54484 Federal Register / Vol. 62, No. 202 / Monday, October 20, 1997 / 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.

significantly lower than those of the

Strong funds.

c. The performance of the N&B Bond

and Calvert Balanced Portfolios has

been essentially equivalent to or better

than the performance of the portfolios

that will be eliminated.

d. The substitutions will, in all cases,

be at the net asset value of the

respective portfolios without the

imposition of any transfer or similar

charge.

e. The costs of the substitutions will

be borne by Acacia National and SCM

and will not be borne by policyowners.

No charges will be assessed to effect the

substitutions.

f. Within 5 days after the

substitutions, Acacia National will send

to policyowners written notice of the

substitutions that identifies the shares

that were substituted and discloses the

shares which replaced them. Included

in the mailing will be a supplement to

the prospectus that discloses

completion of the substitutions.

g. For 30 days following the mailing

of the notice of substitutions,

policyowners may transfer substituted

assets without any charge. No such

transfer will be counted as a transfer

under any contractual provision which

limits the number of transfers in any

year.

h. The substitutions will in no way

alter the insurance benefits to

policyholders or the contractual

obligations of Acacia National.

i. The substitutions will in no way

alter the tax benefits to policyowners.

Counsel for Acacia National has advised

that the substitutions will not give rise

to any tax consequences to the

policyowners.

Applicants’ Conclusions

Applicants assert that, for the reasons

and upon the facts set forth in the

application, the requested order

approving the proposed substitution

meets the standards set forth in Section

26(b) of the 1940 Act and should be

granted.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–27697 Filed 10–17–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–22853; 812–10574]

Equus II Incorporated; Notice of

Application

October 10, 1997.

AGENCY: Securities and Exchange

Commission (the ‘‘SEC’’ or the

‘‘Commission’’).

ACTION: Notice of application for an

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

Investment Company Act of 1940 (the

‘‘Act’’).

SUMMARY OF APPLICATION: Applicant

Equus II Incorporated seeks an order

approving its 1997 Stock Incentive Plan

(the ‘‘Plan’’) for certain of its directors,

and the grant of certain stock options

under the Plan.

FILING DATES: The application was filed

on March 11, 1997. Applicant has

agreed to file an amendment, the

substance of which is incorporated in

this notice, during the notice period.

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

November 3, 1997, 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 5th

Street, N.W., Washington, D.C. 20549.

Applicant, 2929 Allen Parkway, Suite

2500, Houston, Texas 77019.

FOR FURTHER INFORMATION CONTACT:

Lawrence W. Pisto, Senior Counsel, at

(202) 942–0527, or Christine Y.

Greenlees, 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, 450 5th Street,

N.W., Washington, D.C. 20549 (tel. (202)

942–8090).

Applicant’s Representations

1. Applicant is a business

development company (‘‘BDC’’) within

the meaning of section 2(a)(48) of the

Act.1 Applicant requests an order

pursuant to section 61(a)(3)(B) of the

Act approving the Plan as it applies to

each director of the applicant who is

neither an officer nor an employee of

the applicant (‘‘Non-employee

Director’’) and to each new Nonemployee Director who may be elected

in the future to applicant’s board of

directors. The order also would approve

the automatic grant of options, pursuant

to the Plan, to purchase shares of

applicant’s common stock to each

current and future Non-employee

Director.

2. Applicant’s board of directors (the

‘‘Board’’) consists of eight members.

Five members of the Board are persons

who are not ‘‘interested persons’’ (as

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

the applicant. The Plan was approved

by the Board on February 7, 1997, and

by the applicant’s shareholders on April

9, 1997, at a special meeting of

shareholders. Officers, employees, and

directors of the applicant are eligible to

participate in the Plan. Applicant seeks

approval of the Plan as it applies to

Non-employee Directors. On May 15,

1997, the Board implemented part of the

Plan. The portion of the Plan applicable

to Non-employee Directors will not be

implemented until an order is received

from the Commission approving that

portion of the Plan.

3. Each Non-employee Director of the

applicant receives an annual director’s

fee of $20,000, a fee of $2,000 for each

meeting of the Board attended in

person, a fee of $1,000 for participation

in each telephonic meeting and for each

committee meeting attended, and

reimbursement of all out-of-pocket

expenses relating to attendance at

meetings.

4. Equus Capital Management

Corporation (‘‘ECMC’’) is an investment

adviser registered under the Investment

Advisers Act of 1940 (the ‘‘Advisers

Act’’) and serves as the applicant’s

management company. ECMC receives

no compensation from the applicant

under section 205(1) of the Advisers

Act. Other than stock options issued to

officers of the applicant under the Plan,

the applicant does not currently have

outstanding any warrants, options or

rights to purchase its voting securities.

