Federal Register / Vol. 74, No. 175 / Friday, September 11, 2009 / Notices 46811 

5 If the Fund has been in operation fewer than six 

months, the measured period will begin 

immediately following the Fund’s first public 

offering. 

6 If the Fund has been in operation fewer than five 

years, the measured period will begin immediately 

following the Fund’s first public offering. 

prospective common shareholder or 

third-party information provider; 

(b) Each Fund will issue, 

contemporaneously with the issuance of 

any 19(a) Notice, a press release 

containing the information in the 19(a) 

Notice and file with the Commission the 

information contained in such 19(a) 

Notice, including the disclosure 

required by condition 2(a)(ii) above, as 

an exhibit to its next filed Form N–CSR; 

and 

(c) Each Fund will post prominently 

a statement on its (or the Investment 

Adviser’s) Web site containing the 

information in each 19(a) Notice, 

including the disclosure required by 

condition 2(a)(ii) above, and will 

maintain such information on such Web 

site for at least 24 months. 

4. Delivery of 19(a) Notices to Beneficial 

Owners 

If a broker, dealer, bank or other 

person (‘‘financial intermediary’’) holds 

common shares issued by a Fund in 

nominee name, or otherwise, on behalf 

of a beneficial owner, the Fund: (a) Will 

request that the financial intermediary, 

or its agent, forward the 19(a) Notice to 

all beneficial owners of the Fund’s 

shares held through such financial 

intermediary; (b) will provide, in a 

timely manner, to the financial 

intermediary, or its agent, enough 

copies of the 19(a) Notice assembled in 

the form and at the place that the 

financial intermediary, or its agent, 

reasonably requests to facilitate the 

financial intermediary’s sending of the 

19(a) Notice to each beneficial owner of 

the Fund’s shares; and (c) upon the 

request of any financial intermediary, or 

its agent, that receives copies of the 

19(a) Notice, will pay the financial 

intermediary, or its agent, the 

reasonable expenses of sending the 19(a) 

Notice to such beneficial owners. 

5. Additional Board Determinations for 

Funds Whose Shares Trade at a 

Premium 

If: 

(a) A Fund’s common shares have 

traded on the stock exchange that they 

primarily trade on at the time in 

question at an average premium to NAV 

equal to or greater than 10%, as 

determined on the basis of the average 

of the discount or premium to NAV of 

the Fund’s common shares as of the 

close of each trading day over a 12-week 

rolling period (each such 12-week 

rolling period ending on the last trading 

day of each week); and 

(b) A Fund’s annualized distribution 

rate for such 12-week rolling period, 

expressed as a percentage of NAV as of 

the ending date of such 12-week rolling 

period is greater than the Fund’s average 

annual total return in relation to the 

change in NAV over the 2-year period 

ending on the last day of such 12-week 

rolling period; 

then: 

(i) At the earlier of the next regularly 

scheduled meeting or within four 

months of the last day of such 12-week 

rolling period, the Board including a 

majority of the Independent Trustees: 

(1) Will request and evaluate, and the 

Investment Adviser will furnish, such 

information as may be reasonably 

necessary to make an informed 

determination of whether the Plan 

should be continued or continued after 

amendment; 

(2) Will determine whether 

continuation, or continuation after 

amendment, of the Plan is consistent 

with the Fund’s investment objective(s) 

and policies and is in the best interests 

of the Fund and its shareholders, after 

considering the information in 

condition 5(b)(i)(1) above; including, 

without limitation: 

(A) Whether the Plan is 

accomplishing its purpose(s); 

(B) The reasonably foreseeable 

material effects of the Plan on the 

Fund’s long-term total return in relation 

to the market price and NAV of the 

Fund’s common shares; and 

(C) The Fund’s current distribution 

rate, as described in condition 5(b) 

above, compared with the Fund’s 

average annual taxable income or total 

return over the 2-year period, as 

described in condition 5(b), or such 

longer period as the Board deems 

appropriate; and 

(3) Based upon that determination, 

will approve or disapprove the 

continuation, or continuation after 

amendment, of the Plan; and 

(ii) The Board will record the 

information considered by it, including 

its consideration of the factors listed in 

condition 5(b)(i)(2) above, and the basis 

for its approval or disapproval of the 

continuation, or continuation after 

amendment, of the Plan in its meeting 

minutes, which must be made and 

preserved for a period of not less than 

six years from the date of such meeting, 

the first two years in an easily accessible 

place. 

