63208 Federal Register / Vol. 62, No. 228 / Wednesday, November 26, 1997 / Notices

corresponding sub-accounts of the

Accounts.

2. Section 26(b) of the 1940 Act

provides, in pertinent part, that ‘‘[i]t

shall be unlawful for any depositor or

trustee of a registered unit investment

trust holding the security of a single

issuer to substitute another security for

such security unless the Commission

shall have approved such substitution.’’

Section 26(b) of the 1940 Act also

provides that the Commission shall

issue an order approving such

substitution if the evidence establishes

that the substitution is consistent with

the protection of investors and the

purposes fairly intended by the policies

and provisions of the 1940 Act.

3. Applicants assert that the Contracts

give Western Reserve the right, subject

to Commission approval, to substitute

shares of another open-end management

investment company for shares of an

open-end management investment

company held by a sub-account of the

relevant Account. Applicants also assert

that the prospectuses for the Contracts

and the Accounts contain appropriate

disclosure of this right.

4. Applicants contend that the

Substitute Portfolios will have lower or

equal future expense ratios than the past

expense ratios of the Replaced

Portfolios. Each of the Substitute

Portfolios is substantially larger than the

corresponding Replaced Portfolio and

each Substitute Portfolio (except the

U.S. Equity Portfolio, which

commenced operations on January 2,

1997) has had more favorable expense

ratios over the last two years than the

corresponding Replaced Portfolio.

5. As of November 15, 1997, the

Replaced Portfolios will no longer be

available for new investment, and most

likely will experience the net

redemption of their shares from that

date forward. Therefore, Applicants

assert that it is highly likely that in the

near future each Replaced Portfolio’s

asset base will decrease and,

accordingly, each Replaced Portfolio’s

expense ratio will increase.

6. Applicants state that each

Substitute Portfolio has performed

favorably over the past two years

(except the U.S. Equity Portfolio, which

commenced operations on January 2,

1997), and since its inception compared

to the corresponding Replaced Portfolio.

Applicants therefore anticipate that after

the proposed substitutions, the

Substitute Portfolios will provide

Contract owners with more favorable or

comparable investment results than

would be the case if the proposed

substitutions do not take place.

7. Applicants represent that each of

the Substitute Portfolios is a suitable

and appropriate investment vehicle for

Contract owners and that each

Substitute Portfolio has, or will have,

substantially identical or similar

investment objectives and policies to its

corresponding Replaced Portfolio.

Conclusion

Applicants submit that, for all the

reasons summarized above, the

proposed substitutions are consistent

with the protection of investors and the

purposes fairly intended by the policy

and provisions of the 1940 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Security.

[FR Doc. 97–31016 Filed 11–27–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–22898]

Allied Capital Corporation (File No.

811–907) and Allied Capital Lending

Corporation (File No. 811–2708); Notice

of Proposed Deregistration

November 20, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of proposed

deregistration under section 8(f) of the

Investment Company Act of 1940 (the

‘‘Act’’).

SUMMARY OF NOTICE: The SEC proposes

to declare by order on its own motion

that the registrations of Allied Capital

Corporation (‘‘Allied’’) and Allied

Capital Lending Corporation (‘‘Allied

Lending’’) under the Act have ceased to

be in effect as of June 28, 1991, and

November 12, 1993, respectively, the

dates that each elected to be regulated

as a business development company

(‘‘BDC’’).

HEARING OR NOTIFICATION OF HEARING: An

order will be issued unless the SEC

orders a hearing. Interested persons may

request a hearing by writing to the SEC’s

Secretary and serving the relevant

registrant with a copy of the request,

personally or by mail. Hearing requests

should be received by the SEC by 5:30

p.m. on December 15, 1997, and should

be accompanied by proof of service on

the registrant, 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.

Allied and Allied Lending: 1666 K

Street, N.W., 9th Floor, Washington,

D.C. 20006–2803.

FOR FURTHER INFORMATION CONTACT:

Elaine M. Boggs, Senior Counsel, at

(202) 942–0572, or Mercer E. Bullard,

Branch Chief, at (202) 942–0572, (Office

of Investment Company Regulation,

Division of Investment Management).

