STATEMENT OF ADDITIONAL INFORMATION
April 22, 1996
SELIGMAN CASH MANAGEMENT FUND, INC.
100 Park Avenue
New York, New York 10017
New York City Telephone (212) 850-1864
Toll Free Telephone (800) 221-2450 all continental United States
For Retirement Plan Information - Toll Free Telephone (800) 445-1777
This Statement of Additional Information expands upon and supplements
the information contained in the current Prospectus of Seligman Cash Management
Fund, Inc., (the "Fund") dated April 22, 1996. It should be read in conjunction
with the Prospectus, which may be obtained by writing or calling the Fund at the
above address or telephone numbers. This Statement of Additional Information,
although not in itself a Prospectus, is incorporated by reference into the
Prospectus in its entirety.
The Fund offers three classes of shares. Class A shares may be
purchased at net asset value. Class A shares are sold subject to an annual
service fee of up to .25% of the average daily net asset value of the Class A
shares. Such service fee will not be charged until after April 30, 1997. Class B
shares and Class D shares are available only through an exchange of shares of
another mutual fund in the Seligman Group offering Class B shares ("Original
Class B shares") or Class D shares ("Original Class D shares"), respectively, or
through securities dealers or other financial intermediaries, to facilitate
periodic investments in Class B shares or Class D shares, respectively, of other
mutual funds in Seligman Group. Class B shares are sold without an initial sales
load but are subject to a contingent deferred sales load ("CDSL"), if
applicable, of 5% on redemptions in the first year after issuance of such shares
(or, in the case of Class B shares acquired upon exchange, the issuance of the
Original Class B Shares), declining to 1% in the sixth year and thereafter.
Class B shares will automatically convert to Class A shares on the last day of
the month that precedes the eighth anniversary of their date of issue. Class D
shares are sold without an initial sales load but are subject to a CDSL of 1%
imposed on certain redemptions within one year of purchase (or, in the case of
Class D shares acquired upon exchange, the purchase of the Original Class D
Shares). In addition, Class B shares and Class D shares are each subject to an
annual distribution fee of up to .75% and an annual service fee of up to .25% of
the average daily net asset value of their respective class.
Each Class A, Class B and Class D share represents an identical legal
interest in the investment portfolio of the Fund and has the same rights except
for certain class expenses and except that Class B shares and Class D shares
bear a higher distribution fee that generally will cause the Class B shares and
Class D shares to have a higher expense ratio and pay lower dividends that Class
A shares. Each Class has exclusive voting rights with respect to its
distribution plan. Although holders of Class A, Class B and Class D shares have
identical legal rights, the different expenses borne by each Class will result
in different net asset values and dividends. The three classes also have
different exchange privileges.
TABLE OF CONTENTS
Page
Investment Objectives And Policies...............2
Calculation Of Yield.............................2
Investment Limitations...........................3
Directors and Officers...........................4
Management And Expenses..........................7
Administration, Shareholder Services and
Distribution Plan.............................9
Purchase and Redemption of Fund Shares.......... 9
Net Asset Value Per Share.......................10
General Information.............................10
Financial Statements............................11
Appendix A......................................11
Appendix B......................................12
TXCM1A
1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
As stated in the Prospectus, the Fund's objectives are to preserve capital
and to maximize liquidity and current income. Investments in the Fund are
neither insured nor guaranteed by the U.S. Government and there is no assurance
that the Fund will be able to maintain a stable net asset value of $1.00 per
share.
The Fund invests in high-quality money market instruments, including
securities issued or guaranteed by the U.S. Government or its agencies and
instrumentalities, obligations of domestic and foreign commercial banks,
commercial paper and high-grade short-term debt securities (such as bonds and
notes). The Fund may enter into repurchase agreements with respect to these
securities. A more complete description of the investments and ratings of
investments the Fund may make is contained in Appendix A.
Lending of Portfolio Securities
As stated in the Prospectus, the Fund may lend portfolio securities to
certain institutional borrowers of securities and may invest the cash collateral
and obtain additional income or receive an agreed upon amount of interest from
the borrower. Loans are subject to termination at the option of the Fund or the
borrower. The Fund may pay reasonable administrative and custodial fees in
connection with a loan and may pay a negotiated portion of the interest earned
on the cash or equivalent collateral to the borrower or placing broker. The Fund
has not loaned any portfolio securities to date.
CALCULATION OF YIELD
The current and effective yields of the Class A, Class B and Class D shares
of the Fund may be quoted in reports, sales literature, and advertisements
published by the Fund. The current yield of Class A shares is computed by
determining the net change exclusive of capital changes in the value of a
hypothetical pre-existing account having a balance of 1 share at the beginning
of a seven-day calendar period, dividing the net change in account value by the
value of the account at the beginning of the period, and multiplying the return
over the seven-day period by 365/7. For purposes of the calculation, net change
in account value reflects the value of additional shares purchased with
dividends from the original share and dividends declared on both the original
share and any such additional shares, but does not reflect realized gains or
losses or unrealized appreciation or depreciation. Effective yield is computed
by annualizing the seven-day return with all dividends reinvested in additional
Fund shares. The current and effective yields of the Fund's Class B shares and
Class D shares are computed in the same manner, except that the yield on Class B
shares and Class D shares may include a CDSL if shares are held for less than
six years (for Class B shares) or less than one year (for Class D shares).
