19100 Federal Register / Vol. 61, No. 84 / Tuesday, April 30, 1996 / Notices

have been approved in compliance with

said section 15; and where any vote of

the stockholders of the SBA

Subsidiaries would be required by said

section 15, unless the stockholders of

Medallion also shall have approved the

same by a vote of a majority (as defined

in the Act) of the outstanding voting

securities of Medallion; or where any

action of the directors of the SBA

Subsidiaries would be required by said

section 15, unless the board of directors

of Medallion, including a majority of

those directors who are not parties to

any such contract or agreement or

interested persons of any such party,

also shall have approved the same.

4. Medallion will not, and will not

cause or permit any SBA Subsidiary to,

issue any senior security or sell any

senior security of which Medallion or

any SBA Subsidiary is the issuer except

as hereinafter set forth:

(a) each of the SBA Subsidiaries may

continue to have outstanding and may

issue additional shares of its preferred

stock to the SBA in accordance with

applicable SBA regulations; and

(b) Medallion and each SBA

Subsidiary may issue and sell to banks,

insurance companies, and other

financial institutions its secured or

unsecured promissory notes or other

evidences of indebtedness in

consideration of any loan, or any

extension or renewal thereof made by

private arrangement, and each SBA

Subsidiary may issue debt securities

held or guaranteed by the SBA,

provided the following conditions are

met:

(i) such notes or evidences of

indebtedness are not intended to be

publicly distributed,

(ii) such notes or evidences of

indebtedness are not convertible into,

exchangeable for, or accompanied by

any options to acquire, any equity

security, and

(iii) immediately after the issuance or

sale of any such notes or evidences of

indebtedness, Medallion and its

Subsidiaries on a consolidated basis,

and Medallion, individually, shall have

the asset coverage required by section

18(a) of the Act, (as modified by section

61(a) for Medallion), except that, in

determining whether Medallion and its

Subsidiaries on a consolidated basis

have the asset coverage required by

section 18(a) of the Act (as modified by

section 61(a)), any SBA preferred stock

interest in the SBA Subsidiaries and any

borrowings by the SBA Subsidiaries

shall not be considered senior securities

and, for purposes of the definition of

‘‘asset coverage’’ in section 18(h), shall

be treated as indebtedness not

represented by senior securities.

5. No person shall serve as a director

of any SBA Subsidiary who shall not

have been elected as a director of

Medallion at its most recent annual

meeting, as contemplated by section

16(a) of the Act and subject to the

provisions thereof relating to the filling

of vacancies. Notwithstanding the

foregoing, the board of directors of each

SBA Subsidiary will be elected by

Medallion as sole stockholder.

6. Any small business or other

concern to which loans may be made by

Medallion or any of the SBA

Subsidiaries, which may become an

affiliated person of Medallion and/or

the SBA Subsidiaries, may borrow from,

or sell securities issued by it to,

Medallion and the SBA Subsidiaries,

provided that such transaction meets

the requirements for an exemption

pursuant to rule 17a–6 promulgated

pursuant to the Act, except to the extent

that it fails to meet the requirements of

such rule solely because another

member of the group of Medallion and

its SBA Subsidiaries is also a party to

the transaction or has, or within 6

months prior to the transaction had, or

pursuant to an arrangement will

acquire, a direct or indirect financial

interest in the small business or other

concern. In addition, Medallion and the

SBA Subsidiaries may effect purchases

and sales of securities and other

property or the borrowing of money or

other property, provided that Medallion

and its SBA Subsidiaries are the sole

participants in such transactions.

7. Medallion and its SBA

Subsidiaries, as a group or individually,

may participate in any join enterprise or

joint arrangement involving other

participants, provided that such

transaction meets the requirements for

an exemption pursuant to rule 17d–1

except to the extent it fails to meet the

requirements of such rule solely because

any of Medallion and its SBA

Subsidiaries as a group are, or propose

to be, participants in the joint enterprise

or joint arrangement.

8. Medallion will acquire securities of

its SBA Subsidiaries representing

indebtedness only if, in each case, the

prior approval of the SBA has been

obtained. Medallion and its SBA

Subsidiaries will purchase and sell

portfolio securities between themselves

only if, in each case, the prior approval

of the SBA has been obtained.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–10644 Filed 4–29–96; 8:45 am]

BILLING CODE 8010–01–M

[Investment Company Act Rel. No. 21913;

International Series Rel. No. 973; 812–9846]

The Mexico Equity and Income Fund,

Inc.; Notice of Application

April 24, 1996.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of Application for

Exemption under the Investment

Company Act of 1940 (‘‘Act’’).

APPLICANT: The Mexico Equity and

Income Fund, Inc. (‘‘Fund’’).

