Federal Register / Vol. 60, No. 45 / Wednesday, March 8, 1995 / Notices 12807

1The ‘‘General Partner’’ refers to applicant or

another wholly-owned subsidiary of ML&Co. in its

role as the general partner of a Partnership or the

functional equivalent with respect to any

Partnership organized as a business trust or limited

liability company.

2. Pursuant to section 17(b), the SEC

may exempt a proposed transaction

from section 17(a) if evidence

establishes that: (a) The terms of the

proposed transaction are reasonable and

fair and do not involve overreaching; (b)

the proposed transaction is consistent

with the policy of each registered

investment company concerned; and (c)

the proposed transaction is consistent

with the general purposes of the Act.

Under section 6(c), the SEC may exempt

classes of transactions if and to the

extent that such exemption is necessary

or appropriate in the public interest and

consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

the Act. Applicants believe that the

proposed transactions satisfy the

requirements of sections 6(c) and 17(b).

3. Rule 17a–7 under the Act permits

registered investment companies that

might be deemed affiliates solely by

reason of common investment advisers,

directors, and/or officers, to purchase

securities from or sell securities to one

another at an independently determined

price, provided certain conditions are

met. Paragraph (e) of the rule requires

an investment company’s board of

directors to adopt and monitor

procedures for these transactions to

assure compliance with the rule. A unit

investment trust does not have a board

of directors and, therefore, may not rely

on the rule. Applicants represent that

they will comply with all of the

provisions of rule 17a–7, other than

paragraph (e).

4. Applicants represent that purchases

and sales between Series will be

consistent with the policy of each

Series, as only securities that would

otherwise be bought and sold on the

open market pursuant to the policy of

each Series will be involved in the

proposed transactions. Applicants

further believe that the current practice

of buying and selling on the open

market leads to unnecessary brokerage

fees on sales of securities and is

therefore contrary not only to the

policies of the Series but to the general

purposes of the Act.

Applicants’ Conditions

Applicants agree that the order

granting the requested relief shall be

subject to the following conditions:

1. Each sale of Qualified Securities by

a Rollover Series to a New Series will

be effected at the closing price of the

securities sold on a Qualified Exchange

on the sale date, without any brokerage

charges or other remuneration except

customary transfer fees, if any.

2. The nature and conditions of such

transactions will be fully disclosed to

investors in the appropriate prospectus

of each future Rollover Series and New

Series.

3. The trustee of each Rollover Series

and New Series will (a) review the

procedures relating to the sale of

securities from a Rollover Series and the

purchase of securities for deposit in a

New Series and (b) make such changes

to the procedures as the trustee deems

necessary that are reasonably designed

to comply with paragraphs (a) through

(d) of rule 17a–7.

4. A written copy of these procedures

and a written record of each transaction

pursuant to this order will be

maintained as provided in rule 17a–7(f).

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–5582 Filed 3–7–95; 8:45 am]

BILLING CODE 8010–01–M

[Investment Company Act Release No.

20937; 813–136]

EIP Inc.; Notice of Application

March 2, 1995.

AGENCY: Securities and Exchange

Commission (the ‘‘SEC’’).

ACTION: Notice of Application for

Exemption under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANT: EIP Inc.

RELEVANT ACT SECTIONS: Applicant seeks

a conditional order under sections 6(b)

and 6(e) granting an exemption from all

the provisions of the Act, and the rules

thereunder, except section 9, certain

provisions of section 17 and the related

rules thereunder, and sections 36

through 53, and the rules thereunder.

SUMMARY OF APPLICATION: Applicant

seeks to form limited partnerships (the

‘‘Partnerships’’) of which it will be the

general partner and which will be

employees’ securities companies within

the meaning of section 2(a)(13) of the

Act, and to engage in certain affiliated

and joint transactions with the

Partnerships.

FILING DATES: The application was filed

on September 1, 1994, and amended on

November 1, 1994, January 13, 1995,

and February 15, 1995.

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 applicant with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

March 27, 1995, and should be

accompanied by proof of service on

applicant, 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 Fifth

Street, NW., Washington, DC 20549.

Applicant, South Tower, World

Financial Center, 225 Liberty Street,

New York, New York 10080–6123.

FOR FURTHER INFORMATION CONTACT:

James J. Dwyer, Staff Attorney, at (202)

942–0581, or C. David Messman, Branch

Chief, at (202) 942–0564 (Division of

Investment Management, Office of

Investment Company Regulation).