Because Class B shares and Class D shares bear a higher distribution fee than
the Class A shares, the yield of Class B shares and Class D shares will be lower
than the yield of Class A shares.
The following are examples of the yield calculations for Class A and Class D
shares for the seven-day period ended December 31, 1995. No Class B shares were
outstanding during this period.
<TABLE>
<CAPTION>
Class A shares Class D shares
<S> <C> <C>
Total dividends per share from net investment income $ .000929 $ .000728
(seven days ended December 31, 1995)
Annualized (365 day basis) .04844 .037960
Average net asset value per share 1.000 1.000
Annualized historical net yield per share for seven 4.84%* 3.80%*
calendar days ended December 31, 1995
Effective yield (seven days ended December 31, 1995) 4.96%** 3.87%**
</TABLE>
Weighted average life to maturity of investments was 36 days at December 31,
1995.
* This represents the annualized average net investment income per share for the
seven days ended December 31, 1995.
** Annualized average of net investment income for the same period with
dividends reinvested.
2
<PAGE>
INVESTMENT LIMITATIONS
Under the Fund's fundamental policies, which cannot be changed except by a
vote of a majority of its outstanding voting securities, the Fund may not:
- - Issue senior securities or borrow money, except from banks for temporary
purposes in an amount not to exceed 5% of the value of the total assets of
the Fund;
- - Make loans, except loans of portfolio securities and except to the extent
that the purchase of notes, bonds or other evidences of indebtedness, the
entry into repurchase agreements or deposits with banks, may be considered
loans;
- - Mortgage or pledge any of its assets, except to the extent, up to a maximum
of 5% of its total assets, necessary to secure borrowings permitted by
paragraph 1;
- - Underwrite the securities of other issuers; make "short" sales of
securities, or purchase securities on "margin"; write or purchase put or
call options;
- - Invest more than 25% of the market value of its total assets in securities
of issuers in any one industry, provided that the Fund reserves the right
to concentrate investments in money market instruments issued by the U.S.
Government or its agencies or instrumentalities or banks or bank holding
companies;
- - Invest more than 5% of its gross assets (taken at market) in the securities
of any one issuer, other than the U.S. Government, its agencies or
instrumentalities, or buy more than 10% of the voting securities of any one
issuer, other than U.S. Government agencies or instrumentalities;
- - Buy or hold any real estate or securities of corporations or trusts whose
principal business is investing in interests in real estate, or buy or hold
oil or gas interests, or buy or hold any commodity or commodity contracts;
- - Buy securities of any company which, with their predecessors, have been in
operation less than three continuous years, provided however, that
securities guaranteed by a company that (including predecessors) has been
in operation at least three continuous years shall be excluded;
- - Invest in securities with contractual or other restrictions on resale,
except in connection with repurchase agreements;
- - Deal with its directors and officers, or firms they are associated with, in
the purchase or sale of securities except as broker, or purchase or hold
the securities of any issuer, if to its knowledge, directors or officers of
the Fund or of the Manager individually owning beneficially more than 0.5%
of the securities of that other company own in the aggregate more than 5%
of such securities; or
- - Invest in the securities of companies for purposes of exercising control or
management of such companies or in securities issued by other investment
companies, except in connection with a merger, consolidation, acquisition
or reorganization.
Under the Investment Company Act of 1940 (the "1940 Act"), a "vote of a
majority of the outstanding voting securities" of the Fund means the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of the Fund or
(2) 67% or more of the shares of the Fund present at a shareholders' meeting if
more than 50% of the outstanding shares of the Fund are represented at the
meeting in person or by proxy.
3
<PAGE>
DIRECTORS AND OFFICERS
Directors and officers of the Fund, together with information as to their
principal business occupations during the past five years, are shown below. Each
Director who is an "interested person" of the Fund, as defined in the 1940 Act,
is indicated by an asterisk. Unless otherwise indicated, their addresses are 100
Park Avenue, New York, NY 10017.
WILLIAM C. MORRIS* Director, Chairman of the Board, Chief
(57) Executive Officer and Chairman of the Executive
Committee
Managing Director, Chairman and President, J. &
W. Seligman & Co. Incorporated, investment
managers and advisers; and Seligman Advisors,
Inc., advisers; Chairman and Chief Executive
Officer, the Seligman Group of Investment
Companies; Chairman, Seligman Financial
Services, Inc., broker/dealer; Seligman
Holdings, Inc., holding company; Seligman
Services, Inc., broker/dealer; and Carbo
Ceramics Inc., ceramic proppants for oil and
gas industry; Director or Trustee, Seligman
Data Corp., shareholder service agent;
Kerr-McGee Corporation, diversified energy
company; and Sarah Lawrence College; and a
Member of the Board of Governors of the
Investment Company Institute; formerly,
Chairman, Seligman Securities, Inc.,
broker/dealer; and J. & W. Seligman Trust
Company, trust company.
BRIAN T. ZINO* Director, President and Member of the Executive
(43) Committee
Director and Managing Director (formerly, Chief
Administrative and Financial Officer), J. & W.