6. Public Offerings 

A Fund will not make a public 

offering of the Fund’s common shares 

other than: 

(a) A rights offering below NAV to 

holders of the Fund’s common shares; 

(b) An offering in connection with a 

dividend reinvestment plan merger, 

consolidation, acquisition, spin off or 

reorganization of the Fund; or 

(c) An offering other than an offering 

described in conditions 6(a) and 6(b) 

above, provided that, with respect to 

such other offering: 

(i) The Fund’s annualized distribution 

rate for the six months ending on the 

last day of the month ended 

immediately prior to the most recent 

distribution record date,5 expressed as a 

percentage of NAV per share as of such 

date, is no more than 1 percentage point 

greater than the Fund’s average annual 

total return for the 5-year period ending 

on such date; 6 and 

(ii) The transmittal letter 

accompanying any registration 

statement filed with the Commission in 

connection with such offering discloses 

that the Fund has received an order 

under section 19(b) to permit it to make 

periodic distributions of long-term 

capital gains with respect to its common 

stock as frequently as twelve times each 

year, and as frequently as distributions 

are specified by or determined in 

accordance with the terms of any 

outstanding preferred shares as such 

Fund may issue. 

7. Amendments to Rule 19b–1 

The requested order will expire on the 

effective date of any amendments to rule 

19b-1 that provide relief permitting 

certain closed-end investment 

companies to make periodic 

distributions of long-term capital gains 

with respect to their outstanding 

common shares as frequently as twelve 

times each year. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–21923 Filed 9–10–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

28895; File No. 812–13535] 

American Capital, Ltd.; Notice of 

Application 

September 3, 2009. 

AGENCY: Securities and Exchange 

Commission (the ‘‘Commission’’). 

ACTION: Notice of an application for an 

order under section 61(a)(3)(B) of the 


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46812 Federal Register / Vol. 74, No. 175 / Friday, September 11, 2009 / Notices 

1Section 2(a)(48) defines a BDC to be any closedend investment company that operates for the 

purpose of making investments in securities 

described in sections 55(a)(1) through 55(a)(3) of the 

Act and makes available significant managerial 

assistance with respect to the issuers of such 

securities. 

2The Non-employee Directors receive a $100,000 

per year retainer payment and $3,000 for each 

Board or committee meeting or other designated 

Board-related meeting attended, and reimbursement 

for related expenses. Non-employee Directors who 

chair a committee of the Board receive an 

additional $10,000 retainer per year. Non-employee 

Directors who serve as directors on the boards of 

portfolio companies also receive an annual retainer 

from applicant set at $30,000 per board, in lieu of 

any payment from the portfolio company. 

3At Board meetings held on November 13, 2008 

and July 9, 2009, the Board approved amendments 

to the Plan. At each meeting, the Board determined 

that the applicable amendments did not require 

stockholder approval under Section 10 of the Plan 

or applicable law or NASDAQ listing requirements. 

Applicant acknowledges that the Commission is not 

taking a position as to whether applicant is required 

to seek stockholder approval for the amendments. 

4Under the Plan, ‘‘Fair Market Value’’ is defined 

as follows: (a) If the common stock is listed on any 

established exchange or traded on the NASDAQ 

Global Select Market, the closing sales price of 

applicant’s common stock as quoted on such 

exchange or market (or if the common stock is 

traded on multiple exchanges or markets, the 

exchange or market with the greatest volume of 

trading in the common stock) on the date on which 

an option is granted under the Plan, as reported in 

The Wall Street Journal or such other source as the 

Board deems reliable; or (b) in the absence of 

closing sales prices on such exchanges or markets 

for the common stock, the Fair Market Value will 

be determined in good faith by the Board, but in 

no event shall be less than the current NAV per 

share of common stock. 