SUPPLEMENTARY INFORMATION:

Statement of Facts

1. Allied and Allied Lending, both

Maryland corporations and closed-end

investment companies registered under

the Act, filed Notifications of

Registration under the Act on

September 29, 1959 and November 23,

1976, respectively. In January 1960,

Allied began a public offering. Until

November 23, 1993, Allied Lending was

a wholly-owned subsidiary of Allied.

Allied Lending filed a registration

statement under the Act and the

Securities Act of 1933 that became

effective on November 16, 1993. Allied

commenced an initial public offering of

its shares on November 23, 1997.

2. Section 54(a) of the Act provides

that any company that satisfies the

definition of a BDC under sections

2(a)(48) (A) and (B) of the Act may elect

to be subject to the provisions of

sections 55 through 65 of the Act and be

regulated as a BDC by filing with the

SEC a notification of the election, if the

company: (i) has a class of its equity

securities registered under section 12 of

the Securities Exchange Act of 1934 (the

‘‘Exchange Act’’); or (ii) has filed a

registration statement pursuant to

section 12 of the Exchange Act for a

class of its equity securities. On June 28,

1991, and November 12, 1993, Allied

and Allied Lending, respectively, each

elected BDC status by filing a Form N–

54A. Allied Lending filed a registration

statement under the Exchange Act on

November 12, 1993. Allied did not file

a registration statement under the

Exchange Act in reliance on the

exemption provided by rule 12g–2

under the Exchange Act.

3. Section 8(a) of the Act, which

requires registration of investment

companies, does not apply to BDCs.

After an existing registered investment

company has filed an election to be

regulated as a BDC, the SEC on its own

motion will declare by order under

section 8(f) that the company’s

registration under the Act has ceased to

be in effect. The order will be effective

retroactively, as of the date the SEC
Federal Register / Vol. 62, No. 228 / Wednesday, November 26, 1997 / Notices 63209

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3See Securities Exchange Act Release No. 39192

(October 3, 1997) 62 FR 53040.

4See Securities Exchange Act Release No. 19264

(November 22, 1997) 47 FR 53981 (November 30,

1982).

5The Index is scheduled to be split on November

24, 1997. Telephone conversation between Timothy

Thompson, Senior Attorney, CBOE, and Michael

Walinskas, Senior Special Counsel, Division of

Market Regulation, Commission, on November 10,

1997.

6The value of reduced-value Long-Term

AnticiPation Securities (‘‘LEAPS’’) based on the

Index will not be affected by the proposed change

in the value of the Index. Therefore, reduced value

OEX LEAPS, based on one-tenth of the value of the

Index, will be based on one-fifth of the value of the

Index after the value of the Index is reduced by onehalf. See Letter from Timothy H. Thompson, Senior

Attorney, CBOE, to Michael Walinskas, Division of

Market Regulation, Commission, dated November

11, 1997.

7The Exchange has separately requested an

increase in the position and exercise limits for OEX.

See Securities Exchange Act Release No. 38525

(April 18, 1997) 62 FR 20046 (April 24, 1997)

(noticing SR–CBOE–97–11).

8 In this regard, the Commission notes that in a

circular dated November 13, 1997, the CBOE

provided notice to its members and member

organizations of the S&P’s intent to reduce the value

of the Index by one-half and of the CBOE’s intent

to double the position and exercise limits for OEX.

9 15 U.S.C. 78f(b).

10 In approving this rule, the Commission notes

that it has considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f).

11 15 U.S.C. 78f(b)(5).

received the company’s election. See

Investment Company Act Release No.

11703 (March 26, 1981).

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–31018 Filed 11–25–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39338; File No. SR–CBOE–

97–48]

Self-Regulatory Organizations;

Chicago Board Options Exchange,

Inc.; Order Approving Proposed Rule

Change Relating to a Reduction in the

Value of the Standard & Poor’s 100

Stock Index and a Corresponding

Increase in the Existing Position and

Exercise Limits for the Option Traded

on the Index

November 19, 1997.