Seligman & Co. Incorporated, investment
managers and advisers; and Seligman Advisors,
Inc., advisers; Director or Trustee, the
Seligman Group of Investment Companies;
President, the Seligman Group of Investment
Companies, except Seligman Quality Municipal
Fund, Inc. and Seligman Select Municipal Fund,
Inc.; Chairman, Seligman Data Corp.,
shareholder service agent; Director, Seligman
Financial Services, Inc., broker/dealer;
Seligman Services, Inc., broker/dealer; Senior
Vice President, Seligman Henderson Co.,
advisers; formerly, Director and Secretary,
Chuo Trust - JWS Advisors, Inc., advisers; and
Director, Seligman Securities, Inc.,
broker/dealer; and J. & W. Seligman Trust
Company, trust company.
FRED E. BROWN* Director
(82)
Director and Consultant, J. & W. Seligman & Co.
Incorporated, investment managers and advisers;
and Seligman Advisors, Inc., advisers; Director
or Trustee, the Seligman Group of Investment
Companies; Seligman Financial Services, Inc.,
broker/dealer; Seligman Services Inc.,
broker/dealer; Trudeau Institute, nonprofit
biomedical research organization; Lake Placid
Center for the Arts, cultural organization; and
Lake Placid Education Foundation, education
foundation; formerly, Director, Seligman
Securities, Inc., broker/dealer and J. & W.
Seligman Trust Company, trust company.
JOHN R. GALVIN Director
(66)
Dean, Fletcher School of Law and Diplomacy at
Tufts University; Director or Trustee, the
Seligman Group of Investment Companies;
Chairman of the American Council on Germany; a
Governor of the Center for Creative Leadership;
Director of USLIFE, insurance; National
Committee on U.S.-China Relations, National
Defense University; the Institute for Defense
Analysis; and Raytheon Co., electronics;
formerly, Ambassador, U.S. State Department;
Distinguished Policy Analyst at Ohio State
University and Olin Distinguished Professor of
National Security Studies at the United States
Military Academy. From June, 1987 to June,
1992, he was the Supreme Allied Commander,
Europe and the Commander-in-Chief, United
States European Command. Tufts University,
Packard Avenue, Medford, MA 02155
4
<PAGE>
ALICE S. ILCHMAN Director
(60)
President, Sarah Lawrence College; Director or
Trustee, the Seligman Group of Investment
Companies; Chairman, The Rockefeller
Foundation, charitable foundation; and
Director, NYNEX, telephone company; and the
Committee for Economic Development; formerly,
Trustee, The Markle Foundation, philanthropic
organization; and Director, International
Research and Exchange Board, intellectual
exchanges. Sarah Lawrence College, Bronxville,
NY 10708
FRANK A. McPHERSON Director
(62)
Chairman of the Board and Chief Executive
Officer, Kerr-McGee Corporation, energy and
chemicals; Director or Trustee, the Seligman
Group of Investment Companies; Kimberly-Clark
Corporation, consumer products, Bank of
Oklahoma Holding Company, American Petroleum
Institute, Oklahoma City Chamber of Commerce,
Baptist Medical Center, Oklahoma Chapter of the
Nature Conservancy, Oklahoma Medical Research
Foundation and United Way Advisory Board;
Chairman, Oklahoma City Public Schools
Foundation; and Member of the Business
Roundtable and National Petroleum Council. 123
Robert S. Kerr Avenue, Oklahoma City, OK 73102
JOHN E. MEROW* Director
(66)
Chairman and Senior Partner, Sullivan &
Cromwell, law firm; Director or Trustee, the
Seligman Group of Investment Companies; The
Municipal Art Society of New York; Commonwealth
Aluminum Corporation; the U. S. Council for
International Business; and the U. S.-New
Zealand Council; Chairman, American Australian
Association; Member of the American Law
Institute and Council on Foreign Relations; and
Member of the Board of Governors of the Foreign
Policy Association and New York Hospital.
125 Broad Street, New York, NY 10004
BETSY S. MICHEL Director
(53)
Attorney; Director or Trustee, the Seligman
Group of Investment Companies; and Chairman of
the Board of Trustees of St. George's School
(Newport, RI); formerly, Director, the National
Association of Independent Schools (Washington,
D.C.). St. Bernard's Road, P.O. Box 449,
Gladstone, NJ 07934
JAMES C. PITNEY Director
(69)
Partner, Pitney, Hardin, Kipp & Szuch, law
firm; Director or Trustee, the Seligman Group
of Investment Companies; and Public Service
Enterprise Group, public utility. Park Avenue
at Morris County, P.O. Box 1945, Morristown, NJ
07962-1945
JAMES Q. RIORDAN Director
(68)
Director, Various Corporations; Director or
Trustee, the Seligman Group of Investment
Companies; The Brooklyn Museum; The Brooklyn
Union Gas Company; The Committee for Economic
Development; Dow Jones & Co., Inc.; and Public
Broadcasting Service; formerly, Co-Chairman of
the Policy Council of the Tax Foundation;
Director and Vice Chairman, Mobil Corporation;
Director, Tesoro Petroleum Companies, Inc.; and
Director and President, Bekaert Corporation.
675 Third Avenue, Suite 3004, New York, NY
10017
5
<PAGE>
RONALD T. SCHROEDER* Director and Member of the Executive Committee
(48)
Director, Managing Director and Chief
Investment Officer, Institutional, J. & W.