RELEVANT ACT SECTIONS: Order requested

under section 10(f) granting an

exemption from that section.

SUMMARY OF APPLICATION: Applicant

seeks an order that would permit it to

purchase securities in underwritten

public offerings in Mexico in which an

affiliated person of its Mexican

investment adviser or U.S. co-adviser

participates as a principal underwriter.

FILING DATES: The application was filed

on November 8, 1995, and amended on

March 29, 1996.

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

May 20, 1996, 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 such notification

by writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

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

Applicant, 200 Liberty Street, New

York, New York 10281.

FOR FURTHER INFORMATION CONTACT:

Courtney S. Thornton, Senior Counsel,

at (202) 942–0583, or Robert A.

Robertson, 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 from the SEC’s

Public Reference Branch.

Applicant’s Representations

1. The Fund, a Maryland corporation,

is a closed-end management investment

company registered under the Act. The
Federal Register / Vol. 61, No. 84 / Tuesday, April 30, 1996 / Notices 19101

Fund’s investment objective is to seek

high total return through capital

appreciation and current income

through investment in equity and debt

securities of Mexican issuers, including,

to the extent available, convertible debt

securities issued by Mexican

companies. The Fund’s fundamental

policy requires it to invest at least 50%

of its assets in equity and convertible

debt securities issued by Mexican

companies. The remainder of the Fund’s

assets must be invested in Mexican

issuer debt securities (other than

convertible debt securities) and, for cash

management or temporary defensive

purposes, in certain high quality shortterm debt instruments.

2. The Fund’s Mexican investment

adviser is Acci Worldwide, S.A. de C.V.

(‘‘Acci’’), a limited liability company

organized under the laws of Mexico.

The Fund’s U.S. co-adviser is Advantage

Advisers, Inc. (‘‘Advantage’’), a

Delaware corporation that is a whollyowned subsidiary of Oppenheimer &

Co., Inc. Both Acci and Advantage are

registered as investment advisers under

the Investment Advisers Act of 1940.

Acci is responsible for the management

of the Fund’s portfolio, subject to direct

participation by Advantage in all

investment decisions with respect to the

Fund’s portfolio of convertible debt

securities. In the case of other securities

transactions, Acci receives advice from,

and consults with, Advantage regarding

the Fund’s overall investment strategy

and decisions to buy, sell, or hold

particular securities.

3. Acci is a wholly-owned subsidiary

of Acciones y Valores de Mexico, S.A.

de C.V. (‘‘AVM’’), one of the leading

brokerage firms in Mexico. AVM is a

controlled subsidiary of Grupo

Financiero Banamex/Accival, a holding

company formed for the purpose of

owning over 99% of the voting stock of

AVM and Banco Nacional de Mexico,

S.A. (‘‘Banamex’’), Mexico’s largest

commercial bank. During the period

1991 through August 1995, AVM was

lead manager or co-manager for 21 of

the 74 initial public offerings of equity

securities in Mexico (approximately

28.4% of total offerings). AVM-managed

transactions raised approximately

58.5% of the U.S. $16.8 billion raised in

such offerings.

4. Because AVM-managed

transactions constitute such a

significant portion of new publicly

offered Mexican securities, the Fund

believes that its inability to purchase

and hold such securities may be

disadvantageous to its shareholders.

Accordingly, the Fund seeks an

exemption from the prohibition

contained in section 10(f) to permit it to

purchase securities in underwritten

public offerings in Mexico in which an

affiliated person of Acci or Advantage

participates as a principal underwriter

(as defined in section 2(a)(29) of the

Act).

Applicant’s Legal Analysis

1. Section 10(f) of the Act prohibits a

registered investment company from

purchasing securities during the

existence of any underwriting syndicate

if a principal underwriter of those

securities is either (a) an officer,

director, member of an advisory board,

investment adviser, or employee of the

investment company, or (b) a person of

which any such officer, director,

member of an advisory board,

investment adviser, or employee is an

affiliated person. By virtue of having

investment advisers whose affiliated

persons often act as a principal

underwriter in underwritten Mexican

public offerings, the Fund is prohibited

by section 10(f) from purchasing

securities from any member of any

underwriting syndicate in such

offerings. Accordingly, applicant

believes that compliance with section

10(f) undermines the Fund’s investment

objectives.

