example, Morgan Stanley or an 
affiliate may be investment manager for assets of a Plan that are 
unrelated to the assets involved in the transaction. Morgan Stanley 
or any of its affiliates may provide securities custodial services, 
trustee services, clearing and/or reporting functions in connection 
with securities lending transactions, or other services to such 
Plans.

    The Department concurs.
    After giving full consideration to the entire record, including the 
written comments from the Applicants, the Department has decided to 
grant the exemption, as described, amended, clarified, and concurred in 
above. In this regard, the comment letter submitted by the Applicants 
to the Department has been included as part of the public record of the 
exemption application. The complete application file, including all 
supplemental submissions received by the Department, is made available 
for public inspection in the Public Documents Room of the Pension 
Welfare Benefits Administration, Room N-1513, U.S. Department of Labor, 
200 Constitution Avenue, NW., Washington, DC 20210.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the Notice published on March 29, 2002, at 67 FR 15241.
    For Further Information Contact: Angelena C. Le Blanc of the 
Department, telephone (202) 693-8540. (This is not a toll-free number.)

Louisville Electrical Joint Apprentice and Training Committee Trust 
Fund (the Fund) Located in Louisville, Kentucky

[Prohibited Transaction Exemption No. 2002-34; Exemption Application 
No: L-10981]

Exemption

    The restrictions of sections 406(a)(1)(A) through (D), 406(b)(1), 
and 406(b)(2) of the Act shall not apply to the purchase of the Fund of 
an interest in a condominium regime (the Condo) from the International 
Brotherhood of Electrical Workers (IBEW), Local 369 Building 
Corporation (the Building Corporation), a party in interest with 
respect to the Fund; provided that, at the time the transaction is 
entered into, the following conditions are satisfied:
    (1) The purchase of the Fund of the interest in the Condo is a one-
time transaction for cash;
    (2) The Board of Trustees (the Trustees), acting as named fiduciary 
on behalf of the Fund, prior to entering the

[[Page 42081]]

transaction, determine that the transaction is feasible, in the 
interest of the Fund, and protective of the participants and 
beneficiaries of the Fund;
    (3) An independent qualified fiduciary (the I/F) after analyzing 
the relevant terms of the transaction advises the Trustees that 
proceeding with the transaction would be in the interest in the Fund;
    (4) The purchase price paid by the Fund for the interest in the 
Condo is the lesser of: (a) the total amount actually expended by the 
Building Corporation in the construction of the north wing unit (the 
Unit) of the condominium building (the Condo Building), as documented 
in writing and approved by the I/F, plus the value of that portion of 
the land underlying such Unit, which is equivalent to the percentage of 
the square footage of such Unit to the total square footage in the 
Condo Building, plus the value of the same portion of any other common 
elements of the Condo; or (b) the fair market value of the Fund's 
interest in the Condo, as determined by an independent, qualified 
appraiser, as of the date of the transaction, provided that such value 
does not exceed $2,655,000, the fair market value of the Fund's 
interest in the Condo, as determined by such independent, qualified 
appraiser, as of December 11, 2001;
    (5) The terms of the transaction are no less favorable to the Fund 
than terms negotiated under similar circumstances at arm's length with 
unrelated third parties;
    (6) The Fund does not purchase the interest in the Condo or take 
possession of the Unit in the Condo Building until such Unit is 
substantially completed;
    (7) The Fund has not been, is not, and will not be a party to the 
construction financing loan or the permanent financing loan between the 
IBEW, Local Union 369 (the Local) and the Bank of Louisville (the 
Bank);
    (8) The Fund does not pay any commissions, sales fees, or other 
similar payments to any party as a result of the subject transaction, 
and the costs incurred in connection with the purchase by the Fund at 
closing does not include, directly or indirectly, interest incurred by 
the Building Corporation on the construction financing loan or the 
permanent financing loan from the Bank;
    (9) Under the terms of the loan agreement between the Bank and the 
Fund, the Bank in the event of a default by the Fund has recourse only 
against the interest in the Condo and not against the general assets of 
the Fund; and
    (10) Under the terms of the loan agreement between the Bank and the 
Building Corporation, in the event of default by the Building 
Corporation, the Bank has no recourse against any assets of the Fund.
    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 April 26, 2002, at 67 FR 20839.
    Further Information Contact: Angelena C. Le Blanc of the 
Department, telephone (202) 693-8540 (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) This exemption is 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 this exemption is subject to the express 
condition that the material facts and representations contained in the 
application accurately describes all material terms of the transaction 
which is the subject of the exemption.

    Signed at Washington, DC, this 17th day of June, 2002.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 02-15625 Filed 6-19-02; 8:45 am]
BILLING CODE 4510-29-M