[Federal Register Volume 62, Number 87 (Tuesday, May 6, 1997)]
[Notices]
[Pages 24677-24679]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11740]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22647; 813-162]
Merrill Lynch KECALP L.P. 1997 and KECALP Inc.; Notice of
Application
April 30, 1997.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANTS: Merrill Lynch KECALP L.P. 1997 (the ``1997 Partnership'')
and KECALP Inc. (the ``General Partner'').
RELEVANT ACT SECTION: Order requested under section 6(b).
SUMMARY OF APPLICATION: Applicants request an order to amend a prior
order \1\ (the ``1982 Order''), as previously amended by a subsequent
order \2\ (the ``1991 Order'' and, together with the 1982 Order, the
``Order''), to permit Merrill Lynch & Co., Inc. and its affiliates
(``ML & Co.'') to acquire limited partnership interests in the 1997
Partnership and in any similar partnership commencing operations in the
future (collectively, the ``Partnerships''). Each Partnership will be
an employees' securities company within the meaning of section 2(a)(13)
of the Act.
\1\ Merrill Lynch KECALP Ventures Limited Partnership 1982,
KECALP Inc., Investment Company Act Release Nos. 12290 (Mar. 11,
1982) (notice) and 12363 (Apr. 8, 1982) (order).
\2\ Merrill Lynch KECALP Growth Investments Limited Partnership
1983, et. al., Investment Company Act Release Nos. 18081 (Apr. 18,
1991) (notice) and 18137 (May 7, 1991) (order).
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FILING DATES: The application was filed on December 3, 1996, and
amended on April 30, 1997.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicants with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on May 27, 1997,
and should be accompanied by proof of service on applicants in the form
of an affidavit or, for lawyers, a certificate of service. Hearing
requests should state the nature of the writer's interest, the reason
for the request, and the issues contested. Persons who wish to be
notified of a hearing may request notification by writing to the SEC's
Secretary.
ADDRESSES: Secretary, SEC, 450 5th Street, NW, Washington, DC 20549.
Applicants, South Tower, World Financial Center, 225 Liberty Street,
New York, NY 10080-6123.
FOR FURTHER INFORMATION CONTACT:
Suzanne Krudys, Senior Attorney, at (202) 942-0641, or Mary Kay Frech,
Branch Chief, (202) 942-0564 (Office of Investment Company Regulation,
Division of Investment Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
SEC's Public Reference Branch.
Applicants' Representations
1. The 1997 Partnership is a Delaware limited partnership
registered under the Act as a non-diversified, closed-end management
investment company. The
[[Page 24678]]
1997 Partnership is an ``employees securities company'' within the
meaning of section 2(a)(13) of the Act, and will operate pursuant to
the terms of the Order. In accordance with the terms of the Order,
limited partnership interests in the 1997 Partnership (``Units'') will
be offered to certain employees of ML & Co. and its subsidiaries and to
non-employee directors of ML & Co. and, to the extent the relief
requested herein is granted, to ML & Co.
2. The General Partner is an indirect, wholly-owned subsidiary of
ML & Co. The General Partner is registered as an investment adviser
under the Investment Advisers Act of 1940. The General Partner was
formed to manage each of the partnerships operating in accordance with
the terms of the Order (together with the Partnerships, the ``KECALP
Partnerships'') and has the authority to make all decisions regarding
the acquisition, management, and disposition of the KECALP
Partnerships' investments. All investments and dispositions of
investments by the KECALP Partnerships are approved by the board of
directors of the General Partner.
3. The Order limits the classes of potential investors eligible for
participation in the KECALP Partnerships to directors of ML & Co. and
key officers and other employees of ML & Co. and its subsidiaries. Key
officers and other employees must have earned a gross income from ML &
Co. during the most recent calendar year which exceeds the minimum
amount specified by the General Partner for each Partnership. The 1991
Order amended the 1982 Order to include conditions relating to the
eligibility requirements of investors in any KECALP Partnership.
4. Applicants request an amendment to the Order to permit Units to
be acquired by ML & Co. in connection with certain deferred
compensation plans offered by ML & Co. to select employees satisfying
significant eligibility requirements that will, in all cases, exceed
the standards for participation directly in the KECALP program.
Pursuant to the deferred compensation plans, eligible employees of ML &
Co. and its subsidiaries would be permitted to defer compensation
earned during a particular year and to elect to receive a return on
such deferred compensation determined by reference to the performance
of one of several investment options, including the performance of a
Partnership. ML & Co. would acquire Units having a purchase price
approximately equivalent to the aggregate amount of compensation
deferred under its plan for which the Partnership option was selected.
ML & Co. would acquire such Units at the closing of the offering of a
Partnership for a purchase price per Unit equal to the price paid by
all other limited partners participating in the Partnership's offering.