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.

Applicant’s Representations

1. Applicant is a Delaware

corporation and an indirect whollyowned subsidiary of Merrill Lynch &

Co., Inc. (‘‘ML&Co.’’). ML&Co. is a

diversified financial services holding

company that through its subsidiaries

provides investment, financing,

insurance, and related services. Merrill

Lynch, Pierce, Fenner & Smith

Incorporated (‘‘Merrill Lynch’’),

ML&Co.’s principal sudsidiary, is a

registered broker-dealer. ML&Co. and its

affiliated companies are herein referred

to as the ‘‘ML Group.’’

2. Applicant or another direct or

indirect wholly-owned subsidiary of

ML&Co. formed for such purpose will

be the ‘‘General Partner’’ of each of the

Partnerships.1 The General Partner

proposes to establish Partnerships from

time to time for the benefit of highly

compensated key employees of the ML

Group. The Partnerships will be part of

a program designed to create capital

buildings opportunities competitive

with those at other investment banking

firms for ML&Co.’s professionals and

managers and to facilitate its

recruitment of professionals and

managers. Each Partnership will operate

as a non-diversified closed-end

management investment company and

will meet the definition of an
12808 Federal Register / Vol. 60, No. 45 / Wednesday, March 8, 1995 / Notices

2Pursuant to Merrill Lynch KECALP Growth

Investments L.P. 1983, Investment Company Act

Release Nos. 12290 (Mar. 11, 1982) (notice) and

12363 (Apr. 8, 1982) (order), amended, Investment

Company Act Release Nos. 20280 (May 5, 1994)

(notice) and 20328 (June 1, 1994) (order), an

indirect wholly-owned subsidiary of ML&Co. may

establish limited partnerships (the ‘‘KECALP

Partnerships’’) that meet the definition of

‘‘employees’ securities companies’’ under the Act

and are exempt from most provisions of the Act.

Interests in the KECALP Partnerships are offered

exclusively to certain employees of ML&Co. and its

subsidiaries and to non-employee directors of

ML&Co. It is expected that the number of persons

eligible to invest in a Partnership will be

significantly smaller than the number eligible to

invest in a KECALP Partnership. All Eligible

Employees are expected to be eligible to invest in

KECALP Partnerships organized in the future. To

avoid any conflicts of interests between the

KECALP Partnerships and the Partnerships,

ML&Co. had adopted a policy that, with respect to

investment opportunities in which both a KECALP

Partnership and a Partnership may invest, such

opportunities will first be made available to the

KECALP Partnership. In addition, no person may be

a member of both the boards of directors of the

General Partner and of KECALP Inc., the general

partner of the KECALP Partnerships.

‘‘employees’ securities company’’ in

section 2(a)(13) of the Act.

3. Interests in the Partnerships (the

‘‘Interests’’) will be offered only to

‘‘Eligible Employees,’’ who are current

employees of the ML Group that meet

the income standards for ‘‘accredited

investors’’ of rule 501(a)(6) under

Regulation D promulgated under the

Securities Act of 1933 (the ‘‘Securities

Act’’). Eligible Employees will be

experienced professionals in the

investment banking and securities

business, or in related administrative,

financial, accounting, legal, or

operational activities, and will be

sophisticated investors. Eligible

Employees will be senior employees of

the ML Group and will know or be

known to, and have direct access to,

other Eligible Employees.2 Eligible

Employees will be advised that the

Interests will be sold in a transaction

exempt under section 4(2) of the

Securities Act and thus offered without

the protections afforded by registration

thereunder, and that the Partnerships

will be exempt from most provisions of

the Act. An Eligible Employee becomes

a limited partner of a Partnership (a

‘‘Limited Partner’’) by investing in the

Partnership.

4. The applicable partnership

agreement may provide that a Limited

Partner make a capital contribution in

its entirety upon the formation of a

Partnership or in installments. A

Limited Partner who fails to pay an

installment when due must pay interest

on such installment, remain personally

liable for the amount of the default and,

to the extent permitted by law, will not

be entitled to participate as a Limited

Partner when making approvals or

decisions.