Seligman & Co. Incorporated, investment
managers and advisers; and Seligman Advisors,
Inc., advisers; Director or Trustee, the
Seligman Group of Investment Companies;
Director, Seligman Holdings, Inc., holding
company; Seligman Financial Services, Inc.,
broker/dealer; Seligman Henderson Co.,
advisers; and Seligman Services, Inc.,
broker/dealer; formerly, President, the
Seligman Group of Investment Companies, except
Seligman Quality Municipal Fund, Inc. and
Seligman Select Municipal Fund, Inc.; and
Director, J. & W. Seligman Trust Company, trust
company; Seligman Data Corp., shareholder
service agent; and Seligman Securities, Inc.,
broker/dealer.
ROBERT L. SHAFER Director
(63)
Vice President, Pfizer Inc., pharmaceuticals;
Director or Trustee, the Seligman Group of
Investment Companies; and USLIFE Corporation,
life insurance.
235 East 42nd Street, New York, NY 10017
JAMES N. WHITSON Director
(61)
Executive Vice President, Chief Operating
Officer and Director, Sammons Enterprises,
Inc.; Director or Trustee, the Seligman Group
of Investment Companies; Red Man Pipe and
Supply Company, piping and other materials; and
C-SPAN. 300 Crescent Court, Suite 700, Dallas,
TX 75201
LEONARD J. LOVITO Vice President and Portfolio Manager
(35)
Vice President, Investment Officer, J. & W.
Seligman & Co. Incorporated, investment
managers and advisors; Vice President and
Portfolio Manager, two other open-end
investment companies in the Seligman Group of
Investment Companies.
LAWRENCE P. VOGEL Vice President
(39)
Senior Vice President, Finance, J. & W.
Seligman & Co. Incorporated, investment
managers and advisors; Seligman Financial
Services, Inc., broker/dealer; and Seligman
Advisors, Inc., advisors; Vice President, the
Seligman Group of Investment Companies; Senior
Vice President, Finance (formerly, Treasurer),
Seligman Data Corp., shareholder service agent;
Treasurer, Seligman Holdings, Inc., holding
company; and Seligman Henderson Co., advisors;
formerly, Senior Vice President, Seligman
Securities, Inc., broker/dealer; and Vice
President, Finance, J. & W. Seligman Trust
Company, trust company.
FRANK J. NASTA Secretary
(31)
Senior Vice President, Law and Regulation and
Corporate Secretary, J. & W. Seligman & Co.
Incorporated, investment managers and advisers;
and Seligman Advisors, Inc., advisers;
Corporate Secretary, the Seligman Group of
Investment Companies; Seligman Financial
Services, Inc., broker/dealer; Seligman
Henderson Co., advisers; Seligman Services,
Inc., broker/dealers; and Seligman Data Corp
shareholder service agent; formerly, Secretary,
J. & W. Seligman Trust Company, trust company;
and attorney, Seward and Kissel, law firm.
THOMAS G. ROSE Treasurer
(38)
Treasurer, the Seligman Group of Investment
Companies; and Seligman Data Corp., shareholder
service agent; formerly, Treasurer, American
Investors Advisors, Inc. and the American
Investors Family of Funds.
6
<PAGE>
The Executive Committee of the Board acts on behalf of the Board between
meetings to determine the value of securities and assets owned by the Fund for
which no market valuation is available and to elect or appoint officers of the
Fund to serve until the next meeting of the Board.
<TABLE>
<CAPTION>
Compensation Table
Pension or Total Compensation
Aggregate Retirement Benefits from Registrant and
Name and Compensation Accrued as part of Fund Complex Paid
Position with Registrant from Registrant (1) Fund Expenses to Directors (2)
------------------------ ------------------- ------------- ----------------
<S> <C> <C> <C>
William C. Morris, Director and Chairman N/A N/A N/A
Brian T. Zino, Director and President N/A N/A N/A
Fred E. Brown, Director N/A N/A N/A
John R. Galvin, Director $1,730.54 N/A $41,252.75
Alice S. Ilchman, Director 2,842.88 N/A 68,000.00
Frank A. McPherson, Director 1,730.54 N/A 41,252.75
John E. Merow, Director 2,771.44 N/A 66,000.00(d)
Betsy S. Michel, Director 2,735.72 N/A 67,000.00
Douglas R. Nichols, Jr., Director (3) 1,040.90 N/A 24,747.75
James C. Pitney, Director 2,842.88 N/A 68,000.00
James Q. Riordan, Director 2,842.88 N/A 70,000.00
Herman J. Schmidt, Director (3) 1,040.90 N/A 24,747.75
Ronald T. Schroeder, Director N/A N/A N/A
Robert L. Shafer, Director 2,842.88 N/A 70,000.00
James N. Whitson, Director 2,771.44 N/A 68,000.00(d)
</TABLE>
- ----------------------
(1) Based on remuneration received by the Directors of the Fund for the year
ended December 31, 1995.
(2) As defined in the Fund's Prospectus, the Seligman Group of Investment
Companies consists of seventeen investment companies.
(3) Retired May 18, 1995.
(d) Deferred. The total amounts of deferred compensation (including interest)
payable to Messrs. Merow, Pitney and Whitson as of December 31, 1995 were
$61,903, $59,807 and $8,200, respectively. Mr. Pitney no longer defers current
compensation.