Participants in the plan would not acquire any ownership interest in
the Units purchased by ML & Co. The acquisition of Units by ML & Co.
would be made solely to mirror the deferred compensation elections of
its employees who have elected to receive a return determined by
reference to the performance of a Partnership, and not for ML & Co.'s
own proprietary investment. ML & Co. will agree to vote its interests
in a Partnership in identical proportions as the other limited partners
in respect of any matter submitted for a vote of limited partners.
Applicants' Legal Analysis
1. Applicants request an exemption under section 6(b) of the Act to
amend the Order to permit ML & Co. to acquire Units in the Partnerships
in connection with certain deferred compensation programs offered by
Merrill Lynch to select highly compensated employees upon the terms set
forth in the applications.
2. Section 2(a)(13) of the Act defines ``employees' securities
company'' as any investment company or similar issuer all of the
outstanding securities of which (other than short-term paper) are
beneficially owned (a) By the employees or persons on retainer of a
single employer or of two or more employers each of which is an
affiliated company of the other, (b) by former employees of such
employer or employers, (c) by members of the immediate family of such
employees, persons on retainer, or former employees, (d) by any two or
more of the foregoing classes of persons, or (e) by such employer or
employers together with any one or more of the foregoing classes of
persons. Section 6(b) of the Act provides that the SEC may, upon
application, exempt an employees' securities company from provisions of
the Act if, and to the extent that, the exemption is consistent with
the protection of investors. Applicants are not seeking relief from any
additional provisions of the Act.
3. Applicants believe the requested relief is consistent with the
protection of investors and with the general purposes of the Act.
Applicants state that the proposed additional investor is within the
class of investors contemplated by section 2(a)(13). Applicants believe
that ML & Co. has the community of interest with the existing classes
of eligible participants for the KECALP Partnerships as contemplated
for employees' securities companies by the Act.
4. ML & Co. has developed the KECALP program as a series of
investment vehicles to generate and maintain goodwill by offering its
directors, officers and key employees the opportunity to participate in
investments that might otherwise by unavailable to them. Applicants
submit that ML & Co.'s participation as a limited partner in a
Partnership will only serve to further benefit the other limited
partners. ML & Co.'s investment may significantly increase a
Partnership's assets and thus provide economies for such Partnerships'
expenses. In order to ensure that ML & Co.'s participation does not
impair the influence that limited partners of a Partnership would
otherwise enjoy, ML & Co. will vote its interest in a Partnership in
identical proportions as the other limited partners in respect of any
matter submitted for a vote of limited partners. In addition, the
acquisition by ML & Co. of an interest in the Partnership will be
disclosed to prospective limited partners in the prospectuses relating
to the Partnerships' offerings.
5. Applicants believe that the terms of the relief requested are
consistent with the protection of investors and with the general
purposes of the Act. Except as amended herein, applicants will remain
subject to the conditions of all prior orders of the SEC applicable to
applicants.
Applicants' Conditions
Applicants agree that any order of the SEC granting the requested
relief will be subject to the following additional conditions:
1. In connection with Section 17(d) transactions, the General
Partner and any general partner of any subsequent KECALP Partnerships
will adopt, and periodically review and update, procedures designed to
ensure that reasonable inquiry is made, prior to the consummation of
any such transaction, with respect to the possible involvement in the
transaction of any affiliated person of the KECALP Partnership, or any
affiliated person of such a person.
2. Each KECALP Partnership and its general partner will maintain
and preserve, for the life of the Partnership and at least two years
thereafter, such accounts, books, and other documents as constitute the
record forming the basis for the audited financial statements that are
to be provided to the limited partners, and each annual report of the
KECALP Partnership required to be sent to the limited partners, and
[[Page 24679]]
agree that all such records will be subject to examination by the
Commission and its staff.
3. The General Partner and any general partner of any subsequent
KECALP Partnership will send to each limited partner of such
Partnership who had an interest in any capital account of such
Partnership, at any time during the fiscal year then ended, Partnership
financial statements audited by the KECALP Partnership's independent
accountants. At the end of each fiscal year, the General Partner and
the general partner of each subsequent KECALP partnership will make a
valuation or have a valuation made of all of the assets of such
Partnership as of such fiscal year end in a manner consistent with
customary practice with respect to the valuation of assets of the kind
held by the KECALP Partnership. In addition within 90 days after the
end of each fiscal year of each KECALP Partnership or as soon as
practicable thereafter, the general partner of such KECALP Partnership
will send a report to each person who was a partner at any time during
the fiscal year, then ended, setting forth such tax information as
shall be necessary for the preparation by the partner of his or its
Federal and state income tax returns and a report of investment
activities of such Partnership during the year.
4. If purchases or sales are made by a KECALP Partnership from or
to an entity affiliated with the KECALP Partnership by reason of a 5%
or more investment in such entity by any director, officer or employee
of ML & Co. and its subsidiaries, by any director, officer of the
general partner of that KACALP Partnership, such individual will not
participate in that general partner's determination of whether or not
to effect such purchase or sale.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-11740 Filed 5-5-97; 8:45 am]
BILLING CODE 8010-01-M