5. All of the Partnerships will have

minimum capital contributions and

restrictions with respect to

transferability of Interests. Interests will

be non-transferable except with the

express consent of the General Partner

and in any event will be transferable

only to Eligible Employees and

members of a Limited Partner’s

immediate family. Upon the death of a

Limited Partner or such Limited Partner

becoming incompetent, insolvent,

incapacitated, or bankrupt, such

Limited Partner’s estate or legal

representative may succeed to the

Limited Partner’s Interests as an

assignee for the purpose of settling such

Limited Partner’s estate or

administering such Limited Partner’s

property, but may not become a Limited

Partner. Interests will not be

redeemable, except that the estate of a

deceased Limited Partner may elect to

have the Limited Partner’s Interests

repurchased by the General Partner or

the Partnership at a price equal to the

value of the Interests determined at the

next succeeding appraisal date.

6. The purchase price of an Interest

acquired upon the termination of a

Limited Partner’s employment (other

than termination for cause) or upon the

Limited Partner’s bankruptcy or

adjudication of incompetence will equal

the amount that the Limited Partner

would have received had the

Partnership been liquidated on the

valuation date as of the end of the

immediately preceding fiscal year. If

termination is for cause, the General

Partner has the right, but not the

obligation, to acquire the Interest of the

Limited Partner at the lesser of the

amount equal to (a) what the Limited

Partner would have received had the

Partnership been liquidated on the

valuation date as of the end of the

immediately preceding fiscal year, less

any distributions made after such

valuation date, or (b) the cost of the

Limited Partner’s investment on such

valuation date, plus any undistributed

ordinary income.

7. The General Partner will be a

registered investment adviser. The

General Partner will manage, operate,

and control the Partnerships and will

have the authority to make all decisions

regarding the acquisition, management,

and disposition of the investments of

the Partnerships (the ‘‘Investments’’).

All Investments and dispositions thereof

will be approved by the General

Partner’s board of directors (the

‘‘Board’’), which will consist of five

members. When considering

investments for the Partnerships, the

Board will receive the advice of

members of a committee of advisers.

The Board may consider investments

proposed by unrelated third parties and

investments offered by Merrill Lynch in

public offerings or private placements

and investments presented to the

Partnership by affiliates of the General

Partner. All investments selected by the

General Partner will be evaluated

independently of each other and chosen

only if a majority of the Board

determines that they are suitable for and

in the best interest of the Partnerships.

8. Pending investment, Partnership

funds will be invested in ‘‘Temporary

Investments,’’ which consists of: (a) U.S.

Government obligations with maturities

of not longer than one year and one day;

(b) commercial paper with maturities

not longer than six months and one day

and having a rating assigned to it by

Standard & Poor’s Corporation or

Moody’s Investors Service, Inc. (or, if

neither organization shall rate such

commercial paper at such time, by any

nationally recognized rating

organization in the United States) equal

to one of the two highest ratings

assigned by such organization; (c)

interest-bearing deposits in U.S. or

Canadian banks with an unrestricted

surplus of at least $250 million,

maturing within one year; and (d) any

money market fund distributed and

managed by ML&Co. or any affiliated

person thereof or successor thereof.

Consistent with section 12(d)(1)(A)(i),

no Partnership making a Temporary

Investment will acquire more than 3%

of the total outstanding voting securities

of an investment company.

9. The General Partner will make no

cash contribution to the Partnerships

other than a nominal contribution upon

their formation. The General Partner

will be allocated and receive 1% of the

income, profit, loss, credit, expense, and

deductions of the Partnership.

Distributable cash generally will be

allocated 1% to the General Partner and

99% to the Limited Partners. The

General Partner is obligated to pay the

operating expenses of the Partnerships

and is entitled to receive from each

Partnership annually up to 11⁄2% of the

Limited Partners’ capital contribution to

reimburse the General Partner for

incurring such operating expenses. The

General Partner’s net worth will be

adequate to meet the requirements of

classifying the Partnerships as

partnerships rather than as associations

taxable as corporations for federal

income tax purposes.

10. It is expected that new

Partnerships would be formed on a

periodic basis but would not be formed

until the capital of the prior Partnership
Federal Register / Vol. 60, No. 45 / Wednesday, March 8, 1995 / Notices 12809

has been invested or committed for

investment, other than reserves

maintained for follow-on investments or

operating expenses. The General Partner

may under certain circumstances deem

it appropriate to allocate an investment

between two Partnerships.

11. It is expected that a substantial

percentage of Investments will be made

available to a Partnership by the ML

Group. Other affiliated persons of

ML&Co. may also invest in the same

Investments in which the Partnerships

invest.

