[Federal Register Volume 62, Number 236 (Tuesday, December 9, 1997)]
[Notices]
[Pages 64899-64901]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-32169]


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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.

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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\
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    \1\ Liberty Cash Management Fund, Inc., Investment Company Act 
Release Nos. 13196 (Apr. 27, 1983) (notice) and 13271 (May 25, 1983) 
(order).

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 open-
end 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\
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    \2\ Any 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.

FILING DATES: The application was filed on December 12, 1996, and 
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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:

[[Page 64900]]

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 closed-end 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 closed-end 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

[[Page 64901]]

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 penny-
rounding 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