2. Rule 10f–3 under the Act permits

a registered investment company to

make a purchase of securities otherwise

prohibited by section 10(f) provided

certain conditions are met. Paragraph

(a)(1) of the rule requires the securities

purchased to be part of an issue

registered under the Securities Act of

1933 (‘‘Securities Act’’). The Fund is

unable to comply with the provisions of

paragraph (a)(1) because the Mexican

securities in which it invests are not

required to be registered under the

Securities Act, and the Fund lacks the

ability to cause Mexican issuers to

register these securities under the

Securities Act. Applicant therefore

proposes that the public offering rules of

the Mexican authorities be substituted

for the U.S. public offering requirement

of rule 10f–3(a)(1), and represents that

all purchases of Mexican securities

otherwise prohibited by section 10(f)

will comply with all other provisions of

rule 10f–3. Applicant also represents

that audited financial statements for at

least the last two years will be available

with respect to the issuers of all

securities covered by the requested

order.

3. Before an issuer can make a public

offering of its securities in Mexico, it

must file a registration statement with

the Comision Nacional Bancaria y de

Valores (‘‘CNBV’’). The registration

statement requests approval of the

offering and registration of the securities

in the securities section of the Registro

Nacional de Valores e Intermediarios,

the National Registry of Securities and

Securities Brokers, which is a record

maintained by the CNBV. The

registration statement must contain all

the information the CNBV considers

material to an evaluation of the

securities to be offered, and requires an

issuer to submit the prospectus to be

delivered to all prospective investors for

CNBV approval. In addition, the issuer

seeking approval must represent that (a)

the characteristics of the securities and

the terms of the offering are such that

the securities will have significant

circulation and will cause no

dislocation of the market; (b) the

securities possess, or have the potential

for, broad circulation in relation to the

size of the market or the issuer; and (c)

the issuer is solvent and has liquidity.

Although the Ley del Mercado de

Valores, the Mexican securities law,

does not set any specific quantitative

standards regarding the size of an

offering, it does require that every

public offering be large enough, in the

opinion of the CNBV, to assure investors

of the liquidity of the securities. As a

result, securities in a public offering

must be issued in sufficient quantity to

be available to a wide group of offerees,

thereby assuring investors and the

CNBV that a market for the securities

will develop.

4. Where underwriters make a ‘‘firm

commitment’’ in a Mexican public

offering, their commitment to purchase

the securities being offered is firm, and

the obligations of the various

underwriters are several and not joint.

In the underwriting agreement, each

underwriter is obligated to purchase

securities from the issuer at a fixed

price, and the issuer receives proceeds

based on this net price regardless of the

marketing results of the underwriting

group. The price of the issue is

determined by negotiation between the

issuer and the underwriters.

5. Once the offering price for a

security is set, underwriters offer the

securities to the public at the offering

price disclosed in the prospectus.

Pursuant to the policies of the CNBV,

the securities thereafter may be publicly

offered only at the disclosed price,

which may not vary during the offering

period. This helps guarantee that

publicly offered securities are offered to

and purchased by affiliated and

unaffiliated persons on the same terms.

Although Mexican law does permit

securities to be publicly offered at a

premium to market price under certain

circumstances, this situation rarely

occurs. The Fund will not purchase

Mexican securities at such a premium.
19102 Federal Register / Vol. 61, No. 84 / Tuesday, April 30, 1996 / Notices

1 15 U.S.C. § 78s(b)(1) (1988).

2 17 CFR 240.19b–4 (1995).

3See Securities and Exchange Act Release No.

36953 (March 11, 1996), 61 FR 11448.

4See Letter from Claire P. McGrath, Managing

Director and Special Counsel, Derivative Securities,

Amex, to Michael Walinskas, Branch Chief,

Derivatives Regulation, Office of Self-Regulatory

Oversight, Division of Market Regulation,

Commission, dated April 15, 1996 (‘‘Amendment

No. 1’’). In Amendment No. 1, the Amex replaced

one of the Index’s component stocks, Hemlo Gold

Mines, with Cambior Inc., because Hemlo Gold

Mines is expected to merge with Battle Mountain

Gold Company in June 1996. The Amex also

removed Santa Fe Pacific Gold Corp. from the Index

because it no longer meets the Amex’s requirement

for the hedging of gold production. In addition, the

Amex represented that (1) the Exchange will

promptly notify the Commission if the Index fails

to meet the maintenance criteria provided in the

proposal; and (2) the Index will be maintained so

that foreign country securities or American

Depositary Receipts (‘‘ADRs’’) thereon that are not

subject to comprehensive surveillance sharing

agreements will not represent more than 20% of the

weight of the Index.

5Under Amex Rule 901C, Commentary .02, the

Amex may list options on a stock industry index

pursuant to Section 19b(3)(A) under the Act

provided that the index satisfies certain criteria.