12. The General Partner will not have

the power to require that a Limited

Partner withdraw from a Partnership,

except that the applicable partnership

agreement may provide that the General

Partner has the right, but not the

obligation, to acquire the Interest of a

Limited Partner following his or her

termination of employment or

bankruptcy. The General Partner may be

removed by the vote of at least twothirds of the outstanding Interests of a

Partnership. The General Partner may

assign or transfer its Interest to another

wholly-owned subsidiary of ML&Co.

13. The General Partner has the right

to dissolve the Partnership

approximately six years after its

formation. It is anticipated that the

General Partner will dissolve the

Partnership when a Partnership’s equity

investments have matured and

disposition of other Investments can be

effected.

Applicant’s Legal Analysis

1. Section 17(a) prohibits an affiliated

person of a registered investment

company from selling to or purchasing

from such investment company any

security or other property. Applicant

requests an exemption from section

17(a) to the extent necessary to permit

a member of the ML Group to engage in

principal transactions with a

Partnership. The exemption would let

the Partnerships (a) purchase

Investments from members of the ML

Group on a principal basis; (b) purchase

interests or property in a company or

other investment vehicle affiliated with

ML&Co. or in which a member of the

ML Group already owns securities; (c)

sell, put or tender, or grant options in

securities or interests in a company or

other investment vehicle back to such

entity, where that entity is affiliated

with the ML Group; and (d) participate

as a selling security holder in a public

offering underwritten by a member of

the ML Group or in which a member of

the ML Group acts as a member of the

underwriting or selling group. In

addition, a Partnership may purchase

from, or sell to, an affiliated person of

such Partnership a Temporary

Investment or other short-term

investment. Applicant asserts that the

requested exemption is consistent with

the policy of the Partnerships and the

protection of investors. The Limited

Partners will be fully informed of the

possible extent of the Partnerships’

dealings with affiliates and, as

professionals employed in the securities

business, will be able to understand and

evaluate the attendant risks.

2. Section 17(d) and rule 17d–1

prohibit an affiliated person of a

registered investment company, acting

as principal, from participating in or

effecting any transaction in connection

with any joint enterprise or joint

arrangement in which the investment

company participates. The section and

rule might require the Partnerships to

refrain from certain transactions in

which any Limited Partner or a member

of the ML Group is also a participant.

Applicant requests an exemption from

section 17(d) and rule 17d—1 to the

extent necessary to let the Partnerships

engage in transactions with ‘‘Coinvestors,’’ as defined in condition 3

below, who may be affiliated persons of

the Partnerships. Applicant believes

that joint participation by the

Partnerships in transactions with CoInvestors is consistent with the

provisions, policies, and purpose of the

Act. Each Limited Partner will receive a

pro rata share of the income, profit, loss,

credit, expense, and deduction of a

Partnership based on the Limited

Partner’s investment in the Partnership,

after the allocation to the General

Partner of 1% of each such item. Any

Investment made concurrently by a

Partnership and a Co-Investor will be

made on the same terms, though not

necessarily in the same amount.

3. Section 17(f) requires that every

registered investment management

company deposit its securities and

similar investments in the custody of

certain specified entities. Rule 17f–1

requires that a member of a national

securities exchange serving as custodian

of the securities and investments of an

investment company must, among other

things, operate under a written contract

approved by a majority of the

investment company’s board of

directors. Applicant requests an

exemption from section 17(f) and rule

17f–1 to let Merrill Lynch act as

custodian without a written contract.

Applicant asserts that, since there is

such a close association between the

Partnerships and Merrill Lynch,

requiring a written contract would

expose the Partnerships to unnecessary

burden and expense where none is

necessary. Furthermore, any funds or

securities of the Partnership held by

Merrill Lynch will have the protection

of fidelity bonds. Applicant further

requests an exemption from rule 17f–

1(b)(4), which requires that the

investment company’s securities and

investments be verified by actual

examination by an independent public

accountant at certain specified times.

Applicant does not believe the expense

of retaining such an independent

accountant is warranted, in light of the

community of interest of all parties

involved and the existing requirement

for an independent annual audit. The

Partnerships otherwise will comply

with rule 17f–1.