Investment Company Act of 1940 (the 

‘‘Act’’). 

SUMMARY OF APPLICATION: Applicant, 

American Capital, Ltd. (f/k/a American 

Capital Strategies, Ltd.) requests an 

order approving a proposal to grant 

certain stock options to directors who 

are not also employees or officers of the 

applicant (the ‘‘Non-employee 

Directors’’) under its 2008 Stock Option 

Plan (the ‘‘Plan’’). 

DATES: Filing Dates: The application was 

filed on May 28, 2008 and amended on 

November 21, 2008, July 21, 2009, and 

August 28, 2009. 

HEARING OR NOTIFICATION OF HEARING: An 

order granting the application will be 

issued unless the Commission orders a 

hearing. Interested persons may request 

a hearing by writing to the 

Commission’s Secretary and serving 

applicant with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on September 29, 2009, 

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 

Commission’s Secretary. 

ADDRESSES: Secretary, U.S. Securities 

and Exchange Commission, 100 F 

Street, NE., Washington, DC 20549– 

1090; Applicant, 2 Bethesda Metro 

Center, 14th Floor, Bethesda, Maryland 

20814. 

FOR FURTHER INFORMATION CONTACT: 

Laura J. Riegel, Senior Counsel, at (202) 

551–6873, or Marilyn Mann, Branch 

Chief, at (202) 551–6821 (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 via the Commission’s 

Web site by searching for the file 

number, or for an applicant using the 

Company name box, at http:// 

www.sec.gov/search/search.htm, or by 

calling (202) 551–8090. 

Applicant’s Representations 

1. Applicant, a Delaware corporation, 

is a business development company 

(‘‘BDC’’) within the meaning of section 

2(a)(48) of the Act.1 Applicant’s primary 

business objectives are to increase its 

net operating income and net asset 

value by investing its assets in senior 

debt, subordinated debt, with and 

without detachable warrants, and equity 

of small to medium sized businesses 

with attractive current yields and 

potential for equity appreciation. 

Applicant’s investment decisions are 

made either by its board of directors (the 

‘‘Board’’), based on recommendations of 

the executive officers of applicant, or, 

for investments that meet certain 

objective criteria established by the 

Board, by the executive officers of 

applicant, under authority delegated by 

the Board. Applicant does not have an 

external investment adviser within the 

meaning of section 2(a)(20) of the Act. 

2. Applicant requests an order under 

section 61(a)(3)(B) of the Act approving 

its proposal to grant certain stock 

options under the Plan to its Nonemployee Directors.2 Applicant has a 

nine member Board with one current 

vacancy. Seven of the eight current 

members of the Board are not 

‘‘interested persons’’ (as defined in 

section 2(a)(19) of the Act) of the 

applicant (‘‘Disinterested Directors’’). 

All of the current Non-employee 

Directors are Disinterested Directors. 

The Board approved the Plan at a 

meeting of the Board held on March 13, 

2008 and applicant’s stockholders 

approved the Plan at the annual meeting 

of stockholders held on May 19, 2008.3

3. Applicant’s officers, employees, 

and Non-employee Directors are eligible 

to receive options under the Plan. Under 

the Plan, a maximum of 750,000 shares 

of applicant’s common stock, in the 

aggregate, may be issued to Nonemployee Directors and 93,750 shares of 

applicant’s common stock may be 

issued to any one Non-employee 

Director. On the date that the 

Commission issues an order on the 

application (‘‘Order Date’’), each of the 

seven Non-employee Directors serving 

on the Board as of May 19, 2008 will be 

granted options to purchase 93,750 

shares of applicant’s common stock (the 

‘‘Initial Grants’’), provided that the Nonemployee Director is a member of the 

Board on the Order Date. The options 

issued under the Initial Grants will vest 

in three equal parts, the first part on the 

Order Date and the remaining two parts 

on May 19, 2010 and May 19, 2011. Any 

person who becomes a Non-employee 

Director after May 19, 2008 will be 

entitled to receive options to purchase 

93,750 shares of applicant’s common 

stock (the ‘‘Other Grants’’), if and to the 

extent that there are options available 

for grant to Non-employee Directors 

under the Plan. Each Other Grant will 

be effective on the later of the date such 

person becomes a Non-employee 

Director and the Order Date. The 

options issued under the Other Grants 

will vest in three equal parts on each of 

the first three anniversaries of the date 

such person becomes a Non-employee 

Director. 