Commentary .02 requires, among other things, that

the index be calculated based on either the

capitalization weighting, price weighting, or equaldollar weighting methodology, and that the trading

volume for each component stock of the index in

each of the last six months be not less than

1,000,000 shares, except that for each of the lowest

weighted component securities in the index that in

6. Applicant believes that the terms of

the requested order are consistent with

the protection of investors and the

intention of the SEC in exempting

transactions from section 10(f) pursuant

to rule 10f–3. The requested order

departs from rule 10f–3 only in that the

offerings will not be subject to

registration under section 5 of the

Securities Act as required by subsection

(a)(1) of rule 10f–3.

7. Applicant states that adherence to

the conditions contained in the

application will provide an adequate

substitute for the registration

requirement of rule 10f–3. In addition,

the nature of a public offering and a firm

commitment underwriting in Mexico

make it highly likely that a wide group

of offerees will take part in the offering,

and that the securities will be offered to

and purchased by affiliated and

unaffiliated persons on the same terms.

Furthermore, where an issuer’s financial

statements are available for the last two

years, applicant believes that it will be

assured of having the basic financial

information needed to evaluate the

security. Together with the public

offering requirement, such statements

also provide assurance that the

securities were issued in the ‘‘ordinary

course’’ of business. Applicant therefore

believes that exemption from the

provisions of section 10(f) in accordance

with the conditions set forth in the

application is consistent with the

protection of investors and the purposes

intended by the passage of section 10(f)

of the Act and rule 10f–3 thereunder.

Applicant’s Conditions

Applicant agrees that any order of the

SEC granting the requested relief will be

subject to the following conditions:

1. All securities purchased in Mexico

under circumstances subject to section

10(f) of the Act will be purchased in

public offerings conducted in

accordance with the laws of Mexico.

2. All subject foreign issuers of

securities in which the Fund invests

pursuant to the requested order will

have available to prospective

purchasers, including the Fund,

financial statements, audited in

accordance with Mexican accounting

standards, for at least the two years

prior to purchase.

3. All purchases made by the Fund

pursuant to the requested order will

comply with all provisions of rule 10f–

3 except for the registration requirement

set forth in rule 10f–3(a)(1).

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–10583 Filed 4–29–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37139; File No. SR–Amex–

96–08]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Notice of Filing and Order Granting

Accelerated Approval of Amendment

No. 1 to the Proposed Rule Change by

the American Stock Exchange, Inc.,

Relating to the Trading of Options on

the Amex Gold BUGSSM Index

April 23, 1996.

I. Introduction

On February 9, 1996, the American

Stock Exchange, Inc. (‘‘Amex’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘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

provide for the listing and trading of

standardized options on the Amex Gold

BUGS SM Index (‘‘Index’’).

Notice of the proposed rule change

appeared in the Federal Register on

March 20, 1996.3 On April 15, 1996, the

Amex amended its proposal.4 No

comment letters were received on the

proposed rule change. This order

approves the Exchange’s proposal, as

amended.

II. Description of Proposal

A. General

The Amex proposes to trade options

on the Index, a modified equal-dollar

weighted index developed by the Amex

and comprised of 14 gold mining

company stocks (or ADRs thereon)

which are traded on the Amex or the

New York Stock Exchange, Inc.

(‘‘NYSE’’). In addition, the Amex

proposes to amend Commentary .01 to

Amex Rule 901C, ‘‘Designation of Stock

Index Options,’’ to indicate that 90% of

the Index’s numerical index value must

be accounted for by stocks which meet

the then current criteria and guidelines

provided in Amex Rule 915, ‘‘Criteria

for Underlying Securities’’ and to

indicate that these criteria must also be

satisfied immediately following each

quarterly rebalancing.

The Exchange believes that an index

of gold mining stocks whose values are

affected strongly by the price of gold

will be attractive to many investors.

According to the Amex, gold companies

generally manage the risks associated

with fluctuating prices by hedging their

future production. The Amex notes that

companies that hedge their gold

production for longer periods are less

affected by the fluctuating price of gold.

In an effort to give investors an index

with a significant exposure to the near

term movements in gold prices, the

Exchange has included in the Index

those gold mining companies that do

not hedge their gold production for

extensive periods into the future.

Specifically, the Amex states that only

companies that have a hedging ratio of

less than 11⁄2 years production will be

considered for inclusion in the Index.

B. Eligibility Standards for Index

Components

The Amex states that the Index

conforms with Exchange Rule 901C,

which specifies criteria for the inclusion

of stocks in an index on which

standardized options will be traded.

According to the Amex, the Index also

conforms to most of the criteria set forth

in Amex Rule 901C, Commentary .02

(which provides for the commencement

of trading of options on an index 30

days after the date of filing), except that

the Index is calculated using a modified

version of the equal-dollar weighting

method and four of the components of

the Index do not meet the six month

minimum trading volume criteria.5