5. The Plan provides that each Nonemployee Director serving on the Board

as of the later of the date of approval of
Federal Register / Vol. 62, No. 202 / Monday, October 20, 1997 / Notices 54485

the Plan by: (a) The applicant’s

shareholders, or (b) an order of the

Commission, will be granted a

nonqualified stock option to purchase

5,000 shares of common stock, $.01 par

value (the ‘‘Common Stock’’), of

applicant that will vest 50%

immediately and 162⁄3% on the first,

second, and third anniversaries of the

date of the grant. Each new Nonemployee Director will be granted upon

his or her election a nonqualified stock

option for a similar number of shares. In

addition, beginning with the 1998

annual meeting of shareholders of

applicant, each Non-employee Director

elected will, on the first business day

following the annual meeting, be

granted a nonqualified stock option to

purchase 2,000 shares of Common

Stock. The exercise price of the options

will be the closing price of the Common

Stock on the American Stock Exchange

on the date the option is granted or, if

no market for the Common Stock exists,

the current net asset value of the shares

of the Common Stock. Each option will

be exercisable during the period

beginning six months after the date of

the grant and ending ten years after the

date of the grant.

6. In the event that a Non-employee

Director’s services are terminated

because of death, permanent disability,

or retirement, any invested options will

vest, and the Non-employee Director or,

if the Non-employee Director is not

living, the Non-employee Director’s

estate, may exercise his or her options

during the one-year period following the

date of death, permanent disability, or

retirement. The termination of a Nonemployee Director’s services will not

otherwise accelerate the termination

date of his or her options. Options may

not be assigned or transferred other than

by will or the laws of descent and

distribution.

Applicant’s Legal Analysis

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

BDC to sell its common stock at a price

below current net asset value upon the

exercise of any option issued in

accordance with section 61(a)(3) of the

Act.

2. Section 61(a)(3)(B) of the Act

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 exists, the current net asset value

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 SEC 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

paragraph (1) of section 205 of the

Advisers Act, except to the extent

permitted by clause (A) or (B) of that

section; and (f) the BDC does not have

a profit-sharing plan as described in

section 57(n) of the Act.

3. In addition, section 61(a)(3)(B) of

the Act 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 an

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.

4. Applicant represents that the Plan

and the options that would be granted

automatically to current and future Nonemployee Directors would comply with

the requirements of section 61(a)(3)(B)

of the Act. In addition, in support of its

application, applicant states that its

directors devote substantial time and

attention to matters relating to

applicant’s portfolio companies, thus

functioning more like the board of an

operating company than the board of a

traditional investment company.

Applicant relies extensively on the

judgment and experience of its

directors, and believes that these factors

are critical to its success. Further,

applicant states that the Plan would

provide incentives to the Non-employee

Directors to remain on the Board and

devote their best efforts to the success

of applicant’s business.

5. Applicant submits that the terms of

the Plan are fair and reasonable and do

not involve overreaching of applicant or

its shareholders. Under the Plan, the

amount of stock options that would be

granted to the six current Non-employee

Directors would be 30,000 shares in

1997 and 12,000 shares each year

commencing in 1998, or approximately

1% of the 4,300,682 shares of Common

Stock outstanding. Applicant submits

that, given the relatively small number

of options that may be granted and

exercised by Non-employee Directors

under the Plan, the exercise of stock

options pursuant to the Plan will not

have a substantial dilutive effect on the

net asset value of applicant’s Common

Stock. In addition, the total amount of

voting securities that would result from

the exercise of all outstanding warrants,

options, and rights at the time of

issuance would not exceed 20% of the

outstanding voting securities of the

applicant. Further, because the options

may not be exercised until six months

after the date of grant and 50% of the

stock options granted to Non-employee

Directors vest on a ratable basis over the

three years following the date of grant,

the plan provides Non-employee

Directors with an incentive to remain

with the applicant.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–27656 Filed 10–17–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–22851; 812–10356]

Investors Bank & Trust Company, et

al.; Notice of Application

October 10, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for an

order under (i) section 12(d)(1)(J) of the

Investment Company Act of 1940 (the

‘‘Act’’) granting relief from section

12(d)(1) of the Act; (ii) sections 6(c) and

17(b) of the Act granting relief from

section 17(a) of the Act; and (iii) section

17(d) of the Act and rule 17d–1 to

permit certain joint transactions.

SUMMARY OF APPLICATION: Applicants

request an order to permit the lending

agent for certain investment companies

to invest cash collateral derived from

securities lending transactions in shares

of affiliated registered investment

companies organized as a master-feeder

fund.

APPLICANTS: Investors Bank & Trust

Company (the ‘‘Bank’’); Merrimac Funds

(the ‘‘Feeder Trust’’), on behalf of its

Merrimac Cash Fund and Merrimac

Treasury Fund, each a series of the

Feeder Trust, and each other series of

the Feeder Trust established in the

future in which cash collateral from

securities lending transactions may be

invested (collectively, the ‘‘Feeder