The Fund has a compensation arrangement under which outside directors may
elect to defer receiving their fees. Under this arrangement, interest is accrued
on the deferred balances. The annual cost of such interest is included in the
directors' fees and expenses, and the accumulated balance thereof is included in
"Liabilities" in the Fund's financial statements.
Directors and officers of the Fund are also directors or trustees and
officers of some or all of the other investment companies in the Seligman Group.
Directors and officers of the Fund as a group owned directly or indirectly
7,077,762 shares or 3.7% of the Fund's Class A Capital Stock at March 29, 1996.
As of that date, no Directors or officers owned shares of the Fund's Class D
Capital Stock.
MANAGEMENT AND EXPENSES
Under the Management Agreement, dated December 29, 1988, as amended May 15,
1991, subject to the control of the Board of Directors, the Manager manages the
investment of the assets of the Fund, including making purchases and sales of
portfolio securities consistent with the Fund's investment objectives and
policies, and administers its business and other affairs. The Manager provides
the Fund with such office space, administrative and other services and executive
and other personnel as are necessary for Fund operations. The Manager pays all
of the compensation of directors of the Fund who are employees or consultants of
the Manager and the officers and employees of the Fund. The Manager also
provides senior management for Seligman Data Corp., the Fund's shareholder
service agent.
7
<PAGE>
The Fund pays the Manager a management fee for its services, calculated
daily and payable monthly, based on a percentage of the daily net assets of the
Fund. The method for determining this percentage is set forth in the Appendix of
the Prospectus. The management fee amounted to $818,740 in 1995, $779,345 in
1994 and $628,981 in 1993, equivalent to .43% of the average daily net assets of
the Fund in 1995, .44% in 1994 and .35% in 1993. During the year ended December
31, 1994, the Manager reimbursed expenses of Class D shares equal to $16,822.
During the year ended December 31, 1993, the Manager at its discretion waived a
portion of its fee for the Fund.
The Fund pays all its expenses other than those assumed by the Manager,
including brokerage commissions, administration, shareholder services and
distribution fees, fees and expenses of independent attorneys and auditors,
taxes and governmental fees including fees and expenses for qualifying the Fund
and its shares under Federal and state securities laws, cost of stock
certificates and expenses of repurchase or redemption of shares, expenses of
printing and distributing reports, notices and proxy materials to existing
shareholders, expenses of printing and filing reports and other documents filed
with governmental agencies, expenses of shareholders' meetings, expenses of
corporate data processing and related services, shareholder record keeping and
shareholder account services, fees and disbursements of transfer agents and
custodians, expenses of disbursing dividends and distributions, fees and
expenses of directors of the Fund not employed by (or serving as a Director of)
the Manager or its affiliates, insurance premiums and extraordinary expenses
such as litigation expenses. The Fund's expenses are allocated in a manner
determined by the Board of Directors to be fair and equitable.
The Manager has undertaken to one state securities administrators, so long
as required, to reimburse the Fund for each year in the amount by which total
expenses, including the management fee, but excluding interest, taxes, brokerage
commissions, distribution fees and extraordinary expenses, exceed 2 1/2% of the
first $30,000,000 of average net assets, 2% of the next $70,000,000 of average
net assets, and 1 1/2% thereafter. Such reimbursement, if any, will be made
monthly.
The Management Agreement was initially approved by the Board of Directors on
September 30, 1988 and by the shareholders at a special meeting held on December
16, 1988. The amendments to the Management Agreement, to increase the fee rate
payable to the Manager by the Fund, were approved by the Board of Directors on
January 17, 1991, and by the shareholders at a special meeting on April 10,
1991. The Management Agreement will continue in effect until December 31 of each
year if (1) such continuance is approved in the manner required by the 1940 Act
(by a vote of a majority of the Board of Directors or of the outstanding voting
securities of the Fund and by a vote of a majority of the Directors who are not
parties to the Management Agreement or interested persons of any such party) and
(2) if the Manager shall not have notified the Fund at least 60 days prior to
December 31 of any year that it does not desire such continuance. The Management
Agreement may be terminated by the Fund, without penalty, on 60 days' written
notice to the Manager and will terminate automatically in the event of its
assignment. The Fund has agreed to change its name upon termination of the
Management Agreement if continued use of the name would cause confusion in the
context of the Manager's business.
The Manager is a successor firm to an investment banking business founded in
1864 which has thereafter provided investment services to individuals, families,
institutions and corporations. On December 29, 1988, a majority of the
outstanding voting securities of the Manager was purchased by Mr. William C.
Morris and a simultaneous recapitalization of the Manager occurred. See Appendix
B for further history of the Manager.
Officers, directors and employees of the Manager are permitted to engage in
personal securities transactions, subject to the Manager's Code of Ethics (the
"Ethics Code"). The Ethics Code proscribes certain practices with regard to
personal securities transactions and personal dealings, provides a framework for
the reporting and monitoring of personal securities transactions by the
Manager's Director of Compliance, and sets forth a procedure of identifying, for
disciplinary action, those individuals who violate the Ethics Code. The Ethics
Code prohibits each of the officers, directors and employees (including all
portfolio managers) of the Manager from purchasing or selling any security that
the officer, director or employee knows or believes (i) was recommended by the
Manager for purchase or sale by any client, including the Fund, within the
preceding two weeks, (ii) has been reviewed by the Manager for possible purchase
or sale within the preceding two weeks, (iii) is being purchased or sold by any
client, (iv) is being considered by a research analyst, (v) is being acquired in
a private placement, unless prior approval has been obtained from the Manager's
Director of Compliance, or (vi) is being acquired during an initial or secondary
public offering. The Ethics Code also imposes a strict standard of
confidentiality and requires portfolio managers to disclose any interest they
may have in the securities or issuers that they recommend for purchase by any
client.
