Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Notices 64899

6As noted in footnote 2 above, the only

Subsidiaries to be included in the System Money

Pool are those companies specifically named on the

cover and signature pages of the applicationdeclaration, but specifically excluding Conectiv

Communications, Inc. and CoastalComm. Inc., both

wholly-owned ETCs.

1 Liberty Cash Management Fund, Inc.,

Investment Company Act Release Nos. 13196 (Apr.

27, 1983) (notice) and 13271 (May 25, 1983) (order).

2Any existing Funds that currently intend to rely

on the order have been named as applicants, and

any other existing or future registered investment

companies that subsequently rely on the order will

comply with its terms and conditions.

4. Guarantees

Conectiv requests authorization to

enter into guarantees, obtain letters of

credit, enter into expense agreements or

otherwise provide credit support with

respect to the obligations of Subsidiaries

in an aggregate amount not to exceed

$350 million. In addition, the NonUtility Subsidiaries request authority to

enter into arrangements with each other

similar to those described with respect

to Conectiv in an aggregate amount not

to exceed $100 million. Applicants state

that the debt guaranteed will comply

with the parameters for financing.

5. Conectiv System Money Pool

Conectiv and the Subsidiaries request

authorization to establish a Conectiv

system money pool (‘‘System Money

Pool’’). Conectiv may invest, but not

borrow from the System Money Pool.

Also, Delmarva and Atlantic Electric

would be authorized to borrow up to

$275 million and $250 million,

respectively, from the System Money

Pool.6 No other participant in the

System Money Pool would be permitted

to have borrowings from the System

Money Pool exceeding $25 million at

any one time outstanding during the

Authorization Period. Support Conectiv

will administer the System Money Pool

on an ‘‘at cost’’ basis. Support Conectiv

will act strictly in an agency capacity,

and not as principal, with regard to

funds deposited in the System Money

Pool by other participants.

6. Changes in Capital Stock of WhollyOwned Subsidiaries and Dividends Out

of Capital or Unearned Surplus by NonUtility Subsidiaries

Applicants request authority to

change the terms of any wholly-owned

Subsidiary’s authorized capital stock

capitalization by an amount deemed

appropriate by Conectiv or other

immediate parent company. A

Subsidiary would be able to change the

par value, or change between par and

no-par stock, without additional

Commission approval. Any action by a

Utility Subsidiary would be subject to

and would only be taken upon receipt

of necessary approvals by the state

commission in the state or states where

the Utility Subsidiary is incorporated

and doing business.

In addition, Conectiv requests the

flexibility to withdraw capital from a

Non-Utility Subsidiary with excess

funds through a dividend out of capital

surplus to the full extent permitted by

the law of the state where the NonUtility Subsidiary is incorporated.

7. Financing Entities

The Subsidiaries seek authorization to

organize new corporations, trusts,

partnerships or other entities created for

the purpose of facilitating financings.

These entities will issue to third parties

income preferred securities or other

securities authorized or issued under an

exemption. In addition, authority is

requested for (i) the issuance of

debentures or other evidences of

indebtedness by any of the Subsidiaries

to a financing entity in return for the

proceeds of the financing, (ii) the

acquisition by any of the Subsidiaries of

voting interests or equity securities

issued by the financing entity to

establish any such Subsidiary’s

ownership of the financing entity and

(iii) the guarantee by the Applicants of

such financing entity’s obligations.

Applicants also request that (i)

Delmarva be authorized to retain

Delmarva Power Financing I, a whollyowned trust, that has issued trust

preferred securities and loaned the

proceeds to Delmarva and (ii) Atlantic

Electric be authorized to retain Atlantic

Capital I, a wholly-owned trust, that has

issued trust preferred securities and

loaned the proceeds to Atlantic Electric.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–32170 Filed 12–8–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–22923; 812–10460]

Seligman Capital Fund, Inc., et al.;

Notice of Application

December 3, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for an

order under (i) section 6(c) of the

Investment Company Act of 1940 (the

‘‘Act’’) granting an exemption from

sections 13(a)(2), 13(a)(3), 18(a), 18(c),

18(f)(1), 22(f), 22(g) and 23(a) of the Act

and rule 2a–7 under the Act; (ii)

sections 6(c) and 17(b) granting an

exemption from section 17(a) of the Act;

and (iii) section 17(d) of the Act and

rule 17d–1 under the Act.