4. Section 17(g) authorizes the SEC to

require by rules thereunder that certain

officers and employees of a registered

management investment company be

bonded against larceny and

embezzlement. Rule 17g–1 requires,

among other things, that a majority of

the company’s board of directors

approve at least annually the

arrangements regarding the custody and

safekeeping of the company’s assets.

Applicant requests an exemption from

section 17(g) and rule 17g–1 to let the

Partnerships comply with rule 17g–1 by

having the General Partner’s officers and

directors take actions and make

determinations set forth in the rule. In

all other respects, the partnerships will

comply with rule 17g–1.

5. Rule 17j–1 requires that every

access person of a registered investment

company report to such company with

respect to transactions in any security in

which the access person has, or by

reason of the transaction acquires, any

direct or indirect beneficial ownership

in the security. Applicant requests an

exemption from the rule, except for the

antifraud provisions set forth in rule

17j–1(a). Applicant asserts that the other

provisions of the rule are burdensome

and unnecessary as applied to the

Partnerships and that the exemption is

consistent with the policy of the Act.

Applicant contends that the community

of interests among the Limited Partners

by virtue of their common association in

ML&Co. is the best insurance against

any abuse at which the rule is aimed.

6. Section 6(c) permits the SEC to

exempt any person, security, or

transaction from any of the provisions of

the Act, or of the rules thereunder, if

and to the extent that the exemption is

necessary or appropriate in the public

interest and consistent with the

protection of investors and the purposes

fairly intended by the policy and

provisions of the Act. Applicant submits

that the requested exemption satisfies

these standards.
12810 Federal Register / Vol. 60, No. 45 / Wednesday, March 8, 1995 / Notices

3Each Partnership will preserve the accounts,

books and other documents required to be

maintained in an easily accessible place for the first

two years.

4Each Partnership will preserve the accounts,

books, and other documents required to be

maintained in an easily accessible place for the first

two years.

7. The Partnerships will be conceived

and organized by persons who will be

investing in the Partnerships, either

directly or indirectly, and will not be

promoted by persons seeking to profit

from fees or investment advice or from

the distribution of securities. Applicant

asserts that the requested exemptions

are necessary or relevant to the

operations of the Partnerships as an

investment program uniquely adapted

to the needs of the Eligible Employees.

Applicant’s Conditions

Applicant agrees that the requested

order shall be subject to the following

conditions:

1. Each proposed transaction

otherwise prohibited by section 17(a) or

section 17(d) and rule 17d–1 (the

‘‘Section 17 Transactions’’) will be

effected only if the General Partner

determines that: (a) the terms of the

transaction, including the consideration

to be paid or received, are fair and

reasonable to the partners and do not

involve overreaching of the Partnership

or its partners on the part of any person

concerned; and (b) the transaction is

consistent with the interests of the

partners, the Partnership’s

organizational documents, and the

Partnership’s reports to its partners. In

addition, the General Partner will record

and preserve a description of such

affiliated transactions, their findings,

the information or materials upon

which their findings are based and the

basis therefor. All such records will be

maintained for the life of the

Partnerships and at least two years

thereafter, and will be subject to

examination by the SEC and its staff.3

2. In connection with the Section 17

Transactions, the General Partner 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 or promoter of or

principal underwriter for the

Partnerships, or any affiliated persons of

such a person, promoter, or principal

underwriter.

3. As a condition to the relief

requested from section 17(d) and rule

17d–1, the General partner will not

invest the funds of any Partnership in

any Investment in which a ‘‘CoInvestor,’’ as defined below, has or

proposed to acquire the same class of

securities of the same issuer, where the

Investment involves a joint enterprise or

other joint arrangement within the

meaning of rule 17d–1 in which the

Partnership and the Co-Investor are

participants, unless any such CoInvestor, prior to disposing of all or part

of its investment, (a) gives the General

Partner sufficient, but not less than one

day’s, notice of its intent to dispose of

its investment, and (b) refrains from

disposing of its investment unless the

Partnership has the opportunity to

dispose of the Partnership’s investment

prior to or concurrently with, and on the

same terms as, and pro rata with the CoInvestor. The term ‘‘Co-Investor’’ means

ML&Co. and any person who is: (a) An

‘‘affiliated person’’ (as such term is

defined in the Act) of the Partnership;

(b) a subsidiary of ML&Co., or other

company controlled by ML&Co. or its

subsidiaries; (c) an officer or director of

a subsidiary of ML&Co., or other

company controlled by ML&Co. or its

subsidiaries; (d) companies,

partnerships, or other investment

vehicles offered, sponsored, or managed

by a member of the ML Group; (e) any

entity with respect to which ML&Co. or

its subsidiaries or controlled entities

provides management, investment

management, or similar services as

manager, investment manager, or

general partner or in a similar capacity,

and for which it may receive

compensation, including, without

limitation, management fees,

performance fees, carried interests

entitling it to share disproportionately

in income and capital gains or similar

compensation; or (f) a company in

which an officer or director of the

General Partner acts as officer, director,

or General Partner, or has a similar

capacity to control the sale or other

disposition of the company’s securities.