8
<PAGE>
The Ethics Code also prohibits (i) each portfolio manager or member of an
investment team from purchasing or selling any security within seven calendar
days of the purchase or sale of the security by a client's account (including
investment company accounts) for which the portfolio manager or investment team
manages and (ii) each employee from engaging in short-term trading (a purchase
and sale or vice-versa within 60 days). Any profit realized pursuant to either
of these prohibitions must be disgorged.
Officers, directors and employees are required, except under very limited
circumstances, to engage in personal securities transactions through the
Manager's order desk. The order desk maintains a list of securities that may not
be purchased due to a possible conflict with clients. All officers, directors
and employees are also required to disclose all securities beneficially owned by
them on December 31 of each year.
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
The Fund has adopted an Administration, Shareholder Services and
Distribution Plan for each Class (the "Plan") in accordance with Section 12(b)
of the Act and Rule 12b-1 thereunder.
The Plan was approved on July 16, 1992 by the Board of Directors of the
Fund, including a majority of the Directors who are not "interested persons" (as
defined in the Act) and who have no direct or indirect financial interest in the
operation of the Plan or in any agreement related to the Plan (the "Qualified
Directors") and was approved by shareholders of the Fund at a Special Meeting of
Shareholders held on November 23, 1992. Although the Plan became effective in
respect of the Class A shares on January 1, 1993, the Manager has elected to
currently waive the fee. Payments may not commence until after April 30, 1997.
The Plan as it relates to Class B shares was approved by the Directors on March
21, 1996 and became effective with respect to the Class B shares on April 22,
1996. The Plan was approved in respect of the Class D shares on March 18, 1993
by the Board of Directors of the Fund, including a majority of the Qualified
Directors, and became effective with respect to the Class D shares on May 1,
1993. The Plan will continue in effect through December 31 of each year so long
as such continuance is approved by a majority vote of both the Directors and the
Qualified Directors of the Fund, cast in person at a meeting called for the
purpose of voting on such approval. The Plan may not be amended to increase
materially the amounts payable to Service Organizations with respect to a class
of shares without the approval of a majority of the outstanding voting
securities of such class. If the amount payable with respect to Class A shares
under the Plan is proposed to be increased materially, the Fund will either (i)
permit holders of Class B shares to vote as a separate class on the proposed
increase or (ii) establish a new class of shares subject to the same payment
under the Plan as existing Class A shares, in which case the Class B shares will
thereafter convert into the new class instead of into Class A shares. No
material amendment to the Plan may be made except by a majority of both the
Directors and Qualified Directors.
The Plan requires that the Treasurer of the Fund shall provide to the
Directors, and the Directors shall review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the Plan. Rule 12b-1 also
requires that the selection and nomination of Directors who are not "interested
persons" of the Fund be made by such disinterested Directors.
Effective April 1, 1995, Seligman Services, Inc. ("SSI"), an affiliate of
the Manager, became eligible to receive distribution and service fees pursuant
to the Plan. For the period ended December 31, 1995, SSI received distribution
and service fees of $335, pursuant to the Plan.
PURCHASE AND REDEMPTION OF FUND SHARES
The Fund issues three classes of shares: Class A shares may be purchased at
a price equal to the next determined net asset value per share. Class B shares
and Class D shares, which are available only through an exchange of shares of
another Seligman Mutual Fund offering Class B shares ("Original Class B Shares")
or Class D shares ("Original Class D shares"), respectively, at net asset value,
or through securities dealers or other financial intermediaries, to facilitate
periodic investments in Class B shares or Class D shares, respectively, of other
mutual funds in the Seligman Group. Class B shares are sold without an initial
sales load but are subject to a CDSL, if applicable, of 5% on redemptions in the
first year after issuance of such shares (or, in the case of Class B shares
acquired upon exchange, the issuance of the Original Class B Shares), declining
to 1.00% in the sixth year and 0.00% thereafter. Class B shares will
automatically convert to Class A shares on the last day of the month that
precedes the eighth anniversary of their date of issue. Class D shares are sold
without an initial sales load but are subject to a CDSL of 1% imposed on certain
redemptions without one year of purchase (or, in the case of Class D shares
acquired upon exchange, the purchase of the Original Class D Shares). See
"Alternative Distribution System," "Purchase Of Shares," and "Redemption Of
Shares" in the Prospectus.
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Regardless of the method of redemption, a check for the proceeds ordinarily
will be sent within seven calendar days following redemption. Payment may be
made in securities, subject to the review of some state securities commissions,
or postponed, if the orderly liquidation of portfolio securities is prevented by
the closing of, or restricted trading on, the New York Stock Exchange during
periods of emergency, or during such other periods as ordered by the Securities
and Exchange Commission. If payment were to be made in securities, shareholders
receiving securities could incur certain transaction costs.