4. Under the terms of the Plan, the 

exercise price of an option will not be 

less than 100% of the current market 

value, or if no such market value exists, 

the current net asset value (‘‘NAV’’) per 

share of applicant’s common stock on 

the date of the issuance of the option 

(‘‘Fair Market Value’’).4 The Initial 

Grants will expire on May 19, 2018, and 

the Other Grants will expire on the 

tenth anniversary of the date the person 

becomes a Non-employee Director. 

Options granted under the Plan may not 

be assigned or transferred other than by 

will or the laws of descent and 

distribution. In the event of the death or 

disability of a Non-employee Director 

during such director’s service, all such 

director’s unexercised options will 

immediately become exercisable and 

may be exercised for a period of three 

years following the date of death (by 

such director’s personal representative) 

or one year following the date of 

disability, but in no event after the 

respective expiration dates of such 

options. In the event of the termination 

of a Non-employee Director for cause, 


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Federal Register / Vol. 74, No. 175 / Friday, September 11, 2009 / Notices 46813 

5Applicant’s common stock constitutes the only 

voting security of applicant currently outstanding. 

any unexercised options will terminate 

immediately. If a Non-employee 

Director’s service is terminated for any 

reason other than by death, disability, or 

for cause, the options may be exercised 

within one year immediately following 

the date of termination, but in no event 

later than the expiration date of such 

options. 

5. Applicant’s officers and employees 

are eligible or have been eligible to 

receive options under stock option 

plans that exclude Non-employee 

Directors as participants (the ‘‘Employee 

Plans’’), applicant’s 2006 stock option 

plan (the ‘‘2006 Option Plan’’), 

applicant’s 2007 stock option plan (the 

‘‘2007 Option Plan’’), and applicant’s 

2009 stock option plan (the ‘‘2009 

Option Plan’’). Non-employee Directors 

have been eligible to receive options 

under applicant’s two Disinterested 

Director stock option plans (the 

‘‘Disinterested Director Plans’’), the 

2006 Option Plan and the 2007 Option 

Plan (collectively, the 2009 Option Plan, 

the 2007 Option Plan, the 2006 Option 

Plan, the Disinterested Director Plans 

and the Employee Plans are the ‘‘Other 

Plans’’). As of June 30, 2009, applicant 

had 224,493,289 shares of common 

stock outstanding.5 The 750,000 shares 

of applicant’s common stock that may 

be issued to Non-employee Directors 

under the Plan represent 0.3% of 

applicant’s outstanding voting securities 

as of June 30, 2009. As of June 30, 2009, 

the amount of voting securities that 

would result from the exercise of all 

outstanding options issued to 

applicant’s directors, officers, and 

employees under the Other Plans and 

the Plan would be 37,107,027 shares of 

applicant’s common stock, or 16.5% of 

applicant’s outstanding voting 

securities. As of June 30, 2009, 

applicant had no outstanding warrants, 

options, or rights to purchase its voting 

securities other than the outstanding 

options issued to applicant’s directors, 

officers, and employees under the Other 

Plans and the Plan. 