The restrictions contained in this

condition, however, shall not be

deemed to limit or prevent the

disposition of an investment by a CoInvestor: (a) To its direct or indirect

wholly-owned subsidiary, to any

company (a ‘‘parent’’) of which the CoInvestor is a direct or indirect whollyowned subsidiary, or to a direct or

indirect wholly-owned subsidiary of its

parent; (b) to immediate family

members of the Co-Investor or a trust

established for any Co-Investor or any

such family member; (c) when the

investment is comprised of securities

that are listed on any exchange

registered as a national securities

exchange under section 6 of the

Securities Exchange Act of 1934, as

amended (the ‘‘Exchange Act’’); or (d)

when the investment is comprised of

securities that are national market

system securities pursuant to section

11A(a)(2) of the Exchange Act and rule

11Aa2–2(T) thereunder.

4. Each Partnership and its General

Partner will maintain and preserve, for

the life of each such 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

partners, and each annual report of such

Partnership required by the terms of the

applicable partnership agreement to be

sent to the partners, and agree that all

such records will be subject to

examination by the SEC and its staff.4

5. The General Partner will send to

each Limited Partner who had an

interest in the Partnership at any time

during the fiscal year then ended

partnership financial statements audited

by the Partnership’s independent

accountants. At the end of each fiscal

year, the General Partner will make an

appraisal or have an appraisal made of

all of the assets of the Partnership as of

such fiscal year end. The appraisal of

the Partnership assets may be by

independent third parties appointed by

the General Partner and deemed

qualified by the General Partner to

render an opinion as to the value of

Partnership assets, using such methods

and considering such information

relating to the investments, assets, and

liabilities of the Partnership as such

persons may deem appropriate, but in

the case of an event subsequent to the

end of the fiscal year materially

affecting the value of any Partnership

asset or investment, the General Partner

may revise the appraisal as it, in its

good faith and sole discretion, deems

appropriate. In addition, within 90 days

after the end of each fiscal year of each

of the Partnerships or as soon as

practicable thereafter, the General

Partner shall send a report to each

person who was a Limited Partner at

any time during the fiscal year then

ended, setting forth such tax

information as shall be necessary for the

preparation by the Limited Partner of

his or her federal and state income tax

returns and a report of the investment

activities of the Partnership during such

a year.

6. In any case where purchases or

sales are made from or to an entity

affiliated with a partnership by reason

of a 5% or more investment in such

entity by a director, officer, or employee

of ML&Co. or any of its affiliates, any
Federal Register / Vol. 60, No. 45 / Wednesday, March 8, 1995 / Notices 12811

1Until the requested order is issued, U.S.

Investment Company assets will continue to be held

by the London branch of Boston Safe or another

custodian that qualifies under section 17(f) of the

Act.

such individual will not participate in

the 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. 95–5645 Filed 3–7–95; 8:45 am]

BILLING CODE 8010–01–M

[Investment Company Act Release No.

20934; International Series Release No. 789;

812–9262]

Mellon Bank, N.A.; Notice of

Application

March 1, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of Application for

Exemption under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANT: Mellon Bank, N.A.

(‘‘MBNA’’).

RELEVANT ACT SECTIONS: Sections 6(c)

and 17(f).

SUMMARY OF APPLICATION: MBNA seeks

an order under section 6(c) of the Act

granting an exemption from section

17(f). The order would allow United

States registered investment companies

other than investment companies

registered under section 7(d) (a ‘‘U.S.

Investment Company’’), for which

MBNA serves as custodian or

subcustodian, to maintain foreign

securities and assets in the United

Kingdom with Mellon Europe Limited

(‘‘MEL’’), a wholly-owned subsidiary of

MBNA.

FILING DATES: The application was filed

on September 29, 1994 and amended on

February 23, 1995.