SUMMARY OF APPLICATION: Applicants

request an order to permit certain

registered investment companies to

enter into deferred compensation

arrangements with certain of their

directors. The order would supersede an

existing order (the ‘‘Existing Order’’).1

APPLICANTS: Seligman Capital Fund,

Inc., Seligman Cash Management Fund,

Inc., Seligman Common Stock Fund,

Inc., Seligman Communications and

Information Fund, Inc., Seligman

Frontier Fund, Inc., Seligman Growth

Fund, Inc., Seligman Henderson Global

Fund Series, Inc., Seligman High

Income Fund Series, Seligman Income

Fund, Inc., Seligman Municipal Fund

Series, Inc., Seligman Municipal Series

Trust, Seligman New Jersey Municipal

Fund, Inc., Seligman Pennsylvania

Municipal Fund Series, Seligman

Portfolios, Inc., Seligman Quality

Municipal Fund, Inc., Seligman Select

Municipal Fund, Inc., Seligman Value

Fund Series, Inc., and Tri-Continental

Corporation (collectively, the ‘‘Funds’’),

J. & W. Seligman & Co., Incorporated

(‘‘Seligman’’), and any registered openend or closed-end investment

companies for which Seligman or any

entity controlling, controlled by, or

under common control with Seligman

serves as investment adviser.2

FILING DATES: The application was filed

on December 12, 1996, and amended on

May 15, 1997, and on October 27, 1997.

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 applicants 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 29, 1997, and should be

accompanied by proof of service on

applicants, 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, N.W., Washington, DC, 20549.

Applicants, c/o J. & W. Seligman & Co.,

Incorporated, 100 Park Avenue, New

York, New York 10017, attn: Frank J.

Nasta.

FOR FURTHER INFORMATION CONTACT:
64900 Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Notices

Lisa McCrea, Attorney Adviser (202)

942–0562 (Office of Investment

Company Regulation, Division of

Investment Management), or Mercer E.

Bullard, Special Counsel (202) 942–

0659 (Office of Chief Counsel, Division

of Investment Management).

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,

NW, Washington, DC 20549 (tel. 202–

942–8090).

Applicants’ Representations

1. Each of the Funds is an open-end

management investment company

registered under the Act, except for

Seligman Quality Municipal Fund, Inc.,

Seligman Select Municipal Fund, Inc.

and Tri-Continental Corporation, which

are closed-end management investment

companies registered under the Act.

Certain Funds are money market funds

that are subject to rule 2a–7 under the

Act. Seligman or an affiliate of Seligman

serves as the investment adviser to each

of the Funds.

2. Each Fund pays annual fees and

meeting attendance fees to directors

who are not employees of Seligman or

its affiliates (‘‘Unaffiliated Directors’’).

The Existing Order permits the Funds to

adopt deferred compensation plans

(‘‘Plans’’) for their Unaffiliated

Directors. Under the Plans, Unaffiliated

Directors’ fees are credited to an account

on the Fund’s books (‘‘Deferred Fee

Account’’) when the fees otherwise

would have been payable. Amounts in

each Deferred Fee Account bear interest

at a rate equivalent to the 90-day U.S.

Treasury Bill rate. Applicants request an

order that would supersede the Existing

Order to permit a modified deferred

compensation plan (‘‘Modified Plan’’).

3. Under the Modified Plan,

applicants propose an alternative rate of

return for the Deferred Fee Accounts.

The Unaffiliated Directors would choose

a rate of return equal to either (i) the 90-

day U.S. Treasury Bill rate, or (ii) the

rate of return on the shares of any of the

Funds (‘‘Underlying Securities’’)

designated by the Director (‘‘Investment

Fund Rate’’).

4. If an Unaffiliated Director chooses

an Investment Fund Rate, the value of

the Deferred Fee Account (or a specified

portion thereof) will be periodically

adjusted as if the deferred fees had been

invested in the Underlying Securities.

The Deferred Fee Account will be

credited or charged with book

adjustments representing all dividends,

distributions and other earnings and all

realized gains and losses and unrealized

appreciation or depreciation to the same

extent as if the amounts credited to an

account had actually been invested in

Underlying Securities.

5. The Modified Plan provides that

the participating Fund will be under no

obligation to the Unaffiliated Director to

purchase, hold or dispose of any

investments. If the Fund chooses to

purchase investments to cover all or a

portion of its obligations under the

Modified Plan, the investments will

continue to be a part of the general

assets and property of the Fund.

6. A Fund (other than a money market

fund) may elect to cover its obligations

under a Modified Plan with its general

investment assets, or by purchasing

Underlying Securities. Any Fund that is

a money market fund will purchase and

hold Underlying Securities in an

amount equal to the value of the

Deferred Fee Accounts. If the

Underlying Securities are not

purchased, the amounts credited to the

Deferred Fee Accounts will be invested

as part of the Fund’s general investment

operations, in which case there will not

be an exact match between the Fund’s

liability for deferred fees and the value

of the Deferred Fee Account. Any

mismatch will be de minimis in relation

to the net assets of the Fund.