Applicant’s Legal Analysis 

1. Section 63(3) of the Act permits a 

BDC to sell its common stock at a price 

below current NAV upon the exercise of 

any option issued in accordance with 

section 61(a)(3). Section 61(a)(3)(B) 

provides, in pertinent part, that a BDC 

may issue to its non-employee directors 

options to purchase its voting securities 

pursuant to an executive compensation 

plan, provided that: (a) The options 

expire by their terms within ten years; 

(b) the exercise price of the options is 

not less than the current market value 

of the underlying securities at the date 

of the issuance of the options, or if no 

market value exists, the current NAV of 

the voting securities; (c) the proposal to 

issue the options is authorized by the 

BDC’s shareholders, and is approved by 

order of the Commission upon 

application; (d) the options are not 

transferable except for disposition by 

gift, will or intestacy; (e) no investment 

adviser of the BDC receives any 

compensation described in section 

205(a)(1) of the Investment Advisers Act 

of 1940, except to the extent permitted 

by clause (b)(1) or (b)(2) of that section; 

and (f) the BDC does not have a profitsharing plan as described in section 

57(n) of the Act. 

2. In addition, section 61(a)(3) 

provides that the amount of the BDC’s 

voting securities that would result from 

the exercise of all outstanding warrants, 

options, and rights at the time of 

issuance may not exceed 25% of the 

BDC’s outstanding voting securities, 

except that if the amount of voting 

securities that would result from the 

exercise of all outstanding warrants, 

options, and rights issued to the BDC’s 

directors, officers, and employees 

pursuant to any executive compensation 

plan would exceed 15% of the BDC’s 

outstanding voting securities, then the 

total amount of voting securities that 

would result from the exercise of all 

outstanding warrants, options, and 

rights at the time of issuance will not 

exceed 20% of the outstanding voting 

securities of the BDC. 

3. Applicant represents that its 

proposal to grant certain stock options 

to Non-employee Directors under the 

Plan meets all the requirements of 

section 61(a)(3)(B). Applicant states that 

the Board is actively involved in the 

oversight of applicant’s affairs and that 

it relies extensively on the judgment 

and experience of its Board. In addition 

to their duties as Board members 

generally, applicant states that the Nonemployee Directors provide guidance 

and advice on operational issues, 

underwriting policies, credit policies, 

asset valuation and strategic direction, 

as well as serving on committees. 

Applicant believes that the availability 

of options under the Plan will provide 

significant at-risk incentives to Nonemployee Directors to remain on the 

Board and devote their best efforts to 

ensure applicant’s success. Applicant 

states that the options will provide a 

means for the Non-employee Directors 

to increase their ownership interests in 

applicant, thereby ensuring close 

identification of their interests with 

those of applicant and its stockholders. 

Applicant asserts that by providing 

incentives such as options, applicant 

will be better able to maintain 

continuity in the Board’s membership 

and to attract and retain the highly 

experienced, successful and dedicated 

business and professional people who 

are critical to applicant’s success as a 

BDC. 

4. As noted above, applicant states 

that the amount of voting securities that 

would result from the exercise of all 

outstanding options issued to 

applicant’s directors, officers, and 

employees under the Other Plans and 

the Plan would be 37,107,027 shares of 

applicant’s common stock, or 16.5% of 

applicant’s outstanding voting 

securities, as of June 30, 2009. However, 

applicant represents that the maximum 

number of voting securities that would 

result from the exercise of all 

outstanding options issued and all 

options issuable to applicant’s directors, 

officers, and employees under the Plan 

and the Other Plans would be 

56,902,620 shares of applicant’s 

common stock, or 25.3% of applicant’s 

outstanding voting securities, as of June 

30, 2009. Applicant states that to the 

extent the number of shares of common 

stock that would be issued upon the 

exercise of options issued under the 

Other Plans and the Plan exceeds 15% 

of applicant’s outstanding voting 

securities, applicant will comply with 

the 20% limit in section 61(a)(3) of the 

Act. 

5. Applicant asserts that, given the 

relatively small amount of common 

stock issuable to Non-employee 

Directors upon their exercise of options 

under the Plan, the exercise of such 

options would not, absent extraordinary 

circumstances, have a substantial 

dilutive effect on the NAV of applicant’s 

common stock. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–21889 Filed 9–10–09; 8:45 am] 

BILLING CODE 8010–01–P 


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