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 applicant with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

March 27, 1995, and should be

accompanied by proof of service on the

applicant, 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 may request notification of a

hearing by writing to the SEC’s

Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, NW., Washington, DC 20549.

Applicants, Mellon Bank, N.A., One

Mellon Bank Center, Pittsburgh,

Pennsylvania 15258-0001.

FOR FURTHER INFORMATION CONTACT:

Marianne H. Khawly, Staff Attorney, at

(202) 942–0562, or C. David Messman,

Branch Chief, at (202) 942–0564

(Division of Investment Mranagement,

Office of Investment Company

Regulation).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee from the SEC’s

Public Reference Branch.

Applicant’s Representations

1. MBNA requests an order to allow

MBNA, any U.S. Investment Company,

and any custodian for a U.S. Investment

Company to maintain foreign securities,

cash, and cash equivalents (collectively,

‘‘assets’’) in the custody of MEL. For the

purposes of this application, ‘‘foreign

securities’’ includes: (a) securities

issued and sold primarily outside the

United States by a foreign government,

a national of any foreign country, or a

corporation or other organization

incorporated or organized under the

laws of any foreign country; and (b)

securities issued or guaranteed by the

Government of the United States or by

any state or any political subdivision

thereof of by any agency thereof or by

any entity organized under the laws of

the United States or of any state thereof

which have been issued and sold

primarily outside the United States.

2. MBNA is a national banking

association organized and existing

under the laws of the United States.

MBNA is regulated by the Office of the

Comptroller of the Currency and is

subject to the National Bank Act. As of

December 31, 1993, MBNA had

aggregate capital, surplus, and

undivided profits in excess of

$2,460,000,000. MBNA is a whollyowned direct subsidiary of Mellon Bank

Corporation (‘‘Mellon’’), a Pennsylvania

corporation qualified as a bank holding

company under the Bank Holding

Company Act of 1956.

3. MEL is a wholly-owned subsidiary

of MBNA and is regulated by the Bank

of England under the Banking Act of

1987. As of December 31, 1993, MEL

had shareholders’ equity slightly in

excess of $10,000,000.

4. Boston Safe Deposit and Trust

Company (‘‘Boston Safe’’) is a

subsidiary of The Boston Company, Inc.

Boston Safe is organized as a trust

company under Massachusetts law and

is regulated by the Massachusetts

Commissioner of Banks. In May 1993,

Mellon acquired The Boston Company,

Inc. and its subsidiaries, including

Boston Safe. A major business unit of

Boston Safe is Global Securities

Services, which provides international

financial and securities processing

services, including global custody, and

is qualified to hold U.S. Investment

Company assets under section 17(f) of

the Act.

5. Mellon proposes to transfer the

custody activities of the London branch

of Boston Safe to MEL by transferring to

MEL the operations and assets of the

Global Custody Department of Boston

Safe. Assets of U.S. Investment

Companies held by the London branch

of Boston Safe will not be transferred to

MEL prior to the issuance of the

requested order.1 Thereafter, MBNA, as

custodian or sub-custodian for a U.S.

Investment Company, will deposit, or

cause or permit a U.S. Investment

Company to deposit, its assets with

MEL. In the alternative, MEL, as

custodian or subcustodian will receive

and hold the assets of a U.S. Investment

Company directly from such U.S.

Investment Company, its custodian or

subcustodian, other than MBNA but

including Boston Safe.

Applicant’s Legal Analysis

1. Section 17(f) of the Act requires

every registered management

investment company to place and

maintain its securities and similar

investments in the custody of certain

enumerated entities, including bank

having at all times aggregate capital,

surplus, and undivided profits of at

least $500,000. A ‘‘bank’’, as that term

is defined in section 2(a)(5) of the Act,

includes: (a) a banking institution

organized under the laws of the United

States; (b) a member bank of the Federal

Reserve System; and (c) any other

banking institution or trust company,

whether incorporated or not, doing

business under the laws of any state or

of the United States, a substantial

portion of which consists of receiving

deposits or exercising fiduciary powers

similar to those permitted to national

banks, which is supervised or examined

by state or federal authority having

supervision over banks, and which is

not operated for the purposes of evading

the Act.

2. The only entities located outside

the United States which section 17(f)

authorizes to serve as custodians for

registered management investment

companies are the overseas branches of

qualified U.S. banks. Rule 17f-5 expands