7. If an Unaffiliated Director dies

before receiving all amounts in the

Deferred Fee Account, the amounts will

be paid in a lump sum to any

beneficiaries designated by the Director

or, in the absence of a designation, to

the Director’s estate. No deferred

amount may be transferred or assigned

by an Unaffiliated Director except by

will or the laws of descent and

distribution.

8. The Modified Plan will not obligate

a Fund to retain an Unaffiliated Director

or to pay any (or any particular level of)

Director’s fees to any Director. Rather, it

will permit an Unaffiliated Director to

elect deferral of Director’s fees that she

or he otherwise would receive on a

current basis from each Fund. The

proposed arrangement will not affect the

voting rights of the shareholders of any

of the Funds.

Applicants’ Legal Analysis

1. Applicants request an order that

would supersede a prior order under (i)

section 6(c) of the Act granting an

exemption from Sections 13(a)(2),

13(a)(3), 18(a), 18(c), 18(f)(1), 22(f),

22(g), and 23(a) of the Act and rule 2a–

7 under the Act; (ii) sections 6(c) and

17(b) of the Act granting an exemption

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

section 17(d) of the Act and rule 17d–

1 under the Act to permit applicants to

enter into deferred compensation

arrangements with their Unaffiliated

Directors.

2. Section 6(c) provides that the SEC

may exempt any person, security, or

transaction from any provision of the

Act, if an 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. Applicants

submit that, for the reasons discussed

below, the requested relief satisfies this

standard.

3. Sections 18(a) and 18(f)(1) of the

Act generally prohibit registered closedend and open-end investment

companies, respectively, from issuing

senior securities. Section 18(c) generally

provides that registered closed-end

investment companies may not have

outstanding more than one class of

senior security representing

indebtedness. Section 13(a)(2) requires

that a registered investment company

obtain shareholder authorization before

issuing any senior security not

contemplated by the recitals of policy in

its registration statement. Applicants

state that the Modified Plan does not

possess the characteristics that led to

concerns underlying these provisions.

The Modified Plan will not induce

speculative investments by any Fund or

provide opportunity for manipulative

allocation of a Fund’s expenses and

profits. Applicants expect the liabilities

for deferred fees to be de minimis in

relation to a Fund’s net assets and that

the Modified Plan will not affect control

of any Fund.

4. Section 22(f) generally prohibits

restrictions on the transferability or

negotiability of redeemable securities

issued by open-end investment

companies unless the restriction is

disclosed in the registration statement

and does not contravene SEC rules and

regulations. Applicants submit that the

Modified Plan will clearly set forth any

restriction on transferability and will

not adversely affect the interests of the

Unaffiliated Directors, a Fund or its

shareholders.

5. Sections 22(g) and 23(a) generally

prohibit registered open-end and closedend investment companies,

respectively, from issuing any of their

securities for services or for property

other than cash or securities. Applicants

believe that each Fund’s obligation to

make payments under the Modified

Plan would not be issued for services,

but in return for the Fund not being

required to pay these fees on a current

basis.

6. Section 13(a)(3) prohibits a

registered investment company from

deviating without shareholder vote from
Federal Register / Vol. 62, No. 236 / Tuesday, December 9, 1997 / Notices 64901

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

2Securities Exchange Act Release No. 39075

(September 12, 1997), 62 FR 49279.

3For a complete description of BDS, refer to

Securities Exchange Act Release No. 34600 (August

25, 1994), 59 FR 45317 [File No. SR–DTC–94–05]

(order approving proposed rule change).

any investment policy that is

changeable only if authorized by

shareholder vote. The relief requested

from section 13(a)(3) would extend only

to the Funds with a fundamental

investment restriction that prohibits

investments in the securities of

investment companies (‘‘Restricted

Funds’’). Applicants state that each

Restricted Fund has a fundamental

investment restriction prohibiting it

from investing in securities of other

investment companies, except in

connection with a merger,

consolidation, acquisition or

reorganization, or except as permitted

by the Act. Applicants believe that

purchases by the Restricted Funds of

shares of any other Fund under the

Modified Plan will not violate the

Fund’s policies because the purchases

serve solely to offset the Fund’s

liabilities under the deferred fee

arrangements, and, thus, have no impact

on a Fund’s investment results from the

perspective of the shareholders. The

value of the Underlying Securities will

be de minimis in relation to the total

assets of each Restricted Fund. Each

Fund will disclose in its Statement of

Additional Information the existence of

the deferred fee arrangements. Each

Restricted Fund also will disclose that,

for the limited purpose of the deferred

fee arrangements, it may invest in

Underlying Securities.