The Fund will not accept orders from securities dealers for the repurchase
of shares. Shares transferred to dealers will be subject to the redemption
requirements of the Fund and Seligman Data Corp.
NET ASSET VALUE PER SHARE
The net asset value per share is determined as of the close of trading on
the New York Stock Exchange ("NYSE"), (normally 4:00 p.m., Eastern time), on
days on which the Fund is open for business. The Fund's office is currently
closed on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Net asset value
per share is computed by dividing the value of the net assets (i.e., the value
of its assets less liabilities) by the total number of outstanding shares of
such Portfolio. All expenses, including the Manager's fee, are accrued daily and
taken into account for the purpose of determining its net asset value.
Pursuant to Rule 2a-7 under the 1940 Act, the Fund's portfolio securities
are valued by the amortized cost method. This method of valuation involves
valuing a security at its cost at the time of purchase and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the security. While
this method provides certainty in valuation, it may result in periods during
which value, as determined by amortized cost, is higher or lower than the price
the Fund would receive if it sold the security. During periods of declining
interest rates, the quoted yield on shares of the Fund may tend to be higher
than that of a fund with identical investments which uses a method of valuation
based on market prices and estimates of market prices for all its portfolio
securities. Thus, if the use of amortized cost resulted in lower aggregate
portfolio value on a particular day, a prospective investor would be able to
obtain a somewhat higher yield if he purchased shares on that day than he would
be able to receive from a fund using solely market values and existing investors
would receive less investment income. The converse is true in a period of rising
interest rates.
The order permitting the Fund to use the amortized cost method of valuation
requires that, under the direction of the Board of Directors, certain procedures
be adopted to monitor and stabilize the price per share. Calculations are made
to compare the value of its investments valued at amortized cost with market
values. Market valuations are obtained by using actual quotations provided by
market markers, values obtained from yield data relating to classes of money
market instruments or U.S. Government securities published by reputable sources
at the mean between the bid and asked prices for the instruments. The Fund will
not maintain a dollar-weighted average portfolio maturity in excess of 90 days.
In the event that a deviation of 1/2 of 1% or more exists between the $1.00 per
share net asset value and the net asset value calculated by reference to market
quotations, or if there is any other deviation which the Board of Directors
believes would result in a material dilution to shareholders or purchasers, the
Board of Directors will promptly consider what action, if any, should be
initiated.
GENERAL INFORMATION
Capital Stock. The Board of Directors is authorized to classify or
reclassify and issue any unissued Capital Stock of the Fund into any number of
other classes without further action by shareholders. The Investment Company Act
of 1940 requires that where more than one class exists, each class must be
preferred over all other classes in respect of assets specifically allocated to
such class.
Rule 18f-2 under the Act provides that any matter required to be submitted
by the provisions of the Act or applicable state law, or otherwise, to the
holders of the outstanding voting securities of an investment company such as
the Fund shall not be deemed to have been effectively acted upon unless approved
by the holders of a majority of the outstanding shares of each class affected by
such matter. Rule 18f-2 further provides that a class shall be deemed to be
affected by a matter unless it is clear that the interests of each class in the
matter are substantially identical or that the matter does not significantly
affect any interest of such class. However, the Rule exempts the selection of
independent auditors, the approval of principal distributing contracts and the
election of directors from the separate voting requirements of the Rule.
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Custodian. Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105 serves as custodian of the Fund. It also maintains, under the
general supervision of the Manager, the accounting records and determines the
net asset value for the Fund.
Auditors. Deloitte & Touche LLP. independent auditors, have been selected as
auditors of the Fund. Their address is Two World Financial Center, New York, New
York 10281.
FINANCIAL STATEMENTS
The Annual Report to Shareholders for the year ended December 31, 1995 is
incorporated by reference into this Statement of Additional Information. The
Annual Report contains a schedule of the investments as of December 31, 1995, as
well as certain other financial information as of that date. The Annual Report
will be furnished, without charge, to investors who request copies of the Fund's
Statement of Additional Information.
APPENDIX A
Description of Permissible Investments:
U.S. GOVERNMENT, AGENCY AND INSTRUMENTALITY OBLIGATIONS - are securities
issued or guaranteed as to principal and interest by the United States
government or by agencies or instrumentalities thereof and include a variety of
obligations, which differ in their interest rates, maturities, and dates of
issue. Some of these obligations are issued directly by the United States
Treasury such as U.S. Treasury bills, notes, and bonds; others are guaranteed by
the U.S. Treasury, such as securities issued by the Small Business
Administration, the General Services Administration, and Farmers Home
Administration; others are supported by the right of the issuer to borrow from
the Treasury, such as securities issued by Federal Home Loan Banks; while others
are supported only by the credit of the agency or instrumentality and not by the
Treasury, such as securities issued by the Federal National Mortgage
Administration. There can be no assurance that the U.S. Government will provide
financial support to such an agency or instrumentality if it is not obligated to
do so by law.
REPURCHASE AGREEMENTS - involve the purchase of obligations and the
simultaneous agreement to resell the same obligations on demand or at a future
specified date and at an agreed upon price. Such transactions afford an
opportunity to earn a return which is only temporarily available.
NEGOTIABLE CERTIFICATES OF DEPOSIT - are certificates issued against funds
deposited in a bank. They are for a definite period of time, earn a specified
rate of return, and are negotiable.