I. Introduction

On September 19, 1997, the Chicago

Board Options Exchange, Inc. (‘‘CBOE’’

or ‘‘Exchange’’) submitted to the

Securities and Exchange Commission

(‘‘Commission’’), pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’)1 and Rule 19b–4

thereunder,2 a proposed rule change to

double current position and exercise

limits in connection with a reduction by

Standard & Poor’s (‘‘S&P’’) of the value

of its S&P 100 Stock Index (‘‘Index’’)

option (‘‘OEX’’) to one-half of its present

value by doubling the divisor used in

calculating the Index.

The proposed rule change appeared in

the Federal Register on October 10,

1997.3 No comments were received on

the proposed rule change. This order

approves the CBOE’s proposal.

II. Description of the Proposal

In March 1983, the CBOE began

trading OEX options,4 which are

American-style, cash-settled options on

the Index. The Exchange notes that the

value of the OEX has doubled in value

since mid-1995, such that the value of

the Index stood at 928.20 as of August

7, 1997. As a result of the significant

increase in the value of the underlying

Index, the premium for OEX options

also has increased. This has caused OEX

options to trade at a level that may be

uncomfortably high for retail investors,

a large and important part of the market

for OEX options.

As a result, pursuant to CBOE’s

request, S&P (the reporting authority

and sole party responsible for

maintaining the Index) has agreed to a

‘‘two-for-one split’’ of the Index. The

change, which will be implemented

immediately following the November

expiration,5 will result in a halving of

the Index level, as well as a doubling of

the number of OEX contracts

outstanding, such that for each OEX

contract held, the holder will receive

two contracts at the reduced value, with

a strike price of one-half of the original

strike price.6

In addition to the above, the CBOE

proposes to double the position limits

applicable to the OEX from 25,000 to

50,000 contracts.7 The CBOE also

proposes to double the exercise limits

applicable to OEX options from 15,000

to 30,000 contracts. The Exchange

believes this increase in the position

and exercise limits is justified because

the reduction in the divisor would

result in each contract overlying only

one-half of the value of a current OEX

contract. Consequently, the revised

position and exercise limits would be

equivalent to the current levels in terms

of the value of the Index.

The CBOE announced the effective

date of the change by way of an

Exchange circular to its membership,

which also described the changes to the

strike prices and the position and

exercise limits.8

The Exchange expects the proposed

changes to attract additional customer

business in OEX in those series in

which retail customers are interested

most in trading. The Exchange believes

the proposed change will permit some

retail investors to trade these options

who otherwise have been priced out of

the market due to the recent market

surge. The Exchange further believes

that OEX options provide an important

opportunity for investors to hedge and

speculate upon the market risk

associated with the stocks comprising

this broad-based, widely followed

Index. By reducing the value of the

Index, investors will be able to utilize

this trading vehicle, while extending a

smaller outlay of capital. The Exchange

believes that this should attract

additional investors and create a more

active and liquid trading environment.

The Exchange believes that reducing

the value of the Index does not raise

manipulation concerns and will not

cause adverse market impact because

the Exchange will continue to employ

the same surveillance procedures and

has proposed an orderly procedure to

achieve the Index split, including

adequate prior notice to market

participants.

III. Discussion

The Commission finds that the

proposed rule change is consistent with

the requirements of Section 6(b) of the

Act 9 and the rules and regulations

thereunder applicable to a national

securities exchange.10 Specifically,

because reducing the value of the Index

will enhance the depth and liquidity of

the market for both members and

investors in general, the Commission

believes that this rule change is

consistent with and furthers the

objectives of Section 6(b)(5) of the Act 11

in that it would remove impediments to

and perfect the mechanism of a free and

open market in a manner consistent

with the protection of investors and the

public interest.

By reducing the value of the Index,

the Commission believes that a broader

range of investors will be provided with

a means to hedge their exposure to the

market risk associated with the stocks

underlying the Index. Similarly, the

Commission believes that reducing the

value of the Index may attract additional

investors, thus creating a more active

and liquid trading market in OEX.

The Commission also believes that

CBOE’s adjustments to its position and

exercise limits are appropriate and

consistent with the Act. In particular,