7. Rule 2a–7 imposes certain

restrictions on the investments of

money market funds that use the

amortized cost method or the pennyrounding method of computing their per

share price. These restrictions would

prohibit each Fund that is a money

market fund from investing in the shares

of any other Fund. Applicants submit

that the requested exemption will

permit the Funds to achieve an exact

matching of Underlying Securities with

the Deferred Fee Accounts, thereby

ensuring that the deferred fee

arrangements will not affect the Fund’s

net asset value. Applicants assert that

the amounts involved in all cases will

be de minimis in relation to the total net

assets of each Fund and will have no

effect on the per share net asset value of

the Funds.

8. Section 17(a) generally prohibits an

affiliated person of a registered

investment company, or any affiliated

person of such a person, from selling

any security to or purchasing any

security from the company. Section

2(a)(3)(C) defines the term affiliated

person of another person to include any

person controlling, controlled by, or

under common control with such other

person. Because the Funds share the

same investment adviser, directors, and

many officers, applicants believe that

each Fund might be deemed to be under

common control with all other Funds.

9. Applicants assert that section 17(a)

is designed to prevent sponsors of

investment companies from using

investment company assets as capital

for enterprises with which they are

associated or to acquire controlling

interests in these kinds of enterprises

and other types of ‘‘overreaching.’’

Applicants believe that the purchase

and sale of securities issued by the

Funds under the Modified Plan will not

implicate the concerns underlying

section 17(a), but merely will facilitate

the matching of liabilities for deferred

Unaffiliated Directors’ fees with the

Underlying Securities that would

determine the amount of a Fund’s

liability.

10. The SEC may exempt a proposed

transaction from section 17(a) when: the

terms of the proposed transaction are

fair and reasonable and do not involve

overreaching on the part of any person

involved, and the transaction is

consistent with the policies of the

investment company and with the

general purposes of the Act. Applicants

assert that the terms of the deferred fee

arrangements are fair and reasonable

and show an absence of overreaching

because the purchases and sales of

Underlying Securities will be made at

net asset value and market prices, which

are the same prices at which the

Unaffiliated Directors may purchase

shares of the Funds outside of the

Modified Plan. Applicants believe that

the relief requested satisfies the

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

11. Section 17(d) and rule 17d-1

prohibit affiliated persons from

participating in joint arrangements with

a registered investment company unless

authorized by the SEC. Rule 17d-1

provides that the SEC will consider

whether the participation of an

investment company is consistent with

the provisions, policies and purposes of

the Act and the extent to which the

participation is on a basis different from

or less advantageous than that of other

participants. Applicants believe the

Modified Plan may be construed to be

a joint arrangement under section 17(d)

and rule 17d-1. Applicants assert that

deferral of Unaffiliated Directors’ fees

would have a negligible effect on each

Fund’s assets, liabilities, net assets and

net income per share. Applicants

believe that deferral of an Unaffiliated

Director’s fees essentially would

maintain the parties, viewed both

separately and in their relationship to

one another, in the same position as if

these fees were paid on a current basis.

Applicants’ Condition

Applicants agree that the order

granting the requested relief will be

subject to the condition that, with

respect to the requested relief from rule

2a-7 under the Act, any Fund that is a

money market fund that values its assets

by the amortized cost method or the

penny-rounding method will buy and

hold Underlying Securities that

determine the performance of Deferred

Fee Accounts to achieve an exact match

between the Fund’s liability to pay

deferred fees and the assets that offset

that liability.

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–32169 Filed 12–8–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39387; File No. SR–DTC–

97–13]

Self-Regulatory Organizations; the

Depository Trust Company; Order

Approving a Proposed Rule Change

Regarding the Branch Deposit Service

December 2, 1997.

On June 30, 1997, The Depository

Trust Company (‘‘DTC’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) a proposed rule change

(File No. SR–DTC–97–13) pursuant to

Section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Act’’).1 Notice

of the proposal was published in the

Federal Register on September 19,

1997.2 No comment letters were

received. For the reasons discussed

below, the Commission is approving the

proposed rule change.

I. Description

DTC currently operates a branch

deposit service (‘‘BDS’’) through which

DTC participants may route securities

certificates and related documentation

from their branches and other satellite

offices directly to DTC rather than

routing them through the participants’

own central locations for processing

before they are deposited at DTC.3 The

rule change permits DTC to enter into

contracts with individual participants to

provide customized processing services