BANKERS' ACCEPTANCES - are short-term credit instruments primarily used to
finance the import, export, transfer or storage of goods. They are termed
"accepted" when a bank guarantees their payment at maturity.
FIXED TIME DEPOSITS - represent funds deposited in a bank. They are for a
definite period of time and earn a specified rate of return. Unlike negotiable
certificates of deposit, they do not have a market, and they may be subject to
penalties for early withdrawal of funds. Fixed time deposits are made in foreign
branches of domestic banks and in foreign banks.
COMMERCIAL PAPER - refers to promissory notes issued by corporations to
finance short-term credit needs.
CORPORATE DEBT SECURITIES - include bonds and notes issued by corporations
to finance longer-term credit needs.
Description of A-1 and P-1 Commercial Paper Ratings:
The ratings A-1+ and A-1 are the highest commercial paper ratings assigned
by S & P. Paper rated A-1+ has the highest rating and is regarded as having the
greatest capacity for timely payment. Paper rated A-1 indicates that the degree
of safety regarding timely payment is very strong. Long-term senior debt is
rated A or better. The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management are unquestioned.
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The rating P-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity; (5) amount and
quality of long-term debt; (6) trend of earnings over a period of ten years; (7)
financial strength of parent company and the relationships which exist with the
issuer; and (8) recognition by the management of obligations which may be
present or may arise as a result of public interest questions and preparations
to meet such obligations.
Description of Bond Ratings:
Bonds rated AAA have the highest rating S&P assigns to a debt obligation.
Such a rating indicates an extremely strong capacity to pay principal and
interest. Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in a small degree. Bonds rated in the Aa group
(Aa1, Aa2, Aa3) by Moody's are judged by Moody's to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than Aaa bonds because margins of
protection may not be as large or fluctuations of protective elements may be of
greater amplitude, or there may be other elements present which make the
long-term risks appear somewhat larger.
APPENDIX B
HISTORY OF J. & W. SELIGMAN & CO. INCORPORATED
Seligman's beginnings date back to 1837, when Joseph Seligman, the
oldest of eight brothers, arrived in the United States from Germany. He earned
his living as a pack peddler in Pennsylvania, and began sending for his
brothers. The Seligmans became successful merchants, establishing businesses in
the South and East.
Backed by nearly thirty years of business success - culminating in the
sale of government securities to help finance the Civil War - Joseph Seligman,
with his brothers, established the international banking and investment firm of
J. & W. Seligman & Co. In the years that followed, the Seligman Complex played a
major role in the geographical expansion and industrial development of the
United States.
The Seligman Complex:
.... Prior to 1900
o Helps finance America's fledgling railroads through underwriting.
o Is admitted to the New York Stock Exchange in 1869. Seligman remained a
member of the NYSE until 1993, when the evolution of its business made it
unnecessary.
o Becomes a prominent underwriter of corporate securities, including New York
Mutual Gas Light Company, later part of Consolidated Edison.
o Provides financial assistance to Mary Todd Lincoln and urges the Senate to
award her a pension. Is appointed U.S. Navy fiscal agent by President
Grant.
o Becomes a leader in raising capital for America's industrial and urban
development.
...1900-1910
o Helps Congress finance the building of the Panama Canal.
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..1910s
o Participates in raising billions for Great Britain, France and Italy,
helping to finance World War I.
...1920s
o Participates in hundreds of underwritings including those for some of the
country's largest companies: Briggs Manufacturing, Dodge Brothers, General
Motors, Minneapolis-Honeywell Regulatory Company, Maytag Company, United
Artists Theater Circuit and Victor Talking Machine Company.
o Forms Tri-Continental Corporation in 1929, today the nation's largest,
diversified closed-end equity investment company, with over $2 billion in
assets, and one of its oldest.
...1930s
o Assumes management of Broad Street Investing Co. Inc., its first mutual
fund, today known as Seligman Common Stock Fund, Inc.
o Establishes Investment Advisory Service.
...1940s
o Helps shape the Investment Company Act of 1940.
o Leads in the purchase and subsequent sale to the public of Newport News
Shipbuilding and Dry Dock Company, a prototype transaction for the
investment banking industry.
o Assumes management of National Investors Corporation, today Seligman Growth
Fund, Inc.
o Establishes Whitehall Fund, Inc., today Seligman Income Fund, Inc.
...1950-1989
o Develops new open-end investment companies. Today, manages more than 40
mutual fund portfolios.
o Helps pioneer state-specific, tax-exempt municipal bond funds, today
managing a national and 18 state-specific tax-exempt funds.
o Establishes Seligman Portfolios, Inc., an investment vehicle offered
through variable annuity products.
...1990s
o Introduces Seligman Select Municipal Fund and Seligman Quality Municipal
Fund, two closed-end funds that invest in high-quality municipal bonds.
o In 1991 establishes a joint venture with Henderson Administration Group
plc, of London, known as Seligman Henderson Co., to offer global investment
products.
o Introduces Seligman Frontier Fund, Inc., a small capitalization mutual
fund.
o Launches Seligman Henderson Global Fund Series, Inc., which today offers
four separate series: Seligman Henderson International Fund, Seligman
Henderson Global Smaller Companies Fund, Seligman Henderson Global
Technology Fund and Seligman Henderson Global Growth Opportunities Fund.
